Howell, V. C.
It is now proposed by the defendant and its directors to pay to its stockholders a dividend of $10 per share, giving to each his proper proportion thereof, from the funds which have been called the “segregated, assets” of the company, and which consist very largely of the moneys recovered by the enforcement of the decrees against Bigelow. Such a dividend will require the sum oí $1,620,000, some $300,000 less than the amount collected to this date upon the decrees. It is objected that the Bigelow money is capital and not surplus, and that to distribute it to the stockholders in the form of dividends would be a violation of section 30 of the Corporation law as amended in 1904. P. L. 190J+ p. 275. Consequent^, the first question to be decided is whether the Bigelow money belongs to and is part of the money capital of the corporation, or whether taking an account of all the assets and liabilities of the corporation fixere remains a surplus out [513]*513of which, the proposed dividend may be lawfully declared. The statute (P. L. 1901 p. 246) now declares that unless otherwise provided in the incorporation papers or in by-laws adopted by at least a majority of the stockholders tire directors shall, in January of each year, after reserving a working capital fixed by the stockholders, declare a dividend among the stockholders of the whole of its accumulated profits exceeding the amount so reserved and pay the same to such stockholders on demand, but that the directors shall not make dividends except from the company’s surplus or from the net profits arising from its business. P. L. 1904 P- 27-5. Therefore, before reaching any conclusion on the question of the ability of the corporation to pay dividends lawfully, we must inquire into its assets and liabilities and ascertain whether, after payment and satisfaction of all liabilities, taking into account the liability to redeem the capital stock at par there still remains a fund out of which the proposed dividend can be paid without impairment of the capital, or whether there are net profits arising from the business which can be used for that purpose. Goodnow v. American Writing Paper Co., 73 N. J. Eq. (3 Buch.) 692.
It appears that on Juty 31st, 1913, the books of the company show total assets of $9,344,639.3?, and liabilities of $4,808,-861.33 (including the capital stock liability), leaving a‘surplus of $4,535,778.04. Obviously, if these figures are correct, there is in the possession of the company sufficient surplus for the purpose of the dividend. It was argued that inasmuch as the decrees went against Bigelow because of the abstraction by him of moneys claimed to belong to the cash capital of the company, the recovery when made should have been credited to capital account for the purpose of restoring the capital which had been depleted by his act in the promotion scheme. But, on the other hand, it now appears when the Bigelow recovery is included that the company has sufficient assets over all its liabilities to make good its capital, which has been accumulated from its current net profits, and that consequently the Bigelow money is not needed for the purpose of meeting anj7 impairment of the money capital. It, therefore, belongs to that portion of the confpany’s funds which is denominated surplus. It was originally carried on the [514]*514books of the company in an account entitled “Old Dominion Special Account,” and it was'subsequently entered in the ledger under the name “Special Fund Account.” Later on, and after the bringing of this suit, it was transferred to an account which was called “Deserve Account for the Payment of Dividends.” But it makes aro difference whether it is carried as surplus or as segregated assets or ira a special fund account or otherwise. ' It is money which beloaags to the corporation and is under the control of its directors, and it is subject to distribution among the stockholder's if the directors see fit to make distribution of it. Bassett v. United States Cast Iron Pipe and Foundry Co., 74 N. J. Eq. (4 Buch.) 668; affirmed on appeal, 75 N. J. Eq. (5 Buch.) 539.
