West Chester & Philadelphia Railroad v. Jackson

77 Pa. 321 | Pa. | 1875

Mr. Justice Woodward

delivered the opinion of the court,

No language could be more definite and explicit than that of the fourth section of the Act of Assembly of the 30th of March 1855, under which the rights of the plaintiff below were asserted. The earlier sections had authorized the issue by the West Chester and Philadelphia Railroad Company of eight thousand shares of preferred stock, and had directed the form of subscription, and specified the terms and mode of payment. The fourth section declared that the holders of this stock should be entitled to receive! a dividend of eight per cent, per annum, upon their par value, paya-l ble semi-annually from the time of payment therefor, in preference! of, and before any interest or dividends should be declared or paid] in favor of and to any holder or holders of the unpreferred stock! of the company. Of the 5764 shares issued in pursuance of thei act, Gibbons Gray, the plaintiff’s intestate, subscribed for thirty, and subsequently purchased six, which were transferred to him on the company’s books. Under the Acts of the 13th of April 1871, and the 3d of April 1872, a fresh adjustment of the corporate capital has been made. These acts authorized the issue of a consolidated preferred stock, into which both the preferred stock under the Act of 1855 and the common stock should be converted, the holders of the former receiving three new shares for two held by them, and the latter receiving share for share. All the holders of the original preferred stock have accepted this adjustment except the plaintiff and the holders of six.other shares.

On the 7 th of July 1873, a dividend of four per cent, was declared by the company. There had been no previous dividend, and the record shows that this was made up from the net earnings of the road during the two years preceding the date when it was declared. Upon these facts, the question arose whether the plaintiff was entitled to the dividends provided to be paid to the holders of the preferred stock, by the terms of the Act of 1855, or her rights were confined to a participation in the dividend declared in 1873 for the benefit of all the stockholders.

The payment for his shares by Mr. Gray, and the issuing of the r; certificates to him by the defendants, made as complete a contract/:, as if he had been a purchaser of bonds instead of a subscriber for: stock. And his contract rights were precisely defined by the Act] of 1855. In effect, it was an agreement for the advance of money to an embarrassed railroad company. A corporation may issue new shares and give them a preference as a mode of borrowing money, where it has power to borrow on bond and mortgage, as pret]) ferred stock is only a form of mortgage. Redf. on Railw., sect. 237; Everhart v. Railroad Co., 4 Casey 353. The preferred stock wasj] not designed to form a permanent part of the capital, for pro-,'! vision was made by the fifth section of the act for its redemption.] Mr. Gray's subscription was made upon the faith and in view off the statutory stipulations, and of these the plaintiff- has the right! to require the performance by the defendants. She is entitled to] receive just what the company agreed to pay when the 'money was obtained.

It is no answer to the plaintiff’s demand to say that her thirty-six shares were part of the 5764 shares originally issued. Her right is not limited to the proportion of the net profits divided in 1873, which would come to her if the other stockholders had retained their rights to participation in the distribution. All of them, except the holders of six shares, have entered into a new contract with the defendants, under the Acts of 1871 and 1872, by which their claims as preferred stockholders under the Act of 1855 were surrendered and extinguished. The case stands as if forty-two shares only had been issued, for they only were outstanding when the dividend was declared.

And it is no objection to the demand that it covers a period of time during which no profits were realized by the company. The proviso to the fourth section of the Act of 1855, that dividends should not he paid except out of the net earnings of the road, nor until after payment of all interest due on the company’s debts, bad reference only to the time when the dividends should be paid to the stockholders. The amount of them, and the time when they were to commence, were fixed by the enacting clause of the section. They were to be eight per centum per annum, payable semi-annually, “from the time of payment for the stock,” and before any payment to the holders of the common stock.

The dividend the defendants declared in July 1873, proved them to be in possession of ample funds. Unquestionably, the time had arrived when it was legitimate for the plaintiff to call on them to perform their contract. And her claim was properly presented in this action. This is not, in any aspect, an effort to coerce the policy or control the discretion of the directors. It is not an attempt to enforce the declaration of a dividend. That has been declared, hut the defendants have made a mistaken distribution of money they admitted to he in their hands, and which legally belonged to the plaintiff. The authorities relied on by the court below, adequately proved that an action of assumpsit was the plaintiff’s appropriate remedy. Judgment affirmed.