Chaffee v. Rutland Railroad

55 Vt. 110 | Vt. | 1882

The opinion of the court was delivered by

Veazey, J.

The Rutland & Burlington R. R. Co. had two mortgages resting upon its- property, and the road was in possession of, and being operated by, the trustees of the second mortgage bondholders. The trustees of the first mortgage bondholders had brought suit to foreclose that mortgage. While this suit was pending the-bondholders under the second mortgage obtained an act of incorporation under the name of the Rutland R. R. Co., for the purpose of “ holding, maintaining and operating ” said R. & B. Railroad, and in July of that year, 1867, the company was organized. Under the, authority of the eighth and ninth sections of the .charter and for the purpose therein named; and under the circumstances detailed in the referee’s report, the defendant by corporate vote, issued prior to February, 1872, “ preferred or guaranteed stock, commonly called preferred guaranteed stock,” to the amount of $4,300,000. The company had also issued cornmon stock to the amount of $2,500,000. February 1, 1872, the company made its first issue of certificates of “ scrip dividend,” specified therein as being “ in settlement of dividends on the preferred guaranteed stock.” Thereafter from time to time the company continued to issue similar certificates, but varying somewhat in their terms. The plaintiff having become the owner and holder of such certificates of different issues to an amount of over $21,000, and having demanded an exchange into the bonds of the company referred to in the certificates, and the company having refused to make the exchange, and then having demanded payment and been refused, brought this suit declaring in the common counts in assumpsit, to recover the amount of his certificates.

The. plaintiff was a preferred stockholder from June i, 1872, to October 9, 1877, and during this time purchased the certificates in suit and others, and had issued to him certificates on his own stock. The referee gives a statement of the floating debt of the defendant at yearly and half yearly intervals, beginning August 1st, 1868, and ending August 1st, 1879, and says these were the balances of the bills payable as shown by the treasurer’s books at the several dates named, which both parties treated as a fair representation of the floating debt of the defendant.

The referee finds that if the floating debt and current expenses were to be first paid out of rent or income, the defendant has had no funds with which to pay the plaintiff’s certificates, and had none at the time the demands were made and this suit brought. If the preferred stock was entitled to be paid dividends before the floating debt was paid, the income of the company at the time of the demands had been sufficient to pay all such certificates issued by the defendant. The road was leased before the certificates were issued and its sole income was from rents.

The defendant claimed before the referee and now insists that it never had income or earnings out of which a dividend could properly be made at the time when any of the scrip certificates were issued, and that the certificates were issued without authority and without consideration and are not binding on the defendant.

I. A primary question on the facts reported is: Which has the first right to the income, the creditors of the defendant company, or the preferred stockholders ? The provision of the charter, section 8, is, that the preferred or guaranteed stock shall be entitled to dividends from the earnings or income of the corporation before any other dividend shall be paid.

The construction of similar provisions has not unfrequently been involved in causes in this country and in England, and the struggle has been to gain for the preferred guaranteed stockholders the ' double advantage of a shareholder and creditor, but without success. The legislation in this State and elsewhere has been in accord with the idea developed in the reported cases, that the stock and property of a corporation is a trust fund pledged for the payment of its debts, and the creditors’ right to payment and their lien is prior to - the right of every stockholder. In the late case of National Bank v. Douglass, McCrary’s Rep. vol. 1, p. 86, the court say “ sacredly pledged,” and quoting the language of Judge Clifford in R. R. Co. v. Howard, 7 Wall. 392, adds that “ stockholders are not entitled to any share of the capital stock nor any dividend of the profits until all the debts of the corporation are paid.” To similar purport and equally strong is the language of Judge Story in Woody. Dummer, 3 Mason, 308 ; and again in Mumma v. Potomac Co., 8 Pet. 286, and of Judge Curtis in Curran v. The State of Arkansas and Others, 15 How. 304. See also the numerous cases in defendant’s lbrief on this point.

{/ It is now well established that dividends on preferred’ stock are payable only out of net earnings which are applicable to the payment of dividends ; Pierce on Railroads, p. 125, and cases cited in notes ; and that such dividends are not payable absolutely and unconditionally as interest is, but' only out of profits made by the company. The preference is limited to profits whenever earned. Jones on Railroad Securities, s. 620, and cases cited in notes; Field on Corporation, s. 121, and cases cited ; Corry v. Railroad Co., 29 Bevan, 263 ; McGregor v. Ins. Co., 6 Stewart’s Eq. Rep. (N. J.) 181; St. John v. Erie R. R. Co., 10 Blatch. 271; s. c. 22 Wall, 136 ; Lockhart v. Van Alstyne, 31 Mich. 76 ; Taft v. R. R. Co., 8 R. I. 310.

