The evening star and Newark advertiser., 1907-07-10
MILLIONS
MUST BE
PAID OUT
Court Enjoins Against U. S.
and Central Leather
Merger.

In his decision enjoining the con-
solidation of the United States Leather
Company with the Central Leather
Company. announced today by Vice
Chancellor Emery, an accumulated sur
plus amounting to $20.00O,000 is made
available for distribution in the form
of dividends to holders of its $50, ,000. 900
preferred and $50 000,0 900 common stock
The preferred stock, as issued in 1S93
tied TO per cent. accumulated divi-
dends, on which 45 liz per cent was
due on arrears at the time the present
suit started.
The decision of the court will be car
ried to the Court of Appeals, but the
case has been so carefully threshed out
by both sides, and so much care has
been bestowed upon it by the court,
counsel expect little else from the upper
court but final decision affirming the
present decree.
The suit has been before the court
nearly year. and has been prosecuted
vigorously. The complainants to the
two suits which subsequently consol-
dated and were heard as one. were
James c. Colgate. of New York city,
and Robert A. Johnston, of Milwaukee.
Wis. Chauncey g. Parker. of this city,
filed the bill for Mr. Johnson. and Pit
ney Hardin g. Skinner that of Mr..
Colgate. Associated with the counsel
Of record We're Messrs. Hawkins e.
Delafield for Colgate, and Huntington.
Rhinelander & Seymour for Mr.. john
son. r. V. Lindabury, Robert II. Nc
Carter. Edward M. Sheppard, L. c.
Krauthoff and William e. Harkney APP
peared for the defendants.
The bills filed by these stockholders
averred that the United States Leather
Company, through its board of direc-
tors, had undertaken to transfer the
entire assets and business of the cor
poration to a new corporation organ
ized by themselves. and having an iden-
tical directorate on terms which then
contended were in violation of the
contracts contained on the stock GER
tificates.
The decision of the Chancellor
takes UP this main contention of the
complalnants in the opening paragraph.
He says:
ION the assumption that the directors OF
the companies have the right to submit to
their respective companies an agreement
for consolidation. under the act and that
the companies may, by vote of the
statutory majority of the stockholders.
make an agreement for consolidation.
under the act / come to the question
whether the particular agreement of con-
soidation proposed Is. so far as the pre-
ferred stockholders are concerned, legal
agreement under the act. or does Ii as TO
~. ~. a..
assets of the company. which are proposed
to be turned over to the new or consoli-
dated company"
The court considers this proposition very
thoroughly remerklng that under the act
of 1893, although directors are authorized
to enter into joint agreements to merge
or consolidate and to prescribe the man
ner and terms of such merger, 1t cannot
be considered as giving them unlimited
powers in that respect. but only lawful
and equitable powers that shall not un-
fairly prejudice the value Of their instru-
ment to the stockholders. The court held
that in the agreements made by the direc-
tors in court the real question In issue is
whether the obligation Of the United
States Company to Its preferred stock
holders did or did not continue against the
new company.
Admitting that the exercise of It's legal
powers TO CODHOiludlt illiBul ttIIliHait -He
payment Of dividends, the court saws
that such right TO consolidate does not
affect the right to dividends existing at
the time Of consolidation or to such ac-
cumulated dividends as might be payable
at that time.
The right to demand an accounting on
the Termination of business Of the U. s.
Company the court declares, is a duty or
liability of the existing company which
LII
so consolidated
As to the contention made by counsel
for the defendants that s7,0O0.000 of the
S20.000.00o admitted surplus is changeable
to earnings and s13,ooo,0oO to Increased
value OF real estate, the court says ex-
plicitly that the proofs and evidence Of
fered in the cause show the increase to
tcontinnsd On Seventh Page,