Court Opinion

ID: 6517979
Source: CourtListenerOpinion
Date Created: 2022-07-19 18:28:26.294658+00
Date Added: 2024-06-11T15:55:04.513694
License: Public Domain

MoCLELLAN, C. J.
— The contract of subscription of the Dredging company to the capital stock of the Bigbee & Warrior River Packet company was fully executed before the institution of this suit; the money subscribed for the -stock had been paid to the Packet company and the certificates of shares in the capital stock of that company had been issued to the Dredging' company. Therefore, in this action by the assignee of the Dredging company’s right, for dividends declared by the Packet company on its stock the fact that the Dredging company was without corporate power to subscribe for the stock of another corporation is wholly immaterial.—Long v. Ga. Pac. Ry. Co., 91 Ala. 519; Morris v. Hall, 41 Ala. 510, 539; Thompson on Corp, § 6023.
We do not construe the by-laws of the Packet company in respect of the forfeiture of earnings or divi*383dends by a stockholder who fails to keep a boat in the service of the company, as they were construed by the city court. To the contrary, we hold that it was the purpose and is the effect of the provisions in the by-laws on this subject to forfeit to the company all moneys earned by it and as earned by it which, but for the stockholders’ dereliction in respect of keeping a boat in the service of the company, would have become payable to him as dividends upon his stock and been paid to him as such. It is doubtless true that by “dividends” is ordinarily intended dividends declared, earnings set apart by' a corporation for payment to its stockholders, and that by “earnings” of a corporation is ordinarily meant earnings declared as dividends. But it equally cannot be doubted that the corporation in the making of contracts and the ordination of by-laws may give to these terms a different meaning and employ them to designate money earned and as earned, and may provide in respect of such money that so much of it as .is earned dur-' ing a period of default on the part of the stockholder in any duty he owes the company shall be forfeited to the company and deducted from the dividend declared for or covering such period whether such declaration' of dividend be made during the time of such default or afterwards. And whether the Packet company in the by-laws before us has thus provided for the forfeiture of earnings in such case as earnings and as they were earned regardless of the time when the dividend is declared is a question of intentien to be gathered from the by-laws interpreted in the light of surrounding circumstances and the ends sought to be subserved. And taking this point of view it is clear, we think, that the money — or so much of it as was earned while the Dredging company was in default — which constituted the dividends, declared after the default had ended, on the stock held by said company was by the terms and intent of the .by-laws forfeited to the Packet company.' As said by appellant’s counsel: “It is apparent from the by-laws that the Packet company was an incorporated association of steamboat owners in which each agreed to put a boat into the service of the company as a price and condition of receiving dividends upon his stock, and that it was his duty not only to put in a suitable boat, but to *384keep ber in suitable condition for service.” Tliis being the general scheme of the organization, nothing is more natural and reasonable than for the by-laws to declare that the profits of the business of the association should be divided among those members who had contributed to earning them by keeping suitable boats in the service of the company, and that none of the profits earned by the association during any period when a member had no suitable boat in the service should be paid to such member. And this is provided by section 8 of the bylaws as follows: “Should any boat be lost or become peimianently unfit for the company’s business, the dividends upon the shares of the capital stock of this company then standing in the name'of the owners of said boat, or which at any time had been the property of such owners, shall cease from the time such boat is lost or becomes permanently unfit for business or until another boat satisfactory to the board has been furnished in the stead of the boat so lost, or until said boat is in proper condition to perform the services for which it is chartered, but .the proportion of such dividend, earned up to the loss or injury to said boat, shall be paid to such owner.”
It is to be noted that the dividend is to cease from the instant that a boat is lost or becomes permanently unfit for service, and is to commence again the moment another boat satisfactory to the board is furnished for the service of the company. It is also to be noted that the proportion of such dividend earned up to the loss or injury of a boat shall be paid to the owner. This to our minds is as clearly evincive of the intentionofthePacket company to forfeit by the provisions of the by-laws so much and only so much of the money forming the basis of a declaration of dividends as is earned during the default, wholly regardless of the time of declaration made, as can be conceived; and we are constrained to the conclusion that it was the intent of the by-laws bearing on this matter and is their just operation to apportion any dividend declared over the period covered by the declaration and to withhold from a boat owning stockholder such part thereof as is thus apportioned to the time within the dividend period during which he may *385have failed to keep a suitable boat in tbe service of tbe company, and tbis whether tbe dividend is declared during or after tbe period of sucb default.
It is further clear, we tbink, that tbe provisions in these by-laws with reference to boats of stockholders being repaired, etc., by tbe Packet company were inserted for tbe benefit of that company, to be availed of or not at its election, and that they impose no duty to repair, etc., upon, said company.
The rulings of the city court upon tbe pleadings are not in harmony with tbe foregoing views; and! its judgment must, therefore, be reversed. Tbe cause is remanded. ■
. Reversed and remanded.