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it, the court did in fact treat a cash dividend as capital, and a stock dividend as income." 10 In England, the courts distinguish between ordinary or regular dividends and extraordinary dividends, the former going to the life tenant and the latter to the remainder-man."1

1 Ware v. McCandish, 11 Leigh, 595; Cuming v. Boswell, 2 Jur. N. S. 1005; Barclay v. Wainwright, 14 Ves. 66; Norris v. Harrison, 2 Madd. 268; Preston v. Melville, 16 Sim. ; Clive v. Clive, Kay, 600; Murray v. Glasser 17 Jur. 816; Beach on Wills, § 211.

2 Jermain v. Lake Shore etc. R. R. Co. 91 N. Y. 483; Abercrombie v. Riddle, 3 Md. Ch. 320; Gifford v. Thompson, 115 Mass. 478; Richardson v. Richardson, 73 Me. 570; S. C. 43 Am. Rep. 352; Wright v. Tuckett, 1 Johns. & H. 266, and cases cited supra; Beach on Wills, § 211, and cases there cited.

3 Vinton's Appeal, 99 Pa. St. 434; S. C. 3 Am. Prob. Rep. 231; Biddle's Appeal, 99 Pa. St. 278; S. C. 3 Am. Prob. Rep. 443; Roberts' Appeal, 92 Pa. St. 407; Thompson's Appeal, 89 Pa. St. 36; Moss's Appeal, 83 Pa. St. 264; Wiltbank's Appeal, 64 Pa. St. 256; Earp's Appeal, 23 Pa. St. 308; In re Thompson's Estate, 11 Week. N. (Pa.) 482; Ashurst v. Field, 26 N. J. Eq, 1; Van Doren v. Olden, 19 N. J. Eq. 176; 97 Am. Dec. 650; Lord v. Brooks, 52 N. H. 72; Wheeler v. Perry, 18 N. H. 307; Richardson v. Richardson, 75 Me. 575; S. C. 46 Am. Rep. 428; Cook on Stock & Stockh. § 554; Beach on Wills, § 211; 19 Am. Law Rev. 737; 20 Am. Law Rev. 746. See also Hite v. Hite, (Ky. 1837) 2 R'y & Corp. Law J. 568 (not elsewhere reported). In this case STERLING B. TONEY, J., of the Louisville Law and Equity Court, reviews the authorities in favor of the American Pennsylvania rule, it is sometimes called, in a full and learned opinion, and by this decision places Kentucky in line with the States following the sounder and more general American rule.

4 Gilkey v. Paine (1888), 80 Me. 319, referring to_Richardson v. Richardson, 75 Me. 570; 46 Am. Rep. 428; and to 19 Am. Law Rev. 737; 20 Am. Law Rev. 746.

5 Minot v. Paine, 99 Mass. 101; Hemenway v. Hemenway, 131 Mass. 446; S. C. 3 Am. Prob. Rep. 429, 436, note; New England Trust Co. v Eaton, 140 Mass. 532; 54 Am. Rep. 493; Leland v. Hayden, 102 Mass. 542; Duland v. Williams, 101 Mass. 571; Heard v. Eldridge, 109 Mass. 258; 12 Am. Rep. 697; Rand v. Hubbell, 115 Mass. 461; Beach on Wills, § 211, and cases there cited.

6 Petition of Brown, 14 R. I. 371; Busbee v. Freeman, 11 R. I. 149; Parker v. Mason, 8 R. I. 427.

7 Gibbons v. Mahon, 4 Mackey, 120; 54 Am Rep. 262.

8 Ga. Code, § 2256; Miller v. Guerrard, 67 Ga. 284.

9 102 Mass. 542.

10 Gilkey v. Paine (1888), 80 Me. 319. See Richardson v. Richardson, 75 Me. 570; 46 Am. Rep. 428, where the cases are reviewed. See also articles on this subject in 19 Am. Law Rev. 737; 20 Am. Law Rev. 746.

11 In re Hopkins's Trust, Law R. 18 Eq. 696; In re Barton's Trust, Law R. 5 Eq. 233; Price v. Anderson, 15 Sim. 473; Barclay v. Wainwright, 14 Ves. 66; Paris v. Paris, 10 Ves. 185, per Chancellor ELDON; Witt v. Steer, 13 Ves. 363; Norris v. Harrison, 2 Madd. 268; Beach on Wills, § 211, and cases there cited. But see Sproule v. Bouche, 29 Ch. Div. 69, reversed in the House of Lords, 2 R'y & Corp. Law J. 09.

