(N. J.

[3] Moreover, the statute of limitation is a defense which must be pleaded, and no such defense is set up in the defendant's an

swer.

KALISCH, J. The action in the court be- [statute does not mean that. It is well to low was brought against the Lehigh Valley note here that the limitation act above reRailroad Company for the use of the Stand- ferred to was amended by a later statute, ard Fire Insurance Company, and arose out which enlarges the limitation of one year to of the following circumstances: Martin's two years. P. L. 1912, p. 265. But this is of house was burned by a fire originally started no importance here. by sparks or live coal emitted from a locomotive engine of the defendant company. He had a policy of insurance on the house in the Standard Fire Insurance Company, which company paid him upon that policy $1,089, and for which he gave a subrogation receipt to the company. He then brought his action against the railroad company to recover his entire loss, but it appears that this action was compromised between the parties, by the railroad company paying the amount of the total loss, less the sum received by Martin from the insurance company, which was fixed at $1,500. The insurance company then endeavored to collect from the railroad company the amount which it had paid Martin on the policy of insurance, and upon a refusal of the railroad company to recognize this claim the action in the court below was

versal is that there was no negligence shown [4] The only other ground urged for a reon the part of the appellant company as a producing cause of the fire. We think that there was evidence on this point requiring the submission of the question involved to the jury. It is true that there was proof of the examination of the spark arrester of the engine which caused the fire, and that the inspector testified to its good order. But there was also evidence that this same engine had set another fire, and only two days before the one in question, and there was also testimony emanating from an expert called by the railroad company that, where fires re

brought, and resulted in a verdict and judg-peatedly occur through sparks escaping from ment against the railroad company. From an engine, it is good evidence that the engine this judgment the railroad company appeals is not in proper order. to this court.

[1] The first ground of appeal is based upon the claim that the trial judge erred in refusing to nonsuit the plaintiff below, because it appeared that another action had been commenced and determined for the same loss. This manifestly refers to the action brought by Martin against the railroad company to recover the whole amount of the loss, and which was compromised by the railroad company paying Martin $1,500, after deducting the amount received by him from the insurance company. That action was obviously settled upon the basis of the liability over by the railroad company to the insurance company, and therefore afforded no legal bar to the latter maintaining its action against the railroad company.

The next ground of appeal is based upon the assertion by counsel for appellant that more than a year elapsed before the action was begun. But this is not so in fact. The fire occurred on the 2d day of May, 1913, and the action was begun by the issuance of the summons on the 30th day of December of that year and the filing of the complaint

on the 8th day of the next succeeding month.

[2] The argument of counsel for appellant further proceeds upon the theory that the language of section 58 of the railroad act (C. S. p. 4246), creating the special limitation of actions of this nature, requiring that they

"shall be commenced and sued within one

year after the cause of action has accrued, and not after," limits not only the bringing of the action within the year, but also the prosecution thereof to a finality, unless good cause for delay is shown. But clearly the

The judgment will be affirmed, with costs.

35-Orders

PUBLIC SERVICE COMMISSIONS
(Syllabus by the Court.)
-REVIEW-Statute.
Under an act concerning public utilities (P.
is given jurisdiction to review the orders of the
L. 1911, p. 374, c. 195, § 38) the Supreme Court
board of public utility commissioners and to set
aside or affirm the orders in toto, but the Su-
preme Court has no power under said act either
to revise or modify an order of said board.
White, Williams and Gardner, JJ., dissenting.

Appeal from Supreme Court.

Certiorari by the Erie Railroad Company to review an order of the Board of Public Utility Commissioners upon a petition filed by the Board of Chosen Freeholders of the Supreme Court (87 N. J. Law, 438, 95 Atl. County of Hudson. From a judgment of the 177) setting aside part of order for modification by Board of Public Utilities Commission, the Erie Railroad Company appeals. Reversed.

