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dicial search for precise equities necessarily becomes resolved into a speculation and a guess. There exists the ever-present difficulty of tracing financial results to their source, and of distinguishing between what of increased assets rightfully represents profits, and what increase of value to appropriate to capital. Above all, there enters into most situations, to render courts powerless to arrive at any certain results, a controlling factor arising from the discretionary power which directors rightfully exercise to determine at all times, within reasonable limits, the destiny of profits and of accumulated profits represented by surplus. Gibbons v. Mahon, 136 U. S. 549, 34 L. ed. 525, 10 Sup. Ct. Rep. 1057. Profits may be distributed as earned. They may be, in whole or part, retained and utilized for the corporate advantage. They may be used for a time, and later distributed. They may never be distributed, but permanently used in the business. Whether they will. inure to the benefit of stockholders, in the way of a dividend, may ever remain uncertain. Whether, in the ordinary course, they will fall to the lot of the life tenant, as profits declared, or remain to enhance the value of the stock, will depend in part upon the action of the directorate, and in part upon the term of the trust. They, as we shall have occasion to notice later on, can never acquire a status which must remain a fixed and abiding one unless they are formally capitalized. Their future is ever an uncertain one, and none save one who can foretell the action of boards of directors can discover it. The rights of stock are involved in this maze of doubt. Absolute rights there are not. Rights which are superior to those which may at any time be created by corporate management may not exist. In the presence of such conditions, courts must oftentimes find themselves powerless to ascertain and determine rights, since there may be nothing which lies without the domain of conjecture to act upon. The more the matter is studied, the more apparent it becomes that the Maine court, speaking of the Massachusetts rule through Chief Justice Peters, was justified in its expression: "We are satisfied that this can be the only safe, sound, just, and practicable rule, and that any attempt to engraft refined and nice distinctions upon such rule will be productive of much more evil than any good that can come from it." Richardson v. Richardson, 75 Me. 570, 46 Am. Rep. 428. This court has heretofore given its adhesion to the doctrine of Minot v. Paine as the one to be ordinarily applied. Mills v. Britton, 64 Conn. 4, 24 L. R. A. 536, 29 Atl. 231; Brinley v. Grou, 50 Conn. 66, 47 Am. Rep. 618.

An application of this principle would' prima facie, at least, quickly resolve the present contention in favor of the life tenants. The trial court, however, has regarded the rule as it has been adopted in this jurisdiction, at least, as a decidedly flexible one. The logical conclusion of the position taken in its exhaustive memorandum of decision, although not stated in precise terms, is that the rule is such a tentative one that it will yield where it appears upon inquiry that justice will not be accomplished by it. Starting with this premise, the court arrived at the conclusion that in this case justice would not be done by its application, and the rule was therefore disregarded. An inquiry was then made into the sources of the funds out of which the dividend was paid, to discover what was conceived to be the true nature of the transaction, and the real equities of the parties claimant. The court thus arrived at three vital conclusions which dictated the judgment as rendered, to wit: (1) That the accepted general rule must yield where it fails to accomplish just and equitable results; (2) that such results would not be reached in this case by its application; and (3) that the results established by the judgment were the just and &quitable ones.

Let us first consider the last two of these conclusions, since they furnish the key to the court's action. It is said that the operation of the rule would be inequitable, because it would, under the circumstances, result in the diversion to the life tenants, under the guise of income, of that which of right belongs to the stock, as capital, and therefore is the remainderman's. It is said that the distribution made by the court is equitable, because it prevents that diversion, and gives the remaindermen what is equitably theirs, and that only. The same conception underlies both conclusions. They are, however, reached upon mistaken premises. These mistaken premises arise from a failure to properly distinguish be tween the different qualities which attach to the various assets of a private corporation, and between the different characters which these assets may assume.

