91 N.Y.S. 1046 | N.Y. App. Div. | 1905
Lead Opinion
This cause was tried at the. Special Term and a judgment was directed and entered for the plaintiff, from which the defendant •appeals. The findings of fact made by the court, which are material to the disposition -of the cause, are all supported by the evidence, and indeed do not seem to be disputed.
It appears that the defendant, E. P. Gleason Manufacturing Company, was a domestic corporation, and that one Francis Billing-ham was the owner of record and the proprietor of five shares of its capital stock, which he owned from January, 1872, until his death in September, 1902, and that the plaintiff is now the sole legatee and owner of those five shares. Connected with the shares was a scrip dividend (No. 6-7) issued by the defendant. In J uly,. 1875, it was- voted by the- corporation to declare a dividend of thirty-five dollars per share i/n cash and notes, and that scrip for the amount of the surplus be issued to the stockholders in proportion to stock then held by them a/nd subject to the same conditions. At a
“No.. 67. '■ . 8935.29.
“E. P. Gleason Manufacturing Co.
“ This certifies that F. Billingham is entitled to Nine Hundred Thirty-Five 29/100 Dollars, Scrip Dividend, representing' the undivided earnings on Certificate No. . of the 'É. P. Gleason Manufacturing Co. for the year 18—, [seal.]
“This dividend is payable at the - pleasure of the Company, and in case of surrender of Certificate of stock-on. which it is issued, this Certificate is to be surrendered with it.
“ F. "W. BELMONT, Secretary-.
' “E. P. GLEASON,'. JPresideniP
Interest at the rate of four per cent on this certificate was .regularly paid upon it and the outstanding scrip certificates, of a like character. The scrip dividend account qf which the certificate No. 67 formed, a part was carried- on the books .of the defendant company as a liability, and was stated to be-such in reports and affidavits made by the company to the -tax authorities, and was set out as an item of the company’s ■ liabilities in the treasurers report to. the stockholders at-the annual meeting held in February, 1903. Some
The facts found by the court below have been stated in full in order that the whole case may be presented compactly. The conclusions of law arrived at by the learned judge at Special Term were that the scrip dividend certificate No. 67, represented an accumulation of scrip dividends declared at annual meetings of the stockholders ; that it was within their power to make such dividends, and this certificate was issued,as evidence of a debt due Francis Billing-ham from the defendant company; that the directors or trustees of the defendant company ratified and adopted the declaration of scrip . dividends and the issue of the certificates therefor; that the plaintiff has title to the stock and the scrip dividend certificate ; that the
Hpoh the facts as found it is established' that the scrip dividend represented and was-intended tti constitute an- indebtedness of the company to the holder -of that certificate. The form of the certificate as well as its substance indicates an appropriation by the. company of a proportion of undivided • earnings to the holder of that certificate. That is to say, there was an appropriation of. $935.29 of scrip dividend representing -the undivided earnings on Billing-ham’s certificate. That constituted an indebtedness- of the company to Billingham. It-was,so much set apart and reserved for him as undivided earnings. His share was. ascertained and his right to it Was fixed. It was, a- divided share of past earnings,. and, as we think, became a severed indebtedness of the company, for nothing is better Understood than that a dividend when declared is á debt due absolutely to the stockholders.'' It was- an obligation perfect' and complete in its character, although payment was postponed to a future time. It was débitum in prmenti sól/oendum. in fuirn'o. The only answer to .that conclusion would be that the certificate' contains the statement that “This dividend is payable at the pleasure of the Company,” and hence the argument is made .that there was no dividend at all until the company should express its intention to pay. In view of the way in which these certificates have been treated- by the company -itself, that construction is- inadmissible. What is referred to in the clause just quoted is the time of payment—-not the .obligation- to pay.■ • That clause cannot he construed as a nullification of the preceding -one disclosing the existence-of the liability. .There were certain requirements, as appears by the findings of fact, -necessary to be complied with before the certificate was paid, but the plaintiff- offered to make- such compliance.
The judgment, therefore, should be affirmed, with costs.