Under the provision of this charter it is not a debt that is guaranteed, but the right to a dividend from the earnings and income o,f the corporation. The right to a dividend is not a debt. There is no debt until the dividend is declared. The obligation and right to declare it does not arise until there is a fund from which it can properly be made. See cases supra; also In re London India Rubber Co., Law Rep. 5 Eq. Cases, 525.

In this case it could only be made from “ earnings and income.” The only earnings and income was the rental which was insufficient to pay the operating expenses and the floating debt. Upon the plaintiff’s theory there was an unqualified obligation to declare and pay dividends to preferred stockholders from the earnings and income, notwithstanding there were debts of the company greater than the earnings and income. The creditor must come after the stockholder. Under this claim the rule universally recognized in the books that the property of a corporation is a trust fund pledged for the payment of the debts of the corporation, and the distinction everywhere upheld between a stockholder and creditors, would have to be disregarded. In our view the terms of the charter neither force nor import such construction.

II. But the learned counsellor the plaintiff deny that the preferred stock was capital stock, and insist that the only capital stock of the defendant company is the common stock, or the stock that was issued to the second mortgage bondholders, and that the intent and meaning of the charter in reference to the issue of preferred stock, was to provide means of exchanging the first mortgage bonds'into a preferred stock, but not to affect the security, and that such was the understanding of all parties at the time, and that wherever preferred stockholders have been held to be stockholders in distinction from creditors, it has been upon the ground that by the terms of the act or contract their stock formed a part of the capital stock, and' that they by taking the same become in reality and in substance, as well as in name, stockholders, holders of shares of capital stock.

. It is true the charter was granted to the second bondholders, and provides that the capital stock, meaning undoubtedly the stock to be obtained by the second mortgage bonds, should be 3,000,000 dollars, and in the provision, section 8, for issuing the preferred or guaranteed stock, it is not called capital stock. But the counsel nowhere intimate in their able brief wherein the preferred stock lacked any element or quality of the common stock. It seems to have had every privilege and recognition of the common stock in the meetings and administration of the company. The referee puts it in this way: “ Besides the preferred stock the company had issued about §2,500,000 of common stock, the holders of which were entitled to and did vote in the stockholders’ meetings, having equal power in shaping and controlling the action of the company, with the holders of preferred stock to the same amount.” The preferred stockholders had not only every privilege but were exempt from none of the liabilities of the common stockholders. If the eighth section of the charter had said preferred capital stock instead of preferred stock, what different quality would that have given the stock ? The charter specifies the amount of the capital stock of the company, which was sufficient to cover the second mortgage bonds, but much less than the value of the road, the charter being granted to those bondholders, and it then provides for the issue of preferred stock, and limits that to the amount of prior claims or incumbrances.

The terms of this charter are plain .to the intent of providing for two kinds of stock, viz.: common stock and preferred or guaranteed stock. It makes'" no distinction between them except to the effect that the preferred stock should receive dividends from the earnings and income of the corporation, at a rate and time named, with interest thereafter if not paid, “ before any other dividend shall be made therefrom.'” What is there in the charter to indicate that the legislature intended to simply create a creditor class in creating preferred stockholders, and meant interest by the word dividend ? As stated by Jones on Railroad Secu. s. 619, “ whatever rights attached to it [preferred stock] when issued continue to adhere to it.” The peculiar right specified in the charter to be attached to it, is the right to a dividend before any should be made upon the common stock, and that it may be converted into common stock. In St. John v. Erie R. R. Co., supra, Judge Blatchfoed based his result upon a “ fair and reasonable construction of the contract.” Judge Swayne, in the same case in the Supreme Court, says: “ The question presented in the present case depends for its solution wholly upon the construction given to the fifth clause of the agreement.” The defendant’s charter is the instrument to be construed here, and to borrow the words of Judge Swayne, “ The language employed is apt to express the relation of stockholders. None to express the relation of creditors is found in the instrument.” Under it “ the preferred stockholders are entitled to have the full amount of their dividends paid before any payment is made in respect of dividends uponthe ordinary stock.” Jones, s. 620, and cases cited. In Taft v. H. P. & F. R. R. Co., 8 R. I. 310, it was held that the word “ guaranteed ” in connection with preferred stock, did not change the legal effect of the rights of holders of such stock. Bradley, C. J., after referring to the English cases, says: “ Without dwelling longer upon these and similar authorities, it is perfectly apparent that the guaranty of dividends by a railway company is considered by the courts and by the business community also, to mean nothing more than á pledge of the funds legally applicable to the purposes of. a dividend ; that, in, short, it is a dividend and not a debt.”

