the holder shall not be liable for any further payment in the absence of actual fraud in the transaction; but this does not operate as against creditors, for, when the rights of the creditors of an insolvent corporation intervene, a different rule prevails.

[Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 879, 880, 883, 884; Dec. Dig. 232.*]

11. CORPORATIONS († 215, 232*)—STOCKHOLDERS LIABILITY FOR CORPORATE DEBTS-UNPAID STOCK.

Corporate stock issued, outstanding, and unpaid for is a trust fund for the benefit of creditors; and this doctrine is a hard and fast rule, which is never relaxed. In this state, however, the stockholder's liability to creditors no longer depends alone upon the trust fund theory, but is held to be statutory. And, while an issue of bonus stock was formerly good as between the company and its stockholders under an agreement therefor, yet it is now held that these contracts are void, but it is also held that stockholders remain liable to a receiver for the benefit of creditors.

issued, just as surely as they must be charged for the stock where value is absent.

[Ed. Note. For other cases, see Corporations, Cent. Dig. & 879, 880, 883, 884; Dec. Dig. § 232.*]

17. CORPORATIONS (§ 232*) - STOCK-SUBSCRIPTION-CONSIDERATION.

Where a corporation takes over a lease by assignment, the value of that lease to the corporation is its rental value for the outstanding, unexpired term, plus any other things of value to be received by the lessee under the lease.

[Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 879, 880, 883, 884; Dec. Dig. § 232.*]

18. CORPORATIONS (§ 232*)-STOCKHOLDERS→ LIABILITY FOR CORPORATE DEBTS - STOCK ISSUED FOR INSUFFICIENT CONSIDERATION.

Where directors of a corporation take over an unexpired lease, but fail to appraise it according to its rental value, and give it a value in excess of what it actually has, their judgment will be reviewed by this court, which will exercise its judgment now as of the time when they should have acted, in substitution for the judgment they should have formed, and the credit to be given the stockholders will be

[Ed. Note. For other cases, see Corporations, Cent. Dig. §§ 826-828, 845-848, 852, 854, 879, 880, 883, 884; Dec. Dig. §§ 215, 232.*] 12. CORPORATIONS (§ 232*)-STOCKHOLDERS-limited to the then fair value of the lease; LIABILITY FOR CORPORATE DEBTS-STOCK ISSUED FOR INSUFFICIENT CONSIDERATION. The provision in section 49 of the corporation act (P. L. 1896, p. 293) that, in the absence of actual fraud in the transaction, the judgment of the directors as to the value of property purchased shall be conclusive, introduced no novelty into the law, but was merely a declarative enactment of what was and had been the settled law and policy in this state. [Ed. Note. For other cases, see Corporations, Cent. Dig. §§ 879, 880, 883, 884; Dec. Dig. 232.*]

13. CORPORATIONS (§ 99*)-STOCK-ISSUANCE -JUDICIAL SUPERVISION.

The original issue of corporate stock is a special function, in the exercise of which the Legislature has fixed a standard to be observed, and it is the duty of the courts, so far as their jurisdiction extends, to see that this standard is not violated either intentionally or unintentionally.

[Ed. Note. For other cases, see Corporations, Cent. Dig. §§ 444-446; Dec. Dig. § 99.* 14. CORPORATIONS (§ 99*)-STOCK-SUBSCRIPTIONS CONSIDERATION.

Neither stockholders nor directors have any right to make a present capitalization of prospective future profits of a corporation; and consequently they cannot issue capital stock therefor as for property purchased.

[Ed. Note. For other cases, see Corporations, Cent. Dig. §§ 444-446; Dec. Dig. § 99.*] 15. CORPORATIONS (§ 99*)-STOCK-SUBSCRIPTION-CONSIDERATION.

In cases where stock is issued for property purchased, our statute contemplates an actual appraisement of such property by the board of directors.

[Ed. Note. For other cases, see Corporations, Cent. Dig. §§ 444-446; Dec. Dig. § 99.*]

that is, to its value as of the date and time when it should have been valued originally, neither subsequent success nor failure being permitted to operate in the forming of a nunc pro tunc judgment, for, while neither the hope and expectation of success can create property of that which is not property, equally the failure of those hopes and expectations cannot operate to destroy that which was and is property.

[Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 879, 880, 883, 884; Dec. Dig. § 232.*]

19. CORPORATIONS (§ 232*)-STOCKHOLDERS— LIABILITY FOR CORPORATE DEBTS - STOCK ISSUED FOR INSUFFICIENT CONSIDERATION.

The stockholders of an insolvent corporation have an absolute right to the protection of whatever there was fairly, reasonably, and honestly of value in the property at the time it was acquired, and any extremely low price brought by the property at the receiver's sale is no criterion of its value.

tions, Cent. Dig. §§ 879, 880, 883, 884; Dec. Dig. § 232.*]

[Ed. Note.-For other cases, see Corpora

20. CORPORATIONS (§ 232*) — STOCK - SUBSCRIPTION-CONSIDERATION.

The true method of calculating the value of an unexpired lease is not by ascertaining the yearly rental value and then multiplying has to run, but by calculating its value by the the figures by the number of years the lease annuity tables; that is, by multiplying the an nual value by the value of $1 per year for the number of years in the unexpired term.

[Ed. Note.-For other cases, see Corpora tions, Cent. Dig. §§ 879, 880, 883, 884; Dec. Dig. § 232.*]

21. CORPORATIONS (§ 99*)-STOCK-SUBSCRIPTION-CONSIDERATION.

While formerly subscriptions to capital 16. CORPORATIONS (§ 232*) — STOCK - SUB-stock could only be paid in money, stock is SCRIPTION-CONSIDERATION. now issued for work and labor as well as for the purchase of property; but the cases in which such transactions are upheld are only those where the services rendered or property purchased are equal in value to the stock issued therefor.

In an issue of corporate stock for property purchased, and property taken over at a grossly excessive value, the stockholders are nevertheless entitled to have credited to the payment for stock, the just and fair value of the property conveyed to, and services rendered for, the company, and for which stock was

[Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 444-446; Dec. Dig. § 99.*]

For other cases see same topic and section NUMBER in Dec. Dig. & Am. Dig. Key No. Series & Rep'r Indexes

22. PROPERTY (§§ 1, 9*)-DEFINITION.

Property is something to which the owner can have title. Title may be evidenced by an appropriate instrument. No instrument for the conveyance of things which are not property is known to the law, and none can be contrived.

[Ed. Note.-For other cases, see Property, Cent. Dig. § 1; Dec. Dig. §§ 1, 9.*

For other definitions. see Words and Phrases, vol. 6, pp. 5693-5728; vol. 8, pp. 77687770.]

23. CORPORATIONS (§ 30*)-ORGANIZATIONACTS OF PROMOTERS.

concern.

lessors that they would furnish certain arc lights for lighting the park during the term of the lease, and that they would sell to the lessee at any time during the term for a certain price. The promoters also negotiated with the builders of amusement devices for the erection and installation in the park of certain such devices, securing considerable reductions from the asking price therefor. They negowith others for appliances and tiated also things requirable to equip the park as a going They formed a corporation which took over the lease, installed the amusement devices (through purchases made of the manufacturers thereof), and utilized various other Promoters of a corporation are obliged to appliances and things negotiated for by the select competent persons as directors-men promoters. On the organization of the comwho would act wholly in the interest of future pany the promoters were both stockholders stockholders, and who would not be biased or and directors, and, as such, passed omnibus influenced by the persuasions of proposed ven- resolutions reciting that the lease, devices, and dors or by friendship for them-and to make other things just mentioned were of the value to those directors a disclosure of all material of $79,000 to the company, and the company facts; but where, however, the promoters are resolved to purchase the same from the prothemselves directors and constitute a majority moters for $4,000 in cash and $75,000 in comof the board, it is their duty to act as an independent board of directors with full knowl- business and prosecuted it for some time, and mon capital stock. The company commenced edge would have acted, namely, to make a then failed. A receiver was appointed by this careful inventory and appraisement of all prop-court, and he brought this suit to have an aserty to be purchased with stock or for cash, sessment made against the stockholders for and to either issue stock or pay in cash, meas- such sums as will satisfy the claims of credure for measure, value for value. itors; the assets coming to his hands being insufficient for the purpose. The stockholders defended, and claimed that the things turned over to the company by the promoters, and for which stock was issued as for property purchased, were worth a greater sum than the

[Ed. Note. For other cases, see Corporations, Cent. Dig. §§ 97-100; Dec. Dig. § 30.*] 24. CORPORATIONS (§ 562*)-STOCKHOLDERS LIABILITY FOR CORPORATE DEBTS-ASSESSMENT OF STOCK.

ers.

