The age-herald., 1901-04-09
OPINION IN THE SIMPLIFYING cO. CASE Important Decision Affecting the Big Corporations QUESTION OF VALUATION The Opinion Holds That Court Cannot Go Beyond the Board of Directors
 as to the Value of the
 Property.
QUESTION OF VALUATION

New York, April 'S.-Justice Dixon, at Trenton, N. J.. today. filed the opinion of the Court of Errors in the case brought by minority stockholders of the American Smelling and Refining Company to en- join the purchase of the property of M. Guggenheim & Sons.
 This opinion has been awaited with great interest by corporation lawyers as 1t is considered most important and af- fecting corporations in New Jersey.
 The importance of the opinion lies in the construction by the court of the 4Sth and 18th sections of the general corpora tions act Vice Chancellor Stevens held the court could not go beyond the decis- ion of the board of directors as to the value of property to be purchased by the issuing of stock. The Court of Errors on the contrary holds that 1t must be clearly shown that the value of such property is at least reasonably near the price to be paid and that the action of the directors is subject to review at the instance of any stockholder who con siders himself aggrieved. The syllabus of Justice Dixons opinion says:
 "Under section AS of our corporation act when an original issue of corporate stock for property to the purchased is contem- plated, it is the duty of the directors to see that the real value of the property is at least equal to the face value of the stock.
 Before Issuing Stock.
 Before an original issue of corporate stock for property to be purchased takes place, the bona fide judgment of the direc- tors as to the value of the property while it is entitled to considerable weight, Is not conclusive, but may be reviewed at the instance of existing stockholders and if on such review by court of equity the value of the property appears to be less than the face value of the stock the issue should be restrained.
 After stock has been issued as fully paid stock for property purchased, the Judgment of the directors as to the value of the property becomes conclusive in the absence of actual fraud in the transac- tion and such stock is not liable to any further call
 "An increase of corporate stock voted for by the board of directors and by the requisite majority of stockholders, in order to issue such stock for property worth less than the face value of the stock should be restrained at the instance of dissenting stockholders"
 In considering the right of the court to review the action of the directors, Jus | tice Dixon says the language of section AS, of the corporation act is not ques- | tionable as to the fact that money paid in must equal the face value of the stock issued The language of section 49 Is even more explicit. providing that the corporation may issue stock to the amount of the value of the stock.
 Court finds that the mere act that two thirds of the directors and stockholders voted for the purchase cannot prevent Its review, pointing out that this would not justify an issue of stock for an illegiti- mate enterprise. In accordance with these views the court orders that the stay be continued; enjoining the purchase and that proceedings to increase the stock should likewise remain in the statu quo pending final argument and a decision by the court of chancery as to the real value of the Guggenheimer property.