of stock, the measure of damages would seem to be the value of the stock, less, possibly, the amount which the allottees can recover from the company.3 In an action against the vendor of overissued stock which the company refused to register in the name of the vendee upon its transfer books, it was held that the measure of damages was the market value of the stock at the time the transfer was demanded.* 1 Tome v. Parkersburg Branch R. R. Co 39 Md. 36, 87; 17 Am. Rep. 540. In this case the treasurer had hypothecated two of the spurious certificates with the plaintiff, and had issued others to him directly. 2 Tome v. Parkersburg Branch R. R. Co. 39 Md. 36, 87; 17 Am. Rep. 540 3 Firbank v. Humphreys, 18 Q. B. 54. 4 People's Bank v. Kurtz, 99 Pa. St. 344, 349; 44 Am. Rep. 112. Cf. Willis v. Philadelphia etc. R. R. Co. 13 Phila. 33; S. C. 6 W. N. C. 461. § 282. Remedial statutes with respect to overissued stock.-Overissued or spurious stock may, however, it seems, be legalized by a subsequent legislative grant of authority to increase the capital stock of the corporation.' But an overissue of stock by a company incorporated by two States cannot be cured except by the legislative sanction of both of the States from which it derives its existence.2 1 Sewell's Case, Law R. 3 Ch. 131; New York etc. R. R. Co. v. Schuyler, 34 N. Y. 30, 56, 57; Cook on Stock & Stockh. 292. 2 Fisk v. Rock Island etc. R. R. Co. 53 Barb. 513; O'Brien v. Rock Island R. R. Co. 53 Barb. 568. CHAPTER XII. DIVIDENDS. § 283. Definitions-The four kinds of dividends. § 284. Scrip dividends. § 285. Stock dividends-The general rule. § 280 Stock dividends-To be declared by stockholders-Sundry con~ siderations. § 287. Dividends upon preferred stock. § 288. Dividends upon preferred stock-The discretion of the directors subject to review in equity. § 289. Of arrears of dividends upon preferred stock-The American and the English common-law rule. § 290. § 291. Of arrears of dividends upon preferred stock-The English statute. § 292. Dividends upon special stock. § 293. Discrimination between shareholders of the same class, illegal. § 294. The same subject continued-Remedy of the shareholder. § 295. § 296. § 297. § 298. A dividend declared is a debt due absolutely and may be assigned. § 299. Net earnings-The practical difficulties of the subject an avenue to fraud. § 300. Personal liability of corporate officers herein. § 301. § 302. Net earnings and net profits distinguished-Interest on corporate debts. Whether a company can have net earnings while in debt. § 303 To whom dividends belong-As between transferrer and transferree. To whom dividends belong-As between life tenant and remainder § 304. § 306. The discretion of the directors with respect to declaring dividends. § 307. English statutory restrictions upon the power to declare dividends. § 308. Proceedings to compel directors to declare dividends. § 309. Injunctions in restraint of dividends. § 310. When an injunction to restrain a dividend will not be granted. § 311. Proceedings to compel payment of dividends declared. § 312. The same subject continued-Whether demand is requisite Interest. § 313. The same subject continued-Off-set and counterclaim. § 314. Recovery of dividends illegally paid. § 283. Definitions-The four kinds of dividends. A dividend is a corporate profit set aside, declared, and ordered by the proper corporate authorities to be paid to the stockholders on demand or at a fixed time.1 Dividends are of four kinds. The first and most usual is the cash dividend; and in the absence of special provision to the contrary, a dividend is presumed to be payable in cash and in lawful or in current money. Another kind of dividend is payable in property; but while a dividend of this nature is recognized as legal, it is unusual, and but few cases are to be found in which it is discussed. The scrip dividend is simply a certificate issued by the corporation to its shareholders, conferring upon them the privilege of deriving a pecuniary benefit from the assets of the company at some future time. Under certain circumstances a corporation may, in lieu of a dividend in money or property, issue additional stock to its members; but in some of the States, stock dividends are prohibited by statute.5 1 Cook on Stock & Stockh. § 534. 2 See Cook on Stock & Stockh. § 535, and cases cited infra, § 296. 3 Scott v. Central R. R. Co. of Georgia, 52 Barb. 45. 4 Infra, § 284, and cases there cited. 5 Infra, § 286. § 284. Scrip dividends.-Upon an examination of the affairs of a company at the end of a fiscal period, it may be found that after the current lia bilities have been met and certain assets have become availabie, there will remain a net profit from which dividends may be properly declared; yet it sometimes happens that there are no funds on hand from which payment may be made. It is in such a case that a dividend of scrip may be properly issued. This scrip is a certificate reciting that its holder is entitled to a certain sum of money with interest thereon in settlement of dividends upon the stock of the company, or to a certain number of shares of stock, or that its holder may exchange it for any bonds and securities of the company, as the case may be.' The rights of the holders of scrip dividends are measured by the contract under which the scrip is issued, of which the scrip alone is evidence. Thus, where the contract incorporated in scrip, issued as a dividend, is merely an engagement that the holders "will be entitled " to receive stock in exchange therefor after the payment of the funded debt of the company, or after provision shall be made for its payment, the scripholders are not entitled to dividends upon the scrip nor to participate in those declared before the conversion of the scrip into stock 3 And where a certificate recited that it entitled its holder to a certain sum of money, with interest from date, in settlement of dividends on the preferred guarantied stock of the company, which was to be paid whenever the company from its earnings should have extinguished its floating debt, and have a sufficient sum to pay the dividend of which this scrip was a part, the certificate being exchangeable into bonds. of the company, it was held that it was not payable absolutely and unconditionally, as interest is, but only out of profits made by the company, the preference being limited to profits whenever earned.* 1 For examples of the form of these scrip certificates see Chaffee v. Rutland etc. R. R. Co. 55 Vt. 110, 112; Brown v. Lehigh Coal etc. Co. 49 Ia. St. 270; State v. Baltimore etc. Co. 6 Gill, 363; Bailey v. Citizens' Gaslight Co. 27 N. J. Eq. 196. 2 Brown v. Lehigh etc. Co. 49 Pa. St. 270. 3 Brown v. Lehigh etc. Co. 49 Pa. St. 270. 4 Chaffee v. Rutland R. R. Co. 55 Vt. 110, 126. Acc. St. John v. Erie R, R. Co. 10 Blatchf. 271; S. C. 22 Wall. 133: Lockhart v. Van Alstyne, 31 Mich. 76; 18 Am. Rep. 156; McGregor v. Insurance Co. 6 Stewt. Eq. 131; Taft v. Railroad Co. 8 R. I. 310; Corry v. Railroad Co. 29 Beav. 263; Jones on Railroad Securities, § 620; Feld on Corporations, § 121. § 285. Stock dividends - The general rule. When a corporation has not issued stock to the full amount authorized by its charter, or when it has been empowered by statute to increase its capital stock, it may invest the profits of the enterprise in improvements and extension of the business, and in lieu of a cash dividend, issue to its members additional shares of stock.1 Such an issue is termed a stock dividend, and provided it be based upon an equal addition to the capital of the company, or increase in the value of the corporate property, its validity is well established, nnless forbidden by some constitutional or statutory provision, as in Illinois,3 Wisconsin, and Massachusetts. And in Alabama under the provision of the State constitution prohibiting the issue of stock or bonds except for labor done, or money or property actually received, it is held that an increase in the value of the property in which the original stock is invested, will not warrant the issue of additional stock by way of stock dividends. Similar prohibitions of the issue of stock by any corpora |