Case ID: ohio-st_31/html/0116-01.html
Source: Caselaw Access Project
Author: {"author": "Welch, C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

George H. Burt & Charles B. Pettingill, Assignees of the McNairy & Claflin Manufacturing Company v. William Rattle and others.
    1. A statute should not receive a construction which makes it conflict with the constitution, if a different interpretation is practicable.
    2., By the act of March 25, 1870, entitled “ An act to authorize manufacturing corporations to issue preferred stock” (vol.'67, Ohio L. p. 26), the legislature did not intend to authorize the creation of additional stockholders, and to exempt them from individual liability to creditors, but to enable such corporations, upon the terms in the act provided, to .borrow money and guarantee its repayment, with the option on the part of the lenders to become stockholders. .
    3. Such corporations have power to borrow money for the prosecution of their legitimate business, and to secure its repayment by mortgage, independent of, and without any aid from the provisions of said act.
    4. Where a manufacturing corporation, professing to act under the provisions of said act, issued certificates of preferred stock, so called, certifying that the corporation guaranteed to holders the payment of four per cent, semi-annual dividends, and the final payment of the entire amount at a specified time, with the right to convert the preferred stock into common stock; and the company at the same time executed and delivered to a trustee its bond and mortgage to secure the holders of such certificates: Held, that the holders of the certificates did not thereby become stockholders or members of the corporation, but its creditors, and that, as such creditors, they had a lien upon the mortgage property superior to that of general creditors of the corporation, or of its assignees.
    Error to the Common Pleas of Cuyahoga county, reserved in the District Court.
    The McNairy & Claflin. Manufacturing Company is a corporation organized under the laws of Ohio. In December, 1870, the company, consisting of five individuals, and having a paid up capital of $840,000, with an authorized capital of 8500,000, undertook to raise money for payment of its debts, and for a working capital, by sale of so-called “ preferred stock,” under the provisions of the act of March 25, 1870. The provisions of that act are as follows :
    “ Sec. 1. That manufacturing corporations in this state may issue and dispose of preferred stock, to any amount not exceeding oue-half the cash capital paid in by the stockholders ; provided, that before any such stock shall be issued, the written assent of at least three-fourths of the stockholders in interest in such corporation, representing at least three-fourths of the capital stock of said corporation, shall be obtained therefor, and to the terms thereof.
    Sec. 2. The proceeds of such stock shall be used solely for the purpose of paying the debts of the corporation, and furnishing a working capital.
    Sec. 8. It shall be lawful for such corporation to guarantee the holders of such stock semi-annual dividends, as the directors of such corporation may deem advisable, not exceeding the rate of interest allowed by law to be contracted for, and the final payment of such preferred stock at slick time as shall be specified in the certificate; and may provide for the conversion of such preferred stock into the common stock. 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.
    Sec. 4. The common stock of said corporation shall be entitled to dividends only out of the surplus of the profits* after setting apart a sum sufficient to pay current expenses and the dividends upon such preferred stock.”
    To effect the object in view, the company, on the 27th December, 1870, passed the following resolution :
    
      “Sesolved, That the president and secretary be authorized to issue the preferred stock of the company to an amount not exceeding the sum of one hundred thousand dollars, with guaranty of the- payment of the stock, at such time as the president may deem best for the interests of the company, and semi-annual dividends of four per cent., making the same convertible into the common stock of the company, at the option of the holders. Resolved, That to secure the payment of such preferred stock and dividends, the bond of the company be executed to George H. Burt, as trustee for the holders of such preferred stock, with mortgage on the real and personal property of the company, and assigned policies of insurance, premiums paid, to an amount not less than seventy-five thousand dollars.”
    On the same day the five stockholders gave their written assent to the issuance of the stock on the terms proposed.
    Certificates of stock were accordingly prepared for issue in the form following:
    “This certifies thatWm. Rattle is entitled to fifty shares of the preferred capital stock of the McNairy and Claflen Manufacturing Company, unassessable, transferable only on the books of the company, by him or his attorney or legal representative, on the surrender of this certificate.
    “ This company guarantees to the holder of this certificate the payment of semi-annual dividends, at the rate of four per centum, on the shares embraced herein, payable at the office of the company, on the first days of January and July of each year, and the final payment of the entire amount of said shares, at their par value, on the first day of January, a., d. 1876, at which time such dividends shall cease, but such final payment shall be made only on the surrender and cancellation of this certificate.
    “ This preferred stock is convertible into the common stock of said company, at the option of the holder, at any time during the term hereof.
    “ In testimony whereof, the said company has caused this certificate to be signed by its president and secretary, and affixed hereto its corporate seal at Cleveland, this 31st day of December, A. d. 1870.
    (Signed,) H. M. Claelen, V. Pres’t.
    
