117 Mo. App. 40 | Mo. Ct. App. | 1906
(after stating the facts).
The precise questions arising on the record calling for the opinion of the court are:
First. Whether the mere declaration of a dividend by a solvent corporation under such circumstances as indicated, creates a debt in favor of the stockholder and against such corporation for the amount of such dividend in the absence of further express action on the part of the board of directors, setting aside a fund out of which to pay such dividend?
Second. Is it competent for such corporation, after having declared the dividend, to pay one installment thereon and to rescind and recall the installments thereof yet unpaid?
“A dividend is defined as follows: A profit set aside, declared by the board of directors of a corporation and ordered by them to be distributed among the holders of its stock.’ [9 Amer. and Eng. Ency. Law (2 Ed.), 680]. A dividend is a corporate profit, set aside, and ordered by the directors to be paid to the stockholders on a fixed date.’ [2 Cook on Corp. (4 Ed.), sec. 534]. A dividend is a fund which the corporation sets apart from its profits to be divided among its members.’ [Anderson’s Law Dictionary, p. 369]. A dividend is that portion of the pro,fits and surplus funds of the corporation which has been actually set apart by a valid resolution of the board of directors, or by the shareholders at a corporate meeting, .for distribution among the shareholders according to their respective interests, in such a sense as to become segregated from the property of the corporation, and to become the property of the shareholders, distributively.’ [2 Thompson on Corporations, sec. 2126.]”
Upon the words “set aside,” “set apart,” and “actually set apart,” employed in the definitions above stated, the learned counsel predicates the argument that a resolution declaring a dividend is not sufficient to create a dividend, or, in other words, to create a debt from the corporation to the stockholders therefor, in the absence of further action on the part of the corporation setting apart a fund out of which the dividend or debt is to be paid. It is insisted that such resolution declaring a dividend, as in this case, is but an expression of intention in that behalf, which, to constitute it effectual for that purpose, must be followed or accompanied with competent action as well, setting, aside a fund out of which the dividend is to be paid when due, and until such fund is set aside for that purpose, no dividend has been declared and no right thereto is vested in the stockholders, and therefore it is competent for the same authority to rescind or recall the former action in that be
All of the text-writers agree on this doctrine. [2 Thompson on Pri. Corp., sec. 2134; 1 M'orawetz on Pri. Corp. (2 Ed.), 450; 2 Cook on Corp. (4 Ed.), sec. 541; 9 Amer. and Eng. Ency. Law (2 Ed.), 689-690.] And the doctrine is that a dividend is considered parcel of the mass of corporate property until declared and therefore incident to and parcel of the stock up to the time it is declared, and before its declaration, will pass with the sale or devise of the stock. Whosoever owns the stock prior to the declaration of a dividend, owns the dividend
In De Gendre v. Kent, L. R. 4 Eq. 283, such dividends were happily likened to fallen fruit which does not pass with the sale or gift of the tree; the principle clearly established being that the act of declaring the dividend operates as a severance thereof from the stock, and as said in Missouri Baptist Sanitarium v. McCune, 112 Mo. App. 332, the time the law fixes in adjusting the ownership of dividends is the time when the dividends were declared and thus severed from the stock of which they were theretofore treated as incident. Under the foregoing principles, a specific legatee of corporate shares is entitled to all dividends which are declared after the de death of the testator. [Thompson on Pri. Corp., sec. 2206; Cook on Corp., sec. 539; Wright v. Warren, 4 De Gex Rep. 367; Browne v. Collins, 12 Eq. 586; Ibotson v. Elam, 1 Eq. 186; Jacques v. Chamber, 2 Collyer 435.] A transfer of stock passes, of course, all dividends de-1 dared subsequent to the transfer although the dividend was earned before the transfer was made. A legatee of shares takes the stock as it was at the time of the testator’s death. All dividends declared previous to that event go to the administrator. [Cook on Corp., sec. 539; Brundage v. Brundage, 60 N. Y. 544, 12 Ct. App. Reps. 934; In re Kernochen et al., 104 N. Y. 618; Johnson v. Bridgewater Iron Mfg. Co., 80 Mass. 274; 14 Gray 274.] • And upon the principle that the declaration of the dividend operates, as a severance thereof from the stock in the general mass of the corporate property, and raises from such declaration an implied promise on the part of the corporation to pay the stockholder the amount of the dividend, it has been adjudicated that when moneys for the payment of such dividends are not set apart for the payment thereof, but are permitted to remain still in the corpus of such corporate estate after the declara
Wherefore, it appears that the principle obtains that the mere declaration of the dividend, without more, by competent authority under proper circumstances, creates a debt against the corporation in favor of the stockholder the same as any other general creditor of the concern; whereas, the setting apart of a fund after or concurrent with the declaration, out of which the debt thus created is to be paid, passes one step further toward securing the payment of the identical fund to the shareholder inasmuch as the law treats the setting apart of such fund as a payment to the corporation as trustee for the use of - the stockholder, on which fund the stockholder has a lien, and to which fund he has rights superior to the general creditor.
From these considerations we are persuaded that the mere declaration of the dividend itself, without the setting aside of the fund, creates a debt and that when
It is said, however, that the reasons which preclude a corporation from rescinding a cash dividend after its having been declared, do not obtain in a case of a stock dividend, presumably upon the principle that inasmuch as the act of declaring the cash dividend not only creates a debt but thereupon severs the amount thereof from the mass of the corporate funds and property, and cannot be recalled for the reason the debtor cannot cancel a debt and rehabilitate or re-establish the fruit on the tree, so figuratively referred to' in the case supra; whereas the act of declaring a stock dividend does not, of itself, operate to sever the stock to be thereafter issued from the other corporate property, inasmuch as there is no stock to be severed and as the new stock cannot be issued until certain precedent conditions and formalities are complied with, such as issuing stock, the filing of certificates with the proper authorities, etc. [Terry v. Eagle Lock Co., 47 Conn. 441; Hollingshead v. Woodward, 35 Hun (N. Y.) 410; 9 Amer. and Eng. Ency. Law (2 Ed.), 692.] But we are not concerned with this here and it will not be further noticed.
Ford v. East Hampton Rubber Thread Co., 158 Mass. 84, is cited and relied upon by appellant as authority for the action of the board of directors in rescinding the dividend, in that case it appears that the
The court is therefore of the opinion that the learned trial judge properly refused the instruction requested. The judgment will therefore be affirmed. It is so ordered.