Ottumwa semi-weekly courier. [volume] (Ottumwa, Iowa) 1899-1903, 1901-04-11
A BLOW TO TRUSTS
Important Decision Handed Down
in New Jersey.
THE SMALL STOCKHOLDERS WIN
American Smelling and Refining Co.
Enjoined From Buying Certain Prop
erty-Wanted to Issue 5000, 900 OF
Stock in Exchange for Plant.

Trenton, N j., April 9.-Justice Dix
on yesterday filed the opinion OF the
court of errors and appeals in the case
brought by the minority stockholders
of the American Smelling and Refining
company to enjoin the purchase OF the
property of M. Guggenheim Il sons.
This opinion has been awaited with
great interest by corporation lawyers
as it is considered most Important as
affecting corporations in New Jersey.
Its Importance.
The importance of the opinion lies
in the construction placed by the court
on the forty-eighth and forty-ninth
sections of the general corporation act.
Vice-chancellor Stevens held that the
court could not go beyond the decision
of the board of directors as to the val
ne of the property to be purchased by
the issuing of stock. The court of en-
rors, on the contrary, holds it must be
clearly shown that the value of such
property is at last reasonably near
the price to be paid and that the ac-
ton of the directors is subject to re-
view at the instance Of any stockhold,
er who considers himself aggrieved.
AS the Court Sees 1t.
In considering the right of the court
| to review the action of the directors
Justice Dixon says the language OF
section forty-eight of the corporation
act is not questionable as to the fact
that money paid in must equal the
| face value of the stock issued. The
language of section forty-nine is even
more explicit, providing that corpor
alton may issue stock to the amount
of the value of the stock.
The distinction between the contem
plated issue of corporate stock for
property, and its issue for money
Justice Dixon finds. lies not in rule
for valuation, but in the fact that diff
ferent estimates may be formed of the
value of property. When such differ
ences are brought before judicia
tribunal, Justice Dixon says, the judg
ment of those upon whom the duty Of
determining the value is placed, mus
be accorded considerable weight, bu
it is not final.
Justice Dixon points out under sec
ton 40, that when corporate stool
has once been issued for propert.
purchased, the legislature has direct
ed the application of another rule
Under such conditions nothing but &C
tual fraud in transactions can impai
the right of a stakeholder to hold hi
stock as full paid stock free from fur
Their call.
Applying the Rule.
Applying the rule as above lai
down, Justice Dixon discusses the ac
tual value of property, the purchase o
which was contemplated by the issu
of S45, 100000 of stock. He finds it ad
} mitted that the value of the Gugger
helm plant as physical possessions
} did not exceed $10,000,000, and wit
! the cash to have been turned over
leaving about $23000,000 to be mad
! up in value by the good will of tn
: business and leases and contracts, tn
| nature of which was not at any tim
disclosed in the proceedings.
While the defendants claimed tn
: compliments had not borne the bu
: den of proof cast upon them, Justic
: Dixon holds that under the circun
; stances, this rule should not be vii
, orously enforced at this stage. Proof
Judge Dixon says, point strongly
the conclusion that in the negotiation
between the parties, the real valu
of the property to be acquired had ne
4 been the basis upon which they hay
!. determined the amount of stock to b
l issued therefor.
: In accordance with these views tn
I court orders that the stay be contil
! ued; enjoining the purchase. and thu
l the proceedings to increase the stoc
! should likewise remain in statu gu
pending the final argument and the d
y cision by the court in chancery as
+ the real vslue of the Guggenheim pro
0 erty.
d coNGER's RECEPTION.
S -