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Randall v. Bailey
New York Supreme Court
23 N.Y.S.2d 173 (1942)
The Bush Terminal Company (Bush) purchased land in New York. Bush originally listed the value of the land on its books as equal to the purchase cost. The land appreciated in value over time, and to reflect this appreciation, Bush increased the listed value of the land on its books. Because of this increase, the books showed that Bush held assets in excess of its liabilities. However, because Bush did not sell the land, the appreciation had not actually been realized. During this time, Bush also wrote down the cost of investments in its subsidiaries to actual value, taking into account unrealized depreciation. Bush paid dividends during this time to its shareholders. Bush’s lender (plaintiff) sued the Bush directors who authorized the dividends (defendants), seeking to recover the dividends. The lender claimed that it was unlawful to pay dividends based on unrealized appreciation of fixed assets and unrealized depreciation of investments. Bush filed a motion for summary judgment.
Rule of Law
Holding and Reasoning (Walter, J.)
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