64 Conn. 4 | Conn. | 1894
Nathaniel P. Perry, of Kent, in this state, died in 1849, then being the owner of twenty shares of the preferred stock of the Housatonic Railroad Co., which was known as eight per cent cumulative stock; so called because the company guaranteed to its holders dividends from profits earned, at the rate of eight per cent per annum, before the common stock could participate in any division of earnings ; he also was the owner of six shares of the common stock of said company. By his will be gave to his wife, Almira L. Perry, so long as she should remain his widow, all dividends or interest that might accrue or arise from said shares of stock, with remainder to two grandchildren named. He also appointed his wife executrix of his will. She accepted the trust and remained such executrix, and also the widow of the
On March 8d, 1888, there was transferred from Almira L. Perry executrix, to the individual account of Almira L. Perry, twenty shares of said new preferred stock, and a new certificate for twenty shares of said new preferred stock was issued in the individual name of said Almira L. Perry. On January 29th, 1890, said twenty shares of new preferred stock were transferred to the account of a firm of which defendant was a partner, and were received by the defendant, and there was credited by him, upon an account which he had against said Almira L. Perry, the sum of $980, as the proceeds thereof. The other twenty-two shares of said new four per cent non-cumulative stock are now outstanding in the name of Almira L. Perry, executrix. Said stock is in the custody of the defendant, and is claimed by him to form a portion of the estate of Almira L. Perry, in which he, the defendant, has not and does not claim any interest, except as a creditor of said estate.
On February 25th, 1891, the plaintiff, who is the administrator de bonis non on the estate of Nathaniel P. Perry, made due demand upon the defendant for the entire forty-two shares of stock. The defendant has not complied with said demand, or any part thereof.
Upon these, and the other facte which will be stated hereafter in their proper connection, the plaintiff' having in the Superior Court recovered judgment for the value of all the shares, the defendant, by his appeal, in effect contests the correctness of that judgment; first, as to the twenty shares transferred to the individual name of Almira L. Perry, claim
We will consider these claims in the above order. As to the twenty shares, there is no dispute concerning the existence of a general and practically uniform rule that cash dividends declared by a corporation go to the life tenant, and stock dividends to the capital of the fund. The law upon this subject has been so clearly and fully stated in recent cases in our own jurisdiction that neither discussion, nor the citation of authorities elsewhere is required. Terry v. Eagle Lock Co., 47 Conn., 141; Brinley v. Grou, 50 Conn., 66; Hotchkiss v. Brainerd Quarry Co., 58 Conn., 120; Spooner v. Phillips, 62 Conn., 62.
But it is the contention of the defendant that these shares of stock were issued, not as dividends, but in payment of claims based on the nonpayment of dividends on the old guaranteed stock, which claims belonged to the life tenant, and that therefore the title to the stock in question vested in such life tenant; that in deciding whether this be so, and in considering the respective rights of life tenant and remainderman, the intention of the corporation in making the settlement is, in the absence of fraud or collusion, of controlling weight; that such company had a perfect right to pay the additional preferred stock to Mrs. Perry, and that the issue to any one else would have been invalid, and in violation of law.
In order to understand this position it will be necessary to look further into the record. It has already been stated that the Housatonic Railroad Co. guaranteed to the holders of its cumulative preferred stock, dividends from profits earned, at the rate of eight per cent per annum, before the common stock could participate in any division of earnings. No dividends or interest were declared or paid on the com
The General Assembly of this State, at its May session, 1870, passed a resolution which authorized and empowered the directors of the Housatonic Railroad Company “ to settle or compromise with the holders of the preferred or guaranteed capital stock of said company, for any and all claims which they may have for or on account of the back and unpaid dividends upon said stock, either by funding said claims, or by the issue of additional preferred stock therefor, and upon such terms and conditions as may be agreed upon by the holders of both the original and preferred stock, at a special meeting of such stockholders called for that purpose.” Other provisions are contained in said resolution which are unnecessary to quote. This resolution was accepted by the company as an amendment to, and part of its charter, in November, 1870. No further action appears to have been taken by said company in regard to such resolution, or the matters contained therein, until September 6th, 1887. On that day notice was given of a special meeting of the original and preferred stockholders, to be held October 5th, 1887, “for the purpose of making a settlement and exchange with the stockholders as, and in any manner, authorized and contemplated by the Act or Resolution of the General Assembly of the State of Connecticut, passed at its May session, 1870;” also for the transaction of certain other specified business.