Collins & Corbin, of Jersey City, for appellant. L. Edward Herrmann, of Jersey City, and Frank H. Sommer, of Newark, for appellee Board of Public Utility Com'rs. John A. Dennin, James J. Murphy, and Joseph M. Board of Chosen Freeholders of Hudson Noonan, all of Jersey City, for appellee County.

Erie Railroad Company from an order and
BLACK, J. This case is an appeal by the

The judgment of the Supreme Court is therefore reversed, and the order of the board of public utility commissioners is set aside in toto.

WHITE, WILLIAMS, and GARDNER, JJ., dissent.

(87 N. J. Eq. 234) GENERAL INV. CO. v. BETHLEHEM STEEL CORP. (No. 43/42.)

1. EVIDENCE

1917.)

22(1)-JUDICIAL NOTICE.

judgment entered in the Supreme Court reversing an order of the board of public utility commissioners founded upon a petition filed by the board of chosen freeholders of Hudson county. The subject-matter of the order was the keeping on duty flagmen at certain grade crossings of the Newark branch of the appellant's railroad in Hudson county. The facts are clearly and accurately stated in an opinion by Mr. Justice Kalisch, speaking for the Supreme Court, reported in 87 N. J. Law, 438, 95 Atl. 177. The order of the (Court of Chancery of New Jersey. March 6, Supreme Court on which the judgment was entered, in addition to setting aside the order of the board of public utility commissioners, dated June 9, 1914, “further ordered that the record be remitted to said board of public utility commissioners so that said part of said order be modified by providing that the prosecutor be required to keep a flagman on duty at said crossings and each of them only during such hours of the day as trains and engines are operated over said crossings and each of them, and covering the operations of all trains and engines over said crossings and each of them." It is from the above order and judgment of the Supreme Court that an appeal has been made to this court, on the ground that the Supreme Court had no power to make such an order and judgment. The statute involved in this discussion is an act concerning public utilities (P. L. 1911, § 38, c. 195, p. 374), the pertinent part of which is:

"The Supreme Court is hereby given jurisdiction to review said order of the board, and to set aside such order when it clearly appears that there was no evidence before the board to support reasonably such order, or that the same was without the jurisdiction of the board."

The court will take judicial notice of the fact that in an unsettled condition of public affairs, when war is imminent, contract to underwrite an issue of stock, dealing with some millions of dollars, must be entered into with a very limited time provided for performance. [Ed. Note. For other cases, see Evidence, Cent. Dig. § 26.]

2. CORPORATIONS
RIGHTS OF ACTION.

189(1)-STOCKHOLDERS

shares after a corporate transaction solely to
Where a corporate stockholder buys his
acquire status to question it, the Court of Chan-
cery must, nevertheless, consider any equitable
or legal right which the stockholder may have
cognizable or enforceable only in a court of
equity.
[Ed. Note.-For other cases, see Corporations,
Cent. Dig. § 706.]
3. CORPORATIONS
RIGHTS.

310(1)-STOCKHOLDERS

of Chancery will intervene at suit of a stockNotwithstanding such rule, before the Court holder who buys a relatively small amount of stock after the transaction of which he complains, approved by practically all stock issued, it must be satisfied that complainant's right is clear and his injury irreparable.

[Ed. Note.-For other cases, see Corporations, Cent. Dig. § 1352.]

4. CORPORATIONS 157 POWER TO ISSUE NONVOTING STOCK - STATUTE "COMMON

STOCK."

It requires no argument or illustration to demonstrate the point that under this statute, the Supreme Court having concluded there Under Corporation Act (2 Comp. St. 1910, was no evidence to support a certain part P. 1608) § 18, providing that every corporation organized under the act shall have power to of the order, the order of the board of public create two or more kinds of stock, of such classutility commissioners should have been set es, with such designations, preferences, and votaside in toto, without directing or ordering ing powers or restrictions or qualifications therethe board of public utility commissioners to tificate of incorporation or in any certificate of of as shall be stated and expressed in the cereither revise or modify the order. What amendment thereof, a steel corporation, which order should be made in lieu of the one set had accumulated a large surplus, and was desiraside rests exclusively within the jurisdic-ous of distributing part to stockholders and yet tion of the board of public utility commissioners.

to retain it as working capital, had authority_to issue a class of stock called "common, class B," without voting powers, since there is no public policy prohibiting the issuance of such stock; owners to an equal pro rata division of profits, "common stock" meaning stock entitling its one stockholder or class of stockholders having no advantage, priority, or preference over any other shareholder or class of shareholders in the

division.

