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

Facts:
The plaintiff corporation was attempting to donate $1,500 to Princeton University. However, the stockholders were against this decision, and P instituted a declaratory judgment action. The stockholder’s argued:

(1) the plaintiff’s certificate of incorporation does not expressly authorize the contribution, and under common-law principles the company does not possess any implied or incidental power to make it, and
(2) the New Jersey statutes which expressly authorize the contribution may not constitutionally be applied to the plaintiff, a corporation created long before their enactment.

Issue:
Does the corporation possess any implied or incidental power to make the contribution?

Holding:
Yes.

Reasoning:
(1) “In the light of all of the foregoing we have no hesitancy in sustaining the validity of the donation by the plaintiff. There is no suggestion that it was made indiscriminately or to a pet charity of the corporate directors in furtherance of personal rather than corporate ends.”

(2) “State legislation adopted in the public interest and applied to pre-existing corporations under the reserved power has repeatedly been sustained by the Supreme Court.”

Rule: A corporation can make charitable contributions as long as:

  • It’s consistent with state law.
  • There is some form of corporate benefit.
  • The contribution is modest.
  • The contribution was made in furtherance of corporate rather than personal ends.