From the minutes of said meeting, duly held, pursuant to such notice, October 5th, 1887, it appears that:—“ The chairman stated, generally, the purposes of the meeting, explained
“ Resolved, Third, That any and all claims, demands, suits, accountings and liabilities of every kind which the holders of the preferred or guaranteed stock of the Housatonic Railroad Company have or may have against the company to this date for or on account of back or unpaid dividends upon such preferred or guaranteed stock be and the same are hereby settled or compromised, adjusted, released and canceled on the following terms and conditions.”
“ First: The holders of the existing preferred stock shall surrender their certificates of such stock, and shall receive one share of such new four per cent non-cumulative preferred stock in exchange for each share of such eight per cent cumulative stock so surrendered, and shall also receive first, one hundred dollars par value of such bonds authorized by said Act and by this meeting, with interest thereon from the
“ Second: That the company, through its board of directors, shall have the right to pay one hundred dollars in cash on each share of such preferred stock so surrendered in lieu and instead of said bonds as above stipulated and provided, if in the judgment of the board it shall be judicious so to do.”
“ Third: That all further rights to dividends on the existing preferred stock ceases after this day, and the rights and interests of the holders thereof shall be thenceforth such as are conferred or created by such new four per cent noneumulative preferred stock and no other ; that the board of directors are hereby fully authorized and empowered to add (and at will to alter or annul the same) such penalties and conditions to the foregoing provisions as they may deem best, in respect of all such stockholders as shall not make such actual surrender within ninety days after notice thereof shall be sent by the secretary by mail to their last post office address known to him.”
“ Fourth: That the common stockholders of the company, in consideration of assenting to this settlement, shall have the right and privilege contained in resolution fourth upon the conditions therein expressed or referred to.”
“ Fifth: That it is hereby admitted and agreed that such claims are a valid, legal, and subsisting liability and indebtedness of the company to an amount equal at least to the par value of such bonds and additional preferred stock in these resolutions authorized to be issued in consummating any settlement or exchange therein authorized, and that the. right of the holders of such preferred stock to vote as here
“Resolved, Fourth: That the holders of the original or common stock of this company shall have the right, and they are hereby declared to be entitled to exchange and surrender their shares of common stock for the said- new four per cent non-cumulative preferred stock, upon the basis of one share of said new preferred stock for each three shares of such common or original stock so surrendered and exchanged, and to receive such one share of new four per cent non-cumulative preferred stock for each three shares of common stock so surrendered and exchanged. Provided, that such exchange and surrender be made within ninety days from this date; and provided, further, that after the expiration of said ninety days the board of directors shall take up and cancel any of such stock, either by purchase or by exchanging the same for bonds or stock authorized by said act of 1870, and by these resolutions to be issued, only upon such terms and conditions as they may deem best, and as may be agreed to by the owner or owners of such common stock.
“ Resolved, Fifth : That the board of directors be and they are hereby fully authorized and empowered to issue such four per cent non-cumulative preferred stock for the purpose aforesaid, and to make such exchange, and to cause the certificates of such stock to be prepared and executed in such form and manner as they may deem best, and generally to execute all instruments, and do all acts and things, and make all agreements, which, in their absolute judgment and discretion may be necessary or proper to effectuate the purposes aforesaid, and to carry out the foregoing resolutions, agreements and acts.”
The foregoing resolutions were adopted by a practically unanimous vote of stockholders representing both preferred and common stock. And in accordance with the scheme therein provided, Mrs. Perry received the forty-two shares of stock hereinbefore referred to, and in lieu of bonds to that
Upon these facts it is the general claim of the defendant, as we have already seen, that it was the clear intention of the railroad company to issue the twenty shares of additional preferred stock, not as a dividend, but in the payment of an admitted debt; that such intention should govern, and that these shares should be held to belong to Mrs. Perry, the life tenant, as the person entitled to the claim which was intended to be paid by them.
