80 N.J. Eq. 437 | N.J. | 1912
The bill in this case was filed March 30th, 1910. It alleges that the defendants, D. Harry Chandler and Frank H. Walls, together with Edward M. Wallington, Lewis W. Gould and Challes H. Anderson, organized the complainant corporation in the year 1897, for the purpose of manufacturing unfermented wine, or grape juice; that these gentlemen were the original stockholders and directors of the corporation; that they each originally subscribed and paid for twenty shares of the stock of the corporation, the par value of which was $10 per share; that shortly after their election as directors they secretly and fraudulently issued to themselves nine hundred shares of the treasury stock of the corporation (one hundred and eighty shares to each) for two per cent, of the par value of the stock; and that no further payment has at any time since been made upon it; that Gould, Anderson and Wallington are dead, and that their stock has passed into the hands of other holders who .took it with notice of the illegality of its issue; and that Chandler and Walls have .each of them assigned their stock to parties who took it with the same notice. On these alleged facts the prayer of the bill is that Chandler and Walls, and the executors of Anderson and Wallington he decreed to be jointly and
Upon final hearing a decree dismissing the bill was advised by the vice-chancellor for the reason that the allegation that the nine hundred shares of stock were issued fraudulently and without consideration, except as to two per cent, of its value, was not supported by the proofs; and for the further reason that regardless of the meritorious question involved, the right to maintain the suit was barred by tlie supplement to the Corporation act of April 8th, 1903 (P. L. 1903 p. 362), which prohibits any action, either at law or in equity, from being brought against any officer or director of a corporation to recover any bonus, profit or reward of any kind secretly made out of any transaction with the corporation, and without disclosure of the fact, unless such action be brought within four years after the transaction has taken place.
We doubt the applicability of the statute (which was repealed in 1.907) to such a state of facts as that disclosed by the pleadings and proofs in this case; but we are of opinion that the det cree should be affirmed for the first of the reasons which led the vice-chancellor to the conclusion reached by him. At the time of the issuing of the stock to the five gentlemen named in the bill the corporation had been in existence only for a few weeks, and they were its only stockholders. It was their purpose to devote so much of their time and energy as might be necessary for the successful building up and carrying on of the business for which the corporation was organized, without any immediate compensation being paid to them out of its assets or earnings, but, nevertheless, not gratuitously. With this purpose in mind they consulted counsel, and, being a.dvised that corporate stock might he issued and paid for for services rendered to and work done for the corporation, they acted upon this advice, and, honestly believing that they had a right to do so, issued the stock to themselves in anticipation of rendering to the corporation ■services, and of doing 'work for it, without any other compensation, until the value of such services and work should equal the
The decree under review will lie affirmed.
For affirmance—The Gitiep-Jtjstioe, Garrison", Swayze, Trexchard, Bergen", Yoorhees, Mixturn, Kalisci-i, Bogert, Vredexburgh, Coxgdox, Whyte, Tri-iacy—13.
For reverml—None,