[Ed. Note. For other cases, see Corporations, Cent. Dig. §§ 584-586.

We therefore conclude the judgment of the Supreme Court for the above error should be set aside, because the Supreme Court had no power to make such an order or judgment under the statute. The power of the Supreme Court under the above statute must be limited either to affirm or to set aside the order of the board of public utility commissioners as a whole. The rule to be applied is illustrated in cases from our reports. Pub-5. CORPORATIONS lic Service Gas Co. v. Board of Public Utility -PERPETUATION OF CONTROL IN STOCKHOLDERS-GOOD FAITH. Commissioners, 84 N. J. Law, 463, 87 Atl. 651; Id., 87 N. J. Law, 581, 597, 92 Atl. 606, 94 Atl. 634, 95 Atl. 1079.

For other definitions, see Words and Phrases, First and Second Series, Common Stock.] 157-ISSUANCE OF STOCK

That the purpose of a steel corporation's plan, in distributing an accumulated surplus to stockholders by issuing as a stock dividend com

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

mon stock without voting rights and by selling | ers were certain directors of the company, some of such stock, was to retain control of the including Mr. Schwab. The plan was procompany in the then stockholders, did not vitiate mulgated January 25, 1917, and immediately it; the action being taken in good faith. [Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 584-586.] 6. CORPORATIONS

157-DIRECTOR'S INTER

EST IN TRANSACTION.

Where some of the directors of a corporation, who voted for the plan to amend the certificate of incorporation to authorize the company to distribute an accumulated surplus by issuing a stock dividend in common stock without voting powers and by selling some of such stock, became subscribers to the syndicate to take up such stock, the entire transaction was not void on account of their participation, the contract being voidable, and open to ratification by vote of the stockholders, and a complaining minority stockholder, on application for temporary injunction, could not insist that the entire transaction be set aside for participation of the directors.

[Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 584-586.]

Bill between the General Investment Company and the Bethlehem Steel Corporation. On motion for temporary injunction. Order to show cause discharged, and restraint vacated.

McCarter & English, Arthur F. Egner, and Robert H. McCarter, all of Newark, for complainant. Lindabury, Depue & Faulks, F. J. Faulks, J. R. Hardin, and R. V. Lindabury, all of Newark, and Paul D. Cravath, of New York City, for defendant.

became public. The bill is brought by the General Investment Company, a corporation dominated and controlled by Clarence H. Venner. He bought his stock, 100 shares, January 31, 1917, and immediately notified the company of opposition to the plan. He filed his bill on February 9th. The meeting of stockholders called for the purpose of acting on the increase was scheduled to be held February 14th. The last day for stockholders to subscribe under the syndicate agree ment is March 8th. The contract between the company and the bankers provided for a limited time of performance.

[1] It is represented, and the court will take judicial notice of the fact, that, in the present unsettled condition of affairs, contracts of this nature dealing with the sums here dealt with must be entered into with a very limited time provided for performance; nothing else is conceivable.

On the day fixed the meeting was held. There were voted in favor of the plan 126,370 shares of preferred and 112,156 shares of common stock, and against the plan 450 shares of preferred and 125 shares of common stock, of which latter 100 shares were those held by the complainant.

