Ford v. Easthampton Rubber-thread Co.
| Decision Date | 06 January 1893 |
| Citation | 158 Mass. 84,32 N.E. 1036 |
| Parties | FORD v. EASTHAMPTON RUBBER-THREAD CO. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
G.M. Stearns, for plaintiff.
Wm. G Bassett, for defendant.
It seems to be settled that, when a dividend has been fully declared, the corporation thereby manifests its intention that the amount of the dividend should be considered as having been separated from the other property of the corporation, and as having become the individual property of the stockholders, and that, therefore, when the dividend becomes payable, according to the terms of the vote declaring it, each stockholder has a right to demand payment of the proportional part of the dividend which belongs to his shares of stock, and to sue the corporation for it, if it is not paid on demand. In some cases money or other property equal to the whole amount of the dividend declared has been specifically set apart as a fund appropriated to the payment of the dividend, and the stockholders have been regarded as the cestuis que trustent of this fund, each entitled to his share. In other cases the corporation has credited the stockholders with the amount of their shares of the dividend, and the stockholders have assented to this, and the amount so credited has been regarded as a debt of the corporation to the stockholders; or the corporation has paid to some of the stockholders their shares of the dividend, and has refused to pay anything to the others, and it has been held that the corporation must pay all alike. See Beers v. Spring Co., 42 Conn. 17; State v. Baltimore & O.R. Co., 6 Gill, 360; King v. Railroad Co., 29 N.J.Law, 504; Jermain v. Railroad Co., 91 N.Y. 483; Jackson's Adm'rs v. Plank Road Co., 31 N.J.Law, 277; Wheeler v. Sleigh Co., 39 F. 347; Hopper v. Sage, 112 N.Y. 530, 20 N.E. 350. When a dividend has been declared payable at a definite future time but no fund has been set apart for the payment of the dividend, and the corporation meanwhile becomes insolvent, whether the stockholders, to the extent of their proportions of the dividend, should share ratably with the creditors of the corporation in its property, has not, so far as we know, been recently considered, but the decision in Lowne v. Insurance Co., 6 Paige, 482, is that they should. The setting apart of a fund to pay a dividend has been held to give a lien upon it to the stockholders, which they can enforce to the exclusion of the general creditors of the corporation. In re La Blanc, 14 Hun, 8, 75 N.Y. 598; Le Roy v. Insurance Co., 2 Edw.Ch. 656. The English Companies' Act 1862 (25 & 26 Vict. 89, § 38, cl. 7) provides that "no sum due to any member of a company in his character of a member, by way of dividends, profits, or otherwise, shall be deemed to be a debt of the company, payable to such member in a case of competition between himself and any other creditor, not being a member of the company; but any such sum may be taken into account for the purposes of the final adjustment of the rights of the contributories amongst themselves." Upon these questions, however, we desire to express no opinion.
It has been argued that there is no consideration for the promise of a corporation to pay a dividend to its stockholders, but we think that the doctrine of consideration applicable to a simple contract between persons having no fiduciary relations to each other is not applicable to such promise. It is the object of a private business corporation to...
To continue reading
Request your trial