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That a different rule prevails as to valuation, and proof of value, in § 49 the case of mining property see Geer v. Amalgamated Copper Co., 49

Atl. Rep., 159.

Where shares were issued for property at a very excessive valuation, the transaction was held to be dishonest, and it was held that the shares were not fully paid. (Hebberd v. Southwestern Cattle Co., 55 N. J. Eq., 18.) This case was prior to the Revision of 1896.

"To justify a corporation in issuing stock under our act for property purchased, there should be an approximation at least in true value of the thing purchased to the amount of the stock which it is supposed it represents." (Edgerton v. Electric Improvement, &c., Co., 50 N. J. Eq., 354. Decided in 1892.)

(See also Rural Homestead Co. v. Wildes, 54 N. J. Eq., 668. Also Meredith et al. v. N. J. Zinc & Iron Co., 55 N. J. Eq., 211; aff'd 56 N. J. Eq., 454.)

The good-will of a business is property, and stock may be issued for it, and one who participated in and approved the method of valuation of such good-will cannot afterwards claim that the good-will so bought by the corporation was overvalued. (Washburn v. Natl. Wall Paper Co., 81 Fed. Rep., 17.)

An individual creditor cannot bring an action in his own behalf at law against a stockholder upon the ground that the property for which the stock was issued was not of the value of the stock. All such suits must be by a general creditors' bill. (Wetherbee v. Baker, 35 N. J. Eq., 501.)

The earlier cases held that the contract of the subscribers could only be fulfilled by payment in money. In later cases this doctrine has been relaxed, and stock issued and paid up in work and labor, or in the purchase of property the corporation is authorized to hold, has been held to have been legally issued. (Wetherbee v. Baker, 35 N. J. Eq., 501, 512.)

Sales to company by promoters.-The power of directors to contract with the company has been considered (see notes to Sec. 12, ante.)

Vice-Chancellor Green reviewed the leading English cases on the subject and defined very clearly the duties and liabilities under the laws of this state of promoters on a sale of property by them to the company. (Plaquemines Tropical Fruit Co. v. Buck, 52 N. J. Eq., 219.)

He quotes with approval Lord Chancellor Cairns:

"I do not say that the owner of property might not promote and form a joint stock company and then sell his property to it, but I do say that if he does he is bound to take care that he sells it to the company through the medium of a board of directors, who can and do exercise an independent and intelligent judgment on the transaction, and who are not left under the belief that the property belongs not to the promoters, but to some other persons." (Erlanger v. New Sombrero Phosphate Co., 3 App Cas., 1218, 1236; s. c., 6 English Ruling Cases, p. 777.)

§ 49a-50

(See also Loudenslager v. Woodbury Heights Land Co., 58 N. J. Eq., 556.)

It was held that where a promoter has a mere option to purchase lands, a one-sided contract which could not be enforced against him, and he contracts to sell those lands to his company, he is liable for the profits made by himself, but not for profits made by his joint promoter. denslager v. Woodbury Heights Land Co., 58 N. J. Eq., 556.)

49a.* Corporations may not plead usury.

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No corporation shall hereafter plead or set up the defense of usury to any action brought against it to recover damages or enforce a remedy on any obligation executed by said corporation; provided, that this act shall not apply to any such action which is now pending.

("An act relating to usury," approved April 3, 1902; P. L. 1902, P. 459.)

This act is for the protection of holders of corporate bonds and obligations originally issued at less than par, and makes such securities unimpeachable so far as the question of usury is concerned. At common law, such bonds, in the absence of fraud in their issue, were valid, but were open to the defense of usury, where usury statutes were in force. Indirectly, therefore, the act enables corporations to issue securities, when market conditions require, at less than the face value.

A statute for the same purpose has been in force in New Jersey with respect to railway companies since 1855. (Gen. Stat., p. 3703.)

A similar statute, applicable to all corporations, foreign and domestic, has existed in New York since 1850 (Chap. 172), and other States have like statutory provisions.

See, as to the effect of the New York act, Stevens v. Watson, 4 Abb. App. Dec., 302; Butterworth v. O'Brien, 23 N. Y., 275; Rosa v. Butterfield, 33 N. Y., 665; Bank v. Hoge, 35 N. Y., 65; Bank v. Commercial Warehouse Co., 49 N. Y., 635; Stewart v. Bramhall, 74 N. Y., 85; Hawley v. Kountze, 6 App. Div., 217.

A practical way of avoiding the usury act before the passage of the act of 1902 is indicated by the decisions in Franklin Trust Co. v. Rutherford B. S. & C. Electric Co., 57 N. J. Eq., 42, and Lane v. Watson, 51 N. J. Law, 186; aff'd 52 N. J. Law, 550.

50. Certain corporations may take stock and bonds in other corporations in payment for labor and materials.

Corporations having for their object the building, constructing or repairing of railroads, water, gas or electric works, tun

Arbitrary number; section inserted here merely for convenience of reference.

nels, bridges, viaducts, canals, hotels, wharves, piers or any like § 51 works of internal improvement or public use or utility, may subscribe for, take, pay for, hold, use and dispose of stock or bonds in any corporations formed for the purpose of constructing, maintaining and operating any such public works; and the directors of any such corporation formed for the purpose of constructing, maintaining and operating any public work of the description aforesaid may accept in payment of any such subscription, or purchase, real or personal property, necessary for the purposes of such corporation, or work, labor and services performed or materials furnished to or for such corporation to the amount of the value thereof, and from time to time issue upon any such subscription or purchase, in such installments or proportions as such directors may agree upon, full-paid stock in full or partial performance of the whole or any part of such subscription or purchase, and the stock so issued shall be full-paid stock and not liable to any further call, neither shall the holder thereof be liable for any further payments, and in all statements and reports of the corporation to be published or filed this stock shall not be stated or reported as being issued for cash paid to the corporation, but shall be reported in this respect according to the fact.