    “John Coon, Sec’yR
    
    [L. 8.]
    
      A bond was likewise prepared, in the penal sum of $150,000, payable to George II. Bart, trustee, the condition of which was that “if the said McNairy and Claflen Manufacturing Company shall well and truly pay, or cause to be paid, to the holders of said preferred stock, the said semi-annual dividends, as the same shall become due and payable, together with the full amount of all the preferred stock, at its par value of one hundred dollars per share, when the same shall become due, according to the terms and tenor of said certificates, and shall keep the property insured to the amount of $75,000,in the name and for the use and benefit of said trustee, until all of said preferred stock, and the dividends thereon, shall have been fully paid, said bond to be void,” etc.
    A mortgage to said George H. Burt was also prepared, of which the condition was that if said company should “well and truly pay the aforesaid bond, and perform all and singular the conditions thereof, to the said grantee,” then the mortgage to be void, etc.
    The bond, embodying a specimen certificate, and the mortgage were duly recorded on the 23d day of February, 1871, and filed as a chattel mortgage on the 30th day of January, 1874.
    A book was prepared by the company, from which these certificates were cut. It was labeled on the back with the printed label, “ Preferred Stock Claims.”
    In February, 1871, the secretary of the company, John Coon, and the vice-president, Henry M. Claflen, issued the amount of $91,000 of these certificates, which were sold to divers persons, who paid -therefor in money at the rate of about eighty-six cents on the dollar. The plaintiff took, and still holds, the amount of $10,000 of these certificates, for which he paid at that rate.
    The company made the semi-annual payments, called dividends, until July 1, 1874, when they became in default therefor; but no meeting of the directors was ever held to consider whether these payments should be made or not, nor were any such dividends ever declared.
    
      In April, 1874, the company failed, and made an assignment of all its property for the benefit of creditors, its assets being insufficient to pay more than some seventy-five per centum of its liabilities. Its general indebtedness was' all incurred subsequently to the issuance of the certificates of preferred stock.
    The assignees of the company refused to regard the holders of these certificates as creditors of the company, or to acknowledge the validity of the mortgage, and instituted proceedings in the probate court for the sale of the mortgaged property and other assets ’of the company for the payment of its creditors, to the exclusion of the holders of the certificates. The plaintiff then filed his petition in the Court of Common Pleas of Cuyahoga county against the company, making the other holders of such certificates and the assignees of the company also parties defendant, and asking to have the mortgaged property sold for the satisfaction and payment of the amount of principal and interest due thereon to the holders of said certificates, and for other relief.
    By their answer, the assignees for the benefit of creditors claimed that the holders of these certificates were members of the corporation, and not its creditors; that the company had no power to execute the bond and'mortgage, and that the same were null and void. They also denied the power of the company to issue or sell the preferred stock at less than its par value, or to create any indebtedness of the company on account of dividends therefor; and they claimed that the mortgaged property, as other assets of the company, should be applied in payment of the general creditors, to the exclusion of the preferred stockholders.
    The case was referred to referees, who, upon the testimony, found, “That the purchasers and holders of these certificates advanced their money therefor to the corporation, relying upon said bond and mortgage to secure the amount due to the holders, and the assurance of the officers of the corporation that such security was valid and abundantly good.” As their conclusion of law, the referees reported, “ That the certificates of so-called stock, issued by the corporation, can not be regarded in any view as anything more than promises to pay money with interest;” but that only the amount actually advanced to the corporation, with six per cent, interest, should be allowed or paid to the holders.
    On the hearing of exceptions to this report it was confirmed by the court, and a decree was rendered in the case ordering a sale of the mortgage property, and the application of the proceeds to the payment of the holders of certificates, in preference to the claims of general creditors, or those of the assignees of the company.
    A petition in error to- reverse this decree was filed by the present plaintiffs, in the district court, where the cause was reserved for decision here.
    