A citation from the memorandum of decision will indicate the nature of the misconception which lies at the foundation of the trial court's argument and position, to wit: "All of the subject-matter of these awards was properly appropriated to the uses of these plants, and hence permanently made a part of the capital of the company. Corporate profits undistributed belong to the corporation. . . When such profits are expended upon the property of the corporation used in its business, or devoted to the acquisition of new property

gross or net, of a corporation, whatever their source, investment, or employment. Security Co. v. Hartford, 61 Conn. 89, 23 Atl. 699; Batterson's Appeal, 72 Conn. 374, 44 Atl. 546; People ex rel. Union Trust Co. v. Coleman, 126 N. Y. 433, 12 L. R. A. 762, 27 N. E. 818; Ohio & M. R. Co. v. Weber, 96 Ill. 443; State ex rel. Batz v. Lewis, 118 Wis. 432, 95 N. W. 388.

or to the creation of a new business, these | wider sense, as descriptive of all the assets, constitute a permanent addition to capital, beyond the recall of the directors. Once capital always capital. It makes no difference whether such augmentation of capital resulted from the proceeds of increase of stock, or from profits appropriated to capital. It is the thing done with the funds which determines. Did it go to the increase or addition to the property of the corporation, and has it become permanently devoted as such to its uses? This is the test." The misconception embodied in this statement was not a new one. It appears in the opinion in Hemenway v. Hemenway, 181 Mass. 406, 63 N. E. 919, from which source the trial court apparently derived it. As that opinion was the utterance of the same court which promulgated the rule in Minot v. Paine, and which has since repeatedly affirmed that rule, its expressions in argument were naturally accepted as authoritative without careful analysis. They will not, however, bear such analysis.

"Capital" is a term which, as applied to private corporations as ordinarily constituted, is used with widely varying significations. In one sense the strict sense-it is employed to designate specifically the fund, property, or other means contributed, or agreed to be contributed, by the share owners as the financial basis for the prosecution of the business of the corporation; such contribution being made either directly through stock subscriptions, or indirectly through the declaration of stock dividends. As thus used, the term signifies those resources whose dedication to the uses of the corporation is made the foundation for the issuance of certificates of capital stock, and which, as the result of the dedication, become irrevocably devoted to the satisfaction of all the obligations of the corporation. State v. Norwich & W. R. Co. 30 Conn. 290; Bailey v. Clark, 21 Wall. 284, 22 L. ed. 651; Christensen v. Eno, 106 N. Y. 97, 60 Am. Rep. 429, 12 N. E. 648; Iron R. Co. v. Lawrence Furnace Co. 49 Ohio St. 102, 30 N. E. 616; Reid v. Eatonton Mfg. Co. 40 Ga. 103, 2 Am. Rep. 563; Com. v. Charlottesville Perpetual Bldg. & L. Co. 90 Va. 790, 44 Am. St. Rep. 950, 20 S. E. 364; Thomp. Corp. § 1660. Sometimes the term "capital" is used when what is meant to be designated is that portion of the assets of a corporation, regardless of their source, which are utilized for the conduct of the corporate business and for the purpose of deriving therefrom gains and profits. Iowa State Sav. Bank v. Burlington, 98 Iowa, 739, 61 N. W. 851; People ex rel. Lemmon v. Feitner, 56 App. Div. 280, 67 N. Y. Supp. 893; Hemenway v. Hemenway, 181 Mass. 406, 63 N. E. 919. Frequently the term is employed in a still

In Hemenway v. Hemenway, 181 Mass. 406, 63 N. E. 919, the court drew a distinction between those undistributed profits which have been applied to and invested in the increase and improvement of the property used in the business of the corporation, and those profits which may have been set aside for use in the conduct of the business, but not invested in permanent works. The former, it said, was capital; the latter, "floating capital." The former, it said, was as effectually capitalized as they would have been through the declaration of a stock dividend. The trial court accepted this principle as a sound one, and thereon based its argument and conclusions, as witness its language already recited, to wit: "When such profits are expended upon the property of the corporation used in its business, or devoted to the acquisition of new property, or to the creation of a new business, these constitute a permanent addition to capital, beyond the recall of the directors. Once capital always capital." This proposition contains a fundamental error. The quality and incidents of surplus, however invested or employed, are not the same as those of capital, within the strict meaning of that word. Capital, in that sense, constitutes a fund so set apart and devoted to the corporate uses and the security of creditors that the law jealously guards it from the encroachment of directors in the declaration of dividends. It is placed beyond their reach for that purpose, and no way is open to them to return it to the share owners. Its dedication is irrevocable, and it must ever remain a fund held in trust for creditors, unless some judicial or other process authorized by legislation intervene. Of it, it may well be said, "Once capital, always capital." It is not so of undistributed profits or surplus in any form. They may be effectually dedicated to corporate uses through the processes of a stock dividend, but until so dedicated they are not removed from the reach and control of directors. The manner of utilization may be changed, investments altered, permanent property sold and turned into cash, and experimental or other enterprises abandoned, with a realization upon the investments therein, all at the discretion of directors, with no such artificial consequence that the assets thus