[2, 3] There is another common stockholder holding 25 shares who after argument by complainant's counsel to-day seeks to intervene. In view of my conclusions I shall deny her application. The situation therefore is that over 99 per cent. of the present stock desire that the plan should go forward, and opposition is made by only 125 shares. Of these, 100 were actually bought after the promulgation of the plan, and I think for the sole purpose of bringing this suit, notwithstanding the denial of Mr. Venner. The law is settled that even under these circumstances this court must consider any equitable or

LANE, V. C. This is an application for a temporary injunction to restrain Bethlehem Steel Corporation from increasing its capital stock. The present capital stock is $30,000,000, divided one-half preferred and the other common, with equal voting rights. The plan is to increase the capital stock by $45,000,000, the additional to be called common, class B. Of this, $30,000,000 is to be put out as a stock dividend; $15,000,000 is to be sold. The stock is to have all the characteristics of common, except that it will have no vote. The surplus of the company amounts to some-legal right which the complainant may have thing like $69,000,000, and the scheme is proposed so as to get a part of this surplus out into the hands of stockholders and yet leave the money with the company as working capital. The intent of those who formulated the plan was to keep control of the company in its present stockholders. It is said that there is a good business reason for so doing. As part of the transaction, a contract was entered into by the company under which Seligman & Co., bankers, agreed to form a syndicate to underwrite the issue of $15,000,000 of the new stock. They were to be paid a certain commission, amounting in case the plan was unsuccessful, I think, to $225,000, and in case it was successful to $450,000. A portion of this commission was to be retained by Seligman & Co., and the remainder to be paid to those who should become syndicate subscribers. Among the syndicate subscrib

cognizable or enforceable only in a court of equity. Hodge v. United States Steel Corporation, 64 N. J. Eq. 111, 53 Atl. 553. The reason of the rule I assume is, as applied to stock, that to hold otherwise would be to impose a restraint upon alienation. A holder of stock before the threatened act must be able to transfer all of his rights to any one or the value of the stock may be affected. Notwithstanding this rule, before this court will intervene, at the suit of a stockholder who buys in, under the conditions present here, a very small amount of stock, to prevent the carrying out of a plan such as this, approved by practically the entire stock issued, it must be satisfied that the right of the complainant is clear and the injury irreparable. Vice Chancellor Pitney, in Trimble v. American Sugar Refining Company, 61 N. J. Eq. 340, at 345, 48 Atl. 912. The attack made

upon the plan I will consider, putting out of mind, as far as I can, the circumstances under which it comes here.

Complainant asserts: Firstly, that the corporation has no power to issue a class of common stock, or a class of stock having all the characteristics of common stock, without the voting privilege; secondly, that because it is admitted that the purpose is to perpetuate the present control of the corporation, and because some of the directors who voted in favor of it became syndicate subscribers, and therefore will profit by its success, the entire proceedings are vitiated and void.

[4] 1. Whether the corporation has the legal power to issue this class of stock depends upon the construction to be put upon the eighteenth section of the Corporation Act. (Revision of 1896; Compiled Statutes, p. 1608). From a casual reading of that section it would seem that stock of any kind, nature, or description, common or preferred, or whatever it may be called, may be created with or without voting privileges. Counsel for complainant insists that the section must be construed in the light of a public policy said to have prevailed at the time the section was adopted and to prevail now, i. e., that common stockholders at least are entitled to con

"They surrendered the privilege of voting. That was perhaps a valid agreement between stockholders, though of doubtful public policy."

It is almost impossible to get a definition of "common stock" or a statement of what classes of stock may be issued, and the necessary rights and privileges of the classes, that is satisfactory. Thompson, § 3426, in referring to common stock, says that the name itself indicates its nature, and it is so called because it is the common stock, or the stock which private corporations generally issue; and is usually the only kind authorized. He says the universal rule is that the owners of common stock are entitled to a pro rata dividend of profits, and to a pro rata participation in the management of the corporation; that the holders of common stock sometimes have a preference in the management of the corporation. In section 3425 with reference to classes of stock he states:

"The first general division of stock is into common or preferred stock; and these two classes are again subdivided into almost an infinite variety."

