New-York tribune., 1902-10-30
J. A. HODGE WINS A POINT.
VICECHANCELLOR EMERY'S DECISION
IN STEEL STOCK CONVERSION CASE
RESTRAINS BOND ISSUE.

United states Steel Corporation to prevent the sSu
ing of S2oooooo9 of bonds retire equal amount
of preferred stock and allowed preliminary iujunc-
ton Restraint upon the corporation is allowed
only upon condition that the complainants, J. AS
pinwaU Hodge md others, should 20 the
case being set down for hearing before the Court
of Errors and Appeals at its next term If the de-
PENDANTS desire to appeal to that court.
The opinion read is an elaborate one The Vice
Chancellor reviews the questions that arose in the
former similar suit against the steel corporation
which he decided in favor of Mrs. Miriam Berger
the complainant, and which decision the Appellate
Court recently reversed. The Vice-Chancenor then
refers to the fact that the bill In the Berger
was filed solely on the complanants behalf
and against the corporation and the firm of ]. p
Morgan & Co. eujoin issuing of bonds under
the contract called the bankers contract. No d-
rectors of the company made parties defend
ant. but 1t was charged that four OF the firm were
directors AT the time of the contract and its valid
ity assailed upon that ground.
Relief was sought upon four grounds namely;
That the plan it carried would impair the
plainantS vested rights as stockhoIder; that the
plan to retire the stock ultra wires and void
against the complainant any dissenting stock
holder; that the plan runous and impered
the value of the stock that the four members OF
the bankers firm were directors OF the corporation
and that the compensation Of IS 1000 O00 which might
be received under the contract without
sideration and illegal. and that the scheme was
devised TO secure eXOrbtant commissions by this
firm The answer denied -he compIainant's con-
tentons except that Z held that the compensation
was beneficial and reasonable 1t declares that
/ under bylaw ~ the corporation the bankers
contract valid.
The Vice-ChanceIor points out that IN the Hodge
the bill IS filed against all the directors be-
cause fifteen OF the number interested in the
syndicate formed 10 assist In carrying out the con-
tract The bill further insisted that the conversion
plan was never properly ratified by the two-thirds
vote OF the shareholders required by the Corpora
ton act. The complainant held that the votes on
e stock held or controlled by the banks and MEM
bers OF the syndicate had be counted in order TO
make up the necessary two-thirds. Without the
syndicate votes the requisite number did not 1t
maintained. approve the reduction OF the stock.
As to the ground Of impairment Of the stock
holders vested property right, says the de-
cison. the Court of Errors ruling is conclusive.
As to the ultra wires. that courts ruling against
that claim also controls In the second suit. The
third point. that the corporation cannot issue the
| proposed bonds because it has not complied with
the provisions Of the law Of 1902 not raised in
the first suit The vice-C Chancellor first takes up
ti4s point because the Court OF Appeals held that
the power to issue bonds was given under the law
Of 1896. which authorized the company TO reduce
its stock. by purchasing certain shares for retire
ment."
The Vice-Chancslor says:
The opinion Of the Court Of Appeals. showing
precisely the relation of the two laws and the ex-
press declaration that al other netnods OF
the act OF 1902 and that corporations must now
this view untenable and makes the question
whether ,he steel corpoI%6oSn o Goes meet 5ne5e IN See
mined. The conditions of the act OF 1902. emitting
are four and n Is claimed by the coulpIainants
| that two OF these have not been met The nrst
Pany at the time Of the meeting had not paid dlyi
the second condition not met. as the complainant
claims. the one relating to the value OF the
aidavis in respect thereto filed by the defendants
full. complete and detailed. and are made by
afidavits as to the OF assets hed by the
complainant are on the contrary general vague
and made without special knowledge or examina-
ton and the ersdhJy & 1t d9e RrineiRa aant T
paired by his own admissions to his latest afdavit
Cpon these aiu9atlts as 20 EdiuT " asses - S41l 1911
not be justified in enJoining the issue or bonds
pending final hearing.
and regnIsrIv ana sCcordtna 10 charter or byJawS
Plainly. no less than two payments can meet the
requirements under the statute. The second re
continuous payments must be made The pro-
vision is that IT must be for period Of at least
one year next preceding the meeting. Defendants
counsel contend that the dividends themselves and
Per Peod she Of he gSSS Pcng Se meeting rhe
claim that the four dividends paid were toT tne
This construction gives 10 the word dividend an
b Gsfna and 56d ren WT srns S
! ngs may be said to accrue from the begin1ing OF
the year but dividends have no existence under the
BYLAWS until and as SRy STs 6sssa sGnS Spt he OF said
earnlngs ana btt s I5s 1eaT Consjd-
cred from another point OF view. and stated with
defendants claim that the words for the period
I and forth" qualify or describe the dividends
! and not ''the payment or dividends
After discussing the punctuations IN the law the
Vice Chancellor says:
The payment OF dividends required by the
| statute is continuous" dividend and this WORD
dividends for a year annually Is entitled 20 tae
/ companies paying dividends semi-annually or
quarterly would not the act Of 1892 9s be- clearly aI,
o} Erors saws tSat @ the act is not special
applies to all @ sreS teScn ~ ta az
| least one year apply TO and qualify the con
ouired bv the statute and are not TO be treated
descriptive OF and indicating the source or origin
Which the Earnings out Of which the dividends de-
cared and paid during the year have been acculnu-
| This conclusion narmonizes with the decisions
struct:on was given to provisions in other statutes
requrins the performance OF ti f4ntaouS & ac1S @ l IN
establishing a settled rule OF statutory cons Srue-
| meaning OF the statute l conclude that the meet
| ing Of the stockholders was prematureiy called
| luton passed at that meeting must be en5oned
This conclusion renders any Pbs,1on 10 the
resolutions the contrast unnecessary anG; % @ aS
part would be altogether ooiter.
The news that vice-Chancellor Emery had de-
cIded against the United States Steel Corporation
| in the Hodge case came as a surprise to the
Street as it had been popularity supposed that the
ESSENTIAL points of this suit were practically COW
cred by the Berger which the Court or Errors
Appeals recently decided in favor OF the steel
/ corporatfon reversing Vice-Chancellor Emery $
| finding The United States Steel shares were not
/ adversely affected by the announcement At the
/ office of j. P. Morgan & Co no comment on the
/ decision could be obtained beyond the statement
| that the case would. OF course be appealed In
/ ourars AZ the Office of Guthrie. Cravath & Hender-
son of counsel FOR the United States Steel Corpora
tion in the recent litigation received the following