bons v. Mahon, 136 U. S. 549, 34 L. ed. 525, 10 Sup. Ct. Rep. 1057; Bouch v. Sproule, L. R. 12 App. Cas. 385; Pratt v. Pratt, 33 Conn. 446. It would seem fair that its return by the same means to its original status should be as possible as its first transition, and as fair that when it has been transformed back into cash, and a cash dividend declared and paid therefrom, the benefit of that dividend should be dependent upon the final act of the directorate thereon, upon some arbitrarily chosen intermediate act. Our adopted rule rests upon that proposition. It sees no injustice in its general application, and therefore admits of no relaxation when other conditions are not shown.

employed change their character as the re-
sult of the process. Investment in perma-
nent works does not, and ought not to, capi-
talize. Directors can, in their discretion,
fairly exercised, withhold profits, and em-
ploy them in the conduct or enlargement of
the business. By the same right they ought
to be able to, and can, withdraw from any
action which will enable the assets thus em-
ployed to be returned to their original con-
dition, as funds available for distribution to
those to whom they might have been orig-as
inally divided as dividends. Capital of this
kind does not bear the perpetual stamp of
capital. It simply constitutes a portion of
the corporate assets which are within the
discretionary control of the directors, which
they may use for the corporate advantage in
such ways as have the approval of their
judgment, or, if that course seem wiser,
cease using, and by proper action withdraw
from the corporate resources.

It follows that the court's second and third conclusions, in so far as they rest upon the mistaken proposition that undistributed profits which may become invested in permanent works, property, improvements, or acquisitions or business extensions, become, by their very nature, a permanent addition to capital, beyond the recall of directors, and possessing the quality of capital, in the strict sense, are unjustified. There is nothing growing out of the corporate relation, or any of the incidents of corporate estate, which can support the argument which is made to rebut the presumption that, when a solvent, going concern declares a lawful dividend, it is one to be paid out of profits, since capital cannot be impaired. 2 Thomp. Corp. § 2192.

We have thus far pursued the line of argument of the trial court. There is another aspect of the question which possibly requires attention. While invested assets do not become capital in such sense that they thereafter have the quality and incidents of strict capital, it might be suggested that the character of such assets, by their investment in permanent works, improvements, or extensions, becomes such that, as between owners of successive stock interests, they ought, in justice, to be regarded as capital, in the general sense that it should thereafter belong to the capital rather than the income side of those interests. 1 Cook, Corp. § 8. The reason for this is not apparent. Their source is presumptively and for the most part in fact profits. 2 Thomp. Corp. § 2192, and his article on Corporations, 10 Cyc. Law & Proc. p. 562. In so far as such is the case, their status as invested surplus has been created by the lawful fiat of directors, through the withholding and appropriation for use of what might have gone out as income. Gib

There remains to be considered still another aspect of the case: The court finds justification for its conclusions, and counsel for the remainder interests attempt to support the judgment, upon a line of reasoning which differs in form, at least, from those already considered, although it may appear that in its ultimate analysis it rests upon the same fundamental erroneous conception. We have therefore to return to a consideration of the first of the court's conclusions, as we have classified them. The memorandum of decision discloses that the trial court accorded to the rule as adopted in this jurisdiction too much elasticity. We have already had occasion to discuss its importance and beneficent character when reasonably interpreted and applied. If our observations were well made, and the commendations of eminent authorities justified, the conclusion would follow that it was not only a safe and sane one upon occasions, but also a rule which, if used with a proper regard for the substance and intent of the vote of declaration, would be a judicious one for general application, and to which few, if any, exceptions should be admitted. In that spirit and to that effect it has been accepted by this and other courts. We have no occasion to make the academic inquiry as to whether, the rule being interpreted as suggested, any, or what, circumstances would justify а suspension of its operation. Certain it is that it ought not to be, and is not, one which yields whenever an investigation might appear to indicate its failure in a given case to accomplish what might be conceived to be exact justice, upon the basis of some theoretical view of the ultimate rights of persons asserting conflicting successive stock interests. One of the purposes of the rule is to put an end to all such investigations under all ordinary conditions, at least. The prohibition of inquiry naturally and properly extends to all that field of investigation which we have thus far had under consideration in this case.

these proceedings found it a prosperous, going concern,-the same, in all essentials, it was before the city of Holyoke's threatened competition made a change in the scope of its operations an apparently wise act of corporate management. Clearly, there was nothing in the nature of liquidation or a return of capital in the transactions under consideration.

