Deering Milliken, Inc. v. Clark Estates, Inc.

• Decision Date: 14 February 1978
• Citation: 402 N.Y.S.2d 987,373 N.E.2d 1212,43 N.Y.2d 545
• Parties: , 373 N.E.2d 1212 DEERING MILLIKEN, INC., Appellant, v. CLARK ESTATES, INC., et al., Respondents.
• Court: New York Court of Appeals Court of Appeals

Page 987

402 N.Y.S.2d 987

43 N.Y.2d 545, 373 N.E.2d 1212

DEERING MILLIKEN, INC., Appellant, v. CLARK ESTATES, INC., et al., Respondents.

Court of Appeals of New York.

Feb. 14, 1978.

Simon H. Rifkind, Paul J. Newlon and Jay L. Himes, New York City, for appellant.

Peter H. Kaminer, Stephen A. Weiner and George B. Reese, New York City, for respondents.

OPINION OF THE COURT

JONES, Judge.

When a contract is made for the future transfer of beneficial interest in stock and no provision is made therein by the buyer and seller as to which shall be entitled to receive regular dividends declared before the purchase price is paid and delivery of the stock certificates made, such dividends remain the property of the seller.

On March 31 and April 5, 1967 Deering Milliken, Inc., executed agreements for the purchase from defendants, executors under the will of Susan Vanderpoel Clark and the Clark Estates, Inc., of some 480,000 shares of stock of Albany Felt Company. Under the first agreement, with the executors, a minimal payment was to be made at the time the contract was signed, a partial payment on May 1, 1967 and the substantial balance on August 1, 1967. Under the April agreement, with Clark Estates, payment was to be made on such date between May 1 and August 1, 1967 as might be specified by the seller. Under each contract delivery of the stock certificates was to take place when the total purchase price was paid. The contracts also included as a condition to the buyer's obligation of payment a provision that the buyer should have satisfied itself from an evaluation of Albany Felt's business and financial condition that the basis on which the transaction was to be consummated was warranted. Absent from both contracts was any provision as to which party would be entitled to dividends declared by Albany Felt between the dates of the agreements and the dates of transfer of the shares.

On May 24, 1967 the corporation declared a regular quarterly dividend payable on July 1 to stockholders of record on June 16. Payment of the purchase price and delivery of the stock certificates held by Clark Estates took place on June 19, 1967; final payment and delivery of the stock certificates held by the executors was made on August 1. The sellers' rejection of the buyer's demand under both contracts for delivery to it of the dividends distributed July 1 gave rise to the present litigation.

In the circumstances of this case, we agree with the Appellate Division that the dividend declared on May 24 belonged to the sellers.

As in most contract questions, the intention of the parties, if manifested, would have controlled. In the March and April agreements between the parties, however, there were no express provisions with respect to entitlement to interim dividends, and no extrinsic evidentiary proof of the intention of the parties as to that subject has been tendered. That being so, the resolution of the resulting ambiguity by construction of the instruments is for determination by the court on the present cross motions for summary judgment (Hartford Acc. & Ind. Co. v. Wesolowski, 33 N.Y.2d 169, 172, 350 N.Y.S.2d 895, 898, 305 N.E.2d 907, 909; Mallad Constr. Corp. v. County Fed. Sav. & Loan Assn., 32 N.Y.2d 285, 291, 344 N.Y.S.2d 925, 930, 298 N.E.2d 96, 100).

Critical to the determination whether buyer or sellers were entitled to the May dividend is the question whether present sales current transfers of substantial beneficial interest or only agreements to make future sales were manifested by the execution of the contracts of March 31 and April 5, 1967. A purchaser of stock acquires "by a contract of present sale a right to the benefits which may accrue upon the stock bought, and that right is, for convenience, called the 'beneficial ownership' of the stock" (Broderick v. Alexander (Kahn), 268 N.Y. 306, 309, 197 N.E. 291, 292). A different result attends the execution of a contract to make a sale in the future. "In the absence of an agreement to the contrary, the buyer under an executory contract to sell stock is not entitled to dividends until the legal title to the stock has passed to him, which is not until delivery is made to him or is due to him and is offered to be made, unless there is something in the contract specifying or implying a contrary intention. * * * Where there is a sale of stock in praesenti, but the date of delivery and payment is postponed, the vendee is entitled to all dividends declared between the date of the agreement and the date of closing to the purchaser." (11 Fletcher Cyclopedia Corporations (Perm ed. 1971), § 5378.)

Looking to the terminology used by these parties in their agreements, in addition to provisions for future dates for payments of the purchase price and deliveries of the stock certificates, we find: "Seller will sell to Buyer"; "Buyer * * * will purchase such shares from Seller"; the seller " agrees to cause to be sold to" the purchaser; the purchaser "agrees to buy such shares"...