Bailey v. Hannibal & St. J. R.

1 Dill. 174 | U.S. Circuit Court for the District of Missouri | 1870

DILLON, Circuit Judge.

It is admitted on both sides that the holders of the preferred stock are entitled to receive all the net earnings in each year, up to 7 per cent. The dispute relates to the net earnings over 7 per cent. The defendant claims that when the preferréd stock has in any one year received its seven dollars per share, the common stock is entitled to receive seven dollars per share if so much shall have been earned, and that if there be any surplus beyond this, the two kinds of stock shall share it equally. For example: if the net earnings for a year shall be just 12 per cent, the preferred stock first gets its 7, and the common stock the remaining 5 per cent; if the earnings shall be 16 per cent, the preferred and common stock will each get its 7, and then share equally in the other 2 per cent.

On the other hand, the complainant claims that the preferred stock is first entitled to 7 per cent, and that it and the common stock share equally in any surplus beyond the 7 per cent, admitted to be first due -to the preferred stock. For example: if the net earnings in any one year are 12 per cent, the complainant insists that the preferred stock is first to get its 7 (and this is admitted), and then to get one-half of the remaining 5 per cent, and the common stock the other half. This is controverted by the defendant, who insists as above stated, that the common stock is in such a case entitled to the whole of the 5 per cent. Both parties maintain that their positions are warranted by the language of the stock certificates. And the complainant insists that if there is any doubt upon the face of the certificate of the stock, it is removed by the language of the indenture of April 1, 1803, which it recites, and to which by its terms it is subject. On the other hand, the respondent contends that such is not the true construction of the indenture, especially when taken as it should be, in connection with the certificate, and that this is indubitably shown by the history of the issue of the preferred stock, and the aliunde testimony mentioned in the statement of the case. The complainant stands upon the stock certificate and indenture, and objects that all testimony outside of these is inadmissible to vary their construction or to affect his rights. The competency, in this proceeding, of the testimony ali-unde it is not necessary to discuss, for after a careful consideration of the language of the stock certificate the court is of opinion that it does not support the claim of the complainant, but does sustain that of the respondent. The “surplus” mentioned in the certificate refers to what may remain after the preferred and the common stock has each had its $7 per share. If the intention had been as claimed by the complainant, all the language after the word “surplus,” would be unnecessary; and the construction put upon it by the company is the only one which will give effect to all the language employed. The use in the indenture of the word “said,” in the phrase “said 7 per cent,” is a clerical error, and construing the certificate and indenture together, it should not have the effect to change the rights of the holders of the common stock.

[NOTE. In affirming this decree, the supreme court, by Mr. Justice Clifford, held that seasonable objection that the indenture is the only evidence of the contract between the parties could not have availed the complainant if it had been made, “as it is well-settled law that several writings executed between the same parties substantially at the same time, and relating to the same subject-matter, may be read together as forming parts of one transaction; nor is it necessary that the instruments should in terms refer to each other, if in point of fact they are parts of a single transaction. * * * Until it appears that the several writings are parts of a single transaction, either from the writings themselves, or by extrinsic evidence, the case is not brought within the rule, as it may be that the same parties may have had more than one transaction in one day of the same general nature. Doubt upon that subject, however, cannot arise in this case, as the due relation of the several writings to each other is conceded by both parties.” Continuing, the court said: “Standing alone, it may be admitted that the indenture furnishes some support to the views of the complainant, but it is clear that all ambiguity disappears when it is read in connection with the writings which preceded and followed it in respect to the same subject-matter. Ample justification for that remark is found in the plan which preceded it, and which was approved and signed by all the bondholders, and in the form prepared for the certificate of the preferred stock, which was adopted subsequently to the execution of the indenture, and which was accepted by all the holders of the preferred stock as a complete fulfillment of the arrangement between them and the company. Holders of preferred stock, as there provided, are entitled to receive all the net earnings of the company, which may be divided pursuant to the indenture in each year up to $7 per share, and to share in any surplus beyond $7 per share which may be divided upon the common stock, which, in substance and legal effect, is the same regulation as that contained in the circular or plan, and all the other writings upon the subject which were given in evidence at the final hearing.” Bailey v. Hannibal & St. J. R. Co., 17 Wall. (84 U. S.) 96.]

We will not say that the language used does not raise a difficulty, but we think the result we have reached fairly warranted by the stock certificate and indenture, and we know (if it be proper to consider the extraneous evidence) that it is the one which was contemplated by all parties to the arrangement under which the preferred stock was issued.

The. injunction will be dissolved and the bill dismissed.

TREAT and ICREKEL, District Judges, concurred.

Ordered accordingly.