Pardee v. Harwood Electric Co.

Citations

• 262 Pa. 68
• 105 A. 48
• 1918 Pa. LEXIS 589

Syllabus

<p>Corporations — Dividends—Preferred stoch — Directors — Discretion — Review by court — Operating expenses — Future exhaustion of coal — Equity—Finding of chancellor.</p> <p>1. So far as not regulated by contract the question of dividends on corporate stock is committed largely to the directors and while their action may he reviewed by the courts, it will not be set aside except in case of bad faith, or where arbitrary or manifestly erroneous, or such as to constitute an abuse of discretion or disregard of official duty.</p> <p>2. In the absence of an express stipulation, what shall constitute operating expenses, or what amount of earnings should be set aside to cover operating expenses, is a matter primarily for the directors of the corporation to decide.</p> <p>3. A public service corporation is not required to declare §uch dividend as will destroy or impair its efficiency.</p> <p>4. The rule that the findings of a chancellor approved by the court below are entitled to the same weight as the verdict of a jury is especially applicable where such findings are the result of an investigation of the business affairs of a manufacturing corporation, its system of bookkeeping, etc.</p> <p>5. The fact that certain balances are denominated, in the books of a corporation as net earnings is, as against the corporation, persuasive but not conclusive evidence that they are such; in the absence of intervening rights, they are subject to explanation.</p> <p>6. In a suit in equity to compel the payment of dividends on preferred stock of a public sendee corporation with which other companies had been merged it appeared that the certificates for such stock provided that the board of directors must declare certain dividends thereon from earnings in each fiscal year “after payment of all operating expenses and fixed charges.” The defendant set aside from earnings a reserve for the purpose of providing for bad debts, for depreciation of plant and property, and for depreciation of phys