Washburn v. National Wall-Paper Co.
Court of Appeals for the Second Circuit
This is an appeal from a decree of the circuit court, Southern district of Yew York, dismissing the bill. The suit was brought by complainants, who are large owners of the stock of the defendants, the National Wall-Paper Company, to restrain the payment of interest upon certain obligations of the company called “debenture stock.”
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This is an appeal from a decree of the circuit court, Southern district of Yew York, dismissing the bill. The suit was brought by complainants, who are large owners of the stock of the defendants, the National Wall-Paper Company, to restrain the payment of interest upon certain obligations of the company called “debenture stock.” The complainants insisted that such payment was not justified by the terms of the debenture stock itself, but was in violation of the agreement between the company and flic complainants, and of the provisions of the articles of association and by-laws of the company.…
1Opinion of the CourtLacombe, Circuit Judge
(after stating the facts). The contention of the complainants is that, notwithstanding the certificate of the auditors, no debenture interest could be paid without impairing the capital of the company, and that in fact there were no profits. They contend that they have demonstrated the impairment of the capital stock to an extent: more than sufficient to prevent the payment of debenture interest: First, on the theory that the capital stock was originally issued for far less than its par value, and has never been fully, if at all, paid; second, on the theory that, even if it were originally…
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