So the contract may give the vendee a right to dividends previously declared,68 or may give the vendor a right to subsequent dividends,69 or may provide that one party or the other is to have all dividends declared up to a certain time.70 The usages and rules of stock exchanges in this regard may also enter into and form a part of contracts of sale made through the agency of their members.71 Some courts have held that one who sells stock reserving the divi ing the latter dividend apparently relate to a time prior to the sale of the said stock, under a claim that the sale of said stock had been "ex-dividend." 68 Under a contract for the sale of stock "including all dividends due or to become due thereon," the vendee is entitled to a stock dividend previously declared. Rose v. Barclay, 191 Pa. St. 594, 45 L. R. A. 392, 43 Atl. 385. 69 Under a contract by which a party agreed to buy stock within a certain time if the owner should desire to sell, and which reserved to him all dividends declared during the time or the option, it was held that he was not entitled to a dividend declared before, though it was payable during, the time of the option. Hopper v. Sage, 112 N. Y. 530, 8 Am. St. Rep. 771, 20 N. E. 350, aff'g 47 N. Y. Super. Ct. 77. But see Harris v. Stevens, 7 N. H. 454. See also Hancock v. Clark, 68 Vt. 302, 35 Atl. 317, where the vendor of stock reserved the right to dividends thereon until payment therefor. 70 An agreement by which the seller of shares is to receive all dividends up to a certain time does not entitle him to a dividend, declared after that time, of profits earned during the time within which he was entitled to dividends, because a shareholder has no right to the profits of the corporation until a division is made or a dividend is declared. Hyatt v. Allen, 56 N. Y. 553, 15 Am. Rep. 449. Where stock was assigned with a transfer of "all dividends made after the morning of the 23rd of September," both parties at the time expecting that a dividend would be made on the 22nd of the month, but in fact it was not made until after the morning of the 23rd, it was held that the dividend did not pass to the assignee. Brewster v. Lathrop, 15 Cal. 21. 71 Hill V. Newichawanick Co., 8 Hun (N. Y.) 459, aff'd 71 N. Y. 593. In this case it is said: "It is understood that sales of stock made at the board of brokers in this city at any time before the day fixed for the closing of the books of transfer of the corporation or company declaring a dividend payable at a future day, carry with them the dividend so declared, and the price paid is regulated accordingly. After the books are closed, the sales are understood to be ex-dividend, and the price is correspondingly affected, by the fact that the seller retains and is to collect the dividend." But a usage of the stock exchange cannot be shown where the contract was made at the office of one of the parties, by a broker who, as to it, was not acting as a member of the exchange, and was not shown to be a member, and where such usage would have been inconsistent with the rules of law and would have contradicted the plain terms and legal effect of the contract. Hopper v. Sage, 112 N. Y. 530, 8 Am. St. Rep. 771, N. E. 350. 20 dends that may be declared by a certain date is not entitled to stock dividends, but only to cash dividends, so declared.72 § 3704. Rights as between pledgor and pledgee. In the absence of agreement to the contrary, a pledge of shares of stock as collateral security carries with it, as an incident of the pledgee's special ownership, the right to receive dividends afterwards declared, to be applied on the debt, or held in trust for the pledgor; 75 and if the pledgor col 72 Where two persons exchanged stock owned by them in different corporations, each reserving dividends declared for a certain month, and one of the corporations declared both a stock and a cash dividend in that month, it was held that the cash dividend belonged to the original owner of the stock, but that the stock dividend belonged to the new owner. Kaufman v. Charlottesville Woolen Mills Co., 93 Va. 673, 25 S. E. 1003. Where a contract for the sale of stock, made after the corporation had declared regular and extra cash dividends and a stock dividend, all payable in January, reserved "the January dividend" to the seller, it was held that this referred only to dividends payable in money, and hence that the seller was entitled to the regular and extra cash dividends, but that the stock dividend belonged to the purchaser, it appearing that neither party knew that it had been declared. Lancaster Trust Co. v. Mason, 152 N. C. 660, 136 Am. St. Rep. 851, 68 S. E. 235, modifying 151 N. C. 264, 65 S. E. 1015. 