Parks v. Automatic Bank Punch Co. — 14 N.Y. St. Rep. 710

Majority

p. 710

Clementine Parks, Resp’t, v. Automatic Bank Punch Co., App’lt.

(New York Court of Common Pleas, General Term,

Filed February 6, 1888. )

Headnote

Contract—Construction of—Dividends — Whbn they- accrue.

It was agreed by the defendant, upon the plaintiff assigning certain letters patent to it for shares of stock, that she should receive dividends to a certain amount before a stated date, and to a like amount before a year from that date. This agreement was substantially fulfilled, and in the .same year as,the latter dividend, and subsequent to its payment, the defendant declared another, but refused to pay the plaintiff any part of it, but that which accrued subsequent to the last payment, on the ground thahshe would otherwise receive double dividends. Held, that under the agreement the plaintiff was entitled to the whole of the last dividend; that a dividend did not accrue until declared.

Appeal from a judgment rendered in the district court for the first judicial district.

Melnor & Willis, for resp’t; E. B. Conover, for app’lt.

On the 9th day of November, 1885, plaintiff assigned to defendant certain letters patent, and received in part payment therefor thirty-five shares of the capital stock of the defendant; and, on the same day, defendant, as a part of the consideration, executed an instrument in writing, whereby it undertook and agreed “that the dividends accruing to the party of the second part (the plaintiff) on the said thirty-five shares of stock, shall amount to at least the sum of $219, on or before the 17th day of May, 1886, and to the additional sum of $219 on or before the 17th day of May, 1887.”

No dividends were declared before the 17th day of May, 1886, and the defendant, on the 18th day of that month, paid plaintiff $219. On the first day of January, 1887, a dividend of five per cent on the stock was declared, and plaintiff received the dividend on her shares, amounting to $175, and on her demand, about May 17, 1887, defendant paid her the further sum of forty-four dollars, making the full sum of $219 paid her, according to the terms of the agreement. . In July, 1887, the defendant declared a divi- ■ dend of three per cent on its capital stock. On plaintiff’s thirty-five shares this would amount to $105. It, however, refused to pay her more than twenty-five dollars on account of that dividend, claiming that she was entitled to only so much of the dividend as had accrued subsequently to the 17th day of May, 1887; and that it was entitled to retain the rest because it had accrued before that day, and had been advanced to her by defendant in the former payments, and, consequently, if the whole were paid to her, she would be paid twice for that portion of the last divi

p. 711

dend derived from profits accruing between the first of January and the seventeenth of May.

It cannot be denied that this would be the effect of giving her the whole dividend declared on the 1st of July, 1887. But the question is not whether such a result was not intended by the parties to the agreement.

The intention of the parties must be deduced from the phrase “dividends accruing.” The meaning of the word “ dividend,” as used in banking, railroad and other business associations, is that portion of the profits which is set apart and divided by the directors or managers of the corporation among the stockholders. This separation and division is not a growth, but an act, and the dividend is said to be declared or made; interest may be said to be accruing to the principal, and the same may be predicated of profits in a business, but not of dividends, they cannot accrue until declared.

As the dividend of July, 1887, was not declared until after May 17, 1887, it not accrue to plaintiff’s stock during the period covered by the agreement, and consequently, we think she was entitled to the whole dividend. The parties have acted as if they so understood the "agreement, for plaintiff demanded and defendant paid the difference between the dividends declared and the amount guaranteed, as dividends in each year, without question.

Had defendant intended to appropriate the profits arising from its business during the period covered by the agreement, but not declared as dividends until afterwards, in case it paid the full sum guaranteed, it could have easily expressed such intention in the instrument, but the words used cannot be made to have such a construction.

The fact that the first receipt given by plaintiff described the payment then made as “advanced dividends,” does not aid defendant’s contention, as there is no pretense that such payment could be deducted from succeeding dividends, and no such attempt was made.

The judgment should be affirmed, with costs.

Larremore, Oh. J., and Allen, J., concur.