O’Brien and Hatch, JJ., concurred; McLaughlin and Laughlin, JJ., dissented.. " ^
Dissenting Opinion
(dissenting):
. The defendant was incorporated in 1.871 with an authorized capital .stock of $25,000, represented by 1,000 shares of $25 each. ■ This action is brought to recover $935.29, being.the aggregate amount of various scrip dividends represented by one certificate issued, between the years 1875 and 1884, and which is in the following.form:
“No. 67. $935.29
. “E. P. Gleason.. Manufacturing Co. ;.
“ This certifies that F. Billingham is entitled to Nine Hundred Thirty-five. 29/100 Dollars, Scrip Dividend, representing the undivided earnings on Certificate No. of the E. P. Gleason Manufacturing Co .for the year 18 . [seal]. . _
“ This dividend is payable at the pleasure.of the Company, and .in case of surrender? of Certificate of stock on which it. is; issued, this Certificate is to be surrendered-with it.
“F. W. BELMONT, Secretary.
“E. P. GLEASON, President"
The plaintiff is the sole legatee under the will of Francis Billing-ham, who, from the time of the; incorporation of the defendant down’to liis death in 1902, held live shares of the capital stock of the company, during which 'time he was a director and as such took part in 'its management and acquiesced in the resolution referred to. After the passage of the resolution of 1875 nothing further appears to have been done with reference to the scrip issued in pursuance thereof until 1881, when, at the annual meeting held in that year, a resolution was passed by the. stockholders instructing the. treasurer of the company ‘‘to pay interest at the rate of .4 per cent per annum on the scrip dividends now held by members of, this company. That the payments be semi-annual, commencing December 30th, 1881; that said payments be chargpd on the books of the company and also endorsed on the back of each certificate,” • No provision Was made for the payment of interest on such scrip from 1875 until 1881, nor does there seem to have been any corporate act indicating, so far as it was concerned, any obligation to pay such interest. - Upwards of ninety-five per cent of .the capital stock of the company during this time, and in fact down to the date of the trial,, was held by E. P. Gleason or his estate* and to have, paid all- of the scrip'.' issued, purporting to.represent the surplus, would, according to the uncontradicted, testimony, have bankrupted the company. In confirmation of this proof evidently a statement was made at the trial, which was not- contradicted, to the effect that, the Gleason estate had offered to sell to the plaintiff any- or all of the scrip which it' held
The corporation, acting through its board of directors, had the right to determine whether its net. earnings should be divided among its.stockholders in the form of a dividend, or whether stock or certificates with conditions attached should be issued representing the same. (Williams v. Western Union Telegraph Co., 93 N. Y. 162.) The surplus or ne.t earnings of the company, represented by the certificate sued on, was never actually divided and there never was any intent, so far as appears, on the part of the corporation to divide such surplus among its stockholders; on the contrary, such certificate was intended to be, in effect, and I think was nothing more nor less than a certificate of stock, and this intent is so clearly manifested by the resolution of 1875 that it seems unnecessary to resort to argument to show it. The company, it will be remembered, by that resolution provided for a cash dividend and also for the issuance of the scrip to stockholders “ in proportion to stock now held and subject to same conditions and payable at the pleasure of the company.” To give effect to the scrip in the manner done by the Special Term and approved in the prevailing opinion is to entirely eliminate from the resolution the words “ subject to same conditions ” and also to overlook or ignore the fact that a cash dividend was then declared and that the scrip was made subject to payment “ at the pleasure of the company.” Not only this, but the further fact must be overlooked that the corporation itself did not consider it a binding and enforcible obligation, as evidenced by the resolution in 1881, when it provided for the payment of four per cent interest on such scrip, making no provision whatever, if it were a binding obligation, for the payment of interest between 1875 and that year, and that the plaintiff’s testator was then a director of the corporation, took part in its management and acquiesced in the passage of the resolution; also, that the payment of all the scrip would have bankrupted the company.
It is true that in a few instances stockholder’s were paid in full for the scrip which had been issued to them, but this was in pursuance of a resolution which provided that when stock held by pei-sons was surrendered, the scrip should be paid, or else by way of compromise. Such payment cannot affect in any way the rights of
For these reásons l am unable to concur in the prevailing opinion. I think the judgment should be reversed and a new. trial ordered, with costs to appellant to abide event. ■" ■
Laughlin, J., concurred. >
Judgment affirmed, with costs.^