73 United States. Equitable Trust Co. v. National Bank of Commerce, 211 Fed. 688. California. McAuley v. Moody, 128 Cal. 202, 60 Pac. 778. See also Gilfallan v. Gilfallan, 168 Cal. 23, Ann. Cas. 1915 D 784, 141 Pac. 623. Georgia. Merchants & Mechanics Bank v. Boyd Co., 143 Ga. 755, 85 S. E. 914; Reid v. Caldwell, 120 Ga. 718, 48 S. E. 191; Armour & Co. v. East Rome Town Co., 98 Ga. 458, 25 S. E. 504; Guarantee Co. of North America v. East Rome Town Co., 96 Ga. 511, 51 Am. St. Rep. 150, 23 S. E. 503. Illinois. Fairbank v. Merchants' Nat. Bank of Chicago, 132 Ill. 120, 22 N. E. 524, rev'g on other grounds 30 Ill. App. 28. Maryland. Gemmell v. Davis, 75 Md. 546, 32 Am. St. Rep. 412, 23 Atl. 1032. Massachusetts. See Farquhar v. Canada-Atlantic. & Plant S. S. Co., 212 Mass. 278, 98 N. E. 1036. Missouri. Gaty v. Holliday, 8 Mo. App. 118. Nebraska. Farmers' & Merchants' Nat. Bank v. Mosher, 63 Neb. 130, 88 N. W. 552; Central Nebraska Nat. Bank v. Wilder, 32 Neb. 454, 49 N. W. 369. New Hampshire. Fourth Nat. Bank v. Manchester Real Estate & Manufacturing Co., 77 N. H 481, 93 Atl. 661. New York. Booth v. Consolidated Fruit Jar Co., 62 Misc. 252, 114 N. Y. Supp. 1000. Oregon. Steel v. Island Milling Co., 47 Ore. 298, 83 Pac. 783. Pennsylvania. Boyd v. Conshocken Worsted Mills, 149 Pa. St. 363, 24 Atl. 287. South Carolina. Maxwell v. National Bank of Greenville, 70 S. C. 532, 3 Ann. Cas. 723, 50 S. E. 195. Texas. Fulton v. National Bank of Denison, 26 Tex. Civ. App. 115, 62 S. W. 84. Utah. George R. Barse Live Stock Co. v. Range Valley Cattle Co., 16 Utah 59, 50 Pac. 630. lects them, he will be required to account therefor to the pledgee.7 But while it has been said that it is the duty as well as the right of the pledgee to collect them,75 it has been held that his failure to do so will not cast upon him the duty of crediting the uncollected dividends on the debt.76 Where the stock pledged is assigned by the pledgee, the assignee of the pledge cannot be held liable to the owner of the stock for dividends paid to the pledgee after the assignment.77 If the transfer has been registered on the books of the company, or although not so registered, if the corporation has notice thereof, it will be liable to the pledgee if it pays such dividends to the pledgor." As between the parties the failure to register the transfer on the books of the corporation does not affect the right of the pledgee to dividends.79 78 Failure of a pledgee to demand a dividend before it is paid is not a waiver of his admitted right to a subsequent dividend which he does demand before payment.80 Even after the debt, has been satisfied the pledgee may recover from the corporation dividends accruing before that time, provided they have not already been paid to the pledgor.81 But payment to "The general rule that the increase of the property is pledged with it, applies to dividends accruing on stock while it is held in pledge and gives them to the pledgee." Meredith Village Sav. Bank v. Marshall, 68 N. H. 417, 44 Atl. 526. "The pledge of the stock was a pledge of the dividends accruing on it during the continuance of the pledge, and gave the pledgee the legal title to both alike." Hunt v. Laconia & L. St. Ry. Co., 68 N. H. 561, 39 Atl. 437. When the dividends amount to a sufficient sum to pay the debt, the pledgor is entitled to the stock. Reid v. Caldwell, 120 Ga. 718, 48 S. E. 191. 74 Equitable Trust Co. v. National Bank of Commerce, 211 Fed. 688; Fairbank v. Merchants' Nat. Bank of Chicago, 132 Ill. 120, 22 N. E. 524, rev'g on other grounds 30 Ill. App. 28. He receives them to the pledgor's use, and may maintain an action against him for them. Gaty v. Holliday, 8 Mo. App. 118. "When the pledgor receives them he holds them as the trustee of the pledgee, and is answerable for them to the pledgee in a suit for their recovery." Meredith Village Sav. Bank v. Marshall, 68 N. H. 417, 44 Atl. 526. 75 Armour & Co. v. East Rome Town Co., 98 Ga. 458, 25 S. E. 504; Guarantee Co. of North America v. East Rome Town Co., 96 Ga. 511, 51 Am. St. Rep. 150, 23 S. E. 503; Gaty v. Holliday, 8 Mo. App. 118. 76 The dividend is still the property of the pledgor. McAulay v. Moody, 128 Cal. 202, 60 Pac. 778. 77 Maxwell v. National Bank of Greenville, 70 S. C. 532, 3 Ann. Cas. 723, 50 S. E. 195. 78 As to effect of omission to register transfers, see § 3794 et seq., infra. 79 See § 3815, infra. 80 Fourth Nat. Bank v. Manchester Real Estate & Manufacturing Co., 77 N. H. 481, 93 Atl. 661. 81 As to such dividends the pledgee the pledgor is a good defense to an action brought by the pledgee for that purpose.82 The right of the pledgee to receive dividends extends only to those declared after the making of the pledge, and not to dividends previously declared.83 And it follows that, where a renewal of a note and a pledge of stock given to secure it amounts to a payment of the old note and a release of the pledge securing it, the pledgee is not entitled to dividends declared before such renewal.84 But a part payment of the debt and the giving of a new note for the balance will not have that effect where the effect of the transaction is not to create a new and distinct pledge, but the intent of the parties is rather to continue the original pledge in force.85 Of course "the parties to the pledge may agree that the dividends may be drawn by the pledgor and held as his property.' 