Cornell v. Seddinger

Citations

• 237 Pa. 389
• 85 A. 446
• 1912 Pa. LEXIS 948

Syllabus

<p>Corporations — Directors—Dividends—Wrongful declaration of dividends.</p> <p>1. The directors of a corporation are trustees, or quasi trustees, of the capital of the company, and liable as trustees for any breach of duty with respect to the application of it. The capital of the company may not be lawfully used for the payment of dividends.</p> <p>2. Directors cannot be regarded as discharging their duty, and protecting the trust imposed upon them, when they accept the report of the treasurer of the company, which upon its face calls for explanation and analysis, and after merely seeing that it purported to show profits, proceed without further investigation to declare dividends.</p> <p>3. The directors of a ship building company cannot excuse themselves from liability, where they have wrongfully declared dividends out of capital, on the ground that they were not practical ship-builders, and not personally familiar with processes of construction, where it appears that if they had examined with even the most ordinary care, the reports of the treasurer submitted to them, they would have discovered glaring inflations of value, serious impairment of capital, and shortage of working capital; nor are they relieved from liability because the report of the receiver of the company showed that the assets exceeded the liabilities when the company passed into the hands of the receiver, if an inspection of the report shows that in making it up, the capital stock was not taken into consideration as a liability.</p> <p>Appeals — Assignments of error — Exceptions in equity.</p> <p>4. Assignments of error to the dismissals of exceptions to an adjudication in equity are defective if neither the exceptions nor tbe order of tbe court dismissing them are set forth totidem verbis in the assignments.</p> <p>Mr. Chief Justice Fell, dissents.</p>