Evening journal., 1916-07-26

then make a profit out or it by selling
Il 10 the corporation. or using II for
his own purposes, but those illustra-
tions are wide and far apart from the
question that is involved in this case
Mr. Johnson felt IL when he said, "I
am going to show from the charter
that dealing in the stock in this cor
poration was like dealing In ordinary
property connected with IT'S aIfairs
and purposes" Is Il? There never
was a greater fallacy uttered in a
court OF justice than that statement. !
How does he attempt to sustain it?
He quotes large paragraphs from the
charter itself I do not deny but
what the charter contains a wonder
/ full recital Of powers that belong 10
/ it. under that charter and which
might be exercised. They could go
! into telegraphy, they could engage in
the grocery business, they could sell
tins, they could equip a ship. There
tnever was a greater omnium gath
erum than this charter Is in the re-
cital OF rights. With your knowledge
and with mine, we know that that is
not the test by which a court judges
what are the corporate purposes of a
company. You ask What is the
company doing under its charter?"
There is a clause In that charter
which provides for the transmission
OF human intelligence. That might
mean by telegraph wire or wireless,
or wireless telephone. Would any
sane man say that an officer of this
corporation, engaged in the manu-
facture OF munitions. could not enter
upon the question Of developing some
manner of transmitting intelligence
for his own private proit7 Would
any man of sanity say that under
these broad powers in the charter
not exercised, lying dormant utter
ly unused. and by the act Of the cor
! poration set aside, for when the cor
poration starts upon a particular line
of business, that is its line Of busi-
ness that is its corporate purpose,
and act, in connection with which the
, duty of officers is to be measured, as
certained and declared, and in no
/ other way.
: Charters Subject to Laws.
! Again, need not announce to this
learned court, the principle that all
I recltals in a charter are subject TO
the law OF the State. and the law of
r the land. One of the things recited
p in that charter is that when they buy
. stock, they can vote II. Section 3S,
! of the Act OF 1896, OF New Jersey.
declares that no corporation can vote
: stock Of its own which IL holds. Will
r you tell me that the charter over
, rides the law? Into every charter is
written subjeotion TO the constitution
and the laws of the land. How does
that apply to this question? In this
| way am not going to DISCUSS at
! length the law Of New Jersey On
r this subject I have asked by friend,
- Mr. Button, of New York for a few
! minutes to express the views OF the
r. defense with reference to 1t, but I
- am going to say in a general way
q to Your Honor what l understand
e from a careful reading OF IT, and from
E the knowledge derived from my prac-
l. tice and business, TO be the law OF
@ the State OF New Jersey. When this
IS Act was passed, il was passed for the
< purpose of encouraging corporation:
n to come TO that State in order thai
g the State might enrich itself by the
% franchise taxes that would be eN-
L tracted from those corporations In
the beginning the tendency of the
courts was 10 oonstrue the language
G of the law literally along that line.
n Therefore. Il was that the courts in
q the early stages. said that there is an
o implied power 10 deal in your own
y stock. It is not an express power
may il please the court, IL is an i'm
e. piled power because in one section
il says they may deal in personal
I property, among other things, and in
+ another section il says that stock in
o the corporation IS personal property
ergo they may deal in the stock, but
s written into this very Act are the
e words. for corporate purposes and
/. when you take the line of decisions
IS that follow down since then you vii
J. find / am sure this proposition
II brought out clearly and declared flat
e " in those opinions. that when they
n do buy the stock. il must be for
k, Legitimate corporate purpose, an'
Is there is not a decision in the court
n Of New Jersey that says otherwise
and in one OF the cases the Court o
10 Errors and Appeals cites with ap
n proval Of Knickerbocker Importation
is Company VS. State Board of Asses
n sors. 90 Atlantic page 9l3, whicl
IS, uses the following language: "W
le are forced ia the conclusion tina
c. the record does not demonstrat
II a legitimate corporate purpose
re they had taken stock-"in tn
ut subscription. issue and return o
of this stock. The law therefore, de
IS clarcs such transactions invalid" an
w then quotes Morowitz. Section IL.
of Maryland Trust Company VS.. Banl
On 102 Maryland COS We all know th
n writings Of Mr. Morowitz. and tn
IN care and attention with which the
IL have been prepared. l will read
il. Your Honor what Section l12
"a Morowitz says, and II is the sectio
lis that is quoted with approval by th
u- Court of Errors and Appeals Of h
nd State OF New Jersey. "A purchase /
ed corporation Of shares of its ow
a stock in effect amounts TO a viii
MT drawal of the shareholder who's
ch shares are purchased from membe
an ship in the company, and a repa,
,se ment Of his proportionate share
so The company's assets. Il is M
if answer TO say that shares having
Ter market value must be regarded Ill
be any other personal property that
lse what our friends say-"and that l
RS. person is injured if a solvent co
lin poration. in good faith, purchas
IN shares in itself. at their market valu
4. Il. mI.. ~ n G.