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(146 N.E.)

THOMAS v. LACONIA CAR CO. et al.

(Supreme Judicial Court of Massachusetts. Suffolk. March 2, 1925.)

1. Corporations 156-Preferred stockholder's rights are contractual, and determined from provisions of stock certificate and statute.

Right of preferred stockholder to dividends as between herself, the corporation, and other stockholders are contractual, and determinable from terms of stock certificate and provisions of statute under which corporation was organized and functions.

2. Corporations 152-Dividends payable only when declared, and declaration creates right to receive.

Dividends are payable only when declared, and declaration of dividend creates, not only the dividend, but right of stockholders to demand and receive it.

3. Corporations 40-Alterations in agreement of association adopted by two-thirds of stockholders binding on minority.

Alterations in agreement of association or articles of organization,. as to classification of stock, adopted by two-thirds of each class of stockholders held binding on nonassenting preferred stockholders, in view of St. 1903, c. 437, §§ 27, 40, and G. L. c. 156, §§ 14, 42.

declaration and payment of accumulated dividends on preferred stock. On report, after sustaining of demurrer to petition by single justice. Sustaining of demurrer approved, and decree of dismissal ordered.

W. P. Everts and A. J. Aldrich, both of Boston, for plaintiff.

C. L. Favinger, D. M. Hill, and L. M. Lombard, all of Boston, for defendants.

BRALEY, J. It appears from the material allegations of the amended bill that the defendant corporation was organized under the laws of this commonwealth March 4. 1912, with a capital of $2,000,000, $1,000,000 of which consisted of preferred stock on which a cumulative dividend of 7 per cent. was payable quarterly, and $1,000,000 of common stock. The shares of all the stock had a par value of $100, but on September 27, 1920, the common stock was changed to the same number of shares having no par value. The corporation September 30, 1923, had a surplus over the par value of the preferred stock of $830,635.48, and had paid dividends to April, 1914, but thereafter, and to January, 1924, the dividends were passed, leaving on January 1, 1924, accumulated dividends amounting to $700,000, or $70 on every share. The plaintiff, the holder of 300 shares of the preferred stock, brought the

4. Corporations 156-Preferred stockhold-present suit June 24, 1924, to compel the corer, refusing to accept second preferred stock in lieu of accumulated dividends, held not entitled to cash payment of such dividends in preference to other preferred stockholders.

poration, and the individual defendants, its president and directors, to declare and pay to her the share of accumulated dividends to which she claims to be entitled.

er as between herself, the corporation, and [1, 2] The plaintiff's rights as a stockholdother stockholders are contractual. Page v. Whittenton Manufacturing Co., 211 Mass.

Where corporation, owing accumulated dividends on preferred stock, adopted reorganization plan pursuant to which non-par value second preferred stock was issued and offered to owners of existing preferred stock who would release dividends in arrears, and where direc-424, 427, 97 N. E. 1006. tors subsequently voted to pay a cash dividend on preferred stock, preferred stockholders, who had not agreed to accept the second preferred stock, held not entitled to be paid accumulated dividends in full before other preferred stockholders shared in dividend.

5. Corporations 152-Déclaration of dividends rests in sound discretion of directors.

Declaration of dividend, if justified by net profits, rests in sound discretion of directors, unless they are controlled or limited by statute, charter, by-law, or vote of stockholders.

6. Corporations 155(5)—Breach of trust on part of corporate directors must be specifically charged.

Stockholders, seeking to compel payment of dividends, and desiring to impeach directors' conduct, as in breach of trust, should specifically so charge; general suggestions or intimations being insufficient.

