Argued
March 27, 1906
Appeal, No. 54, Jan. T., 1906, by defendant, from decree of
C.P. No. 5, Philadelphia Co., June Term, 1905, No. 3,344, on
bill in equity in case of Fidelity Trust Company, Trustee, et
al., v. Lehigh Valley Railroad Company. Affirmed.
Bill in
equity for an injunction. Before Ralston, J.
The
facts appear by the opinion of the Supreme Court.
Error
assigned was the decree of the court.
The
assignments of error are overruled, the appeal is dismissed
and the decree of the court below is affirmed.
John G
Johnson, for appellant. -- The preferred stock is not
cumulative: Elkins v. Camden & Atlantic R.R. Co., 36
N.J. Eq. 233.
If it
be cumulative, there is no right on the part of the holders
of the preferred shares to deny payment of dividends on
common shares, excepting to such extent as said holders prior
to June, 1904, had not received dividends at the rate of ten
per centum per annum from the time of original issuance
thereof: Wright v. Hanna, 210 Pa. 349.
H.
Gordon McCouch and Samuel Dickson, with them Henry S.
Drinker, Jr., Stacy B. Lloyd, G. Heide Norris and Crawford &
Loughlin, for appellees. -- The terms of the contract
contained in the Act of March 4, 1850, P.L. 129, make the
dividends on the preferred stock cumulative: Henry v. Ry.
Co., 1 DeG. & J. 606; Webb v. Earle, L.R. 20
Eq. 556; Crawford v. Ry. Co., 3 Jur. N.S. 1093;
Corry v. Ry. Co., 29 Beav. 263; Allen v. Ry.
Co., 25 W.R. 524; Matthews v. Ry. Co., 5 Jur.
N.S. 284; Prouty v. R.R. Co., 1 Hun, 655;
Boardman v. Lake Shore, etc., Ry. Co., 84 N.Y. 157;
Elkins v. Camden, etc., R.R. Co., 36 N.J. Eq. 233;
West Chester, etc., R.R. Co. v. Jackson, 77 Pa. 321.
The
appellees are entitled to their arrears without any deduction
for past overpayments: Chicago, etc., Ry. Co. v. Ry.
Co., 101 Fed. Repr. 792.
Before
MITCHELL, C.J., FELL, POTTER, ELKIN and STEWART, JJ.
OPINION
MR. JUSTICE POTTER:
The
facts of this case were not in dispute, and are clearly and
accurately stated by the learned trial judge, as follows:
"The original complainants in this case, and others who
have intervened, are owners of shares of preferred stock of
the Lehigh Valley Railroad Company, respondent.
"Under
the terms of an act passed by the legislature of
Pennsylvania, approved March 4, 1850, P.L. 129, the Beaver
Meadow Railroad & Coal Company was authorized to issue
preferred stock which was entitled to a preference over all
other stock of said company in every future dividend of
profits declared, until the holders were paid from the funds
applicable to the payment of such dividend, ten per cent. per
annum. It was further enacted that the holders of all the
other stock of the company should not be
entitled to participate in any future dividend of the profits
of the company until the holders of preferred stock had been
first paid from the funds applicable to such dividend ten per
cent. per annum.
"On
June 18, 1864, an agreement was entered into between the
Beaver Meadow Railroad & Coal Company and the Lehigh Valley
Railroad Company, under the provisions of the Act of May 16,
1861, P.L. 702, relating to the merger of railroad
corporations, by which a merger of the two corporations was
effected.
"By
this agreement the property of the Beaver Meadow Railroad &
Coal Company was transferred to and vested in the Lehigh
Valley Railroad Company. It was agreed that the holders of
preferred stock of the Beaver Meadow Railroad & Coal Company
should be entitled to preferred stock to be issued by the
Lehigh Valley Railroad Company, securing the same rights and
privileges with respect thereto as were held and enjoyed by
them in the Beaver Meadow Railroad & Coal Company.
"Dividends
upon the preferred stock were paid at the rate of ten per
cent. until October 17, 1893. In addition thereto, on January
2, 1860, an extra dividend of ten per cent. on the preferred
stock, as well as upon the common, of the Beaver Meadow
Railroad & Coal Company was paid in shares of common stock,
except where such dividends amounted to a fractional part of
a share, when the payment was made in cash at the rate of
$50.00 per share.
"In
1861 a regular dividend of ten per cent. was paid on both
common and preferred stock. In 1862 ten per cent. was paid on
preferred stock, but only eight per cent. was paid on common
stock.
"On
January 2, 1863, an extra dividend of ten per cent. was
declared and paid in stock, and on January 2, 1866, a
dividend of ten per cent. of the same character was paid by
the Lehigh Valley Railroad Company. The regular dividend of
ten per cent. was paid each year upon the preferred stock
until 1893. In 1876 nine per cent. only was paid to the
common stockholders, and during the years from 1877 to 1893
the annual dividend upon the common stock was from six to
eight per cent. No dividends were declared on either the
preferred or common stock from October 17,
1893, until June 20, 1904, when a dividend of ten per cent.
was declared on the preferred stock, payable August 1, 1904,
and a dividend of one per cent. on the common stock.
"A
bill in equity was filed by the holders of the preferred
stock, praying for a decree declaring them entitled to
cumulative dividends at the rate of ten per cent. per annum
before the payment of any dividends to the holders of common
stock; for an order directing the specific performance of the
agreement of merger between the corporations, and for an
injunction enjoining the payment of dividends to holders of
common stock until the preferred stockholders had been paid
at the rate of ten per cent. per annum from October, 1893.
"An
answer and replication were filed and testimony taken in
support of the allegations contained in the bill and in the
answer which was amended at the hearing."
Under
these facts two questions arose which are thus stated by
appellant:
"Whether
the holders of preferred shares were entitled cumulatively,
to dividends at the rate of ten per centum per annum from the
time of issuance thereof, before the holders of common shares
were entitled to any dividends.
"Whether,
if
thus entitled, their right was to an amount in excess of ten
per centum per annum from the date of original issuance of
shares, there having been paid to them, in some years,
dividends in excess of ten per centum per annum."
The
court below decided both these questions adversely to the
defendant company, and finally decreed "That by virtue
of the provisions of the Act of Assembly of Commonwealth of
Pennsylvania, March 4, 1850, P.L. 129, and the execution of
the articles of merger between the Beaver Meadow Railroad and
Coal Company dated June 18, 1864, and the issue of the Lehigh
Valley Railroad Company of its preferred stock thereunder,
the Lehigh Valley Railroad Company specifically contracted
that the holders thereof should be entitled to cumulative
dividends thereon at the rate of ten per cent. per annum
before the payment of any dividend to the holders of its
common stock.
"The
Lehigh Valley Railroad Company is hereby perpetually enjoined
from making any payments of dividends to the
holders of its common stock until it shall have paid the
holders of its preferred stock, dividends at the rate of ten
per cent. per annum from October 17, 1893.
"Judgment
is hereby entered in favor of the complainants against the
defendant for the sum of $91,338.85, being ten per cent. per
annum from October 17, 1893, to August 1, 1903, on 1,714
shares of preferred stock of the par value of $83,892 with
interest at the rate of six per cent. per annum from August
1, 1904; the various complainants being entitled to the
proportion of said sum which the number of shares held by
him, her or it bears to the whole 1,714 shares held by them
in the aggregate."
From
this decree defendant has appealed.
As to
the first question, whether or not the dividends upon the
preferred stock are under the contract cumulative, we feel
that sound reason, and the weight of authority, both English
and American, are in accordance with the conclusion reached
by the court below.
The act
of ...