With the facts recited before us, let us examine the claim. In the exchange of the old stock, it is apparent that no consideration was given by the railroad company to the respective rights and interests of life tenants and reversioners or remaindermen, of such stock. Nor was any attempt to define the rights of either in the new stock made or thought of. It is unnecessary to determine whether such company, either by virtue of the resolution or otherwise, had any power or authority to make any such adjustment of such interests, since it is manifest that none was intended. All the new stock issued in lieu of or in addition to the stock, both preferred and common, which had belonged to Nathaniel P. Perry was properly issued, and the money paid to his executrix, leaving the rights of respective claimants to be elsewhere determined.
But if it were to be conceded that such determination should be governed by the intention of the company, if it could be ascertained; that the additional stock, with the
But if the only object had been what the defendant assumes, what occasion was there to retire the old stock ? If we use, for illustration, the example of interest largely in arrears upon a note secured by mortgage upon real estate, the maker of which is irresponsible' beyond the security, the surrender of the old note and the substitution of a new one signed by the same maker and secured upon the same property, for twice the amount of the old, but bearing half the former rate of interest, would seem a peculiar transaction, if regarded solely as a mode of payment of such accrued interest. It is equally hard to see how in the case before us, increasing the old preferred stock of the corporation, while at the same time proportionately decreasing its guaranteed earning capacity, adding also to its shares in exchange for common stock, admitted on the same plane of earning capac
But suppose there had been profits or net earnings, for which cash dividends should have been declared to the owners of preferred stock in excess of those actually declared and paid; it follows, since even the cash given to the stockholders as part of the exchange had to be borrowed, that these earnings had already been invested. They had been added to the capital, and the effect of the action of the stockholders was to confirm the previous action of the directors and to retain them as such.
But we return to the real argument of the defendant. And granting, for its sake, the first assumption, that the railroad company admitted that the claims of its preferred stockholders against it for undeclared dividends, to the extent of eight per centum per annum, constituted a “ valid,
The defendant says in his brief:—“It was for the interest of the stockholders to consent to a change which would give them, in place of an eight per cent cumulative stock, on which the interest had been paid only at very irregular intervals, a four per cent stock on which it was evidently expected that interest would be paid with regularity.” But the defendant in that connection, does not quite go to the extent of asserting that such speculative interest in an increase would have constituted a controlling consideration in inducing a remainderman to accept one share of four per cent, which could only be paid provided the net earnings of the road were eight per cent upon its previous stock, in place of one share of such eight per cent which must be paid, if all the earnings would permit, and if not would constitute, at least in the eyes of the stockholders passing in their meeting upon their own claims, an indebtedness.
It appears to us, however this question may be looked at, the plain principles declared in repeated decisions in reference to the respective rights of remaindermen and life tenants, in case of increase of capital shares of corporate stock, underlie and control the decision which should be reached. Thus, referring to cases in our own jurisdiction, in Brinley v. Grou, supra, the words used in creating the life interest were “rents, dividends, increase and income,” being somewhat broader terms than in Mr. Perry’s will. But this court held that an increase of capital from three to four millions, with an apportionment of new shares pro rata among the
Among the many cases cited in the opinion is that of Gibbons v. Mahon, 186 U. S., 549, the original case being reported with extended note in 54 Am. Rep., 262, a most instructive and exceedingly pertinent case, in which the conclusion stated is this :—“ Reserved and accumulated earnings, so long as they are held and invested by the corporation, being part of its corporate property, it follows that the interest therein, represented by each share, is capital, and not income, of that share, as between tenant for life and the remainderman, legal or equitable, thereof.” And again it was said :—“ A dividend is something with which a .corporation parts, but it parted with nothing in issuing this new stock.” See also, Minot v. Paine, 99 Mass., 101; 96 Am. Dec. 705, with note ; Rand v. Hubbell, 115 Mass., 461.