P. L. 1891, p. 329.

Only to the corporations designated in this section is express power given by the statute to issue stock in payment of work, labor and services, and then only to construction companies, although it would seem from the case of Wetherbee v. Baker (35 N. J. Eq., 501, 512), that where the contract for the rendition of services has been made in good faith and stock issued thereon, such stock would be held to be legally issued.

51. Any corporation may hold stock and bonds of other corporations.

Any corporation may purchase, hold, sell, assign, transfer, mortgage, pledge or otherwise dispose of the shares of the capital stock of, or any bonds, securities or evidences of indebtedness created by any other corporation or corporations of this or any other state, and while owner of such stock may exercise all the rights, powers and privileges of ownership, including the right to vote thereon.

§ 52

P. L. 1888, p. 385; P. L. 1888, p. 445; P. L. 1891, p. 329; P. L. 1893, p. 301.

Before the statute was enacted the general rule was that a corporation had no implied power to purchase shares of the capital stock of another corporation. Elkins v. Camden & Atlantic R. R. Co. (36 N. J. Eq., 5.) In 1889, by an amendment to Section 55 of the Revision of 1875 (Section 49, ante) the directors of any company organized under that act were authorized to purchase "the stock of any company or companies owning, mining, manufacturing or producing materials, or other property necessary for their business," and to issue stock in payment therefor.

The present section is an enlargement of the law as to the power of a corporation to guarantee securities of another corporation when disposed of in payment of debt. [See Ellerman v. Chicago Junction Rys., &c., Co., 49 N. Y. Eq., 217 (1891).]

A corporation may vote shares in another corporation in which it is a stockholder by a proxy duly authorized. (State v. Rohlffs, 19 Atl. Rep., 1099.)

52. Penalty for false certificates.

If any certificate made, or any public notice given by the officers of any corporation, in pursuance of the provisions of this act, shall be false in any material representation, all the officers who shall have signed the same, knowing it to be false, shall be jointly and severally liable for all the debts of the corporation contracted while they were stockholders or officers thereof, as a penalty enforceable in the courts of this state only.

P. L. 1846, p. 70; P. L. 1849, p. 307; Act of 1875, § 55.

The Revision of 1896 makes a knowledge of the falsity of the certificate or notice a prerequisite to a recovery under this section and provides that the liability created is a penalty enforceable in the courts of this State only. Such knowledge was not necessary under either the Act of 1845 or the Revision of 1875.

This personal liability may be enforced by any creditor whose contract arose while such officers were stockholders or officers of the company, by an action at law, and it is not necessary to proceed by general creditors' bill, as under Section 21. (Wetherbee v. Baker, 35 N. J. Eq., 501.) Sections 93 and 94 apply, and no sale can be had under the execution against the officer or director, until after judgment has been obtained against the corporation and execution thereon returned unsatisfied. The case of Quimby v. Waters (27 N. J. Law, 295, 28 Id., 533) is a precedent for such an action.

This section relates to "officers," and does not include incorporators who signed the certificate of organization. (Thompson-Houston Elec. Co. v. Murray, 60 N. J. Law, 20.)

V.-Winding Up.*

53. Corporate existence continues.

All corporations, whether they expire by their own limitation or be annulled by the legislature or otherwise dissolved, shall be continued bodies corporate for the purpose of prosecuting and defending suits by or against them, and of enabling them to settle and close their affairs, to dispose of and convey their property and to divide their capital, but not for the purpose of continuing the business for which they were established.

P. L. 1846, p. 72; P. L. 1849, p. 308; Act of 1875, § 59.

In a suit by stockholders of a dissolved corporation against the directors for mismanagement of its affairs, the corporation should be made a party, by virtue of this section. Creditors should likewise be made parties. (Camp v. Taylor, 19 Ail. Rep., 958.)

On the expiration of the charter of a corporation, the corporate existence is continued by this section for the purposes therein mentioned. (Grey v. Newark Plank Road Co., 65 N. J. Law, 603.)

54. Directors; trustees on dissolution.

Upon the dissolution in any manner of any corporation the directors shall be trustees thereof, with full power to settle the affairs, collect the outstanding debts, sell and convey the property and divide the moneys and other property among the stockholders, after paying its debts, as far as such moneys and property shall enable them; they shall have power to meet and act under the by-laws of the corporation and, under regulations to be made by a majority of said trustees, to prescribe the terms and conditions of the sale of such property, and may sell all or any part for cash, or partly on credit, or take mortgages and bonds for part of the purchase price for all or any part of said property.

Act of 1875, § 57.

This section seems to give directors power to sell at private sale. (Freeman v. Sea View Hotel Co., 57 N. J., Eq., 68.)

Where the directors on dissolution of a corporation divide the assets -more than sufficient to reimburse the complainant-among its stockhold

* A company whose charter has been proclaimed by the Governor to be void for non-payment of taxes is within the provisions of §§ 53-60 as to winding up. (American Surety Co. v. Great White Spirit Co., 58 N. J. Eq., 526.)

§ 53-54

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