Court Opinion

ID: 5193911
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:40:25.65233+00
Date Added: 2024-06-11T08:27:00.375267
License: Public Domain

Hooker, J. (dissenting):
This action is brought to recover the amount of a dividend on twenty shares of the plaintiff’s stock in defendant’s corporation, which', he claims, was declared in the year 1898, and not paid to him. The defendant contends that in the year 1898 no such dividend as the plaintiff insists" upon was declared by the defendant. The action was tried before a court without a jury.
• The undisputed evidence in the case established these -facts: That in the month of October, 1896, the defendant found itself lawfully possessed of seventy shares of its own capital stock, which it had purchased from the estate of one Franlce, deceased ; that some talk was had between the several stockholders in relation to dispos*112ing of this stock to the' stockholders Millikin, Mecke and this plaintiff, and that the directors of the defendant held a meeting on October 22, 1896, when Millikin and this plaintiff favored declaring a dividend of $87.39 per share upon the capital stock of the defendant so as to allow themselves and Mecke to purchase at $257.17 each the said seventy shares known as the Franke stock. For some reason one of the stockholders opposed this action. On November 25, 1896, at a meeting of tlie stockholders, the matter was under con-, sideration again, and, although done with a degree of informality, it ■ was resolved by the board of directors that “ a dividend be declared, so that the seventy shares at present unissued can be taken up by Messrs. Millikin, Hartley and Mecke.” The resolution further provided, that the portion of the dividend accruing from the interests of Millikin, Mecke and the plaintiff should go toward pay-' ing for the seventy shares, and that the dividends accruing from the interests of all the other stockholders should be credited to an indebtedness of one of them to the-defendant, known as the Consuelo indebtedness. At that time letters consenting to this whole action were filed on behalf of all the stockholders who were not present at the, meeting, and those who were present gave verbal assent.
It is to be noticed that the resolution did not name any sum which should be paid by the defendant as a dividend upon the shares of its stock, although all of the stockholders consented to the declaring of a dividend to enable Millikin, Mecke and the plaintiff to pay for the stock which they were then acquiring; nor was. á price for the stock named, but the books of the corporation are hr evidence, showing that the account of each stockholder was,.on the 1st day of December, 1896, credited with a dividend of $87.39 per-share. Of the seventy Franke shares, Millikin took forty-eight, Mecke" two and the plaintiff twenty, and their accounts are charged with the purchase price of such shares respectively at $257.17 per ■ share.
The entries so made in the books of the company remained unobjected to and unchanged for nearly two years. In July, 1898, some of the other stockholders raised an objection to the amount of the dividend of December 1, 1896, and claimed that as the entries appeared upon the books of the company the three stockholders *113who acquired the Franke shares were given the benefit of $87.39 dividend upon the shares of stock they were then acquiring, as well as upon the stock of the defendant which they held prior to the acquisition of the Franke stock, and they insisted that the accounts of all the stockholders be changed so that these three stockholders should not reap the benefit of any dividend on the seventy Franke shares. In other words, they claimed that the Franke stock was sold “ ex-dividend,” whereas the books of the defendant showed it to have been sold “ dividend on.”
A meeting of the directors was held on July 12, 1898, but no formal action was taken in relation to correcting the books in the particular indicated, although the matter seems to have been discussed. ' There is no evidence that any resolution or direction was made to that effect, but one of the stockholders, who considered himself aggrieved by the sale of the Franke shares of stock with the dividend on, directed the bookkeeper to enter as of the date, December 1, 1896, a revision of the $87.39 dividend, so as to make the dividend appear to have been $132,367 per share, and directed him to amend the account so that no dividends should appear to have been allowed upon the Franke stock. These changes were made on the books with the result that the credit of this dividend upon the shares of stock owned by the three stockholders in question, prior to acquiring their portion of the seventy shares, was about equal to a sum sufficient to pay for their respective shares of the Franke stock acquired December 1, 1896, at $257.17. The impossibility of adjusting the amount of this amended dividend so as to balance the accounts of the purchasers led to a credit of $6.29 on the plaintiff’s account, and the defendant forwarded him a check for that sum, which he retained without using, promptly demanding a credit of $132,367 upon each of the twenty shares he purchased in December, 1896.
