Evening journal., 1917-07-25

NlhIlnB the ulNluenu) 1915, ,llO.Z0
Dividends paid on pre-
ferred and debenture
stock plus interest ... 4O,63997
Received upon sale OF
debenture stock, plus
interest .... ....... 1,593,922OO
21.47O.ss9.70
Amount paid T. Cole
man DUPONT plus in
terest ...... ...... 1b70S, $50 Sc
Apparent balance in ex-
cess OF cost ....... 5761 ,9sg. .13
"As stated in the findings from the
evidence produced at the trial the
receipts in dividends. exclusive OF the
l26 62S shares Of stock Of q. I. du-
Pont dc Nemours and Company. were
equivalent 10 slS3 per share upon
stock for which Pierre and his as
sociates paid 5000 per share. AS the
record then stood. therefore IL the
Company acquired the stock. IL would
have been obliged TO pay out OF its
treasury Sl7 per share TO make up tho
price OF 5000 per share paid for the
common stock. In view of the present
showing that the defendants have re-
ceived over S5,000000 In excess of
what the stock cost. counsel for the
plaintiffs contend that there remains
no question Of business policy TO be
determined. and therefore decree
directing the transfer OF the stock
and the payment OF the difference
should be entered without anv action
OF the corporation or stockholders
because the stockholders could have
no honest difference or opinion as
TO the benefit 10 be derived by the
company from the purchase Of the
stock. am not prepared to adopt
this view
No principle Of law or equity here
tofore announced has gone so far as
70 assert that a court OF equity may
substitute its judgment for that of
the corporation through It's directors
or stockholders in determining
whether It should or should not ac-
Quire an asset TO which it has no
title but merely an inchoate right
10 assert a title. In all OF the nu-
merous cases cited by the plaintiffs,
the decisions holding that action by
stockholders contrary to the inter
osts OF the corporation at a corporate
meeting would not be upheld. because
Il would be a fraud by the majority
upon the minority. involved substan-
tally the questions whether the cor
poration would rescind contract
parting with some OF It's assets. or
would ratify the transfer OF its as
sets where tho transaction in rcla-
tion 10 the assets was clearly an in
jury TO the company and i'm violation
OF its rights IL should be borne IN
mind that the rights of the COM
pany in the present case arise out OF
pending negotiations for purchase OF
its own stock. the amount OF stock
10 be purchased and the price 10 be
paid never having been determined
by any affirmative corporate action.
The defendants in acquiring the
stock have been held to he trustees
ex maliflcio for the corporation. ac-
countable 10 Il at its election The
conclusion arrived az I'm the opinion
heretofore filed that the question
must be determined for the company
by a meeting OF its stockholders will
therefore be adhered TO- If the court
is in error in declining 10 extend the
doctrine of the cases illustrated by
Gamble VS.. Queens County Water
Company. 12S ~ Y. 81. % n. E 201.
the plaintiffs will have an opportunity
TO have the error corrected in the ap-
pellate court
"But the argument OF counsel for
the plaintiffs that no necessity arose
for any preliminary action by the
stockholders was also based upon
their conclusion that an accounting
would show no necessity for the pay
ment Of any funds out OF the treasury
OF the corporation. This conclusion
was based upon the statements fled
Of record by the defendants. showing
a balance OF value received IN excess
OF cost. and the claim that the COM
pany is entitled TO be repaid in cash
for whatever the defendants received
in dividends. whether those dividends
wer in the form OF cash, stocks or
bonds. This position is. I'm my opin-
ion, untanable. n the company is en-
titled to the benefit OF the entire
transaction. then what il is entitled TO
receive is what tho defendants have
derived from the transaction and have
held or now hold under the construc-
tive trust which has arisen in favor
of the company. I am unable to dis
tinguish between the rights OF the
company to the stock OF the r. l..
DUPONT de Nernours and Company re-
ceived as a dividend upon the COM
mon stock OF the Powder Company
and its rights to the Atlas Powder
Company stock and the 'Anglo-French
bonds also received as dividends. AS
was very forcibly pointed out by the
counsel for the defendants at the ar
ugment. dividends paid by the eorpo-
rations in stock or bonds cannot be
regarded as cash payments in an ac-
counting II the stock and bonds re-
main in the hands or control OF the
defendants unconverted. There has
been no assertion by the plaintiffs OF
a right TO demand the cash value OF
the 126,62S shares of stock OF u. l..
Dupont de Nemours and Company, and
the only ground upon which they
rested their claim az the argument
that the value Of the Anglo-French
bonds ana the Atlas Company stock
AZ the time OF the declaration OF the
dividends should be paid in cash TO the