      S. Burke, for plaintiffs in error.
    The act under which this stock was issued should be treated as constitutional, because neither party has pleaded that it is unconstitutional, but both parties rely on the act and claim under it as a valid enactment, and we think the court is not called upon sua sponte to pronounce it void. 8 A. K. Marsh. 515; 23 Miss. 600; 12 La. Ann. 364; 3 R. I. 64; 8 N. Y. 317; 12 TJ. S. Dig. N. S. 735-6; 9 Calif. 341.
    Parties acting under it are estopped, 18 Ga. 65.
    When part of a statute is unconstitutional such part may be disregarded. 2 Pet. 526; 4 Blatchf. 263; 86 Calif. 379; 33 111. 390 ; 11 Ind. 424; 2 Iowa, 165 ; 1 Gray, 1; 3 R. I. 33.
    The court will treat the unconstitutional parts as if they were stricken out of the statute. 22 Cal. 379; 3 Ohio St. 1; 5 Ohio St. 497.
    We think the necessary consequence of holding it unconstitutional is to render the stock certificates and the bond and mortgage executed to secure the same null and void, and to leave the parties as if no contract of any kind had been made between them.
    For if the act falls the contract must fall, because it certainly would be unjust to say that because the statute under which they assumed to act is unconstitutional and void, that the one or the other should be put in a better position than he would have been if the act had turned out to be valid.
    If the act is unconstitutional, it is so simply because it contains an exemption of preferred stockholders'from liability for the debts of the company.
    We maintain that this mortgage can not be sustained under any circumstances as a mortgage securing bonds; it never was so intended by either party. No bonds are described in the mortgage except the bond securing the preferred stock. The whole1 object of issuing preferred stock, and securing it in the manner in which it was secured, was to issue and sell preferred stock under the act of 1870. If that act is constitutional and valid, then we maintain that the mortgage is utterly null and void so far as creditors are concerned ; for, clearly, it is against the very first principles of equity to allow stockholders of any class to secure themselves as against their creditors.
    If the constitutionality of the statute in question is not to be questioned by the court, and if the court is to enforce the contracts made by the parties under this statute, according to the terms of the certificates issued, then we maintain that the preferred stockholders are essentially part proprietors of the corporation; stockholders merely and not creditors of the company; favored stockholders it is true, but still stockholders; and their capital invested was invested in stock and not in bonds; they were to receive dividends with regularity duly guaranteed, but still their income from their investment was to be in the form of dividends and not interest.
    If anything in this statute under consideration is plain and clear beyond debate, it is, that it was intended by the legislature “ to authorize manufacturing corporations to issue and dispose of preferred stock,” and we insist that the word “stock,” in the act, is used to describe a portion of the capital of the company.
    The whole capital stock is divided into a certain specified number of shares, and the whole of these shares together constitute the capital stock of a corporation; but as we have seen, and as we suppose is clear beyond all question, the whole capital stock of a corporation may be represented by two classes of stock, common and preferred. The difference between the two is apparent. Preferred stock under the statute is created by the ‘owners of the common stock for- the purpose of putting the company in which they are proprietors on a firmer footing and giving it better credit, and for this purpose they take in with them, as proprietors, or consent to the creation of a class of shareholders, or stockholders, who are to share in the profits of the corporation in preference to themselves, and who, as between the common and preferred stockholders, are first to be paid their dividends on the capital invested by them in the stock of the corporation.
    The creation of preferred capital stock is a species of loan. The security given is not a security upon the property of the corporation ; but the security given is that the preferred stockholders, up to the percentage agreed upon, shall have the first profits that are made or earned by the company, and shall have certain other rights, and privileges, among which is the right to become general or common proprietors in the corporation, or to retire from the company, withdrawing from it the capital which they have put into it: This special and peculiar relation has been hold in every case, so far as we know, to create simply a preference between proprietors in the company, and not to create any preference as between any class of stockholders and the creditors of the company in which they are stockholders. 2 Redfield on Railways; 8 Rhode Island, 310 to 335.
    "We claim that the plaintiffs below were preferred stockholders, and the question here is, shall they be preferred to the general creditors of the company? "We say they should not.
    The statute under which, the preferred stockholders became such authorized them to become preferred stockholders, to whom dividends should be guaranteed, but did not authorize them to become creditors. The guarantee made to the stockholders did not create a debt against the corporation. Lockhart v. Van Alstyne, 31 Mich. 76; Stevens v. Railway, 9 Hare, 312; Harvey v. Railway, 1 He Gox & Jones, 605; Taftv. Railway, 8 E. I. 310; Williston v. Railway, 13 Allen, 400; 49 Me. 491; 7 E. I. 333; 6 Gill. 363-385; 1 Dillon, 174; Crawford v. Railway, 3 Jurist (N. S.), 1093 ; 5 Jurist (N. S.), 284; Eedfield on Eailways, 521.
    
