Exchange of Stock for Capitalized Profits

The judgment of Vice Chancellor Pitney in the somewhat recent case of See v. Heppenheimer is of more than usual importance on account of the nature of the interests involved, and the advanced position taken on the perplexing question of watered stock. Extensive notes on the case have appeared in legal periodicals, yet it would seem, in view of the doctrines announced, that more extensive comment will be profitable. The particular case is one of a series of suits growing out of the failure of the so-called "Straw Board Trust." In this particular case, See, as receiver of the Columbia Straw Paper Co., filed a bill to compel the defendants, stockholders in the corporation, to pay assessments on their stock to satisfy the claims of creditors of the corporation, on the ground that the stock held by the defendants had not been fully paid for. The suit is based primarily on a statute of New Jersey providing that stockholders whose stock is not fully paid shall contribute such further sums up to the par value, as are needed to pay the debts of the corporation.