No claim is made in this case that the preferred shareholder does not have all the rights as a shareholder that is enjoyed by the holder of the common stock. The claim is that he is also a creditor with all the rights pertaining to that relation. Against this claim are the terms of the charter, the presumptions of law and the usual course of business. The evidence of his relation to the company is a certificate of stock which under the charter should, and probably does, guarantee a dividend to be paid to him before any dividend shall be paid on the common stock. Mr. Pierce, page 120, defines dividends to be corporate funds derived from the earnings of the corporation, and appropriated by a corporate act to be divided among the stockholders. A preferred dividend is the fund paid to one class of shareholde rs in priority to that to be paid to another class. See authorities cited by Pierce,

The case most relied upon by the plaintiff’s counsel, where it was held that a holder of stock was a creditor, is that of Burt v. Battle, reported in The Reporter, March 6, 1878, p. 310, (31 Ohio St. 116). The preferred stock in that case was issued under a statute that provided that the “ holders of such preferred stock shall not have the right to vote on any question, at any meeting of the stockholders of such corporation, or for the election of officers, and shall not be liable for the debts of such corporation.” And the corporation pursuant to a vote of the corporation secured the preferred stock then in suit by a bond and mortgage of the corporate property. Welch, C. J., in delivering the opinion of the court says : “ A majority of us think that the transaction between the corporation and the so-called preferred stockholders, was in fact and in law a loaning of money upon mortgage security and not the creation of additional members of the corporation. A man who advances his money to a corporation, and takes a bond and mortgage for its repayment, and also by express agreement between the parties takes no interest or risks in the concerns of the company, is a creditor of the company, and to call him a stockholder is a simple misnomer.”

The distinction between that case and the one at bar is apparent. It is insisted that the pi-ovisions of the defendant’s charter to the effect that the preferred stock should be issued only for the “ purpose of satisfying, paying or purchasing prior claims, or incumbrances upon or interests in said road and property,” and should be limited to the amount of such claims, and providing the rate of dividend, and for its payment semi-annually, and, “ until declared,” interest thereon to be added from the end of the half year when the same should be declared, and that no mortgage should take precedence of the preferred .stock in the application of income, all show a purpose to create a preferred stock with all the security of a first mortgage, taken in connection with the fact that the prior claims consisted largely of the first mortgage then in process of foreclosure.

Courts have not favored the creation of different classes of shareholders with superior rights in one over others. Doubt is expressed in the books whether (here is power in a corporation to distinguish between its stockholders by making them unequal in interest and right, except as it is expressly granted. Although some courts and law writers have said that the issue of preferred stock is but a method of borrowing money, and that preferred stock is only a form of mortgage, we think the law as now settled is better expressed by Pierce, who says, page 124 : “ The issue of preferred stock is a mode by which a corporation obtains funds for its enterprise, without borrowing money or contracting a debt.” The other view has been expressed generally in cases where the claim was that no dividend could properly be paid on preferred stock before and without paying on the other stock, as in R. & B. R. R. Co. v. Thrall, 35 Vt. 536 ; or where the preferred ' stockholders had no right in the management of the company, and were not liable for debts, and were nominal stockholders only, as in Burt v. Rattle, supra.

It was necessary for the defendant, consisting of the second mortgage bondholders, to raise money to pay up the first mortgage, in order to save the property from going on that mortgage. Two ways were open to them, one to borrow money, the other to sell stock. They decided to try the latter method. The pressure was severe upon them, and the amount to be raised was large. The stock in order to be sold must necessarily be carefully guarded. The issue of the preferred stock in this case was made as it usually is, that is, when the corporation has reached a crisis in its affairs, and the corporators are unwilling or unable to put more ' or sufficient money into the business, but are nevertheless disposed to give to those who will do so a preference in profits. Careful guards are, therefore, usually thrown around preferred stock in the charter or contract, as was done in this case ; but this did not change the chai’acter of the transaction. It was still an obtaining of funds by sale of stock, and not a borrowing of money on a mortgage.

