## Facts

- A.P. Smith Manufacturing Company, a New Jersey corporation incorporated in 1896, manufactured valves, fire hydrants, and related equipment and employed about 300 workers.
- In 1951, the board of directors adopted a resolution authorizing a $1,500 contribution to Princeton University as part of its annual giving.
- Certain shareholders objected, asserting the corporation’s charter did not authorize charitable gifts and that the donation was ultra vires and contrary to shareholder interests.
- The corporation filed a declaratory judgment action in the Chancery Division to determine whether the contribution was lawful and within corporate power.
- The Chancery Division upheld the donation as intra vires; the case was certified to the New Jersey Supreme Court due to its public importance.

## Issues

1. Whether a New Jersey business corporation may make a charitable contribution to a university consistent with corporate power and directors’ duties.
2. Whether a later-enacted New Jersey statute authorizing corporate charitable donations applies to a corporation incorporated before the statute.
3. Whether the contribution was ultra vires or an improper diversion of corporate assets absent an immediate profit motive.

## Decision

- The New Jersey Supreme Court affirmed the judgment sustaining the validity of the $1,500 donation.
- The court held the contribution was within the corporation’s power and was not an unlawful act merely because the charter did not expressly provide for charitable gifts.
- The court held the authorizing statute applied to pre-existing corporations through the state’s reserved power to amend and regulate corporate powers in the public interest.
- The court found no indication of self-dealing, personal motives, or an indiscriminate gift unrelated to corporate ends.

## Legal Principles

- A corporation may make charitable contributions when authorized by statute and when directors can reasonably regard the contribution as serving corporate interests through indirect benefits such as goodwill, community relations, and improved conditions for business.
- The absence of an immediate, measurable profit does not, by itself, render a charitable gift ultra vires if the directors’ judgment supports a rational relation to corporate benefit.
- Statutes expanding or regulating corporate powers may be applied to corporations formed before enactment under the state’s reserved power, and shareholders are not entitled to insulation from later corporate regulation adopted in the public interest.
- Corporate charitable giving remains constrained by statutory limits and fiduciary limits; gifts tainted by self-dealing, personal favoritism, or violations of statutory conditions are not validated.

## Conclusion

The court upheld a modest corporate donation to a university, holding that statutorily authorized charitable giving may be consistent with corporate power and fiduciary duty when directors act in good faith, avoid self-interest, and can reasonably connect the gift to corporate benefit, and that such statutory authority may reach corporations incorporated before the statute under the state’s reserved power.


A.P. Smith Mfg. Co. v. Barlow, 13 N.J. 145, 98 A.2d 581 (N.J. 1953)