The only items in the defendant’s statement of assets arad liabilities as of July 31st, 1913, which are subject to criticism, are the items relating to mines and mining claims, and new plant, and construction. Mines and mining claims belonging to the company are carried on the books at $3,414,856.81. This appears, from the testimony, to'be a careful and conservative statement of the values of those items. As testified to by the president of the company their value is from four1 to five million dollars, exclusive of any of the plant improvements. The complainant, who is a mining engineer of large experience, and who was the man that was depended upon at the time of the original purchase to advise the officers and directors -as to the development of the mine, and who has a perfect knowledge of the mines and mining claims, was asked whether, in his opinion, the president’s valuation was high or low. His answer was that it was low. I think that I must assume from these statements that the real value of the mine and mining claims exceeds the sum at which they are carried on the company’s books by a large amount. ' The other item, which is called new plant and construction, and aggregates $3,013,754.37, was largely discussed by counsel on the argument. It represents moneys expended on the construction and erection of the operating plant and machinery, and so far as I can see, it represents actual expenditures and actual values. It cannot be said that the operating plant of a mine has little or no value simply because it is used as a factor in the de[515]*515velopment and working of a wasting property. It, or its equivalent, is necessary to the operation of the mine, and its valuation for that purpose must be left to the honest judgment of the board of directors. No case of fraud in the valuation of this item is shown, and a mere mistake of judgment, if honestly arrived at, must stand as the final act of the directorate.
The total surplus of $4,535,778.04 is carried on the books of the company in four items:
Reserve against special fund............... $1,956,483.08
Plant renewals........................... 759,344.37
Mine renewals ........................... 867,073.91
Profit and loss........................... 952,846.68
Total ............................. $4,535,77S.04
If these figures are correct there can be no doubt but that the company, after providing for all its liabilities upon a full adjustment of all its affairs, including a proper charge for depreciation and renewals, has sufficient money or property with which to pay the proposed dividend without in any way or to any extent impinging upon the fund known as the company’s money capital. Having reached this conclusion, it is hardly necessary to say that the question of the declaration of a dividend and its amount, time and terms of payment, are entirely within the honest discretion of the board of directors. Murray v. Beattie Manufacturing Co., 79 N. J. Eq. (9 Buch.) 604; Blanchard v. Prudential Insurance Co., 80 N. J. Eq. (10 Buch.) 209.
The next objections relate principally to the situation in which the directors of the defendant company find themselves.
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Howell, V. C.
It is now proposed by the defendant and its directors to pay to its stockholders a dividend of $10 per share, giving to each his proper proportion thereof, from the funds which have been called the “segregated, assets” of the company, and which consist very largely of the moneys recovered by the enforcement of the decrees against Bigelow. Such a dividend will require the sum oí $1,620,000, some $300,000 less than the amount collected to this date upon the decrees. It is objected that the Bigelow money is capital and not surplus, and that to distribute it to the stockholders in the form of dividends would be a violation of section 30 of the Corporation law as amended in 1904. P. L. 190J+ p. 275. Consequent^, the first question to be decided is whether the Bigelow money belongs to and is part of the money capital of the corporation, or whether taking an account of all the assets and liabilities of the corporation fixere remains a surplus out [513]*513of which, the proposed dividend may be lawfully declared. The statute (P. L. 1901 p. 246) now declares that unless otherwise provided in the incorporation papers or in by-laws adopted by at least a majority of the stockholders tire directors shall, in January of each year, after reserving a working capital fixed by the stockholders, declare a dividend among the stockholders of the whole of its accumulated profits exceeding the amount so reserved and pay the same to such stockholders on demand, but that the directors shall not make dividends except from the company’s surplus or from the net profits arising from its business. P. L. 1904 P- 27-5. Therefore, before reaching any conclusion on the question of the ability of the corporation to pay dividends lawfully, we must inquire into its assets and liabilities and ascertain whether, after payment and satisfaction of all liabilities, taking into account the liability to redeem the capital stock at par there still remains a fund out of which the proposed dividend can be paid without impairment of the capital, or whether there are net profits arising from the business which can be used for that purpose. Goodnow v. American Writing Paper Co., 73 N. J. Eq. (3 Buch.) 692.
