Hopper v. Sage — 21 N.Y. St. Rep. 491

Majority

p. 491

Mary C. Hopper, as Executrix, etc., Resp’t, v. Russell Sage, App’lt.

(Court of Appeals,

Filed March 5, 1889.)

Headnote

1. Stock—Sale op—Dividend on stock belongs to owner op stock at TIME IT IS DECLARED.

When a dividend is declared it belongs to the owner of the stock at that time. Until such declaration the profits form part of the assets, and an assignment by a stockholder before such declaration carries with it his

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proportional share of the assets, including all undeclared dividends. So dividends declared, but which are payable at a future time, belong to the owner of the stock when declared.

3. Same — Effect of declaration of a dividend — Construction of CONTRACT OF SALE OF STOCK.

The declaration of the dividend is, in legal contemplation, a separation of the amount thereof from the assets of the corporation, which holds such amount thereafter as the trustee of the stockholder at the time of the declaration of the dividend. In the absence of any provision in a contract of sale and purchase of stock (in this case a “put”) outside of, and not subject to, the rules of the stock exchange, the law declares that such a contract gives the dividends to the owners of the shares when the dividends were declared.

8. Evidence—Usage and custom cannot be proved to contravene A RULE OF LAW OR TO ALTER A CONTRACT.

Usage and custom cannot be proved to contravene a rule of law or to alter or contradict the express or implied terms of a contract free from ambiguity, or to make the legal rights or liabilities of the parties to a contract other than they are by the terms thereof. When the terms of a contract are clear, unambiguous and valid, they must prevail, and no evidence of custom or usage cap be permitted to change them. Walls v. Bailey, 49 If. Y., 464, distinguished.

Appeal from a judgment of the general term of the superior court of New York city, affirming a judgment in favor of the plaintiff, entered upon the verdict of a jury at the trial term thereof.

On the 23d of May, 1878, the defendant, for a valid consideration, made an agreement with the plaintiff’s decedent, of which the following is a copy:

'‘A. 3099. New York, May 23d, 1878.

“For value received the bearer may deliver me, on one day’s notice, except last day, when notice is not required, five hundred (500) shares of the common stock of the Chicago and Northwestern Railway Company, at forty-nine (49) per cent, at any time in thirty (30) days from date.

The undersigned is entitled to all dividends' or extra dividends declared during the time. ,

Expires 1:45 o’clock, P. M. RUSSELL SAGE.”

On the 16th day of May, 1878, the board of directors of the above named company did by resolution declare a dividend on its capital stock of three per cent, both on the preferred and common stock, payable at the office of the company in New York, on the 27th of June, 1878, and the transfer books were to be closed for the purpose of the dividend on Tuesday, June 18th, and re-opened on Saturday, June 29th, 1878.

It was admitted as a fact upon the trial, subject to objection as to the materiality thereof, that the following rule was in force during the year 1878 upon the stock exchange

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in New York, viz: ££ On the day of the closing of the transfer books of any stock for a dividend, transactions in such -stock for cash shall be £ dividend on ’ up to the time officially designated for the closing of the books; all transactions other than for cash shall be 6 dividend off ’ after a quarter past two o’clock P. M., or after the closing of the books, should they close before that hour.” It was also admitted, subject to the same objection, that in conformity to the above rule, and the resolution above named declaring a dividend, the stock of the Chicago and Northwestern Railway was, on June 18th, 1878, quoted and dealt in upon the stock exchange, l£ dividend off.”

On the 22d day of June, before 1:30 P. M. of that day, the plaintiff’s decedent tendered 500 shares of the common stock of the above mentioned railway to the defendant at his office in the city of New York, and demanded payment therefor at; the rate of forty-nine dollars per share. The defendant refused to give that amount, but offered to receive and pay for the stock at the rate of forty-six dollars per share, which the plaintiff’s decedent refused to take, and notified the defendant that he should hold him for the difference between forty-nine and the market price, which was then forty-six. The defendant based his refusal to pay more than forty-six upon his alleged right to receive the dividend of three per cent on the common stock of the railway, which had been declared on the 16th of May, and which was payable on the 27th of June, 1878.

The agreement, or as it is termed in the case, the ££ put,” was purchased of the defendant, at his private place of business in New York, by a broker on behalf of plaintiff’s «decedent, and such broker, so far as appears, was not a member of the stock exchange. There was no disputed question of fact in the case, and the trial judge ordered a verdict to be entered for the plaintiff, for the difference between the price agreed to be paid (forty-nine dollars per share), and'the market price of the stock on the day when the tender was made, June 22, 1878, which price was forty-six dollars per share, together with interest thereon from the day of such tender. The judgment entered upon the verdict was affirmed at a general term of the superior court of New York city, and from such judgment of affirmance, the defendant has appealed here.