The terms of the contract are to be found in the agreement of association as stated in the preferred stock certificates, and the provisions of the statute under which the corporation was organized, and has functioned. Page v. Whittenton Manufacturing Company, supra. It is provided that preferred stockholders shall be entitled to dividends at the rate of 7 per cent. per annum commencing April 1, 1912, and no more, payable from the surplus or net profits of the corporation quarterly on the 1st days of July, October, January, and April. The dividends shall be cumulative and payable before any dividends, on the common stock shall be payable or set aside; So that in any year that dividends amounting to 7 per cent, have not been paid, the deficiency shall be payable before any dividend shall be payable upon, or set aside for the common stock. A dividend, however, is payable only when it has been declared. The

Report from Supreme Judicial Court, Suf- declaration of the dividend creates not only folk County.

Suit by Caroline M. Thomas against the Laconia Car Company and others to compel

the dividend, but the right of the stockholder to demand and receive it. Boston Safe Deposit & Trust Company v. Adams, 219

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Mass. 175, 177, 106 N. E. 590; Smith v. Cot- [ and entitled to vote. The alterations in its ting, 231 Mass. 42, 120 N. E. 177. The cer- agreement of association, or articles of ortificate follows the power given to the cor- ganization, and classification of stock, were poration by St. 1903, c. 437, § 27, and the therefore valid, and bound the plaintiff. St. terms of the certificate mean that the plain- 1903, c. 437, §§ 27, 40; G. L. c. 156, §§ 14, tiff in common with stockholders of her class 42; Durfee v. Old Colony & Fall River Railis to receive current and accrued dividends road, 5 Allen, 230; Page v. Whittenton Manbefore the common stockholders can partic- | ufacturing Co., supra. We have not overipate in the distribution of net profits. Field looked her contention that the new stock v. Lamson & Goodnow Manufacturing Co., 162 Mass. 388, 394, 38 N. E. 1126, 27 L. R. A. 136; Gardner Savings Bank v. Taber Prang Art Co., 189 Mass. 363, 365, 75 N. E. 705.

provisions impaired the right of sharing in the distribution of assets upon dissolution of the corporation. But under the new provisions she was entitled upon any liquidation, dissolution or winding up to be paid in full both the principal amount of her shares, and the unpaid accumulated or accrued dividends. The second preferred stockholders out of the assets remaining were to receive $70 a share, and any dividends accumulated or accrued thereon, and if any balance remained it was to be divided among the holders of the common stock. The original articles of organization as well as the new provisions having expressly provided, that in the event of liquidation the plaintiff shall be paid in full both the principal amount of her shares, and the unpaid dividends accrued thereon, there was no breach of contract, or impairment of vested rights to property. Reynolds v. Royal Arcanum, 192 Mass. 156, 78 N. E. 129, 7 L. R. A. (N. S.) 1154, 7 Ann. Cas. 776; Granara v. Italian Cemetery Association, 218 Mass. 387, 103 N. E. 1073.

The directors under the amended articles of organization sent to the plaintiff and other stockholders a letter formulating a plan by which stockholders should receive one share of second preferred stock without par value in exchange for a release of their dividends in arrears.

It is alleged, that notwithstanding the contract and the surplus applicable to the payment of dividends, the defendants in violation of the plaintiff's rights illegally declined to make payment, and have unlawfully caused the surplus and net profits to be converted into capital assets without her consent which are to be shared in accordance with the votes of the stockholders at a special meeting held April 30, 1924. The business affairs of the corporation seem to have gradually become unsatisfactory, and the efforts of the directors to devise some mode of relief culminated in calling this meeting when they submitted a plan of reorganization. It was voted to increase the capital stock by the issue of 10,000 shares of second preferred stock without par value, to be disposed of as might be determined by the board of directors, and that the agreement of association and articles of association be amended by striking out the provisions as to preferred stock and substituting other "stock provisions" which are fully stated in the record. The first paragraph of the first section of these provisions is the same as those of the certificate previously described. [4, 5] It is immaterial that a large number But this is followed by the provision that, of the preferred stockholders accepted the "when all dividends have accumulations ac- proposal, and surrendered their stock The cruing after January 1, 1924, on the prefer- plaintiff, who did not assent, alleges that the red stock have been paid, the second prefer- directors June 16, 1924, voted to pay a divired stock shall be entitled to dividends at dend of $35,000 on the preferred stock, which the rate of $3.50 a year and no more." "Div- amount has been deposited in the defendant idends on the second preferred stock shall be bank, and is an indebtedness to her, and othcumulative from the date of issue only for er preferred stockholders whose accumulateach fiscal year during which the earnings ed dividends have not been paid or released, are in excess of an amount" necessary to pay to be ratably distributed. The declaration of current dividends, accumulations on the a dividend however if justified by net profits preferred stock for the fiscal years since Jan-rested in the sound discretion of the directors uary 1, 1924, during which current dividends unless they were controlled or limited by statwere not earned, and to make up the defi-ute, charter, by-law, or vote of the stockholdciencies in surplus caused by the payment of dividends for any fiscal year since January 1, 1924, "during which dividends were not earned. But in no case shall the dividends on the second preferred stock be cumulative for an amount in excess of the amount by which the earnings exceed the above three limitations."