The defendant, however, further contends that the issue of the additional preferred stock to any one but the life tenant would have been invalid and in violation of law. It is said that the Resolution of 1870 is the sole authority for this issue ; that by virtue of that enactment stock could only be issued for the purposes of payment of existing claims, and the conversion of the common stock into preferred stock ; that, therefore, this action is an attempt to claim for the remainderman stock which was not intended to be issued to him by the company, and which, if issued to him by the company, would have been absolutely void in his hands. In answer to this it is unnecessary to consider whether the Act of 1870 rvas in existence at all in 1887, or whether, as contended by the plaintiff, it had been repealed by subsequent legislation in 1878. Eor is it necessary to determine whether, if such Act was in existence when it provided for the issue of bonds or stock in settlement of claims, it was followed when both honds and stock were issued in such settlement. It is unnecessary, we say, to decide these matters, since, if
It is further said by the defendant that he stands in the position of a bond fide holder for value, and that he cannot be affected by any equities existing between Mrs. Perry and the plaintiff. The record, however, states that the defendant had seen a copy of the will of said Nathaniel P. Perry, and had read the provisions therein contained with respect to the interest of Mrs. Perry in the Housatonic Railroad stock. It also appears that the stock was transferred to him to be applied in part payment of a debt by Mrs. Perry, who was his grandmother, three days before her death. There is nothing whatever in the record to justify the assertion of the defendant that this debt was for the advances made Mrs. Perry upon the faith of her ownership of this stock. It is true that the stock had been transferred from Mrs. Perry’s name, as executrix, to her individual name. But the record leaves no room to question the defendant’s full knowledge of the source from which this stock was derived, and the trust under which it was held. The defendant therefore stands in the same position, in respect to these shares, as Mrs. Perry stood, and the right of the plaintiff, as administrator de bonis non, to maintain this suit against him rests upon the same foundation as that which supported the recovery by the plaintiff in Mansfield v. Lynch, 59 Conn., 820. In each case, the party exercising the original administration parted with assets of the estate, in a manner which gave the
But to the extent that such judgment also includes damages for the conversion of the remaining twenty-two shares of stock, we think that it is erroneous. It appears from the record that at the time of her death, Mrs. Perry was largely indebted to the defendant, and that her estate was insolvent. Commissioners were appointed upon her estate to whom the defendant presented his claim. The plaintiff also presented to such commissioners the same claim set forth in this present action against the defendant for the conversion of the stock. This claim was allowed, but an appeal was taken from the doings of the commissioners, which is still pending, and no payment or dividend has yet been made upon said claim. At the time of the demand by the plaintiff upon the defendant, the defendant understood that his custody of the twenty-two shares of stock was for and in the behalf of the executor of Mrs. Perry, and he did not claim and has not claimed any interest therein, except as creditor of her estate,
It is the further claim of the defendant that he was a party to the proceedings before the commissioners, in which the claim was made against the estate of Mrs. Perry for the conversion of these shares, and that as against him the plaintiff elected to consider these shares as a part of her estate; that this being so, it would be unjust to him to compel him to pay for their value, or to deliver them, in a proceeding in which the executor of Mrs. Perry is not a party. It is the claim of the plaintiff that he has not elected, and that this is not a case in which he is put to any election; that it is an action of tort, in which the liability for the conversion alleged is several as well as joint; that “ a judgment against one of two joint trespassers, without satisfaction, is not a bar to an action against his co-trespasser, for the same trespass, and does not pass the title of the property to the defendant.” Sheldon v. Kibbe, 3 Conn., 214; Atwater v. Tapper, 45 Conn., 144; and that the allowance of this claim by commissioners ought to have no higher effect than a judgment.
It seems to us that this contention does not meet the precise point of the true issue. The question is not whether the defendant would be severally liable for conversion ; but whether he has in fact converted this stock by his refusal to deliver it to the plaintiff on demand, as we have herein previously held that he might be considered to have done with the twenty shares of stock. As bearing upon the question, the further inquiry as to the reason or ground of such refusal, is relevant. Hartford lee Co. v. Greenwoods Co., supra. The plaintiff’s claim for conversion presented to the commissioners on Mrs. Perry’s estate was allowed. And though an appeal was taken, he is still pursuing it. If finally allowed.
There is error in the amount of the judgment rendered, to the extent of the damage awarded for the value of the twenty-two shares, and to that extent it is reversed. And it is affirmed to the extent of the damages for the conversion of the twenty shares.
In this opinion the other judges concurred; except Cablentes,, J., who dissented as to that part of the opinion holding there was error in the judgment below respecting the conversion of the twenty-two shares.