In making an assessment against stock-cash and par of the stock given therefor. holders of an insolvent corporation, it is the practice of this court, first, to ascertain the whole amount of the unpaid debts; second, in case of unpaid stock subscriptions or stock issued without payment, to determine the names of such stockholders and the amount due from each; and, third, to make an assessment against those stockholders, which, in case an action at law is brought, based upon that assessment, is conclusive against the stockholdIn order to ascertain the whole amount of money necessary to be raised, the receiver must compute the amount due on the several claims allowed by him and approved by this court by adding interest on each claim. To the sum of those must be added the cost of the solicitors for the creditors in the proceeding to wind up the corporation and a reasonable counsel fee to complainant, to be fixed by the court on motion for that purpose; also, a round sum to cover the receiver's compensation and any further expenses which he may incur in the enforcement of the decree against the defendants held liable thereby. This last sum will be liable to reduction, according to the conduct of the defendants in resisting the enforcement of the decree.

[Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 2265-2279; Dec. Dig. § 562.*]

They adduced testimony tending to show that the leased premises were of a value largely in excess of the price for which the company could have purchased the premises in fee under the lease; also, that the lighting contract contained in the lease was of very great value; also, that large sums had been saved to the company through the negotiations of the promoters in securing reductions from the price of devices which were installed in the park. Held, that the lease, including the lighting contract therein contained, was property turned over to the corporation, but that the basis of ascertaining the value of the lease was erroneous; that its true value is not the difference between what the company would have to give for the property, if it gave it, and the value of the property which it would get, if it got it (assuming there was such difference, great or small), but that its true value consisted of rental value, including the value of the lighting contract; that the sums said to have been saved to the company through the negotiations of the promoters in securing reductions from the asking price for devices to be installed in the park were not property at all, and therefore could not form the basis for an issue of stock as for property purchased under the statute; that for their services and expenses in promoting the company, securing its or

25. EQUITY ( 375*) — HEARING-CONTINU-ganization and starting it upon its career as a

ANCE.

This court has the power to continue a hearing and permit further and other proof to be taken, and that power ought to be exercised where it does not appear that injustice will be done, but where, on the contrary, justice requires it.

[Ed. Note. For other cases, see Equity, Cent. Dig. §§ 785-786; Dec. Dig. § 375.*] 26. CORPORATIONS (§§ 99, 562*)-STOCKHOLDERS LIABILITY FOR CORPORATE DEBTS-ASSESSMENT OF STOCK-CONTINUANCE.

Promoters of an amusement company secured a lease for 10 years upon a park, which lease contained a covenant on the part of the

going concern, the promoters were entitled to expenses, and that payment therefor could be reasonable compensation together with their made in stock instead of cash. Held, further, rental value of the leased premises (there beas there is no proof before the court of the ing, however, evidence as to the value of the arc lighting contract), and no evidence as to the reasonable value of the promoters' services, that, while an assessment will have to be made upon the stock issued as for property purchased, to satisfy the claims of creditors, the stockholders are, nevertheless, entitled to have credited on their shares the rental value of the leasehold, including lighting contract, and reasonable compensation for the services

es.

of the promoters, together with their expens- [ were mailed to persons who were likely to The ascertainment of these values requir- be interested in property such as the receiving further testimony, and the court having power to open the proofs and take testimony for such purpose, the proofs will be opened. [Ed. Note.-For other cases, see Equity, Cent. Dig. 88 444-446, 2265-2279; Dec. Dig. $99, 562.*]

(Additional Syllabus by Editorial Staff.) 27. PROPERTY (§ 7*)—"TITLE.”

er was about to sell, and also advertised the sale in the Cincinnati Bill Board, New York Dramatic Mirror, New York Clipper, New York Sunday Telegraph, Trenton Sunday Advertiser, and Trenton Evening Times; that the first four papers are of extensive circulation in the theatrical profession and among

"Title" is the means whereby a man hath amusement purveyors, such as the defendant the just possession of his property.

[Ed. Note. For other cases, see Property, Cent. Dig. § 9; Dec. Dig. § 7.*

For other definitions, see Words and Phrases, vol. 1, pp. 6978-6982; vol. 8, p. 7816.] 28. CORPORATIONS (§ 562*)—SтocкHOLDERS— LIABILITY FOR CORPORATE DEBTS-Set-Off.