[3] We assume, in the absence of any allegations to the contrary, that the reorganization was adopted by a vote of at least

ers, to which no reference is found in the bill. Fernald v. Frank Ridlon Co., 246 Mass. 64, 140 N. E. 421. The directors were to decide in view of the general financial condition of the corporation and the funds available for dividends, whether the amount set aside should be appropriated to the partial payment of dividends which had accumulated, or whether the preferred stockholders of record June 24, 1924, should be paid for the period from January 1, 1924, to July 1, 1924.

(146 N.E.)

that no dividend has been voted on the common stock, and the dividend declared was payable to all preferred stockholders including the plaintiff.

The accumulated dividends were not, as the plaintiff also contends, a charge upon the fund which she can enforce. It never was appropriated for the specific purpose of paying her demands.

[6] The directors on the record did not act unlawfully and without authority, and if the plaintiff intended to impeach their conduct as having been a breach of trust and hence fraudulent, she should have specifically so charged; general suggestions or intimations are insufficient. Barron v. International Trust Co., 184 Mass. 440, 443, 68 N. E. 831; Cosmopolitan Trust Co. v. S. L. Agoos Co., 245 Mass. 69, 73, 139 N. E. 806.

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The single justice correctly ruled that the demurrer should be sustained, and a decree dismissing the bill with costs is to be entered. Ordered accordingly.

PHILADELPHIA TAPESTRY MILLS V.
NEW ENGLAND S. S. CO.
(Supreme Judicial Court of Massachusetts.
Bristol. Feb. 27, 1925.)

1. Shipping ~132(5)—Evidence of shipper's
arrangement with one in trucking business in
effort to avoid freight embargo held compe-
tent, in action against common carrier to re-
cover for lost merchandise.

ble as initial carrier, under Interstate Commerce Act (U. S. Comp. St. § 8563 et seq.) and Carmack (U. S. Comp. St. §§ 8604a, 8604aa), and other amendments (U. S. Comp. St. Ann. Supp. 1923, §§ 8604a, 8604aa).

4. Shipping 103-Interstate Commerce Act and amendments do not apply to carriage wholly by water.

Interstate Commerce Act (U. S. Comp. St. 8 8563 et seq.) and Carmack (U. S. Comp. St. $$ 8604a, 8604aa), and other Amendments (U. S. Comp. St. Ann. Supp. 1923, §§ 8604a, 8604aa), do not apply to carriage wholly by water, where no railroad is involved.

Exceptions from Superior Court, Bristol County; James H. Sisk, Judge.

Action in contract by the Philadelphia Tapestry Mills against the New England Steamship Company to recover value of merchandise transported by defendant as common carrier. On plaintiff's exceptions to court's refusals to rule, refusal to find, and findings made. Exceptions overruled.