Henry S. Bennett, for app’lt; S. Jones, for resp’t.

The only question in this case is as to whether the defendant was entitled to insist upon his claim to the dividend on the common stock of the railway, which had been declared on the 16th of May, and was payable on the 27th of June. 1878.

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It has been held a number of times in this court that when a dividend is declared, it belongs to the owner of the stock at that time, but that until such declaration, the profits form part of the assets, and an assignment by a stockholder before such declaration, carries with it his proportional share of the assets, including all undeclared dividends. This is so in regard to dividends declared, but which are payable at a future time, and such dividends belong to the owner of the stock when declared. The declaration of the dividend is, in legal contemplation, a separation of the-amount thereof from the assets of the corporation, which holds such amount thereafter as the trustee of the stockholder at the time of the declaration of the dividend.

In the absence, therefore,, of any provision in a contract of sale and purchase of stock, outside of and not subject to-the rules of the stock exchange, the law declares that such a contract gives the dividends to the owner of the shares when the dividends were declared. This rule was announced in Boardman v. Lake Shore, etc., Railway ( 84 N. Y., 157 ),. and in Jermain v. Same Defendant, 91 id., 483, at 492, and Matter of Kernochan, 104 id., 618; 6 N. Y. State Rep., 439.

On looking at the contract in question it is seen that the parties did make some provision as to dividends, and it was. agreed that the defendant was to be entitled to all dividends, or extra dividends, declared during the time of its running, that is, for thirty days from the date thereof, which was May 23, 1878. But that provision did not include the case of a dividend which had already-been declared, and as to that dividend the contract was silent, and the law itself fixes the ownership thereof just the same as if it were thus provided in so many words in the contract.

To overcome this result, the counsel for the defendant, endeavored in many and various ways to show that by-usage of the stock exchange, a person situated as was the defendant with reference to this stock, and under precisely the same liability as the defendant under the contract in question, was entitled to the dividend which had been declared, and which each party to this action now claims. All the various offers to prove facts, and all the various questions asked of different witnesses, had this one result, for their object, which was to change the law on the subject by reason of this custom or usage claimed to be prevalent on the New York exchange.

We think the learned trial judge correctly refused to-permit evidence of this nature to be given.

Usage and custom cannot be proved to contravene a rule of law, or to alter or contradict the express or implied terms of a contract free from ambiguity, or to make the

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legal rights or liabilities of the parties to a contract other than they are by the terms thereof.

When the terms of a contract are clear, unambiguous and valid they must prevail, and no evidence of custom or usage can be permitted to change them. See Markham, v. Jaudon, 41 N. Y., 236 ; Bradley v. Wheeler, 44 id., 495; Baker v. Drake, 66 id., 518; Colgate v. Penn. Co., 31 Hun, 297 , at 299.

In Walls v. Bailey ( 49 N. Y., 464 ), evidence was held proper of the existence of a custom among plasterers in Buffalo as to the particular manner of measuring the number of square yards plastered. It was admitted because, as the court said, the contract for the payment for the work done was not so plain in its terms as that there could be but one conclusion as to the mode of measurement by which th3 number of square yards could be arrived at. Usage, it was said, was to be considered as entering into and forming a part of a contract when the usage was reasonable, uniform, well settled, not in opposition to fixed rules of law, and not in contradiction of the terms of the contract.

The evidence offered in this case would have been inconsistent with the rules of law, and would have contradicted the plain terms and legal effect of the contract.

This is not a case where by the terms of the contract made between members of the stock exchange its rules and regulations are to control in its interpretation and obligations; nor was it made under such circumstances that those rules and regulations could have any legal effect. The contract was made at the office of the defendant and by a broker for plaintiff’s decedent, who as to this contract, at all events, was not acting as a member of the stock exchange, and, so far as the case shows, he was not a member thereof.

Upon the question of damages the proof was uncontradicted that at the time of the tender of the stock, when the defendant should have paid the plaintiff’s decedent forty-nine dollars a share for the stock in compliance with his agreement, the stock was selling at forty-six dollars per share, and that was its market value.

There was no error committed on the trial, and the judgment entered upon the verdict for the plaintiff should be affirmed, with costs.

All concur.