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§ 305. To whom dividends are payable.-In case of doubt with respect to the person entitled to receive a dividend, it is well settled that the company may safely pay the dividend to the person in whose name the stock is registered upon the corporate stock book;1 without making inquiry as to whether the registered shareholder has transferred his stock; and without requiring him to present his certificate of stock as evidence that he has not transferred his interest therein. But if a shareholder has sold his stock and caused it to be transferred upon the books of the company to the name of his vendee, without surrendering the certificates, the company will not be protected in paying dividends to the registered transferree as against the holder of the outstanding certificates; for it has been guilty of negligence in permitting the transfer without the surrender of the certificates, or has violated its obligations as a trustee for the protection of stockholders against unauthorized transfers.1 A stock-owner to whom no certificate has been issued is not thereby debarred from claiming his dividends.5 It has been said that after the company has been notified of a transfer of stock, although registration thereof has not been made upon the corporate records, the dividend may be paid to the transferree. As between the person holding the stock at the time that a dividend is declared and the owner at the time it is made payable, the former is entitled to receive the dividend. Upon the death of a shareholder, the company should pay dividends to his administrator until notified that he has transferred the stock; and before the heir is entitled to receive the payments, the shares must be trans

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ferred into his name upon the corporate records.9 The law of the domicile of the corporation determines whether a dividend upon stock owned by a married woman is payable to her or to her husband.10 To obviate the difficulties arising from the transfer of shares, it is customary to close the transfer books of the company a few days before the payment of a dividend; and while there has been, perhaps, no positive judicial declaration as to the legality of this practice, the plain tendency of the courts is to regard it as a lawful and regular exercise of control over the corporate affairs on the part of the management, even in the absence of charter provisions authorizing it."

1 Brisbane v. Delaware etc. R. R. Co. 94 N. Y. 204; S. C. 25 Hun, 438; Jones v. Terre Haute etc. R. R. Co. 29 Barb. 353.

2 Brisbane v. Delaware etc. R. R. Co. 94 N. Y. 204; S. C. 25 Hun, 438; Cleveland etc. R. R. Co. v. Robbins, 35 Ohio St. 483.

3 Brisbane v. Delaware etc. R. R. Co. 94 N. Y. 204; S. C. 25 Hun, 483; Cleveland etc. R. R. Co. v. Robbins, 35 Ohio St. 483; Cook on Stock & Stockh. § 542.

4 Bank v. Lanier, 11 Wall. 369; Lowry v. Commercial etc. Bank, Taney, 310; Brisbane v. Delaware etc. R. R. Co. 25 Hun, 438; Magwood v. Railroad Bank, 5 S. C. 379; Brewster v. Sime, 42 Cal. 139.

5 Ellis v. Proprietors of Essex Merrimack Bridge, 2 Pick. 243.

6 Hill v. Newichawanick Co. 48 How. Pr. 427; Smith v. American Coal Co. 7 Lans. 317; Bell v. Lafferty, 1 Pa. Sup. Ct. 454.

7 Hill v. Newichawanick Co. 71 N. Y. 593, S. C. 8 Hun, 459; S. C. 48 How Pr. 427; Spear v. Hart, 26 N. Y. 420; Bright v. Lord, 51 Ind. 272; De Gendre v. Kent, Law R. 4 Eq. 283; Wright v. Tuckett, 1 Johns. & H. 266. Cf. Brundage v. Brundage, 60 N. Y, 544; S. C. 65 Barb. 397 Cf. Hopper v. Sage, 47 N. Y. Super. Ct. 77; City of Ohio v. Cleveland etc. R. R. Co. 6 Ohio St. 489. Contra, Burroughs v. North Carolina etc. R. R. Co. 67 N. C. 376; 12 Am. Rep. 611.

8 Brisbane v. Delaware etc. R. R. Co. 94 N. Y. 204.

9 State v. New Orleans etc. R. R. Co. 30 La. An. 308.

10 Graham v. First National Bank, 84 N. Y. 393; 38 Am. Rep. 528; S. C. 20 Hun, 325. Cf. Dow v. Gould etc. Co. 31 Cal. 629.