A. S. Phillips, of Fall River, for plaintiff.
A. W. Blackman, of Boston, for defendant.

RUGG, C. J. This is an action of contract to recover the value of merchandise transported by the defendant as common carrier. Undisputed facts are that the plaintiff sent the merchandise in question to the Mt. Hope Finishing Company at North Dighton in this commonwealth, to be finished. That com

In action against a steamship company to recover value of merchandise shipped by plain-pany, after doing its work, reshipped them tiff to finishing mills, which was reshipped to plaintiff after work on it had been completed, and lost while on return trip, evidence of arrangements made by finishing mills, as plaintiff's agent, with one in trucking business in New York, in effort to get by freight embargo,

held competent.

2. Carriers 82-Goods shipped to consignee in care of another person may be properly delivered by carrier to such person.

Goods shipped to consignee in care of another person may be properly delivered by carrier to such person.

3. Shipping 120-Carrier held to have made delivery to person designated to receive shipment, and not liable as initial carrier under Interstate Commerce Act, on theory of through shipment.

Where shipment, originating in Massachusetts and destined for plaintiff in Philadelphia, consigned to "W. Bros. [plaintiff ], c/o S. A. M., Pier 14 N. R., N. Y." by bill of lading which also indicated that destination was "Phila., state of Pa.," was, pursuant to an arrangement made with M., engaged in trucking business in New York, for purpose of getting by freight embargo, delivered to M. an agent of the consignor for forwarding, held, shipment was not a through shipment to Philadelphia, and that carrier, having delivered to person designated to receive shipment in New York, was not lia

from Fall River in this commonwealth by
the defendant under a bill of lading issued
by the defendant at Fall River. That bill of
lading contained, on the line marked "Con-
signed to," the words "Wasserman Bros.,

c/o S. A. Mangam, Pier 14 N. R., N. Y.” On
the next line, marked "Destination," ap-
peared, "Phila., state of Pa." On the next
line, marked "Route," was "FR-c/o Mt.
Hope Fin. Co." The symbol "c/o" means
"care of." The bill of lading bore, under
the printed heading, "If charges are to be
prepaid, write or stamp here, "To be pre-
paid," the written words, "Paid to N. Y."
In the lower left-hand corner
"Mount Hope Finishing Co., Shipper, Per O."
was this:

The letter "O" was an abbreviation for the
name of the employee of the shipper who
had charge of this shipment. Further facts
are that at the time of this shipment there
was a strike on the railroads. Consequently
there was an embargo on the railroads out
of New York and great delay in forwarding
freight. The regular lines over which the
defendant maintained through route connec-
tions and forwarded its interstate shipments
to Philadelphia were the Pennsylvania Rail-
road of the Reading Railroad, whereby the
cheapest rate was obtained. On a through

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Company. Delivery apparently was made to both in New York. The mention of Philadelphia as the destination in the bill of lading does not control the express designation of the consignee as being in New York. It does not prevent a delivery by the carrier to such consignee from exonerating the carrier from all liability.

[3] Since there has been delivery by the defendant as carrier in New York to a person designated in the bill of lading and authorized to receive the merchandise the Interstate Commerce Act and the Carmack and other Amendments-24 U. S. Sts. at Large, 379 (U. S. Comp. St. § 8563 et seq.); 38 U. S. Sts. at Large, 1196; 39 U. S. Sts. at Large, 441 (U. S. Comp. St. §§ 8604a, 8604aa); 41

shipment neither the consignee nor anybody | was directed to Wasserman Bros. in care of else outside the carrier had anything to do both Mangam and the Mt. Hope Finishing with the goods in New York City. By reason of the strike S. A. Mangam, in the trucking business in New York, visited the Mt. Hope Finishing Company among many other shippers in New England and outlined a plan to get by the embargo, by having goods sent in his care in New York, so that he could take charge of them, and he would move them forward where practicable, as in the case of shipments destined ultimately for Philadelphia, by water routes. The Mt. Hope Finishing Company at that time had an agent in New York named Smith. Pursuant to this plan, the shipment in question was made. When it reached New York, Smith, as the representative of the Mt. Hope Finishing Company, instructed Mangam to reship the goods to Philadelphia by New York & Bal- U. S. Sts. at Large, 494 (U. S. Comp. St. timore Inland Transportation Company. Ann. Supp. 1923, §§ 8604a, 8604aa)-have no Mangam signed an order at the top of which relevancy to the case. City National Bank was printed: "Mount Hope Finishing Co. Delivery memorandum for truckman's record only." At the right of the signature of Mangam appeared in writing: "Del. 7/14 F. L. Smith." A carbon copy of this was left with Mangam, which he presented to the agent of the defendant and obtained the freight bill. He loaded the merchandise thus obtained on one of his trucks and reshipped it as instructed by Smith. When that was completed, he turned the papers over to Smith and took Smith's receipt therefor.

