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Business Organizations Keyed to Chasalow, 3rd Ed.
A.P. Smith Manufacturing Co. v. Barlow
Citation:
98 A.2d 581 (1953)Facts
The A.P. Smith Manufacturing Company was incorporated in 1896 and engaged in manufacturing valves, fire hydrants, and special equipment for water and gas industries. The company had approximately 300 employees with its plant located in East Orange and Bloomfield, New Jersey. On July 24, 1951, the board of directors adopted a resolution to contribute $1,500 to Princeton University’s Annual Giving campaign, deeming it in the corporation’s best interests. When this action was questioned by shareholders, the corporation sought a declaratory judgment to validate the contribution. At trial, the company president testified that he considered the donation a sound investment that created goodwill and a favorable business environment. Corporate executives from other companies testified that corporations have public responsibilities and self-interest in supporting higher education as essential to preserving the free enterprise system. The objecting shareholders acknowledged the public policy favoring such contributions but maintained that the corporation lacked authority to make the donation.
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