#### George W. McGill, Respondent, *v.*Holmes, Booth *&*Haydens, Appellant.

(City Court of New York, General Term,

May, 1898.)

Action, for a dividend — Defenses inconsistent with, admissions of the answer — Counterclaim — Pledge — Status of a dividend declared.

The complaint in an action alleged, in substance, that the defendant was a foreign corporation and had declared a certain dividend to which the plaintiff, as a stockholder of record, was entitled but that, although demanded, the dividend had not been paid to him. The answer admitted these allegations. As defenses, it further alleged first, that when the dividend was declared the plaintiff was indebted to the corporation for loans and advances and that the dividends were “ placed ” by the .defendant to the plaintiff’s credit against the loans and advances; second, that there was and is, pending between the parties, *525an action for an accounting in regard to certain paper fasteners, which action involved the same issues; and, third, that while.the stock was on the defendant’s books and in the plaintiff’s name he had pledged it to the defendant ,and that the plaintiff subsequently assigned the stock to his wife, subject ito the pledge.

Held, that the first defense alleged no contract right of the defendant to apply the dividends to the loans and advances; and that the facts were not available as a counterclaim as none had been pleaded.

That, as to the second defense, the present cause of action was not involved in the prior action for an accounting.

That the third defense was unavailable, not only because no pledge was proved, but also because the defense was inconsistent with the prior admissions of the answer to the effect that the plaintiff owned the dividends.

That a dividend declared is, in legal contemplation, severed from the assets of the corporation and is thereafter held by it as a trustee of the person' who Was the stockholder at the time when the dividend was declared.

Appeal from judgment, entered on a report of referee, appointed to hear and determine the issues herein.

Atwater & Cruikshank, for respondent.

Ward, Hayden & Satterlee, for appellant.

Schuchman, J.

This action was brought to recover dividends, declared by the .defendant corporation on its stock.

The complaint alleges that the defendant is a foreign corporation, organized and existing under the laws of the state of Connecticut; that its board of directors duly declared a dividend to stockholders of record on a day certain; that the plaintiff was a'stockholder of record on that day to the extent of 500 shares of the capital stock of the defendant; that he was the owner of the dividends on the stock in his name; that they had not been paid; that payment had been duly demanded of defendant, and refused.

The answer admite all the allegations of fact contained in the complaint herein, and sets up the following matters as defenses;

First. That at the time of the declaration of the dividends, the plaintiff was indebted to the defendant in an .amount greater than the .dividends, for money loaned and advanced to him, and that *526“the said, dividends were placed by the defendant to plaintiff’s credit ¡against said loans ¡and advances on plaintiff’s account.”

Second. That, prior to the commencement of this .action, there was pending ¡and still is undetermined' between the plaintiff and ■ the defendant an .action for an accounting of all their dealings and transactions under certain contracts for the manufacture and sale of McGill’s paper fasteners, which involved the same issues as -this action.

Third. That while .said ¡500 shares of defendant’s stock, stood in the plaintiff’s name upon the defendant’s books, the plaintiff assigned 490 shares thereof to his wife, Mary L. H. McGill, by an assignment in writing, on February 2.0, 1894, .and that the assignment was made subject to all claims ¡of the defendant against the plaintiff, who had given- the defendant said ¡stock as security therefor.

As to the matters firstly above set forth,' the learned referee held, and we think correctly, that there was no allegation in the answer ■ of the existence of any. contract right between the plaintiff and the defendant justifying-the defendant applying the plaintiff’s dividends to the payment of the alleged loans and advances, nor any equitable ground therefor, and that the facts could not be proved as a counterclaim, because no counterclaim was - pleaded. - Beferee’s Memorandum of Decision.

As to the defense secondly above set forth, the cause of action herein is not involved in the prior action for an accounting.

As ¡to the matters thirdly above set forth, the assignment was made to 'Mrs.. McGill on February 20, 1894, the dividends were declared in January, April -and July, 1896, and in August, 1896,. this action was commenced'; and the answer to defendant’s query, “ how can plaintiff be entitled to said dividends,, having assigned, said stock to his wife? ” is simply this,^ your query is inconsistent with the ¡admissions made by you in your answer.

The defendant’s claim that the stock was- pledged to it by the plaintiff, prior to the assignment thereof, by him to his wife and that' the defendant ■ as pledgee is entitled ito the ■ dividends, is answered by the fact that no such pledge has been proved; a mere recital thereof is contained in the assignment. Furthermore, this claim is again ¡inconsistent with the-specific admissions in the defendant’s answer. When a dividend is' declared, it belongs to . the owner of the stock at that time. The declaration of the dividend is, in legal contemplation, ¡a separation of the- amount thereof *527from the assets of the corporation, which holds such amount thereafter as ithe trustee of the stockholder ¡at the time of the declaration of the dividend. Hooper v. Sage, 21 N. Y. St. Repr. 491.

Wc have examined all the exceptions in the case, and none present reversible .error.

Judgment affirmed, with costs.

Pitzsimons, ¡Oh. J., and Com,ah, J., concur.

Judgment affirmed, with costs.