These new entries in the books, of course, gave all of the stockholders, except Millikin, Mecke and the plaintiff, a dividend much larger than they received in 1896, and this division of profits made informally by the entries in the books did not materially benefit Millikin, Mecke or the plaintiff. The dividend of December, 1896, was about $42,000, while the amendment sought to be made in *114July, 1898) entailed a division of sóme $54,000, thus dividing in 1898 for the first time about $12)000; of profits. From the 12th of July, 1898, to the time of the commencement of this action in October, 1900, none of the stockholders objected to this revision of the dividend of 1896, except the plaintiff. It appears from the dividend that Ilillikin and Mecke acquiesced in it by either paying, or accepting in cash, the small difference in the balancing of their accounts owing to the; new rate of ' dividend. The plaintiff, however, has ever since July, 1898, objected to the revision of the prior dividend, and has insisted that he is now and always was entitled to a. dividend upon the twenty shares of Franke stock he bought from-the defendant, in December; 1896; that the attempted revision of the dividend of December, 1896, was actually a division of profits-upon the basis of a dividend upon each share of stock, amounting to a sum equal to the difference between the dividend as made, $87.39, and as sought to be amended, $132:367. The defendant insists that, the intention in 1896 was that the seventy Franke shares of stock should be sold by the company without the dividends then declared, -and that the purchasers should not enjoy the fruit of that dividend by reason of their ownership of that: block of stock ; but there is in -the case no direct evidence whatever, either documentary or otherwise, offered by either party, as; to what the intention of the parties was at that time, and the resolutions and the Other documentary evidence are also silent upon the question. There being no' direct evidence of the intention of the parties in November, 1896, what that intention was must be -gathered, if possible, from the course of dealing and the circumstances.
The' court dismissed' the complaint: on the merits on the ground that the Franke stock was unissued, and it should not be found, without, affirmative evidence, that it Was the intention to declare a dividend on such unissued stock.
I think it must be held that the entries, made December 1, 1896, remaining unchanged for one and one-half years, although no claim is made that the books were not open to the inspection óf all the stockholders, established the fact that, the intention of these parties in- November, 1896, was to sell the Franke stock with the dividend declared on the first day of the month following; The defendant had the power to sell the stock, and how it was to be-sold Was a *115question of intention. (City Bank of Columbus v. Bruce & Fox, 17 N. Y. 507.) The direction to the bookkeeper on July 12, 1898, to make changes in the books as of the 1st day of December, 1896, was, therefore, unauthorized and improper; but it appears that all the stockholders except the plaintiff acquiesced in this action. Millikin and Mecke sanctioned the amendment by actually adjusting the balances of their accounts reached upon the basis of this unauthorized change, and all the other stockholders, except the plaintiff, received and accepted the benefit of the large credits upon their accounts. These acts cannot be construed otherwise than to be a division of the profits of the defendant company upon the basis per share of the difference between $132,367 and $87.39, or $44,977.
It has been said that “a- division of profits without the formality of declaring a dividend is equivalent to a dividend. A. division of the profits is a dividend even though not called such and not considered such by the directors and stockholders.” (2 Cook Corp. [4th ed.] § 534; Rorke v. Thomas, 56 N. Y. 559, 564.) I believe this to be a correct statement of law as applicable to this case, in which the division of profits was unobjected to by • all. the stockholders and actually instigated by one who, as the evidence shows, represented a class which would profit substantially by such a division.
Reaching the conclusion, therefore, that the $12,000 divided for the first time in July, 1898, was a dividend, the rule applies that “ every shareholder of the same class is entitled to the same pro rata dividends from the. profits of the corporation.” (9 Am. & Eng. Ency. of Law [2d ed.], 683.) And it must be held from the evidence as it is presented in the record that this division of profits was a dividend of $44,977 upon each share of stock, and that- plaintiff was entitled to maintain an action for that sum upon each of his thirty-nice shares.
These views lead to the conclusion that the judgment should be reversed and a new trial granted, costs to abide the event. '
Jen-ks, J., concurred.
Judgment affirmed, with costs.