New Jersey Car Spring & Rubber Co. v. Fields

The opinion oí the court was delivered by Swayze, J. This action is to recover money paid the decedent, upon the theory that the contract of July 15th, 1902, was void since the decedent as director was contracting with himself. Gardner v. Butler, 3 Stew. Eq. 702, is relied on. The case, however, differs from Gardner v. Butler in several respects — first, the contract was assented to by all the stockholders who were also all the directors; second, the payments ■were continued for more than six years after the elder Fields' had ceased to be a director or stockholder; third, the plaintiff corporation, controlled as it was by those who- still control it, never repudiated the transaction until after the death of the elder Fields. The case of the defendant might therefore be rested upon the right of the stockholders as distinguished from the directors to make or to ratify the contract (United States Steel Corporation v. Hodge, 19 Dick. Ch. Rep. 807), or upon their acquiescence in what was done (Breslin v. Fries-Breslin Co., 41 Vroom 274), or upon the long delay in acting (Lilland v. Oil, Paint and Drug Co., 4 Robb. 197, 210). But inasmuch as the payment was on the face of it and irr form a mere gratuity, or at best a pension to the man who seems to have built up the company, it may be well to examine a little further its real character, for the purpose of showing the fairness of the whole transaction to the stockholders who now seek to question it and recover the money. Mr. .Fields had been receiving six per cent, on $100,000, the entire capital stock. FTe had already given one thousand shares to his son, and was about to give him two thousand more, and to give the grandson the remaining one thousand, lie rvas about to strip himself of the whole capital stock without consideration. As a part of the transaction, and evidently by way of partial payment, the son and grandson, in effect, agreed to pay him three per cent, on the amount during his life, which, at best, could last but a few years. They might have put the agreement in the formal shape of a contract by them as individuals to pay the annuity. They might then as [220] stockholders have received dividends from the company and out of the money paid their obligation to the decedent. They sought to accomplish the same object by a-short cut — by having the corporation pay him directly. The practical effect was the same. ' Their dividends were necessarily that much less. In the absence of any claim of creditors, we see no- legal objection to their accomplishing the object as they did, as long as every one acquiesced. To hold otherwise would enable them to retain the stock without paying the price agreed upon. There was no fraud, and although this method of paying a dividend to the nominee of the stockholders instead of paying it directly to the stockholders is irregular, it is not ultra vires, and there is no minority of the stockholders to suffer thereby. The irregularity even is much less serious than were the irregularities in Breslin v. Fries-Breslin Co., supra. The judgment in favor of the defendant is affirmed, with costs. For affirmance — The Outer Justice, Garrison, Swayze, Trenoi-tard, Parker, Bergen, Voorhees, Minturn, Kalisch, Yredenburgh, Conc.don, White, Teri-iune, IIeppenI-IEIM.ER, JJ 14. For reversal — None.