These provisions of the charter seem to us to point to a careful security of the benefit of the preference as between the two kinds of stock, but not a preference over the creditor’s of the corporation ; not a preference with a perpetual promise to pay more than a legal-rate of interest on the sum invested, out of the earnings, without regard to what the corporation owes as a “ floating debt,” not a preference that would give to the holders of the preferred stock the character of corporators with the right to be the corporate managers, and also make them the preferred creditors of the corporation ; not a preference under which the debts of the corporation might, and, as the company was situated, must go on increasing from year to year indefinitely unprovided for, while the stockholders and managers were receiving the whole income in dividends. We think the language of the charter well expresses what the report shows was the only object' which the parties in interest needed or wanted to secure, so far as they then understood the situation, viz.: a preference in dividend between the two kinds of stock and nothing more. Under their preference the common stock can receive nothing until all the dividends on the preferred stock are paid according to the terms of the charter. Pierce on Railroads, page 125, and cases cited in notes.

It follows from this construction of the charter that the earnings of the defendant corporation should have. been appropriated to the payment of its floating debt, in preference to the payment of dividends on preferred stock.

III. It appears from the report that until early in the year 1872, the financial condition of the company had not been fully understood, and that a very large floating indebtedness then first came to light. In this emergency the company began the issue of scrip dividend certificates. The first certificates were dated February 1st, 1872, and they were issued every six months thereafter ¡until February 1st, 1875.

The plaintiff claims that even if the company had no profits out of which to pay dividends, and therefore ought not to have made or paid them, yet it is estopped from denying the validity of these certificates as obligations of the company by reason of its conduct in regard to them.

The defendant claims that they are incapable of ratification; that they are absolutely void because issued without right; that being issued when the company had no money applicable to dividends it was an unauthorized, illegal act, which affected the certificates the same as though prohibited in the charter.

There was no lack of authority to make dividends to preferred stockholders. The charter provided for it. The company’s action in regard to dividends was unseasonable, that is before it had funds applicable. Did such unseasonable exercise of power render the certificates void ? The question is not what might have been the right of creditor or stockholders had they interposed. But must the court say in behalf of the company only, that its premature exercise of charter power was void because premature ? We think not. In Stoddard v. Shetucket Foundry Co., 34 Conn. 542, it was held in an action against the corporation by a stockholder, to recover a dividend declared by the directors, if all the other stockholders have received and retain their dividends, the corporation cannot set up in defence, that the dividend has not been earned, and that its payment would withdraw a part of the capital. Kent v. Quicksilver Mining Co., 78 N. Y. 186. “ If the power to make the contract exists, an excess in some particulars is not a defence.” Pierce, 518, and cases there cited. In Taylor v. Chichester &. M. R. Co., L. R. 2 Exch. 356, 378, Blackburn, J., says : “ I think it very unfortunate that the same phrase of Ultra Vires has been used to express both an excess of authority as against the shareholders, and the doing of an act illegal as being malum prohibitum ; for the two things are substantially different; and I think the use of the same phrase for both has produced confusion.”

It is ordinarily a matter of internal management, to be determined by the company-or the directors, when to declare dividends and the amount. This is subject to limitations, and equity will interfere either to enforce or restrain a dividend upon sufficient showing. Green’s Brice, Ultra Vires, 2 Am. Ed. p. 202, and cases cited.

But equity even would not interfere with a dividend unless it appeared that somebody in particular was hurt or liable to be injured. It would not interfere after all danger had passed, and for the sake of vindicating general principles. Stevens v. The South Devon Ky Co., 9 Hare, 313 ; reported also in XII. L. and Eq. 229; Browne v. The Monmouthshire R'y & Canal Co., 13 Beav. 32 ; reported also in IV Eng. L. and Eq. 113 ; Moore v. Hudson R. R. R. Co., 12 Barb. 156, 160 ; 2 Redf. on Railways, s. 211.

