The sun. [volume] (New York [N.Y.]) 1833-1916, 1899-07-20
FEDERAL STEEL ENJ0INED.
,ovp1NY Forbidden TO Par DITI-
DEyD on COMMON STOCK.

Tnt
W. I,,dcc Thomas OF the United states
yirruit Court Directors Cnnnot Fix at
pI,n.uro Days for Paying Dividends.
In the United states Circuit Court in Brook
,,., ,ostorday Judge Thomas handed down
,ocis,on continuing the Injunction restraining
go r,l.ral steel Company from paying a
ItIdend Of a per cent. on the common stock
,,,,r,r.I on June %. The injunction was OBJ
,,,rel hy Frederick F. Narquand who owns
.,,,y shares OF common stock and Louis
s,hocrer. who owns eighty shares OF pre-
,orred stock The complainants alleged that
no corpany had no right TO declare dividends
,,ro1 tDs 500. 100000 OF common stock until
,h, optire dividend for the fiscal year ending
q, r,,uary 1900 on the 800 ,O00.of pre-
,orrsl stock shall have been paid. and that no
dIytjend at all shall be declared before the end
NJ the fiscal year. except as specially provided
~ the hy.laws 1t was held tha1 no special
nr5,Ision had been made allowing the dlrec-
,or, to declare a dividend. The Injunction
was grated on June 80. motion was made
tan DAYS ago for an order to show cause why
the INJUNCTION should not be dissolved and
Argument was had on the motion last Satur-
day. IN his decision continuing the injunc-
ton Judge Thomas says:
The questions for decision are these: ~
MAY the defendant CORPORATION declare and
IN, a quarterly dividend upon its preferred
stock upon DAYS selected by the directors. or
mus, some specific day or DAYS for that pur-
,,,, lie fixed In its.charter or by-aws2 t2)
NAV dividends be declared upon the common
,tock previous to the close OF the fiscal year2
The charter itself provides that tina dividends
mon the common stock shall be declared after
the rlr-e Of any fiscal year ana thereby ac-
cords with the general time fixed BY the
statute The provision Is plain and no at
utrn.,t Iim iniah Ia nj m, nj n
and direct authority. The solution OF the
question relating to the preferred stock is not
different The inquiry does not relate to the
csrarlty ~ the directors TO determine whether
sufficient profits applicable to dividends have
been received That is uncontroverted. The
directors have undertaken to select the months
and DAYS when the disidends for the year 1890
-hall be paid. II the directors have the ability
to do thisthsy.have capacity pursuant to their
will to vary the time for paym ent in different
wears But it is considered that The statute
section 81. Corporation act. n. J.l requires
thap fixed times for making such payments
hal b. embodied in the charter or bylaws.
and that in default OF such designation OF GER
tain days III either the charter or bylaws. tho
declaration and payment OF dividends shall be
made a. provided by the statute during the
month following the close OF the fiscal year.
Section ~ provides: The directors Of
every corporation created under this act thall
in January in each year, unless some specific
day or DAYS for that purpose be fixed in its
charter or bylaws. and In that case, then on
the days so fixed. after reserving over and
aboye,i's carital stock maid in. as working
s saS declare dividend among It's
stockholders on ths whole OF its accumulated
profits exceeding the amount 90 reserved.
and nav the same to such stock holders on de-
ID that the nay 1 in
amour, TO he reserved as work ing CAPITAL
One obvious ntendment o. tho statute is
Rasr. The scs ha' The p re b
vided at appointed time or times. and that such
time shall be uniformly In tha month Of Jan
Full power Of selection is conferred upon the
to the varying discretion Of the directors: Thu.
CORPORATION is limited only in its method OF
body the days in the charter or by.lawe.' that
Is the single qualification Of power. But the
learned counsel Tor the defendants urges Il
that section ~ is not applicable to preferred
the power Of the directors to declare and pay
than see aion az u y
quarterly payments Ct dividend. ;, upon pre- r.,
P"xeE ' ns 'ss deears dividend:
the preferred stock. section AZ commands
s: ns .Ss s ss dsSSs. !:
ment to the common stockhodep. The sec
i shs The u sSs sesop
70 s.mp gel distribution IN January; II some
nne purpose Of tho seetion. But does the ses.
ton intend that the directors may divide the
uar T
some specific day or days, &c,? Clearly the
may be made on any days selected by tho
Board q Directors. and II rot 90 made. that
The mon;h OF January. or % ION some specine day
or DAYS hxed in the charter or bylaws. Such
sr SSons,rnGti9n renders the section shtpes;,s
he rsstraint impo.ed b. Section ' A. section
j. nermi.s payment, OF dividends upon pre-
nuaIly; There IL no tontrover tine conten ton.
i Ba, who shall nx the dividend days. The d. q;
states that the designation OF days must be
mad, made in the charter or bylaws. The two sec
yiIes that the preferred stock shall be en-.
ttsd out Of any and all SURPLUS net profits.
70 non.cumulative dividends at the rate OF and
not exceeding Is Dsr cent. rer annum.' &C., and
select the dividend DAYS Il Is rsIpable that
tbs brovsio Intends to declare the rights OF
.s6ss .S and S. RS % a sPT
their pleasure. But assume otherwise who
DSsed the proysion in the Ghsrts1 The d.
provision nul!ify the commando OF section ~
The matter doe. not admit OF discussion. 1t
Is nnay directed that II: directors n canpot b
Illegal the title Of the dividends paid has
vested In the stockholders according TO theii
respective holdings.
But shareh olders acquire interests in divi-
dends when lawfully declared. This court
Will not withhold its hand TO prevent unlawful
action on the part OF directors until 1t can as
certain and bring. within the influence OF III
tul act i will be sufficient to enjoin share
holder, when he shall ven ture to particip pate In
me unauthorized act az the directors by seek
lnE TO obtain some portion OF this fund antici
lated to he divided. It results from the fore
gong view that the Injunction must DO con