A.P. Smith Mfg Co v. Barlow PDF

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A.P. SMITH MFG. CO. v. BARLOW 13 N.J. 145, 98 A.2d 581, appeal dismissed, 346 U.S. 861 (1953) FACTS: Parties: Appellant: Barlow (Δ) Appellee: A.P. Smith (Π) Procedural History: 

Chancery division found in favor of Π

Relevant Facts: 

Π wanted to give Princeton $1,500 out of the corporation’s money

ISSUE: 

Whether a charitable donation to a Princeton college was within the power of the directors despite a shareholder objection

PARTIES’ ARGUMENTS: Appellant: 

Π certificate of incorporation does not expressly authorize the contribution



Under common law principals the company does not possess any implied or incidental power to make it



NJ statutes which expressly authorize the contribution may not constitutionally be applied to the Π

Appellee: 

Corporate contributions are a sound investment and the public expects corporations to aid philanthropic and benevolent institutions



Contributing creates good will and a business friendly environment



Contributing to a college furthers the self-interest in assuring properly trained personnel for administrative and other corporate employment

DISPOSITION OF THE COURT: 

Affirmed

RULE OF LAW:



Those who managed the corporations could not disburse any corporate funds for philanthropic or other worthy public cause unless the expenditure would benefit the corporation

HOLDING: 

A charitable donation to Princeton is within the discretion of the corporate directs even against the wishes of a minority shareholder

COURT’S REASONING:    

Under NJ law a donation in excess of 1% of the capital stock required 10 days’ notice to stockholders and approval at a stockholders’ meeting if written objections were made by the holders of more than 25% of the stock Where justified by the advancement of the public interest the reserved power may be invoked to sustain later charter alterations even though they affect contractual rights between the corporation its stockholders The public policy supporting the statutory enactments is greater and the alteration of preexisting rights of stockholders much lesser Nothing indicating the donation was made in furtherance of personal rather than corporate ends...