W. C. & Phila. Railroad Co. v. Jackson

• Decision Date: 01 February 1875
• Citation: 77 Pa. 321
• Parties: West Chester and Philadelphia Railroad Co. <I>versus</I> Jackson, Adm'x, &c., of Gray.
• Court: Pennsylvania Supreme Court

77 Pa. 321

West Chester and Philadelphia Railroad Co. versus Jackson, Adm'x, &c., of Gray.

Supreme Court of Pennsylvania.

January 20, 1875.

February 1, 1875.

January 20th 1875.

Before AGNEW, C. J., SHARSWOOD, MERCUR, GORDON, PAXSON and WOODWARD, JJ.

Error to the Court of Common Pleas of Chester county: Of July Term 1874, No. 38.

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W. Darlington, for plaintiffs in error, discussed the various Acts of Assembly, and argued that the company was not permitted from the earnings of one year to pay their dividends for preceding years in which no profit was made. A dividend not declared cannot be recovered in this action: Williston v. Michigan Railroad Co., 13 Allen 400; Angel & Ames on Corp. 554. If the plaintiff can recover at all, it can be but for the proportion of the dividend which her thirty-six shares of preferred stock bears to the whole number of such shares existing before the conversion into the consolidated preferred stock. She is bound by the arrangement creating that stock: Curry v. Scott, 4 P. F. Smith 277. There were 5764 shares of preferred stock; the whole dividend was $33,000; of this she would be entitled to $206.10, less $72, already received: Coleman v. Oil Co., 1 P. F. Smith 74.

R. T. Cornwell and J. J. Lewis, for defendant in error.—The contract fixing the rights of the parties is in the Act of March 30th 1855, which was to meet the exigencies of the road as then existing, and when they should be met, the preferred stock was to be redeemed. Creating preferred stock is a mode of borrowing money and is but a form of mortgage: Redf. on Railways, sect. 237; Everhart v. W. C. & Phila. Railroad Co., 4 Casey 353. The action is not to compel the declaration of a dividend; the company has declared a dividend, and plaintiff but claims her share of a dividend declared: Montgomery v. Reese, 2 Casey 143, s. c. 7 Id. 78; McCullough v. McCullough, 2 Harris 295; Wilson v. Bank, 5 Casey 537.

Mr. Justice WOODWARD delivered the opinion of the court, February 1st 1875.

No language could be more definite and explicit than that of the fourth section of the Act of Assembly of the 30th of March 1855, under which the rights of the plaintiff below were asserted. The earlier sections had authorized the issue by the West Chester and Philadelphia Railroad Company of eight thousand shares of preferred stock, and had directed the form of subscription, and specified the terms and mode of payment. The fourth section declared that the holders of this stock should be entitled to receive a dividend of eight per cent. per annum, upon their par value, payable semi-annually from the time of payment therefor, in preference of, and before any interest or dividends should be declared or paid in favor of and to any holder or holders of the unpreferred stock of the company. Of the 5764 shares issued in pursuance of the act, Gibbons Gray, the plaintiff's intestate, subscribed for thirty, and subsequently purchased six, which were transferred to him on the company's books. Under the Acts of the 13th of April 1871, and the 3d of April 1872, a fresh adjustment of the corporate capital has been made. These acts authorized the issue of a consolidated preferred stock, into which both the preferred stock under the Act of 1855 and the common stock should be converted, the holders of the former receiving three new shares for two held by them, and the latter receiving share for share. All the holders of the original preferred stock have accepted this adjustment except the plaintiff and the holders of six other shares.

On the 7th of July 1873, a dividend of four per cent. was declared by the company. There had been no previous dividend, and the record shows that this was made up from the net earnings of the road during the two years preceding the date when it was declared. Upon these facts, the question arose whether the plaintiff was entitled to the dividends provided to be paid to the holders of the preferred stock, by the terms of the Act of 1855, or her rights were confined to a participation in...