§ 45-46 approved by him they are valid. (Wells v. Rahway White Rubber Co., 19 N. J. Eq., 402.) Entries in the books of a corporation are, as a general rule, competent evidence of the proceedings of the corporation and of the acts and votes of its officers transacted at official meetings, but are not notice to third persons of the acts or resolutions entered in the minutes. As to third persons, the books of a corporation are private books, and such persons are not chargeable with knowledge of matters there recorded any more than a third person would be chargeable with knowledge of entries made against him in the books of a private person. (Wetherbee v. Baker, 35 N. J. Eq., 501, 509, 510; North River Meadow Co., v. Christ Church, 22 N. J. Law, 424; and see Van Hook v. Summerville Mfg. Co., 5 N. J. Eq., 137.) The minute book of a corporation is competent evidence in suits between stockholders to show the acts of the corporation, but is not competent evidence of any agreement made by the stockholders as individuals. (Black v. Shreve 13 N. J. Eq., 455, 466, 483.) 45. The name of every corporation shall be at all times conspicuously displayed at the entrance of its principal office in this state, and in default thereof the directors shall be jointly and severally liable to a penalty of two hundred dollars, to be recovered with costs, by the state, before any court of competent jurisdiction, by action to be prosecuted by the attorneygeneral; and they shall jointly and severally be liable to a like penalty for every thirty days' additional default from and after the service of process in the first action, to be recovered in like manner. 46. Whenever, for any reason, a legal meeting of the stockholders of any corporation cannot be otherwise called, three or more stockholders having voting powers may call such meeting by publishing ten days' notice of the time, place and purposes of the meeting in a newspaper published in the county in which its principal office in this state is located, and mailing such notice to all stockholders whose post office address is known or can be ascertained; a meeting called as aforesaid shall be a legal meeting of the corporation, and if there be no officers present, the stockholders may elect officers for the meeting; and the secretary of the meeting shall record the proceedings thereof in the book of minutes of the corporation. P. L. 1845, p. 70; P. L. 1849, p. 305; Act of 1875, § 51. IV. Dividends-Payment of Capital Stock. 47. Unless otherwise provided in the original or amended certificate of incorporation, or in a by-law adopted by a vote of at least a majority of the stockholders, the directors of every corporation created under this act shall, in January in each year, after reserving over and above its capital stock paid in, as a working capital for said corporation, such sum, if any, as shall have been fixed by the stockholders, declare a dividend among its stockholders of the whole of its accumulated profits exceeding the amount so reserved, and pay the same to such stockholders on demand. (As amended by Chap. 110, Laws of 1901; P. L. 1901, p. 246.) This section in the Act of 1875, and as amended in the supplement of 1891 (P. L. 1891, p. 176), applied only to "manufacturing corporations within this State." This section applies to all corporations formed under this act, and is not limited to manufacturing corporations. The purpose of the amendment of 1901 primarily was to do away with the effect of Marquand v. Federal Steel Company (95 Fed. Rep., 725), and to enable corporations to pay dividends on common stock during the same year and for the same time that dividends are paid on preferred stock, and to provide in the charter or by-laws for the times of paying dividends. It would seem that under this amendment the certificate of incorporation or a by-law adopted by a majority of the stockholders may empower the board of directors to do either or both of the following things: (1) Determine the time or times for the declaration and payment of dividends; (2) Fix the amount to be reserved as working capital or otherwise. Suits to compel declaration of dividends.-"The power of the Court of Chancery to order the directors of a trading corporation to make a dividend of unused profits, when they improperly refuse to do so, is undoubted. * * * Generally suits to compel the declaration of dividends must be in the name of the corporation, but where the corporation is a defendant and the majority of directors are parties charged with fraud in this very respect the suit will proceed to a decree upon the complainant's rights." (Laurel Springs Land Co. v. Fougeray, 50 N. J. Eq., 756, 759.) When a dividend is declared it becomes a debt due from the corporation to the individual stockholder, and after demand of payment, an § 47 § 48-49 action at law may be maintained for its recovery. (King v. Paterson & Hudson R. R. R. Co., 29 N. J. Law, 504.) As to the rights to dividends as between the life tenant and remainder-man of shares of stock, see Van Doren v. Olden, 19 N. J. Eq., 176; Lang v. Lang's Executor, 57 N. J. Eq., 325. Contract to pay employee percentage of net profits as compensation. "It is admitted that the president impliedly promised the plaintiff to pay him one-sixth of the net profits of the operations of the defendant as part of his compensation, but it is claimed that by reason of section 47 of the Revised Corporation Act neither the president nor the corporation itself could thus dispose of the profits. But this one-sixth proposed to be given to the plaintiff was salary,-payment for services, and not part of the profit, but part of the expenses of the business; and if the corporation had permitted its president, by acquiescence, or by receiving the benefit of the services for which this one-sixth was to pay, to make this arrangement, then the corporation was as much bound to pay this as to pay the fixed salary which they had agreed to. The profits referred to in section 47 were not ascertained until this expense of conducting the business had been paid." (Bennett v. Milville Imp. Co., 51 Atl. Rep., 706.) 