There remains, however, another aspect of the situation before us, which is relied upon as satisfying the conditions of what is termed an approved exception. As nothing else is pointed out as justifying a departure from the literal enforcement of the rule, we may well confine our discussion to the claim which is made. In Second Universalist Church v. Colegrove, 74 Conn. 83, 49 Atl. 902, we held that, where the assets of a cor- The remaindermen claim that they will poration were distributed to the share own-be aggrieved if the life tenants are perers in liquidation, they were, as between mitted to take this dividend. That must delife tenants and remaindermen, to be treated pend upon the view which is taken of their as principal or capital, and not income, al- rights and equities. The advocates of juthough the distribution was made in the dicial investigation for the purpose of ascerform of a cash dividend. See also, to the taining and establishing in each case the same effect, Gifford v. Thompson, 115 Mass. rights of the parties have most commonly 478. It is needless to inquire whether or and confidently asserted that the rule which not the principle involved in these cases alone could lead to exact justice was one constitutes a true exception to the general which recognized the right of remaindermen rule, as properly interpreted. Whether it to have the capital and those profits which does or not, it is plain that it is a just and had accumulated prior to the inception of sound one. On the behalf of the remainder- the trust retained in the corpus, and that of men it is contended that this principle is as life tenants to receive subsequent accumuapplicable to partial as to complete liqui- lations. Earp's Appeal, 28 Pa. 368; dations. By "partial liquidations" we Smith's Estate, 140 Pa. 344, 23 Am. St. Rep. understand to be meant proceedings involv- 237, 21 Atl. 438; 2 Thomp. Corp. § 2196; 2 ing the surrender by the corporation of Cook, Corp. § 552. Even if this rule, which portions of its capital. The contention may, of all rules professes to be most mindful of for the purposes of this case, be conceded. strict equities, were accepted for appliBut there has been no liquidation, complete cation to the present situation, we should or partial, of the Holyoke company, or any- look in vain through this record to discover thing tantamount thereto. The company any suggestion that a disposition of this has withdrawn from certain incidental dividend as income would operate to the branches or departments of its business, as injury of those asserting the remainder it was formerly, in the discretion of its interest in the corpus, which, after the dividirectors, conducted, and converted what dend, remained worth three times what it had been the investment of some of its as- was worth when the trust took effect. sets in those departments into cash. The amount of the company's capital stock after the dividend remained unchanged. It was not only unimpaired, but continued to represent an ownership of net assets amounting to nearly three times the par value of its stock. The shares continued to be worth $300 or more each. The business of the corporation remained the same, in its general character and purposes, and the inception of

It is conceded that the decision of the case is to be governed by the law of Connecticut. Massachusetts law would lead to the same result.

There is error. The judgment is reversed, and the cause remanded for the rendition of judgment in accordance with the views herein expressed.

The other Judges concur.

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tained near it to render it visible to passers- Quimby v. Filter, 62 N. J. L. 766, 42 Atl. by.

(April 7, 1903.)

PPEAL by plaintiff from a judgment of the Supreme court in favor of defendant in an action brought to recover damages for personal injuries alleged to have been caused by obstructions which defendant unlawfully allowed to be upon a sidewalk. Affirmed. The facts are stated in the opinion. Messrs. D. W. Baker and John C. Gittings, for appellant:

This carriage block in question was an unlawful obstruction of the street, and it was the clear duty of the District to see that all sidewalks were free from obstructions of every kind and character.

D. C. Rev. Stat. §§ 222, 225-227, 229; United States v. Cole, 7 Mackey, 504; District of Columbia v. Libbey, 9 App. D. C. 321; Curry v. District of Columbia, 14 App. D. C. 423.

There being an unlawful obstruction in the streets of a municipal government, of which it has knowledge, it is certainly its duty to cause the same to be removed.