[1] The evidence as to Mangam's conference and engagements with the Mt. Hope Finishing Company was competent. That company was the consignor. It was both by intendment of law and according to the evidence the agent of the plaintiff for reshipping its merchandise after having performed work on such merchandise. Whatever arrangement that company made with the carrier was binding on the plaintiff and consignee. Johnson v. New York, New Haven & Hartford Railroad, 217 Mass. 203, 208, 104 N. E. 445; Great Northern Railway v. O'Connor, 232 U. S. 508, 34 S. Ct. 380, 58 L. Ed. 703.

v. El Paso & Northeastern Railroad, 262 U. S. 695, 700, 43 S. Ct. 640, 67 L. Ed. 1184.

[4] The defendant is not liable on another ground. If this be treated as a through bill of lading requiring through shipment from Fall River to Philadelphia, there is no designation of carrier beyond New York. The transportation of the goods in fact appears to have been wholly by water, except so far as the truck of Mangam carried the goods from the defendant to another carrier by water in New York. It has been the uniform interpretation of the Interstate Commerce Law and its Amendments that it does not apply to carriage wholly by water, where no railroad is involved. In the Matter of Jurisdiction over Water Carriers, 15 Interst. Com. Com'n R. 205; Cosmopolitan Shipping Co. v. Hamburg-American Packet Co., 13 Interst. Com. Com'n R. 266; Goodrich Transit Co. v. Interstate Commerce Commission (Com. C.) 190 F. 943, reversed on another ground in 224 U. S. 194, 32 S. Ct. 436, 56 L. Ed. 729. That law was aimed at railroads and their connecting and connected carriers by water. Texas & Pacific Railway v. Interstate Commerce Commission, 162 U.

No common-law liability has been shown on this record against the defendant. Nutting v. Connecticut River Railroad, 1 Gray, 502; Burroughs v. Norwich & Worcester Railroad, 100 Mass. 26, 27, 1 Am. Rep. 78; Florida Cotton Oil Co. v. Clyde Steamship Co., 235 Mass. 10, 125 N. E. 855.

[2] Where goods are shipped to a consignee S. 197, 210, 16 S. Ct. 666, 40 L. Ed. 940. in the care of another person, that person has the right to receive the goods and he becomes the proper person to whom the carrier may make delivery. City National Bank v. El Paso & Northeastern Railway, 262 U. S. 695, 43 S. Ct. 640, 67 L. Ed. 1184; Commonwealth v. People's Express Co., 201 Mass. 564, 572, 88 N. E. 420, 131 Am. St. Rep. 416.

According to the terms of this bill of lading, the defendant as carrier rightly could make delivery to Mangam at Pier 14, New York. In truth, the shipment in question

It is not necessary to examine in detail the requests for rulings. So far as not given, they rightly were denied in view of the facts found and the controlling principles of law.

Exceptions overruled.

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1. Trial 174-Request for ruling held in effect motion for directed verdict, properly denied.

Request for ruling that "on all the evidence the plaintiff is not entitled to recover" held in substance a motion for directed verdict for defendant, and properly denied for failure to comply with superior court rule (1923) No. 44.