      Collins § Herron, with whom was H. Foote, H. McKinney, and Otis, Adams $ Russell, for defendants in error.
    I. The main question in this case arises upon the interpretation to be given to the statute of 25th March, 1870; to the so-called certificates of preferred stock, taken in connection with the bond and mortgage; and to the conduct and intent of the parties when the papers were delivered.
    1. In construing the statute, we are to gather from it the intent of the legislature, and give it effect, though it may be opposed to the letter of the statute, or the ordinary meaning of some of the words used. The maxim is : “ Qui hceret in litera hceret' in corticeJackson v. Collins, 3 Co wen, 89; People v. Utica Ins. Co. 15 Johns. Eep. 358, 380, 381; Canal Co. v. R. R. Co., 4 Gill. & Johns. 152; 41 Penn. St. 142 ; Brown v. Somerville, 8 Md. 444, 456 ; Bur get v. Bur get, 1 Ohio, 469, 480; McCormick v. Alexander, 2 Ohio, 65, 74; Teojfv. Hewitt, 1 Ohio St. 543; Slater v. Cave, 3 Ohio St. 80, 553, 558.
    “ Scire leges, non hoc est verba earum tenere, sed vim ac potestatem.” Bigelow v. West. Wis. R. R., 27 Wis. 478; Duncombe v. Burette, 12 Iowa, 1; Caldwell v. Mays L. Co., 4 E. C. Green, 245 (N. J.); Iowa $ C. Co. v. Webster Co., 21 Iowa, 221.
    2. If two interpretations are claimed, that one will be adopted, other things being equal, which best harmonizes with the constitution. Hogg v. Zanesville C. $ M. Co., 5 Ohio, 410, 417; No. 11 Libber’s Eules ; Sedwiek on Interpretation, 288.
    3. The act must be so interpreted that if all of its parts can not be harmonized so as to stand, that construction wkick%llows the greater part to stand, and permits the lesser to fail, must be adopted. The maxim is : “ Verba [ita sura' intelligenda, ut res magis valeat, quam pereat.” Metcalfe on Contracts, 290.
    In view of these rules of interpretation, we say that the relation of plaintiff and other like holders, to the corporation, was not that of members of the corporation; was not that of stockholders, in any sense of that term; but was that of a class outside of the corporation, and having no other relation to it than that of creditors, with a privilege of becoming members within a time limited, on the exercise of an option to that effect.
    And to make this interpretation requires only that we read in the statute, in lieu of the phrase “ preferred stock,” the phrase “ preferred stock claims.”
    So reading, the meaning of the statute is clear in all its parts; its parts are all consistent with one another, and with the constitution; and it requires no other construction than that which is freely applied by a court even to a contract. 2 Parsons on Contracts, 27.
    Words are, no doubt, to be taken in their ordinary sense; but when the context shows that they are not so used, and the whole act, taken together, shows that they can not have been so used, then the court will give effect to the more specific provisions, rather than to the general terms.
    It is not a new thing in legislative acts, that terms are used in an anomalous sense; or for courts to find that they are so used, and that names given were in fact misnomers. Moss v. Insurance Co., 10 Wall. 566; State v. Roberts, 11 Gill & J. 506; Mays v. Cincinnati, 3 Ohio St. 272; Corcoran &¡ Riggs v. Rowers, 6 Ohio St. 19; Valletti v. Woods, 7 Ohio St. 172.
    II. We say, then, that the act properly interpreted neither makes stockholders of those advancing .money under its provisions, nor does it intend that the money advanced should become a part of the capital stock to stand as security for corporate debts. Eor—
    
      
      First. The act does not purport to authorize an “ increase of the capital stock,” or to have for its object the creation of “ additional stock.” These terms are not used in it.
    