It appears that on Juty 31st, 1913, the books of the company show total assets of $9,344,639.3?, and liabilities of $4,808,-861.33 (including the capital stock liability), leaving a‘surplus of $4,535,778.04. Obviously, if these figures are correct, there is in the possession of the company sufficient surplus for the purpose of the dividend. It was argued that inasmuch as the decrees went against Bigelow because of the abstraction by him of moneys claimed to belong to the cash capital of the company, the recovery when made should have been credited to capital account for the purpose of restoring the capital which had been depleted by his act in the promotion scheme. But, on the other hand, it now appears when the Bigelow recovery is included that the company has sufficient assets over all its liabilities to make good its capital, which has been accumulated from its current net profits, and that consequently the Bigelow money is not needed for the purpose of meeting anj7 impairment of the money capital. It, therefore, belongs to that portion of the confpany’s funds which is denominated surplus. It was originally carried on the [514]*514books of the company in an account entitled “Old Dominion Special Account,” and it was'subsequently entered in the ledger under the name “Special Fund Account.” Later on, and after the bringing of this suit, it was transferred to an account which was called “Deserve Account for the Payment of Dividends.” But it makes aro difference whether it is carried as surplus or as segregated assets or ira a special fund account or otherwise. ' It is money which beloaags to the corporation and is under the control of its directors, and it is subject to distribution among the stockholder's if the directors see fit to make distribution of it. Bassett v. United States Cast Iron Pipe and Foundry Co., 74 N. J. Eq. (4 Buch.) 668; affirmed on appeal, 75 N. J. Eq. (5 Buch.) 539.
The only items in the defendant’s statement of assets arad liabilities as of July 31st, 1913, which are subject to criticism, are the items relating to mines and mining claims, and new plant, and construction. Mines and mining claims belonging to the company are carried on the books at $3,414,856.81. This appears, from the testimony, to'be a careful and conservative statement of the values of those items. As testified to by the president of the company their value is from four1 to five million dollars, exclusive of any of the plant improvements. The complainant, who is a mining engineer of large experience, and who was the man that was depended upon at the time of the original purchase to advise the officers and directors -as to the development of the mine, and who has a perfect knowledge of the mines and mining claims, was asked whether, in his opinion, the president’s valuation was high or low. His answer was that it was low. I think that I must assume from these statements that the real value of the mine and mining claims exceeds the sum at which they are carried on the company’s books by a large amount. ' The other item, which is called new plant and construction, and aggregates $3,013,754.37, was largely discussed by counsel on the argument. It represents moneys expended on the construction and erection of the operating plant and machinery, and so far as I can see, it represents actual expenditures and actual values. It cannot be said that the operating plant of a mine has little or no value simply because it is used as a factor in the de[515]*515velopment and working of a wasting property. It, or its equivalent, is necessary to the operation of the mine, and its valuation for that purpose must be left to the honest judgment of the board of directors. No case of fraud in the valuation of this item is shown, and a mere mistake of judgment, if honestly arrived at, must stand as the final act of the directorate.
The total surplus of $4,535,778.04 is carried on the books of the company in four items:
Reserve against special fund............... $1,956,483.08
Plant renewals........................... 759,344.37
Mine renewals ........................... 867,073.91
Profit and loss........................... 952,846.68
Total ............................. $4,535,77S.04
If these figures are correct there can be no doubt but that the company, after providing for all its liabilities upon a full adjustment of all its affairs, including a proper charge for depreciation and renewals, has sufficient money or property with which to pay the proposed dividend without in any way or to any extent impinging upon the fund known as the company’s money capital. Having reached this conclusion, it is hardly necessary to say that the question of the declaration of a dividend and its amount, time and terms of payment, are entirely within the honest discretion of the board of directors. Murray v. Beattie Manufacturing Co., 79 N. J. Eq. (9 Buch.) 604; Blanchard v. Prudential Insurance Co., 80 N. J. Eq. (10 Buch.) 209.