Stockholders liable to assessment in favor of creditors of the corporation are not entitled to set off their claims against the corporation against the assessment.

[Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 2265-2279; Dec. Dig. 562.*]

Bill in equity by Alfred G. Holcombe and others against the Trenton White City Company. Heard on application of Charles J. Fury, receiver, for assessments on capital stock for benefit of creditors. Decree ordered.

John H. Backes, for receiver. John M. Dickinson and Gilbert Collins, for stockhold

ers.

WALKER, V. C. Upon bill filed the defendant company was declared insolvent, and Mr. Charles J. Fury was appointed its receiver. An order limiting creditors was made and filed, and in due course claims were presented to the receiver amounting to $806.28 preferred, and $38,817.06, unpreferred, total, $39,623.34.

company; that in the notice was published that the receiver asked for private bids, but received none such, and only received one inquiry concerning the sale as a result of the advertisements; that, when the property was offered, there was one bid for $100 and a second bid for $500, and, there being no contending bidders, he publicly adjourned the sale for one week, at which time there were two rival bidders, and that $2,075 was the highest bid offered, and for that much the property was struck off, and the sale afterwards confirmed, on notice to the credi

tors and stockholders. After the sale the

receiver filed a petition setting forth, among other things, that the defendant company was organized under our corporation act (Revision of 1896) for the purpose of acquiring, constructing and operating grounds, parks or places of amusement, and to equip the same with all necessary appliances and paraphernalia for operating and conducting games and amusements of all kinds whatever, and that the total authorized capital stock of the corporation was $150,000 divided into 15,000 shares of the par value of $10 each, of which 7,500 shares, amounting to $75,000, was to be preferred stock, and 7,500 shares, amounting to $75,000, was to be common stock; that the holders of the preferred stock should be entitled to receive a certain dividend before any dividend on the common stock should be paid, and that, in the event of liquidation or dissolution, the holders of the preferred stock should be paid at par before any amount should be paid to the holders of the common stock; that certain persons, naming them, subscribed for certain shares of the common stock of the corporation, whereby they became liable to pay for the same at par, but have not done so, notwithstanding demands by the receiver, and he prayed that an assessment be levied against the persons so subscribing, respectively, for the full amount of the common stock so issued to them, or for such other sum as might be sufficient to enable him to pay the debts of the defendant corporation and liquidate its affairs.

In pursuance of an order, the receiver exposed for sale at public vendue the property of the defendant corporation, consisting of the following: "The lease of the lands and premises known as Capital City Park, consisting of 120 acres. (The rent on this lease is fully paid.) Carrousel, shute the shutes, concert hall, dancing pavilion, down and out, crystal maze, moving pictures, theatres, boating and numerous other amusement devices, including the buildings upon which the same are erected, together with all other personal property, as fully as the same is described in an inventory filed by the said receiver in the office of the clerk of chancery, in a suit wherein Alfred G. Holcombe et als. are complainants and the Trenton White City Company is defendant." In his report of sale the receiver stated that, in addition to the usual notice required by law, he caused to be posted in the city of Trenton and township of Hamilton (wherein the property was located) at least 50 other like notices; that in all 100 posters were printed, and that those that were not posted For other cases see same topic and section NUMBER in Dec. Dig. & Am. Dig. Key No. Series & Rep'r Indexes

[1, 2] Upon the filing of this petition an order was made requiring the persons shown to be stockholders to show cause on a certain day why the prayer of the petition should not be granted, and afterwards a trial was had in this court upon the question presented by the petition. This proceed