      Second. In examining the act of March 25, 1870, we find a provision that “ it shall be lawful for such corporation to guarantee to the holders of such stock the final payment of such preferred stock at such time as shall be specified, in the certificate.”
    
      Third. Had the corporation been dissolved, and its affairs wound up, the holders of these certificates would not have been entitled to share as stockholders in the residuum, after all debts were paid. They could receive only the sum specified in the certificates—no more, no less.
    
      Fourth. Neither is the holder of a certificate entitled to the earnings made by the money he furnishes. He is still limited to the stipulated compensation for its use. He can not, therefore, be said to be interested in the profits as profits.
    
      Fifth. We may, then, say he is not a part owner of the capital stock. He is not entitled tp share in its division when divided, nor in its increase when productive. lie is not seized of any title in it. He owns no part or particle of it. Ile.is, therefore, lacking the first and most essential quality of a shareholder. Gray v. Portland Bank, 3 Mass.. 363.
    
      Sixth. We next find, in examining the act, that he had no control over the property, by himself or agents, no voice in the management of it. “ lie shall not have the right to vote on any question at any meeting of the shareholders of such corporation, or for the election of officers.” As we construe the statute, this is all consistent. Why should he have the custody of any of the property, or dominion over it, by himself or his agents, if he cipes not own it ? And if he owns it, why should he not have a voice in its management? Here again we find him lacking a second most essential attribute of a stockholder. The right to vote on stock is 'one of its inseparablefincidents. Downing 
      v. Potts, 3 Zabriskie, 66; Hex v. Bank of England, 2 Dong. 524; Gilbert v. Manchester Iron Go., 11 Wend. 627.
    
      Seventh. The constitution has declared there shall be no stockholder without individual liability. Constitution, art. 13, sec. 3. Yet the legislature said the holders of these certificates “ shall not be liable for the debts of the corporation.” How could they more plainly have said, we do not intend them to be real stockholders ?
    III. Is the Burt mortgage a lien ? We claim first, that the statute of March 25,1870, authorizes it; second, that sections 3 and 14 of the general corporation'act, of May 1, 1852, authorizes it; and third, that if neither of these statutes authorized it, it is valid at common law. Angelí & Ames, sec. 691; Reynolds v. Com. of Stark Co., 5 Ohio, 205; White Water Valley Canal Go. v.Valette, 21 How. 414; Jackson v. Brown, 5 Wend. 590; Gordon v. Beston, 1 Watts, 385 ; Collins v. Central Bank, 1 Kelly (Ga.), 455.
    And power given by statute to mortgage for a particular purpose does not abridge the general power to mortgage for the security of creditors. Mobile ^ Cedar Point R. R. v. Taiman, 15 Ala. 472 ; Allen v. Montgomery R. R., 1 Ala. 437.
    Also on the general power, and the acquiescence of the stockholders. Chicago & R. I. R. R. v. Howard, 7 Wallace, 392 ; Lester v. Hammond, 33 Md. 558; Hazlehurst v. S. &¡ R. R. R., 43 Ga. 13; Bryce on Ultra Yires, 116.
   Welch, C. J.

A majority of us concur with the court below in holding that this 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. We think this conclusion must be reached, whether we regard the statute in question as constitutional and valid to smy extent, or for any purpose, or whether we are to consider it as wholly void, and the transaction between the parties as unaided by its provisions. In the absence of any such a statute, the corporation had power to borrow money for the payment of its debts, and for the prosecution of its business. It surely had power to sell and issue its remaining $160,000 of the capital stock. If'it could sell this stock for money, it is difficult to see why it could not borrow the money, and agree to repay the amount either in money or in stock, at the option of the lender. The latter is what was done, and all that was done, if we are right in our interpretation of the contract between the parties. True, without the aid of the statute, the corporation could pay no more than eight per cent, per annum for the use of the money. Whether it could increase this rate by selling the stock under par, either with or without the aid of the statute, is not a question raised upon the í’eeord. I can not see that the statute gives any new power of that kind. It simply authorizes the company to “sell and dispose of” its stock. This power it had before the passage of the act. If, therefore, we are right in holding that this was a mere loaning of money, and not an increase of the company’s stock, the company has only exercised the powers which it had before the passage of the act.