11 Cook on Stock & Stockh. § 542; Jones v. Terre Haute etc. R. R. Co. 57 N. Y. 205.

§ 306. The discretion of the directors with respect to declaring dividends.—It is usually with

the directors of a company to determine upon the expediency of declaring an ordinary dividend. It is in the discretion of the directors either to declare a dividend or to retain the profits in the treasury as a fund to meet probable or possible liabilities upon disputed claims, or for the payment of probable future indebtedness, although it be not yet contracted. Although the articles of association may provide that dividends shall be declared semiannually, it is nevertheless within the discretion of the directors not to do so.3 The discretion of the directors as to declaring dividends is not to be restricted by the contracts of the promoters of the company with respect to the disposition of corporate profits. Their judgment of what part of the net profits should be distributed is not in general to be questioned by the shareholders.5 The directors, with the concurrence of a majority of the shareholders, may invest the net profits of the enterprise in its extension and development, when the working capital at their disposal is inadequate to the demands of the business; and dissenting shareholders cannot under such circumstances invoke the aid of a court of equity to require a diviIdend to be declared. The courts will interfere with the discretion of the directors with respect to declaring dividends only in rare and exceptional cases, where they are acting in bad faith or from a willful abuse of their discretion.' And a very strong case must be made out by the stockholders, before a court will interfere with the discretion of the directors in this respect, and order a dividend to be declared. But a court of equity will interfere in cases where the directors have applied funds which

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should have been distributed as dividends to purposes not warranted by the object of incorporation nor authorized by the charter of the company.9 And wherever there is a clear abuse of power on the part of the directors amounting to a breach of trust, the court will order a dividend to be declared.10

1 Carpenter v. New York etc. R. R. Co. 5 Abb. Pr. 277; Cook on Stock & Stockh. § 541.

2 Karnes v. Rochester etc. R. R. Co. 4 Abb. Pr. N. S. 107.

3 Ely v. Sprague, Clarke Ch. 151, where it was held that in such a case a stockholder cannot maintain a bill to restrain the collection or sale of the securities he had given for his shares.

4 Coyote Gold etc. Co. v. Ruble, 8 Or. 284; Cook on Stock & Stockh. § 541. Cf. Richardson v. Railroad Co. 44 Vt. 613.

5 State v. Baltimore etc. R. R. Co. 6 Gill. 363; Karnes v. Rochester etc. R. R. Co., 4 Abb. Pr. N. S. 107. Cf. Brown v. Buffalo etc. R. R. Co. 27 Hun, 342.

6 Pratt v. Pratt, 33 Conn. 446. Cf. Park v. Grant Locomotive Works, 40 N. J. Ea. 114.

7 Chase v. Vanderbilt, 62 N. Y. 307; Thompson v. Erie R. R. Co. 45 N. Y. 468; Scott v. Eagle Fire Ins. Co. 7 Paige Ch. 198; Karnes v. Rochester etc. R. R. Co. 4 Abb. Pr. 417; Ely v. Sprague, Clarke Ch. 351; Howell v. Chicago etc. R. R. Co. 51 Barb. 378; Smith v. Prattville Manuf. Co. 29 Ala. 503; State v. Bank of Louisiana, 6 La. 745; Williston v. Michigan Southern etc. R. R. Co. 13 Allen, 400; Beers v. Bridgeport Spring Co. 42 Conn. 117; Pratt v. Pratt, 33 Conn. 446; Harris v. San Francisco etc. Co. 41 Cal. 393; Barnard v. Vermont etc. R. R. Co. 7 Allen, 512; Chaffee v. Rutland R. R. Co. 55 Vt. 110; Park v. Grant Locomotive Works, 40 N. J. Eq, 114; Browne v. Monmouthshire R'y etc. Co. 4 Eng. Law & Eq. 118; S. C. 13 Beav. 32; Stevens v. South Devon R'y Co. 9 Hare, 313.

8 State v. Bank of Louisiana, 6 La. 745; Lambert v. Neuchatel Asphalt Co. 51 Law J. Ch. 882. Cf. Park v. Grant Locomotive Works, 40 N. J. Eq. 114; Dent v. London Tramways Co. 50 Law J. Ch. 190; S. C. 16 Ch. Div. 344; S C. 1 Am. & Eng. R. R. Cas. 592; Davison v. Gillies, 16 Ch. Div. 192.

9 Park v. Grant Locomotive Works, 40 N. J. Eq. 114; March v. Eastern R. R. Co. 43 N. H. 515; 77 Am. Dec. 732.

10 Brown v. Buffalo etc. R. R. Co. 27 Hun, 342; Beers v. Bridgeport Spring Co. 42 Conn. 17; Park v. Grant Locomotive Works, 40 N. J. Eq. 114; Browne v. Monmouthshire R'y etc. Co. 4 Eng. Law & Eq. 118; S. C. 13 Beav. 32; Stevens v. South Devon R'y Co. 9 Hare, 313.

307. English statutory restrictions upon the power to declare dividends.-In England, previously to every ordinary meeting at which a dividend is intended to be declared, the directors shall cause a

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