86 An assignment of future dividends does not give the assignee a priority of right thereto over a previous pledgee of the stock, after the latter has demanded payment from the corporation.87 But where the assignment is based upon a valuable consideration and the assignee has neither actual nor constructive notice of the pledge, the consent of the pledgee that a dividend may be paid to the assignee may estop him to recover the same from the latter.88 is the trustee of the pledgor, and it is his right and duty to collect them, and if they are not paid to the pledgor he may demand of the pledgee an accounting for them. Guarantee Co. of North America v. East Rome Town Co., 96 Ga. 511, 51 Am. St. Rep. 150, 23 S. E. 503, followed in Armour & Co. v. East Rome Town Co., 98 Ga. 458, 25 S. E. 504. 82 Guarantee Co. of North America v. East Rome Town Co., 96 Ga. 511, 51 Am. St. Rep. 150, 23 S. E. 503, followed in Armour & Co. v. East Rome Town Co., 98 Ga. 458, 25 S. E. 504. 83 Fairbank V. Merchants' Nat. Bank of Chicago, 132 Ill. 120, 22 N. E. 524, rev'g 30 Ill. App. 28. See generally § 3700, supra. 84 Fairbank V. Merchants' Nat. Bank of Chicago, 132 Ill. 120, 22 N. E. 524, rev 'g 30 Ill. App. 28. 85 Boyd v. Conshocken Worsted Mills, 149 Pa. St. 363, 24 Atl. 287. 86 Fourth Nat. Bank v. Manchester Real Estate & Manufacturing Co., 77 N. H. 481, 93 Atl. 661. By express agreement the pledge may not include a pledge of the dividends. Gaty v. Holliday, 8 Mo. App. 118. Of course, where, by a special contract the pledgor reserves the right to collect the dividends himself, the rule that the dividends belong to the pledgee does not apply. Guarantee Co. of North America v. East Rome Town Co., 96 Ga. 511, 51 Am. St. Rep. 150, 23 S. E. 503. 87 Fourth Nat. Bank v. Manchester Real Estate & Manufacturing Co., 77 N. H. 481, 93 Atl. 661. 88 Where the president of the corporation pledges his stock and then assigns future dividends thereon to the treasurer of the corporation, and the pledgee consents to the payment of a dividend to the treasurer, the § 3705. Rights of legatees and distributees. Since dividends belong to the person who owns the stock at the time when they are declared,89 and since "a legatee of shares takes the stock as it was at the time of the testator's death," 90 a specific legatee of shares of stock is entitled to all dividends declared after the testator's death, although out of profits earned before, but he is not entitled, unless by express provision in the will, to dividends declared before the testator's death, although not payable until afterwards. Such dividends form part of the corpus of the estate, and go to the executor.91 It has, however, been held that so much of an extraordinary dividend as represents surplus accumulated before the testator's death goes to the residuary legatee rather than to a specific legatee of the stock.92 On the other hand it has been held that where the stock is doubled after the death of the testator and the new stock allotted to the stockholders on payment of a specified sum per share, a special legatee is entitled, as against the residuary legatee, to so much of the value of the new stock as grew out of the accumulated profit belonging to the old shares, and that where the new stock has been paid for by the administrator out of the funds of the estate, the specific legatee is entitled to have such stock transferred to him on repayment of that amount.93 pledgee is estopped to question his disposition of it, and cannot recover it from him. Fourth Nat. Bank v. Manchester Real Estate & Manufacturing Co., 77 N. H. 481, 93 Atl. 661. 89 See § 3700, supra. 90 McLaran V. Crescent Planing Mill Co., 117 Mo. App. 40, 93 S. W. 819; Missouri Bapt. Sanitarium v. McCune, 112 Mo. App. 332, 87 S. W. 93; In re Wilson's Estate, Ore. - 167 Pac. 580. 91 Connecticut. Phelps v. Farmers' & Mechanics' Bank, 26 Conn. 269. Missouri. McLaran V. Crescent Planing Mill Co., 117 Mo. App. 40, 93 S. W. 819; Missouri Bapt. Sanitarium v. McCune, 112 Mo. App. 332, 87 S. W. 93. New York. In re Kernochan, 104 N. Y. 618, 11 N. E. 149; In re Brandreth's Estate, 64 App. Div. 566, 72 N. Y. Supp. 333; In re Leavitt's Estate, 86 Misc. 609, 148 N. Y. Supp. 758; Brundage v. Brundage, 65 Barb. 397, 1 Thomps. & C. 82, aff'd 60 N. Y. 544. Oregon. In re Wilson's Estate, 167 Pac. 580. England. De Gendre v. Kent, L. R. 4 Eq. 283. "It is immaterial when the dividends accrued, whether before or after the death of the testator."' Missouri Bapt. Sanitarium V. McCune, 112 Mo. App. 332, 87 S. W. 93. Where the owner of stock dies before a scrip dividend is declared, the dividend goes to the legatee of the stock; but he is not entitled to a scrip dividend received by the testator. Brundage v. Brundage, 65 Barb. (N. Y.) 397, 1 Thomps. & C. 82, aff'd 60 N. Y. 544. 92 In re Leavitt's Estate, 86 N. Y. Misc. 609, 148 N. Y. Supp. 758. 93 Bushee v. Freeborn, 11 R. I. 149. |