Scranton v. Catterson, 94 Pa. 203; Davis v. Austin, 22 Tex. Civ. App. 460, 54 S. W. 927; Barnes v. District of Columbia, 91 U. S. 540, 23 L. ed. 440; District of Columbia v. Woodbury, 136 U. S. 450, 34 L. ed. 472, 10 Sup. Ct. Rep. 990.


If one, in passing over a sidewalk, fails to exercise ordinary care, he is not entitled to


Moore v. Richmond, 85 Va. 538, 8 S. E. 387; Dubois v. Kingston, 102 N. Y. 219, 55 Am. Rep. 804, 6 N. E. 273; Robert v. Powell, 168 N. Y. 415, 55 L. R. A. 775, 85 Am. St. Rep. 673, 61 N. E. 699; Vincennes v. Thuis, 28 Ind. App. 523, 63 N. E. 315; District of Columbia v. Moulton, 182 U. S. 582, 45 L. ed. 1237, 21 Sup. Ct. Rep. 840.

A stepping stone upon a sidewalk in front of a house, which does not interfere to an unreasonable extent with the use of the sidewalk, is not an unlawful obstruction, nor a nuisance, nor does it constitute negligence which will render a municipality liable to one who is injured by falling over it.

Howes v. District of Columbia, 2 App. D. C. 188; Dubois v. Kingston, 102 N. Y. 219, 55 Am. Rep. 804, 6 N. E. 273; Robert v. Powell, 168 N. Y. 414, 55 L. R. A. 775, 85 Am. St. Rep. 673, 61 N. E. 699; Cincinnati v. Fleischer, 63 Ohio St. 229, 58 N. E. 568; Macomber v. Taunton, 100 Mass. 255; Rockford v. Tripp, 83 Ill. 247, 25 Am. Rep. 381; Tiesler v. Norwich, 73 Conn. 199, 47 Atl. 161; Vincennes v. Thuis, 28 Ind. App. 523, 63 N. E. 315; Canavan v. Oil City, 183 Pa. 611, 38 Atl. 1096; Horner v. Philadelphia, 194 Pa. 542, 45 Atl. 330; Cushing v. Boston,

Messrs. Andrew B. Duvall and E. H. 124 Mass. 434. Thomas, for appellee:

A pedestrian has no right to assume that the portion of a public sidewalk ordinarily occupied by steps and inner-line projections, or the outer portion commonly occupied by carriage steps and the like, can be passed over with freedom; and it is negligence in him to use such portions of the sidewalk without at least casual observation of their


Howes v. District of Columbia, 2 App. D.

C. 188.

The use on the curb line of such a common article or thing as a carriage step was not of itself notice that it was necessarily hazardous or dangerous.

District of Columbia v. Moulton, 182 U. S. 581, 45 L. ed. 1237, 21 Sup. Ct. Rep. 840; Allis v. Columbian University, 8 Mackey, 270; District of Columbia v. Ashton, 14 App. D. C. 579.

The immediate cause of the plaintiff's accident in this case was the reckless speed with which, without looking, he approached the wagon, and not the existence of the carriage step alone.

Swart v. District of Columbia, 17 App. D. C. 412; District of Columbia v. Brewer, 7 App. D. C. 113, Reaffirmed in Mosheuvel v. District of Columbia, 17 App. D. C. 401;

Alvey, Ch. J., delivered the opinion of the court:

This is an appeal from the supreme court of the District of Columbia. The action was brought by the appellant, Abraham Wolff, against the District of Columbia to recover damages suffered by the plaintiff, occasioned, as alleged, by what is

contended to be a nuisance or an unlawful obstruction allowed to exist in C street N. W., in the city of Washington, by the defendant, the municipal corporation of the District of Columbia.

The cause of action, as set forth in the amended declaration of the plaintiff, is stated to be that the defendant, as a municipal corporation, was in duty bound to keep the sidewalks of the streets in the city of Washington free from obstruction, nuisances, or encumbrances, so as to be safe for all travelers thereon, including the plaintiff : and the breach of duty of the defendant, as alleged in the declaration, was, that the defendant wrongfully and negligently allowed "a certain large stone, several inches high above the surface of the sidewalk, usually termed a carriage step, to impede travel and encumber that part of said sidewalk which was opposite to and in front of a certain

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