Warren v. Queen & Co.

• Decision Date: 31 March 1913
• Docket Number: 339
• Citation: 240 Pa. 154,87 A. 595
• Parties: Warren v. Queen & Co., Appellant
• Court: Pennsylvania Supreme Court

87 A. 595

240 Pa. 154

Warren v. Queen & Co., Appellant

No. 339

Supreme Court of Pennsylvania

March 31, 1913

Argued January 17, 1913

Appeal, No. 339, Jan. T., 1912, by Willard P. Barrows Trustee in Bankruptcy of Queen & Company, Inc., from order of C.P. No. 4, Philadelphia Co., March T., 1911, No. 1343 making absolute rule for judgment for want of a sufficient affidavit of defense in case of J. Henry Warren v. Queen & Company, Incorporated, defendant, and William P. Barrows, Trustee in Bankruptcy of Queen & Co., Incorporated (substituted defendant). Reversed.

Rule for judgment for want of a sufficient affidavit of defense. Before WILLSON, P.J.

The opinion of the Supreme Court states the facts.

Error assigned was the order of the court.

The judgment of the court below is reversed with a procedendo.

Hampton L. Carson, with him John Kent Kane and Henry T. Dechert, for appellant. -- We contend that the plaintiff being an owner of part of the capital as shown by his certificate of stock should not be allowed to convert himself into a creditor and withdraw his capital by means of this action, and that a judgment should not have been entered in favor of the plaintiff: Culver v. Reno Real Estate Co., 91 Pa. 367; Lockhart v. Van Alstyne, 31 Mich. 76; Sternbergh v. Brock, 225 Pa. 279; Hamlin v. Toledo, Etc., R.R. Co., 78 Fed. Repr. 664; Guaranty Trust Co. of N.Y. v. Galveston City R. Co., 107 Fed. Repr. 311; Ellsworth v. Lyons, 181 Fed. Repr. 55; Stang's Appeal, 10 W.N.C. 409.

G. Plantou Middleton, with him John Blakeley, for appellee. -- The instrument upon which suit was brought and judgment recovered in the court below was not a certificate of preferred stock but an instrument in writing for the payment of money: Cook v. Bldg. & Loan Association, 104 Ga. 814 (30 S.E. Repr. 911); West Chester & Philadelphia R.R. Co. v. Jackson, 77 Pa. 321; Savannah Real Estate Loan & Building Company v. Silverberg, 108 Ga. 281 (33 S.E. Repr. 908).

Before FELL, C.J., BROWN, MESTREZAT, ELKIN and STEWART, JJ.

OPINION

MR. JUSTICE MESTREZAT:

This is an action of assumpsit to recover on an instrument in writing, the material parts of which are as follows: "This is to Certify that J. Henry Warren is the owner of Fifty shares of the preferred stock of Queen & Company, Incorporated. . . . This certificate is part of an issue of preferred shares amounting in the aggregate to Fifty thousand Dollars ($50,000) which are entitled to dividends at the rate of Eight per centum annually, clear of all taxes, cumulative, from the first day of March, 1906, out of the earnings of the Company applicable to the purpose, and before any dividend is declared on the common stock. . . . The shares represented by this certificate shall be redeemed by the Company on March 1, 1911, at par. The preferred stock, of which these shares are a part, constitute under all circumstances a lien on all the assets of the Company to be first paid in full prior to any right of the common stock to participate in or receive anything from such assets." The statement avers an indebtedness on this writing of five thousand dollars, the par value of the stock, due and payable to the plaintiff from the defendant company on March 1, 1911, with interest thereon from that date. The defendant filed an affidavit of defense, denying its liability for the following reason: "That on the 15th day of March, 1911, and at no time before or since has the defendant been in the possession of funds, property or revenues, or the proceeds of its property or business which could be applied to the redemption of the plaintiff's shares of preferred stock, without injustice to the existing rights of creditors and other stockholders, or without depriving the corporation of funds, property and revenues necessary to the usual current and proper business of the company." The plaintiff took a rule for judgment for want of a sufficient affidavit of defense which the court below made absolute, and entered judgment against the defendant for the amount of his claim. The defendant has taken this appeal.

The plaintiff contends that the instrument on which the suit was brought is an instrument in writing for the payment of money, and that as such it was due and payable by the terms of the writing on March 1, 1911. He claims that the certificate was merely representative of the obligation to repay to him the amount which he paid to the defendant company in accordance with the terms of the contract, and that, therefore, it is an obligation to repay upon a date certain the par value of the stock with interest thereon from March 1, 1911. The defendant contends that the instrument is a certificate in favor of the plaintiff for fifty shares of preferred stock of the corporation, that the plaintiff as a holder of such is simply a preferred stockholder and not a creditor of the corporation, and that as such he cannot maintain this action for the reasons set forth in the affidavit of defense. The defendant company was adjudged a bankrupt a few days after the entry of judgment and the trustee was substituted as a defendant.

The defendant maintains that the writing in suit is a certificate of preferred stock, and that neither under the statutes of the State nor at common law can the plaintiff recover in this action. The defendant was incorporated under the Act of April 29, 1874, P.L. 73. By an act approved April 3, 1872, P.L. 37 any company incorporated under the laws of the Commonwealth is authorized to issue with the consent of a majority in interest of the stockholders preferred stock, not exceeding at any time one-half of the capital stock of the corporation, and it is provided that the holders of such preferred stock should be entitled to receive dividends not exceeding twelve per cent. per annum, as might be prescribed by the board of directors, payable out of the net earnings of the company. By an act approved April 28, 1873, P.L. 79, 1 Purd. 804, it is provided that any company authorized by the Act of 1872 to issue preferred stock, may issue the same in different classes, may give to the various classes such order of preference in payment of the dividends, or in the redemption of the principal thereof, as may be approved by the holders of a majority of the stock, and the company has the right to redeem its preferred stock upon such terms as may be prescribed in the issue thereof, and for such purpose may appropriate revenues from any specific department of its...