The next objections relate principally to the situation in which the directors of the defendant company find themselves. It is urged that in declaring the dividend in question the directors are acting under the compulsion of an agreement made between the defendant’s stockholders and the stockholders of the United Globe Mines, and the agreements supplemental thereto, and that the presence of three common directors of itself is sufficient to render invalid any act in which the two companies may be interested. It will be remembered that the defendant corporation is not a party to any of the agreements complained of. Neither have its directors or officers in the remotest way become parties to it. The Maine corporation, by reason of its large holdings of [516]*516the stock of the defendant company, undoubtedly dictates the personnel of the defendant’s directorate, and when it agreed that it would compel the performance of the agreements in question b3r the defendant, who was not a party to them, it did, so far as I can see, merely what it had a right to do as the predominant holder of the defendant company’s stock. The point of these last-mentioned objections seems to have been considered.by Vice-Chancellor Stevenson in his opinion in Pierce v. Old Dominion Co., 67 N. J. Eq. (1 Robb.) 426; and in view of the expression of the court of errors .and appeals in that case (74 N. J. Eq. (4 Buch.) 450), it may well be argued that the reasoning of the vice-chancellor on the injunction motion was approved by the appellate court. This view appears to me not only to be reasonable, but, under the circumstances, the only view that could be taken of the situation. The argument of the complainant is that on account of the circumstances in which the directors of the defendant are, it is impossible that there should be any relations between the' companies at all. The other view is that so long as the defendant’s directors confine themselves to lawful acts, this court will not interfere in an honest exercise of their discretion. The fact that the Maine corporation holds nearly all the stock of the defendant corporation casts upon it the duty of seeing to it that the alfairs of the defendant company are projoeriy and fairly and honestly managed with respect to ’the rights of all the defendant shareholders. This appears to me to have been accomplished. The complainant who now objects to the declaration of a dividend is being treated in the same manner in which the other stockholders are being treated, and he must and will receive his pro rata share of the moneys to be divided, without discrimination or distinction.
Einalty, it is argued on behalf of the defendant that the complainant is estopped from questioning the validity of the proposed action, for the reason that he ratified evei^hing that had been done, with full knowledge of all the details thereof by the purchase of one hundred shares in the Old Dominion Trust which he had transferred on the books of the trustees to his own name, and besides other shares which stand in the names of other persons for him- I do not think that this is an acquiescence in [517]*517the scheme of sufficient force and cogency to operate as an estoppel. Neither do I think that his motives in making these purchases can be inquired into as the case now stands. Hodge v. United Steel Corporation, 64 N. J. Eq. (19 Dick.) 111. Neither do I think that his appearance at the meeting of April 6th, 1910, by his counsel, Mr. Tyler, can be so construed, or that the vote by the stockholders on that day, approving all the doings of the officers of the company during the preceding year, and accepting the report of the directors containing- the report of the treasurer, can be held to be a ratification of all the company’s acts. It is likewise urged that an estoppel grows out of the fact that the complainant holds four hundred shares of the defendant company’s stock, two hundred of which were once owned by Mr. Smith, both of whom were concluded by the decision in the Pierce suit, or actively assented to all the matters concerning which the complainant now complains. It may be true that the predecessors in title of these four hundred shares of stock have acquiesced .in the policy of which the complainant now complains, but his remaining shares are not subject to the same disability, and I think it quite clear that he may sue with respect to his rights in them.
There is an incidental matter mentioned lastly, but of the first importance. Upon the filing of the bill in this cause on October 10th, 1912, an order was made which is still in force by which the defendant and its directors were restrained from declaring as a dividend to the defendant’s stockholders the whole or any part of the moneys received by reason of the decrees against Bigelow. While this injunction was in force, and on June 3d, 1913, a quorum of the directors of the defendant passed the resolution above recited. This action of the directors seems to me to be a violation of the terms of the injunction, and sufficient to charge the defendant with process of contempt. I shall not assume that the contumacy was either wanton or intended as a manifestation of contempt. It is a technical violation of the injunction, however, and the court will not entertain any motion for a final decree on behalf of the defendant until this resolution shall have been rescinded.