Bavington v. Pitts. & S. R. Co., 34 Pa. St. 358; Cally v. Phila. & C. C. R. Co., 80 Pa. St. 363; McCarty v. Selinsgrove & N. B. R. R. Co., 87 Pa. St. 332; Boyd v. Peach Bottom R. R. Co., 1 Am. & Eng. R. R. Cas. 631; and see Taggart v. West Md. R. R. Co., 24 Md. 563.

It is quite clear that parol conditions entered into with the subscriber at the time of subscription, either with reference to the location of the road or organization of the company, are void. Not only is it contrary to the general rules of evidence to allow such parol stipulations to be made part and parcel of a written contract, but in addition it would be in the highest degree impolitic to give them such an effect in this particular instance. Persons dealing with the company must necessarily rely upon the contract of subscription as committed to writing, and would have no security if they were liable to be effected by parol stipulations of which they have no possible means of notice. Kennebec & B. R. Co. v. Waters, 34 Me. 369; White Mts. R. R. Co. v. Eastman, 34 N. H. 124; Conn. & P. R. R. Co. v. Bailey, 24 Vt. 465; Ridgefield & N. Y. R. R. Co. v. Brush, 43 Conn. 86; Tuckerman v. Brown, 33 N. Y. 297; Fox v. Allansville, etc., Turnpike Co., 46 Md. 31; Miller v. Hanover Junction R. R. Co., 87 Pa. St. 95; Melvin v. Lamar Ins. Co., 80 Ill. 446; Henry . Vermilion & A. R. R. Co., 17 Ohio, 157; Scarlett v. Academy of Music, 46 Md. 132; Cross v. Peach Bottom R. R. Co., 1 Am. & Eng. Cas. 336.

A subscriber to a railroad company is, of course, released from liability if the undertaking be not completed within the time specified by the charter, or if that portion of the subscription collected be refunded to some of the other subscribers. McCully . Pittsburgh, etc., R. R. Co., 32 Pa. St. 25. He will also be released if the road be not completed within the time distinctly required by the terms of subscription. M. K. & C. R. R. Co. v. Thompson, 1 Am. & Eng. R. R. Cas. 331.

DERICK L. BOARDMAN et al., Executors, etc., Respondents,

v.

THE LAKE SHORE AND MICHIGAN SOUTHERN RY. Co., Appellant. (84 New York Report, 157. March 1, 1881.)

Where preferred guaranteed stock is issued by a railroad company, the holders, although they are not entitled to dividends when no profits are earned, yet are first entitled to be paid the amount of dividends specified and guaranteed, including all arrears, before the holders of common stock are entitled to anything.

A shareholder in a corporation is not entitled to any of the property or profits until a division has been made or a dividend declared.

When a dividend is declared it belongs to the owners of the stock at the time, but until such declaration, the profits form part of the assets; and an assignment by a stockholder of his shares carries with it his proportionate share of the assets including all undeclared dividends.

While as a general rule the officers of a corporation are the sole judges as to the propriety of declaring dividends, and the courts will not interfere with a proper exercise of their discretion, where the right to a dividend is clear and fixed by contract, and requires the directors to take action before the right can be asserted by an action at law, a court of equity will interpose to compel such action, and when necessary, to restrain, by injunction, any action adverse to such right.

A foreign corporation sued in this State cannot avail itself of the statute of limitations; and this, although it has, for the time specified in the statute, before the commencement of the action, continuously operated a railroad in this State, and has property and officers therein.

In 1857 the M. S. & N. I. R. R. Co. issued certain preferred and guaranteed stock; the certificates therefor stated that the stock was entitled to annual dividends at the rate of ten per cent, payable semi-annually, at days specified, out of the net earnings of the company, and also to share pro rata with the other stock in any excess, and that the payment of the dividends was thereby guaranteed. Said company was consolidated with defendant, the latter assuming its obligations. No dividends were paid upon the said stock until 1863, and the arrears were not subsequently paid although dividends were declared and paid upon the common stock. In an action to compel the payment of the back dividends, for the purpose of showing authority for the issue of the stock, the book of minutes, containing certain resolutions of the board of directors of said M. S. & N. I. R. R. Co. authorizing the issue of the preferred guaranteed stock, was offered and received in evidence under the objection that the certificate was the contract and could not be varied by other evidence. Held, no error; that the whole proceeding relating to the issue of the stock could be taken in connection as constituting the one transaction.