48. Nothing but money shall be considered as payment of any part of the capital stock of any corporation organized under this act, except as hereinafter provided in case of the purchase of property, and no loan of money shall be made to a stockholder or officer thereof; and if any such loan be made the officers who make it, or assent thereto, shall be jointly and severally liable, to the extent of such loan and interest, for all the debts of the corporation until the repayment of the sum so loaned. P. L. 1846, p. 69; P. L. 1849, p. 305; Act of 1875, § 54. An agreement on the part of a corporation that a subscriber for stock shall be secured as to part of his investment by mortgage on the corporation's property is void as to creditors of the corporation. (Boney v. Williams, 55 N. J. Eq., 691.) For further cases see notes to next section. 49. Stock issued for property purchased. Any corporation formed under this act may purchase mines, manufactories or other property necessary for its business, or the stock of any company or companies owning, mining, manu facturing or producing materials, or other property necessary § 49 for its business, and issue stock to the amount of the value thereof in payment therefor, 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 payment under any of the provisions of this act; and in the absence of actual fraud in the transaction, the judgment of the directors as to the value of the property purchased shall be conclusive; 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. Act 1875, § 55; P. L. 1889, p. 414; P. L. 1893, p. 444. "In the absence of actual fraud in the transaction the judgment of the directors as to the value of the property purchased shall be conclusive" was inserted in the statute by the Revision of 1896. Before the Revision of 1896 the rule was clearly stated by the Court of Errors and Appeals, as follows: "The inquiry, therefore, in the court below, should have been, whether the agreement in question was fraudulent or not; for, if the transaction was an honest one, the difference in value between the property constituting the consideration of the sale and the stock had no legal significance. The charter of this company authorizes the corporation to exchange its capital stock for property, and, under that condition of things, a court of equity cannot set aside a transaction of that kind simply on the ground that the bargain on the side of the corporation, is a disadvantageous one. In such affairs the company and the purchaser stand on the common footing of buyer and seller, the valuations of property in making the exchange, either on the one side or the other, cannot be supervised or controlled by the Court of Chancery, for, in the absence of deceit, or some other corrupt constituent, the bargain between the parties cannot be disturbed." (Bickley v. Schlag, 46 N. J. Eq., 533.) In Donald v. American Smelting and Refining Co., (48 Atl. Rep., 771) the Court of Errors and Appeals said: “The meaning of Section 48 is not questionable; the money must equal the face value of the stock. The language of Section 49 is even more explicit; the corporation may issue stock to the amount of the value of the property. The value of the property in the one case, just as the value of the money in the other, must at least equal the face value of the stock. Such was the view expressed for this Court by Mr. 49 Justice Depue in Wetherbee v. Baker, 35 N. J. Eq., 501, and supported by abundance of authority. "The distinction between the contemplated issue of corporate stock for property and its issue for money lies, not in the rule for valuation, but in the fact that different estimates may be formed of the value of property. When such differences are brought before judicial tribunals, the judgment of those who are by law entrusted with the power of issuing stock 'to the amount of the value of the property,' and on whom, therefore, is placed the first duty of valuing the property, must be accorded considerable weight. But it cannot be deemed conclusive when duly subjected to judicial scrutiny. Nor is it necessary that conscious over-valuation or any other form of fraudulent conduct on the part of these primary valuers should be shown, to justify judicial interposition. Their honest judgment, if reached without due examination into the elements of value, or if based in part upon an estimate of matters which really are not property, or if plainly warped by self-interest, may lead to a violation of this statutory rule, as surely as would corrupt motive. "The cases in this State to which we are referred (Elkins v. Camden & Atlantic R. R. Co., 36 N. J. Eq., 241; Park v. Grant Locomotive Works, 40 N. J. Eq., 114; Ellerman v. Chicago Junction Rys. Co., 49 N. J. Eq., 217; Willoughby v. Chicago Junction Rys. Co., 50 N. J. Eq., 656; Sewell v. East Cape May Beach Co., 50 N. J. Eq., 717; Edison v. Edison United Phonograph Co., 52 N. J. Eq., 620), in support of the proposition, that the honest judgment of the managers of a corporation with respect to matters intra vires cannot be disturbed at the instance of stockholders, all relate to transactions for which the Legislature has set up no other criterion than the discretion of those managers. But the original issue of corporate stock is a special function, in the exercise of which the Legislature has fixed the 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. "When corporate stock has once been issued for property purchased, then the Legislature has directed the application of a different rule. In the words of the same section 49 '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 payment under the provisions of this Act; and in the absence of actual fraud in the transaction the judgment of the directors as to the value of the property purchased shall be conclusive. Under these provisions, after the property has been purchased and the stock issued therefor, nothing short of actual fraud in the transaction can impair the right of the holder to hold his stock as full-paid stock, free from further call.' The cases of Bickley v. Schlag, 46 N. J. Eq., 533, and Rural Homestead Co. v. Wildes, 54 N. J. Eq., 668, indicate that the completed transaction was equally secure, even before the statute received its present decisive form." |