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A.P. Smith Mfg. Co. v. Barlow

Supreme Court of New Jersey
98 A.2d 581 (1953)


Facts

New Jersey law was amended in the 1930s to provide that corporations could make charitable contributions to support the community. As long as a donation did not exceed 1 percent of the company’s capital stock, the board did not need to give notice to the shareholders of the donation. A.P. Smith Manufacturing Company (defendant) was a New Jersey corporation, founded in the late nineteenth century, which made a donation to Princeton University. This sort of donation, while mentioned in New Jersey law, was not specifically authorized in A.P. Smith’s articles of incorporation. A.P. Smith claimed that, as a corporation, it had a duty to support the public good, and that it was to the company’s benefit to make sure that there was an educated public from which to draw future employees. Barlow (plaintiff), a shareholder in A.P. Smith, filed suit seeking declaratory judgment that the company should not have made the donation, and alleging that the application of New Jersey’s statute would be unconstitutional. The trial court entered a judgment for A.P. Smith, and Barlow appealed.

Rule of Law

Issue

Holding and Reasoning (Jacobs, J.)

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