IV. These certificates being susceptible of ratification, should the defendant be estopped from denying their validity in this case ? All these issues of .certificates were authorized by nearly if not entirely unanimous votes of the corporation, followed by votes of the directors. The first vote was as follows:

“ Besolved, That the directors be authorized and are hereby instructed to prepare and issue to the holders of the preferred stock, a scrip dividend of three and a half per cent., to date February 1st, 1872, upon forty three thousand shares of preferred stock.” The next vote was, “ to pay further dividends on the preferred stock of the company by issuing to the holders thereof scrip (dividends) therefor as the same may become due.” Other votes followed from time to time. Every vote of the company and directors expressed or implied the idea of a payment of dividends. These certificates were all expressed to be “ in settlement of dividends on the preferred guaranteed stock ” ; and were made convertible on demand or at the option of the holders, into mortgage bonds of the company, except the last two issues. The referee finds that the plaintiff received scrip certificates as they were issued from time to time on the preferred stock owned by him, and they have all been converted into bonds. Certificates have been so converted amounting to over $1,000,000. In such conversions, no distinction or difference has been made between the two last issues, Nos. 6 and 7, and the earlier issues. Considerable of this scrip was sold in market and was purchased by the president, treasurer and some of the directors, and was converted into bonds. The scrip so purchased in market was converted by the company into bonds, for the- purchaser as readily as it was for the holders of the preferred stock to whom the scrip certificates thereon were issued. This was done for the plaintiff to quite an extent down to about the time this suit was brought, July, 1878. The referee reports that the president had the general direction of the conversion of scrip certificates into bonds.

The president told the plaintiff that the last two issues, which contain no clause in regard to their convertibility, were convertible the same as those which contained such clause, and showed him the stockholders’ vote to that effect. The referee finds the company and its directors so treated them, under that vote.

Some of the preferred stockholders, when they saw such clause was omitted from the scrip certificates, supposed they were not convertible into bonds and so sold them in market, and the plaintiff bought them at large discount, after he had been informed by the president that they were convertible into bonds, and was shown by him the said stockholders’ vote to that effect; and he never knew until after this suit was brought, why the last two issues did not contain the convertible clause. Until after this suit was brought, neither the company nor any of its officers ever denied that these certificates were convertible into bonds, and the president and treasurer continued to make the conversions until after this suit was brought, though some of the later conversions were into a lower rate of interest bond, as shown in the report.

The referee does not find in terms that the plaintiff’s certificates are the only ones not so converted; but he finds certificates have been so converted to an amount of over $1,000,000 ; and it appears by computation that the total amount of certificates was about $1,058,500. Therefore the fair conclusion from the report is that the plaintiff’s certificates are substantially the only ones not converted.

It further appears that the floating debt of the company at the time this suit was brought had been very largely reduced, and it does not appear that the same treatment of these certificates with the other would have embarrassed the company, or that any creditor objected to the conversion.

The above is but a summary of what the report more fully shows that the company did in respect to the dividend certificates, and after stating the facts, the referee finds “ that the defendant has uniformly treated the scrip certificates as an obligation binding on the defendant.”

On the other hand the plaintiff was a stockholder, and so far as' affected by constructive notice is entitled to stand no better as to the certificates purchased by him than he would be as to certificates issued to him on his own stock. As a stockholder he cannot escape the responsibility pertaining to that relation for the • wrongful policy of the company as to dividends. But it was only the financial condition of the company that rendered the policy wrongful. Can it be said that a stockholder is necessarily chargeable with notice that the affairs of a corporation are in such condition that they ought not to make a dividend ? The propriety of making a dividend at a particular time is a matter to be determined upon consideration of all the circumstances ; and these are not usually known by the stockholders. If a dividend is voted unwisely and without strict right at the time on account of no funds, the law would afford a remedy in behalf of an injured party. But may the company itself, after having so voted and paid every stockholder except the plaintiff, no one ever objecting, and after having treated the transaction as valid throughout, and after all danger from the wrongful policy has passed, say to the last beneficiary of the dividend, the act of voting and paying these dividends in scrip form was unlawful, and you, being a stockholder, thereby participated, and are, therefore, not entitled to the benefit that every other stockholder has enjoyed ? It does not appear that the plaintiff had knowledge, or suspicion in fact, that the company, its officers, or its stockholders, designed or transacted anything unlawful or wrong towards any parties or interests in voting to pay dividends in scrip, or in paying the scrip by exchange into bonds, as was done down to the time payment was refused to himself. He had no part, in fact, in what was done by the company. The company decided the question of dividends for itself. It, and all its agents, officers and stockholders, have concurred in all that has been voted and transacted, and have taken the fruits-thereof to themselves as matter of lawful right, and by no vote or act have any of said parties denied the validity and good faith of what has been done, until the defence in this suit was asserted.