Section 859: "The rule that a right to vote follows the ownership of stock means only that in the absence of any common restriction upon all the stock, or upon a class of stock, this right prevails. That is, the right of a stockholder to vote cannot be arbitrarily abridged and is not is equally emphatic, if not so general, that resubject to universal restriction. But the rule strictions may be placed upon the right to vote; or, as sometimes stated, the right to vote may be separated from the ownership of stock. It must be remembered, in this connection, that stockholders can make any agreement respecting their stock, or the voting of it, that they may see fit or deem wise, except agreements that are

sultation with, and advice of, and action by
every other common stockholder, and that
the policy of the law required that a cor-
poration should be managed by a majority of
its stock. In other words, the privilege of
voting is necessarily incidental to common
stock. The cases relied on are Cone v. Rus-void as against public policy."
sell & Mason, 48 N. J. Eq. 208, 21 Atl. 847;
White v. Thomas Inflatable Tire Company, 52
N. J. Eq. 178, 28 Atl. 75. But see Chapman
v. Bates, 61 N. J. Eq. 658, at page 667, 47 Atl.
638, 88 Am. St. Rep. 459.

The question is not, however, whether, after a person has purchased stock in a corporation having a certain amount of stock vested with the right to vote, these fellow stockholders may voluntarily separate the right of property from the right to vote, and thus put the control of the corporation in the hands of those having no pecuniary interest therein and deprive the dissenting stockholder of the advice and action of those whose advice and action he may have fairly be said to have contracted for, but rather whether such stockholder is entitled to require that any new stock issued should be vested with the privilege of voting-a very different proposition. I have examined in the short time I have had

all the cases that I could locate, and I have failed to find any statement of such public policy, with possibly the exception of a remark made by Judge Lurton in Hamlin v. Toledo, St. L. R. R., 78 Fed. 671, 24 C. C. A. 271, 278 [36 L. R. A. 826], in which, while sustaining an issue of preferred stock, or, rather, an issue of stock which was neither preferred nor common, a rather peculiar kind of stock, as he called it, he said:

He cites Miller v. Ratterman, 47 Ohio St. 141, 24 N. E. 496, Supreme Court of Ohio. There the question was as to whether preferred stock might be issued without voting privileges. The court said:

generally, is that it can be voted upon.
"It is true that one characteristic of stock,
But
this is not essential. Indeed, instances may
arise where it is good policy to prohibit the vot-
ing upon stock"-citing cases.

Thompson, § 859, contains the statement : "So, it has been established that holders of the same at any meeting of the holders of the preferred stock may be denied the right to vote capital stock of the corporation. The legality of such restriction is not based on the theory that preferred stockholders are guaranteed a the corporation to restrict the voting power. It dividend, but rather on the inherent power of is simply a contract relation between two classes of stockholders, in which the public has no

concern."

He instances a great number of cases where restrictions with respect to voting has stockholder should not vote more than a been imposed upon common stock; i. e., one fourth of the total, a stockholder should not vote more than 100 shares, nonresidents should not vote, purchasers of forfeited stock should not vote, even though not liable for the amount due until the amount due was paid.

"There is no rule of public policy which forbids a corporation and its stockholders from

"Inasmuch as preferred stockholders are members of the company, and except in so far as their rights may be altered by the contract, statute, or by-law under which the shares are issued, entitled in all respects to the same rights as other shareholders, it follows that they have the same voting rights as other shareholders. The right of shareholders to vote is, however, like the right to dividends or to participate equally in a division of capital on liquidation regarded as a private matter for each shareholder which he may waive if he choose. Consequently, a provision that shareholders of a certain class shall have no right to vote is, if assented to by them, quite valid. Such a provision might theoretically be made as to either theme that a corporation may not issue this preferred or the deferred (Machen calls common deferred shares), but it is much more common with respect to the preferred shares so as to compensate the other shareholders for the preference of the preferred stockholders as to dividends." Machen, § 570.