[3] Individual judges have no power to dispense with rules lawfully adopted for the conduct of the business of the courts. Oliver Ditson Co. v. Testa, 216 Mass. 123, 125, 103 N. E. 381; Everett-Morgan Co. v. Boyajian Pharmacy, 244 Mass. 460, 462, 139 N. E. 170. There was no attempt on the part of the presiding judge to waive the rule. He was not required to take notice of the request in the form in which it was presented.

If the question attempted to be raised be considered on its merits, there was no reversible error. The testimony of the plain2. Courts ~80(1)-Court rule as to motion tiff was somewhat conflicting. It was not for directed verdict held proper, and within in such unequivocal form that he was bound power of court to adopt.

Superior court rule (1923) No. 44, requir- by any particular part of it as matter of
law. Sullivan v. Boston Elevated Railway,
224 Mass. 405, 407, 112 N. E. 1025. A ques-
tion was presented for the decision of the
jury. The main point of the case is gov-
erned by Phippen v. Stickney, 3 Metc. 384,
and Gibbs v. Smith, 115 Mass. 592. See
Hopkins v. Ensign, 122 N. Y. 144, 25 N. E.
306, 9 L. R. A. 731.
Exceptions overruled.

ing motion for directed verdict to be separate
matter, dissociated from requests for instruc-
tions, held proper requirement, and within pow-
er of court to adopt, under G. L. c. 213, § 3.
3. Courts 82-Individual judges have no
power to dispense with rules adopted for con-
duct of courts.

Individual judges have no power to dispense with rules adopted for conduct of courts.

Exceptions from Superior Court, Suffolk County; Marcus Morton, Judge.

Action of contract by George S. Carp against one Kaplan and one Leitman, doing business as the Virginia Bag Company, with trustee process. On defendants' exceptions to refusal of court to rule. Exceptions overruled.

Maurice Jacobs, of Boston, for plaintiff. Richard M. Walsh and E. Philip Finn, both of Boston, for defendants.

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RUGG, C. J. This action to recover damages for breach of contract was tried before a jury. At the close of the evidence the counsel for the defendant submitted to the judge among other requests for rulings this: "Upon all the evidence the plaintiff is not entitled to recover."

[1] This was in substance a motion for a directed verdict in favor of the defendant, and it was commingled with other requests for instructions to the jury. It is manifest that this was not in accordance with the part of rule 44 of the superior court 1923 rules, which requires that:

"The question whether the court should order a verdict must be raised by a motion. Such question shall not be raised by a request for instructions to the jury."

. [2] This is a valid rule. It is a proper requirement that a motion for a directed verdict be a separate matter, dissociated from requests for particular instructions to the jury. Its adoption is within the power of the Superior Court under G. L. c. 213, 8 3. It was binding upon the defendant.

LOWENSTEIN et al. v. SILTON. (Supreme Judicial Court of Massachusetts. Suffolk. Feb. 27, 1925.)

1. Accord and satisfaction 27- Evidence held to warrant refusal of directed verdict.

In action for price of goods sold and delivered, where there was evidence tending to show accord and satisfaction between parties, plaintiffs' request for directed verdict was denied rightly.

2. Appeal and error 1068 (5)—Exception to denial of request held immaterial, in view of verdict.

Plaintiffs' exception to denial of request that defendant could not recover on certain counts in declaration in set-off became immaterial, where verdict was for plaintiff. 3. Sales

364(1)—Charge on bankrupt's title to claim against creditors held favorable to plaintiffs.

In action for price of goods sold and delivered, where evidence showed that at some time after sale plaintiffs went into bankruptcy and receiver took charge of their property, charge that claims of bankrupt against creditors go to trustee or receiver, and do not come back to bankrupt, except through conveyance by trustee or receiver, or termination of proceedings in such way that property revests in creditor, was sufficiently favorable to plaintiffs. 4. Appeal and error

197(7)-Objection that bankruptcy was not pleaded as defense cannot first be urged on appeal.

In action for price of goods sold and delivered, where no question was raised at trial that plaintiffs' bankruptcy had not been pleaded as

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