After this suit was brought the stockholders voted to issue five per cent, bonds, secured by mortgage, “ to fund the indebtedness of the company, including the outstanding scrip dividends or certificates,” and used them for that purpose. The company has more than a million dollars bonded debt created by taking up these certificates, and has devoted its earnings and income to pay the interest on it; and the preferred stockholders have received this benefit. The effect of excluding the plaintiff as to his certificates would be to divide the amount among the preferred stock- . holders who have already enjoyed the benefit he now claims. We think, upon the facts stated in the report, the company cannot in this suit assert as a defense its wrongful administration. The plaintiff stands in no such equal fault as to warrant a denial of remedy. Harrington v. Grant, 54 Vt. 236, and cases there cited.

Y. The defense of alleged want of consideration in the certificates is not available.

The right to dividends, seven per cent., existed under the charter when there should be funds applicable. As before shown, this is a continuing right. The company issued the certificates in settlement. The shareholder took them in settlement. The votes were in effect to pay the dividends in this form. The certificates were taken, and the right to a dividend in any other form surrendered. They were taken in settlement of a claim made by the shareholders, and recognized as valid by the company, and authorized by the terms of the charter. There would be no question but that this would constitute a good consideration if the financial condition of the company had warranted a dividend. Hayward v. Pilgrim Soc., 21 Pick. 276; Blake v. Peck, 11 Vt. 483; Cross v. Richardson, 30 Vt. 641; Miller v. Emans, 19 N. Y. 384; Plank Road Co. v. Payne, 17 Barb. 567.

The company having obtained the surrender in the exercise of a power existing under the charter, and having always treated the certificates as resting upon the same consideration as though given in surrender of a dividend actually earned and warranted, cannot, under the facts disclosed, be heard to say that the certificate holders surrendered nothing.

YI. The defendant’s counsel make the point and support it by strong argument and great array of authority, that the company had no right to exchange its mortgage bonds for these dividend certificates ; that the bonds were authorized and issued for a particular purpose, — a purpose or object expressed in the statute, in the acts in amendment of the defendant’s charter, in the resolution of the corporation, and in the eight per cent, mortgage itself.

It is plain that the company had no better right to appropriate its bonds to the payment of a dividend not strictly earned than it had to pay ii^money. There was no absolute right to a dividend in any form before debts were paid. Neither is it clear that the amended charter and the mortgage issued thereunder should be construed as authorizing the exchange of the bonds for these certificates. We malte no further expression upon these points, because what has been said upon the subject of ratification and estoppel applies ás well here. The stockholders themselves in corporate action have given construction to the act and the mortgage, until they have been benefitted under that construction to the amount of a million dollars and more. It is now too late, under the facts reported, for the company to ask for a different, though perhaps better construction, as against the last holder of its obligations of this character.

VII. These certificates, except the first issues, were made payable at the option of the company, but convertible into bonds at the option of the holder. They were all issued from 1872 to 1875. inclusive, and demand made for bonds and suit brought in 1878. As to certificates promising to pay a specified sum with interest, in bonds, on demand, Jones (R. R. Securities, s. 19) says: if the corporation does not on demand exercise its election to make payment in bonds, the creditor may recover the amount in money; payment in bonds being a privilege for the benefit of the corporation ; but if this privilege be not taken advantage of at the proper time, the rule of damages is the principal sum and interest.” These certificates are different, but whatever would be the proper construction of them independently, we think the facts of this case bring them within the rule established as to certificates payable in bonds on demand, and this applies to the first issue.

The declaration was in general assumpsit, but the stipulation provides that special counts may be filed. Formerly, especially in England, whenever there was an express or special promise, all implied assumpsits were merged and superseded, and could never after be resorted to. But this rule has been deviated from, especially in this State. If goods have been sold, work done or money passed, whatever may have been the agreement as to price, or mode, or time of payment, if the terms have transpired so that money has become due, the general count is sufficient. But when the contract is executory and subsisting, and the action is for the breach, for the recovery of damages, then the declaration must be special. Way v. Wakefield, 7 Vt. 223. It is settled law in this State that, the general counts are sufficient for the recovery on a promissory note payable in specified articles, when payment is not made at the time named. Upon failure to pay as agreed, the note is considered as an obligation for the payment of money alone. Perry v. Smith, 22 Vt. 301. This rule was applied in a case of general assumpsit, where the stipulation was to accept a portion of the price of the work in the stock of the defendant company, which was worth only 33 per cent, at the time the work was finished. The court say: “ The stock of a corporation is but a certificate of such a sum being due the bearer. And where the party stipulates to pay in his own paper, if he refuse, suit may be brought immediately, although the paper was to have been on time, if given. But it was never supposed the party could reduce the money by showing his paper depreciated in the market. This would be virtually giving the difference to the other stockholders. Barker et al. v. T. & H. R. R. Co., 27 Vt. 766; see also Wainwright v. Straw, 15 Vt. 219; Read v. Sturtevant, 40 Vt. 521; Bradley v. Phillips, 52 Vt. 517. Under the decisions in this State we hold the common counts were sufficient.