622

82 ATLANTIC REPORTER

ing instituted by the receiver is in accord- lease there is an unexpired term of four ance with the practice which was establish- years, and whereas said persons above named in Cumberland Lumber Co. v. Clinton Hill ed also control an option upon said property Lumber Mfg. Co., 57 N. J. Eq. 627, at page to lease the same for an additional period of 629, 42 Atl. 585, at page 586, wherein the six years from the time of the expiration of Court of Errors and Appeals, speaking by the term of their present lease aforesaid; Mr. Justice Dixon, said: "When the business and whereas said persons have entered into of a corporation has been abandoned, and various contracts with certain persons, firms, the corporation is insolvent, subscribers for and corporations for the construction and erection of various devices which would be or holders of its stock not paid for have no further obligation with respect thereto than useful and necessary in the operation and to pay so much of what is unpaid on the conduct of the business of this company; stock as will satisfy the claims of corporate and whereas it appears to the stockholders creditors and meet the expenses of winding that such property rights and interest would up its affairs. Scovill v. Thayer, 105 U. S. be of great value to this company, and that 143, 156 [26 L. Ed. 968]; Wetherbee v. Baker, their acquisition is indispensable to the suc 35 N. J. Eq. 501, 506; Hood v. McNaughton, cessful operation of this company, and the 54 N. J. Law, 425, 427 [24 Atl. 479]; Gen. conduct of its business, and that no other Stat. p. 910, § 5; P. L. of 1896, p. 284, § 21. property rights and interests of a similar naThe proper tribunal to ascertain the amount ture and character can be acquired by this necessary for these purposes is a court of company which would be of equal value to it; equity, since courts of law have no procedure and whereas the said Barker G. Hamill, John adapted to the marshaling of assets and lia- S. Broughton, W. Meredith Dickinson, Wilbilities requisite in such a calculation. The bur F. Sadler, Jr., and C. H. Oberheide have ascertainment may be made on a petition offered to sell said property interests and filed by the receiver against the stockholders contract rights to this company for the sum in the suit wherein the corporation was ad- of four thousand dollars in cash and in conjudged to be insolvent, for it seems to be sideration of the issue of the common stock settled that a stockholder is so far an inte- of this company to them to the amount of gral part of the corporation that, in the view seventy-five thousand dollars, par value: of the law, he is to that extent privy to those Now, therefore, be it resolved, that the board of directors of this company be and they are proceedings; and when in such a suit an assessment on the stock has been ordered by hereby authorized in their discretion to purthe court to meet corporate liabilities, and chase the property, leasehold interests and an action is brought against a stockholder contract rights above mentioned, for the to collect his quota, he cannot there question price aforesaid, and to issue said stock in the propriety of the assessment. Hawkins v. payment therefor. Upon motion duly made Glenn, 105 U. S. 319 [9 Sup. Ct. 739, 33 L. and seconded, and by the affirmative vote of Ed. 184]; Hood v. McNaughton, 54 N. J. Law, all present, the following preamble and reso425 [24 Atl. 479]." Preferred stock was is-lution was unanimously adopted: Whereas, sued and paid for in cash at par. All of the it has been agreed between each of the incommon stock was issued to the promoters, corporators and Barker G. Hamill, John S. Messrs. W. Meredith Dickinson, John S. Broughton, W. Meredith Dickinson, Wilbur Broughton, Barker G. Hamill, Wilbur F. Sad- F. Sadler, Jr., and C. H. Oberheide that the stock to be issued in payment for the propler, Jr., and Christian H. Oberheide, and was by them returned to the treasury of the com- erty authorized to be purchased by the resopany to be used and distributed as a bonus to lution above set forth shall include the stock the subscribers for the preferred stock in the subscribed by the incorporators, as evidenced ratio of one share of common stock for every by the certificate of incorporation: Now, two shares of preferred stock. The common therefore, be it resolved, that the board of stock was accordingly issued, and now those directors be and they are hereby authorized stockholders in virtue of their possession of and directed to accept said property as full the certificates, unpaid for, are asked to re- payment for the subscription for stock of the incorporators, and to issue full paid spond. stock to the incorporators or their assigns to the amount of their respective subscriptions." A meeting of the board of directors There were present was held on the adjournment of the stockholders' meeting. Messrs. John S. Broughton, Barker G. HamMessrs. Sadler ill, John M. Dickinson, W. Meredith DickinIn the minute son, and C. H. Oberheide. and Roebling were absent. book, at the end of the minutes of the directors' meeting, is a waiver of notice of the time and place of and of the business to be transacted at the meeting. This is signed by all of the directors, including the absentees,

At the corporation's organization meeting, Messrs. W. Meredith Dickinson, John S. Broughton, Barker G. Hamill, John M. Dickinson, Wilbur F. Sadler, Jr., and F. W. Roebling, Jr., were elected directors. Action was then taken with reference to the issuance of stock as shown by the minutes as follows: "Whereas Barker G. Hamill, John S. Broughton, W. Meredith Dickinson, Wilbur F. Sadler, Jr., and C. H. Oberheide own and control a certain leasehold in and to a certain large tract of land and premises in the township of Hamilton and County of Mercer, com