Court Opinion

ID: 6884490
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:24:33.391643+00
Date Added: 2024-06-11T16:05:40.722624
License: Public Domain

SIBLEY, Circuit Judge
(dissenting).
The Secretary-Treasurer further testified: “These committees met with the stockholders on Jan. 19, 1934, and reported to the stockholders what the committees had agreed upon. That was recorded in the minutes, and the minutes were signed by the corporation. The bondholders have kept the agreement and have so far failed to foreclose. The stockholders have kept their agreement and operated the mill to the best of their ability. The bondholders’ committee reported to the stockholders’ meeting on Jan. 19, 1934, for the purpose of having the petitioner (the corporation) confirm the agreement the two committees had made. It was confirmed in these minutes.”
The oral agreement between the two committees became a written one when it was recorded on the corporation’s minute book. The minute is not a mere recital of what the committees did, but uses words of present contract. “The bondholders agree” not to press for interest due nor to foreclose on the mill; “the stockholders agree with these trustees and the bondholders that in consideration of their agreement * s;: * neither the stockholders nor the directors of the mill will pay out any dividends * * until authorized so to do by the trustees, and that in no event shall any dividends be paid in any manner until the past due interest on the bonds has been fully paid.” This minute constituted the written memorial of the contract, superseding all prior negotiations. The new trustees were also parties to it and were present and received their° trust deed at the same time.
There are two things that may be urged against the due execution of this contract by the corporation. First, it is not the function of the stockholders, but of the directors, to make the ordinary contracts of the corporation. Georgia Code, § 22-709; Henderson Lumber Co. v. Chatham Bank & Trust Co., 33 Ga.App. 196, 197, 125 S.E. 867; 19 C.J.S., Corporations, §§ 742, 1000. But this was an extraordinary contract, affecting the policy and existence of the mill, and stockholders as the .owners of the mill might well assume to act upon it. Second, the stockholders’ meeting was a special one, called only to elect new trustees, and all stockholders do not appear to have been present. Both these objections are fully met by the fact that at the next regular meeting of the directors, their minutes show this: “The President reported what had happened at the stockholders’ meeting of Jan. 19, 1934, and the minutes of that meeting were read and approved by the directors.” This minute is signed by the *860President and Secretary of the Corporation. This constituted a full ratification and adoption by the directors of what the stockholders had attempted to do. 19 C.J. S., Corporations, §§ 1016, 1017. The minute of the stockholders’ meeting became by reference a part of the minute of the directors’ meeting, and the written contract in the former became the contract of the directors, authenticated by the signatures of the President and Secretary. Although in the contract no specific time of indulgence was stipulated, indulgence was enjoyed throughout the tax year, and the interest not having been paid, the taxpayer was bound not to pay out any dividends. See Loewenherz v. Weil, 33 Ga.App. 760, 767, 127 S.E. 883; Morrow v. Southern Exp. Co., 101 Ga. 810, 812, 28 S.E. 998. 17 C.J.S., Contracts, §§ 103, 104.
I therefore think there was a written contract executed by the corporation before May 1, 1936, expressly dealing with the payment of dividends, which would have been violated by paying dividends in the tax year, and a credit was due under Section 26 (c) (1).