But are we right in this interpretation ? If we are, a corresponding interpretation must be given to the statute under which the parties professed to act, and the provisions of which they substantially followed. Is such the true interpretation of the statute? In other words, is it to be construed as a statute merely authorizing such corporations to borrow money to a limited amount, at eight per cent, interest, to guarantee its repayment by mortgage or otherwise, and to give the lenders the option to convert the loan into stock? Such we think is the legislative intent to be gathered from all the provisions of the act. But for the words “ stock,” and “ dividends,” occurring in the act, no other interpretation would be possible. If we can understand the word “ dividend ” in the sense of interest, and the word “stock” in the sense of debt, so that “ certificates of stock” will mean certificates of indebtedness, and “ preferred stockholders ” mean preferred creditors or preferred certif, cate holders, there is no trouble in so interpreting the act,, and making all its provisions harmonious and constitutional. On the other hand, to give it the interpretation-contended for on behalf of the defendants would be to disregard its manifest purpose, to make its several provisions repugnant with each other, and to bring the act indirect conflict with the constitution of the state. Such a-construction makes the legislature say that the holders of these certificates shall be stockholders without any of the-rights of stockholders—preferred stockholders without the-rights of common stockholders. The act denies them every element and attribute of ownership or actual membership. They have no right to vote, or to take any. part in the possession or control of the concern. They gain nothing by its success, and lose nothing by its failure. They have no-participation in either the profits or losses. They are strangers to the company, have no interest in it, and look alone to its promise and its mortgage for remuneration. It is, moreover, expressly declared that they shall not be individually liable to creditors. If it was the legislative'intention to make them stockholders in fact, and not merely in name, then the intention must ha^e been to violate a. plain and well known provision of the constitution, which declares all stockholders liable to creditors. Such an intention can never be presumed if the statute admits of any interpretation which avoids the presumption. A stockholder, in such a corporation in Ohio, without individual liability, is simply an impossibility. To declare a party not individually liable is, prima facie, to declare him not a stockholder. It is but reasonable to conclude that the legislature, by simply denominating these parties “preferred stockholders,” and calling the semi-annual payments to them “dividends,” did not mean to violate this well-known provision of the constitution, and also to nullify the substantial provisions of the act, which give to such parties ad the-relations and characteristics of creditors of the corporation,, and none of those which belong to its real owners and. members. To give tbe contrary interpretation to the act would be to regard its letter rather than its spirit and intention. To call a thing by a wrong name does not change its nature. A mortgage creditor, although denominated a preferred stockholder,” is a mortgage creditor nevertheless ; and interest is not changed into a “ dividend ” by calling it a dividend. Nothing is more common in the construction of statutes and contracts than for the court to •correct such self-evident misnomers by supplying the proper words. To use the language of the court, in Corcoran & Riggs v. Powers, 6 Ohio St. 19, “the question in such cases is not what did the parties call it, but what do the facts and circumstances require the court to call it.” A man who advances his money to a corporation, and takes a bond and mortgage for its repayment, and who, by express agreement between the parties, takes no interest or risk in the •concerns of the company, is a creditor of the company, and to call him a “stockholder” is a simple misnomer. He is .á creditor, and remains a creditor, until by some future act of his own, he elects to become a stockholder, or otherwise changes his relation. The right to become a stockholder does not make its possessor a stockholder.

But it is said that by the fourth section of the act, the «emi-annual “ dividends ” to these creditors can only be paid out of the “profits,” and that they have, therefore, an Interest in the concern, and are real stockholders and members. This is a misconstruction of that section. The word •“profits” is another misnomer, and is evidently used for ■earnings, or income, because it makes the “ expenses,” as well as these “ dividends ” of 4 per cent., payable out of the profits, whereas there are no profits until the “ expenses ’’ .are all paid or deducted. The object of the section is to define what shall be paid to the common stockholders, and not what shall be paid to the “preferred stockholders.” The true meaning of the section is, that common dividends shall be paid out of the surplus of earnings remaining after setting apart this four per cent., and all other expenses. The four per cent, is to be regarded as part of the “ expenses ” or outlays. ■

Questions are also raised and argued as to the validity •of the mortgage upon the' personal property, or a portion •of it. These we have deemed it unnecessary to consider, farther than to say that we see no error in this respect, or an any other respect, in the judgment of the court below.

Judgment affirmed.