The resolution of the directors declared that dividends on the stock authorized to be issued should always be paid out of any net earnings before any portion should be applied to pay dividends on the other stock. Held, that this was in effect the contract as expressed in the certificate; and that under it the dividends were not only preferred, but being guaranteed, were cumulative and a specific charge upon the accruing profits, and in case of a failure in any year to earn profits sufficient so pay the dividends specified, they were to be paid as arrears before any dividends were paid upon the common stock.

There was no proof of plaintiffs' title to the preferred stock except the certificate issued to plaintiffs' testator. Held, that in the absence of proof of the issue of other stock of this description the presumption was that plaintiffs' stock was a portion of that so authorized to be issued, and that plaintiffs were the lawful owners.

Plaintiffs' testator did not become owner of the stock until 1862. Held, that the transfer to him carried with it all right to the unpaid dividends. Hill v. The N. Co. (8 Hun, 459; affirmed, 71 N. Y. 593), distinguished. The complaint asked and the judgment directed a specific performance of the contract and restrained defendant from paying dividends upon that portion of its common stock which represented the common stock of the M. S. & N. I. R. R. Co. until the amount of the arrears was paid. Held, no error; that plaintiff was entitled to the equitable relief granted.

Coey v. B. & C. D. R. R. Co. (2 Irish R. [Ĉ. L. S.] 112), distinguished.

Also, held, that an action was maintainable against defendant alone as the representative of the corporation with which the contract was made.

Also, held, that, as the claim was originally against a foreign corporation, and as the articles of consolidation by which defendant assumed the obligation took effect within six years of the commencement of the action, the statute of limitations did not run against plaintiffs' claim; also that as it did not appear that any action on the part of defendant was induced by the delay in prosecuting said claim, plaintiff was not estopped by such delay. Kent . Q. M. Co. (78 N. Y. 184), Coles v. Bank of England (10 Ad. & El. 437), Pickard v. Sears (6 id. 474), Prendergast v. Turton (1 Younge & Coll. 98), Stafford v. Strofford (1 De Gex & J. 193), Nichols v. Gilson (3 Atk. 573), Currie v. Goold (2 Mad. Ch. 426), Matthews v. G. N. R. R. Co. (5 Jurist [N. S.], Part 1, 284, 290) distinguished.

Defendant was organized as a corporation under the statutes of several States to operate a continuous line of road running through those States which had previously been operated by the consolidated corporations. It was claimed that those statutes, so far as they authorized the "consolidation in adjoining States, were repugnant to the provision of the U. S. Constitution (art. 1, § 8, sub. 3), conferring on Congress the power to regulate commerce with foreign nations and among the several States. Held, untenable; that in the absence of any legislation by Congress upon the subject, the power so to legislate existed in the States.

Also, held, that plaintiff was entitled to recover interest.

The rule laid down by the English authorities where interest upon annuities was refused, held, not to apply.

(Argued November 12, 1880; decided March 1, 1881.)

APPEAL from judgment of the General Term of the Supreme Court, in the first judicial department, entered upon an order made June 4, 1879, affirming a judgment in favor of plaintiffs, entered upon a decision of the court on trial at Special Term.

This action was brought by George S. Boardman, plaintiffs' testator, in August, 1875, to compel defendant to pay dividends upon certain shares of preferred stock held by him and to restrain it from paying dividends upon certain portions of its common stock until the claim of plaintiff was paid and satisfied. The original plaintiff having died after trial and before the decision the present plaintiffs were substituted.

The facts found by the court are substantially as follows:

From and during the year 1857, until in or about the year 1869, the Michigan Southern and Northern Indiana R. R. Co. was a corporation created and existing under the laws of the respective States of Michigan, Ohio, Indiana and Illinois, and was the owner of and engaged in operating railroads lying in the said States. About the month of April, 1857, the said corporation having become indebted to a large amount, a plan was devised to raise funds by the issue of preferred stock. The plan was submitted for approval to the stockholders of the said corporation at their regular annual meeting in April, 1857, and thereupon the same was approved by a vote or resolution adopted unanimously. On or about the 5th day of May, 1857, the then board of directors of the said company duly voted to issue the said prc

ferred stock, and for that purpose unanimously adopted a resolution as follows:

"Resolved, That for the purpose of providing means for the payment of the unfunded debts of this company and for the completion of its unfinished works, there be and there is hereby created a guaranteed and preferred stock of this company, to be denominated construction stock,' to the amount of $3,000,000, which stock shall be entitled to dividends at the rate of ten per cent per annum, payable in cash semi-annually in New York, and in the payment of such dividends the said guaranteed stock shall have preference and priority over the remaining stock of the company, and dividends at the rate aforesaid shall always be paid upon said guaranteed stock out of any net earnings of the company before any portion of said net earnings shall be applied to the payment of dividends upon the remaining stock of the company; and in case the earnings of the road shall enable the company hereafter to pay dividends upon all of its stock at a rate exceeding ten per cent per annum, then such guaranteed stock shall be entitled to share pro rata with the other stock in such excess over ten per cent per annum. The first dividend on said stock will be payable the 1st day of December next, and thereafter on the 1st of June and 1st December in each year."

Notice was given to the public and to stockholders, and books of subscription were opened and the amount of stock offered was subscribed for and taken. The book of minutes containing those resolutions was received in evidence under objection and exception.

No dividend whatever was declared or paid by the company upon the said guaranteed or construction stock from the date of the issue thereof until on or about the 1st day of July, 1863, at or about which time the then directors of the said corporation declared and announced a dividend of five per cent on so much of said stock as was then outstanding, payable on the 1st day of August, 1863, for the six months prior to that date.

After that date, and down to the time of the consolidation hereinafter mentioned, the said company regularly earned, declared and paid the said percentage or dividend of five per cent for each successive period of six months upon said stock.

The company realized and accumulated surplus earnings over and above the dividends so paid, and its board of directors declared and announced a dividend of three and one-half per cent upon its common stock, payable August 1, 1864, which was paid, and also declared and paid a second dividend of like amount, payable March 1, 1865; said two dividends amounting to a sum sufficient, if applied for that purpose, to cancel and pay off the whole arrears of dividends upon the guaranteed or construction stock which was outstanding at the time of the commencement of this action. After the said 1st day of March, 1865,

other dividends were declared and paid by the said company upon the common stock.

On November 26, 1862, twenty-three shares of said preferred stock were assigned to plaintiff's testator, and a certificate of the said shares was contemporaneously with such sale delivered to him; such certificate being in the form adopted by the said board of directors, and which was printed in blank to be filled up in writing. The form of the certificate is as follows:

66

'Michigan Southern and Northern Indiana Railroad Company. "Guaranteed ten per cent stock.

"This is to certify that.....

to......

.entitled

shares of $100 each in the capital stock of the Michigan Southern and Northern Indiana R. R. Co., denominated construction stock; said stock is entitled to dividends at the rate of ten per cent per annum, payable semi-annually in New York on the 1st days of June and December in each year, out of the net earnings of the said company; and is also entitled to share pro rata with the other stock of the company in any excess of earnings over ten per cent per annum, and the payment of dividends as aforesaid is hereby guaranteed. The said stock is transferable only on the books of the said company at their office in the city of New York by the said stockholder in person, or by....

attorney, on the surrender of this certificate.

"In witness whereof the said company have caused the same to be registered, and this certificate to be signed by their president and treasurer and countersigned by their secretary."

In or about the year 1869, pursuant to the provisions of certain acts of the legislatures of the States of Pennsylvania, Ohio, Michigan, Indiana and Illinois, the Michigan Southern and Northern Indiana R. R. Co., was merged and consolidated with the Lake Shore Ry. Co., which owned and operated a railroad extending from the city of Erie, in the said State of Pennsylvania, to the city of Toledo, in the said State of Ohio, and the consolidated company so formed took and assumed the name of the Lake Shore and Michigan Southern Ry. Co. Afterward, and pursuant to the provisions of the act of the legislature of the State of New York, entitled "An act authorizing the consolidation of certain railroad companies," passed May 20, 1869, and also pursuant to the provisions of certain laws of the said States of Pennsylvania, Ohio, Michigan, Indiana and Illinois, the Buffalo and Erie R. R. Co., a corporation created and existing under and by virtue of the laws of the States of New York and Pennsylvania, and which owned and operated a railroad extending from Buffalo to the eastern terminus of the line of railway of the Lake Shore and Michigan Southern Ry. Co. was merged and consolidated with the Lake Shore