Williams v. Parker

Field, J. The question which underlies all others in this case is whether the guaranty that each share of the preferred stock “shall receive semiannual dividends of four dollars on each share ” is an absolute guaranty, or is conditional upon the earning of sufficient profits by the corporation. This depends upon the construction to be given to the St. of 1855, c. 143. No condition is expressed in the statute, and the natural meaning of the words used is, that the corporation is to guarantee to each holder of preferred stock that he shall, while the corporation does business, receive semiannual dividends of four dollars on each share; so that, if the net earnings of the corporation are insufficient to pay such dividends, the corporation shall make good the difference out of any property it has. If the Legislature had intended that the holders of preferred stock should only be entitled to a preference over the common stockholders in dividends to the extent of four dollars semiannually on each share, and should never receive a greater dividend than this, it would have been easy to express this intention accurately ; and the only guaranty required of the corporation would have been, that it should appropriate the net earnings first to the payment of a dividend of four dollars semiannually upon each share of the preferred stock. The preferred stock authorized by this statute has some of the characteristics of stock, and some of the characteristics of a debt of the corporation; the corporation is authorized to guarantee a fixed, semiannual dividend upon the preferred stock, which is all the dividend that can under any circumstances be paid upon it. This stock is not to be issued until the company has received $100 a share therefor ; it may be exchanged for common stock, but not within two months next preceding the making of a dividend; and, upon the [207] dissolution or termination of the corporation, the holders of preferred stock are entitled to be paid in full next after the payment of debts, and before any payments to the holders of the common stock. The St. of 1855, c. 143, which was a special act, was followed by the St. of 1855, c. 290, which applied to all corporations then or thereafter established within the State. This last act authorized the issue of general and special stock, and the special stock was made subject to redemption, at par, after a fixed time to be expressed in the certificate; and the act also provided that “ Holders of such special stock shall be entitled to receive, and the corporation shall be bound to pay thereon, a fixed half-yearly sum or dividend, to be expressed in the certificate, not exceeding four per cent, and shall in no event be liable for the debts of the corporation beyond their stock. Holders of such general stock shall be, jointly and severally, individually liable for all the debts of the corporation until such special stock shall be redeemed in full.” See Gen. Sts. c. 60, § 12; Sts. 1862, c. 218, § 2, cl. 4; 1870, c. 224, § 25; Pub. Sts. c. 106, § 42; Allen v. Herrick, 15 Gray, 274. The general legislative policy of the Commonwealth thus appears to be that holders of special stock shall be regarded as creditors of the corporation for the dividends guaranteed, which have become payable; and a similar construction must be given to the St. of 1855, c. 143. The defendants, so far as appears by the bill, rightfully received the dividends paid them. See Rutland Burlington Railroad v. Thrall, 35 Vt. 536. The cases cited, in which either the preferred stock was issued without statutory authority, or the dividends thereon by the terms of the promise or guaranty were held to be, either expressly or impliedly, payable out of the net earnings of the corporation, afford but little aid in the construction of the St. of 1855, c. 143. In the opinion of a majority of the court, the demurrers must be sustained, and the Bill dismissed.