YIII. It is claimed these certificates are not negotiable instruments, hence the plaintiff cannot recover in his own name. They run to the “ holder,” went on the market, and have always been treated by the defendant as entitling the subsequent holder to the same rights as though payable to bearer. Such has always been the treatment accorded the plaintiff. The remarks of the court in Hennings v. Rothschild, 4 Bing. 315 (13 En. Com. L., 448), are pertinent: “ We do not say whether the receipts were transferable or not. The ground upon which we put the plaintiff’s right to recover in this case, is this, that whether the original receipts were transferable or not, the defendant has treated the plaintiff as the person holding these receipts, and has undertaken to consider him as the person who originally subscribed the money.” So in this case, as these certificates are worded and have been treated, we do not think the plaintiff’s right of recovery depends on their negotiability, but, whether strictly negotiable or not, which has not been considered, we think he may stand on them as though he were the original holder. The plaintiff holds by purchase and payment, in his own right, without wrong to the company, the obligation of the company directly to himself as ■ holder. The terms of the paper imply that it was to be used, recognized and treated, as it has been by the company and third parties, and it should now receive the same recognition by the court. Upon the facts found there would be strong ground for putting the case, if necessary, upon the principle stated in Moar v. Wright, 1 Vt. 57; Bucklin v. Ward, 7 Vt. 195 ; and Hodges v. Eastman, 12 Vt. 358 ; in all of which it was held that if the maker of a note expressly promises to pay his note to the holder, the holder might sue on such promise in his own name, though he could not sue on the note by reason of its not being negotiable, or not being legally transferred to him.

IN. The Cheshire Railroad Company, one of the trustees named in writ, is a foreign corporation. The defendant claims it cannot be held chargeable, first, because the process does not allege that this corporation is operating any railroad or doing any business in this State, or was under any liability in consequence of any debt due or owing in this State, and insists that such jurisdictional fact is necessary to be alleged in the process. The process alleges that the Cheshire Company u has an authorized agent resident within the State of Vermont at Bellows Falls, in the town of Rockingham and the County of Windham and said State of Vermont.” Such allegation is sufficient to give the court jurisdiction when service has been made according to the statute. The 'question whether chargeable follows on disclosure or default. The disclosure filed would make the Cheshire Company chargeable. The defendant filed allegations, charging that the fund to be paid monthly by that company to the defendant had been assigned by the defendant for valuable consideration to one Williams, and that the Cheshire Company had promised to pay it to him. The difficulty with this defence is, that it stands on mere allegation without'any proof. Neither does the referee’s report, which was agreed to be treated as a commissioner’s report in the trustee branch of the case, contain any finding upon this allegation. The liability is left to stand upon the disclosure and the report, and, so far as these show, both trustees are chargeable.

The defendant filed allegations, claiming for reasons therein stated that the Central Vermont Railroad Company should not be held or adjudged chargeable as trustee. The reasons assigned pertain not to any question between the trustee and the defendant (except the assignment to Williams), but to the right of the plaintiff to recover of the defendant. The statute, Gen. Sts., c. 34, s. 16, R. L., s. 1094, provides that either party may allege and prove any facts that may be material in deciding whether the alleged trustee is chargeable. This does not refer to the issues between the principal parties, but to questions as to the liability of the alleged trustee. There being no such question in this case, as it stands on the disclosure and report, said allegations should be dismissed.

The proforma judgment of the County Court is reversed, and judgment for the plaintiff to recover the amount of his scrip dividend certificates with interest as found by the referee, with interest thereon, and both the Central Vermont Railroad Company and the Cheshire Railroad Company are adjudged chargeable as trustees.