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"Neither is the clause in the deed providing | 4. CORPORATIONS that John Chappel 'is not to sell or convey the AS DEBT. above land to any one except the heirs of Reu- Where the directors of a corporation declare ben Chappel' * * * binding upon him. It is a dividend, or where the company has earned entirely inconsistent with the deed, and an un-profits, and yet the directors wrongfully refuse reasonable limitation upon the right of disposition vested in him by the deed subject to the estate retained by the grantors."
WITH REFERENCE TO LAW. The charter of a corporation and the recitals of a certificate of preferred stock must be construed in connection with the statutory law upon the point to determine whether the holder was a creditor of the corporation or a stockholder.
[Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 624-632; Dec. Dig. 170.] 2. CORPORATIONS 178 STOCKHOLDERS RELATIVE RIGHTS OF COMMON AND PREFERRED STOCKHOLDERS.
Except as to preference in the payment of
dividends and distribution of the assets, as when provided by a certificate of preferred stock and the corporation's charter, and authorized by statute, the holders of common and preferred stock have the same rights and are subject to the same liabilities.
[Ed. Note. For other cases, see Corporations, Cent. Dig. §§ 658-662; Dec. Dig. 178.] 3. CORPORATIONS 170-STOCK-PREFERRED STOCK-HOLDER AS CREDITOR.
Where a corporation was organized, the charter and preferred certificates providing that the preferred stock should constitute a prior and preferred lien on the plant and stock and all property of the corporation, and should be entitled, at the end of each fiscal year, to a dividend of 7 per cent., and no more, and that at the end of the third fiscal year 10 per cent. of the preferred stock should be redeemed and retired, and 10 per cent. thereafter at the end of each year until the entire amount should have been redeemed and retired, a holder of a certificate of such preferred stock did not become, by virtue of his ownership, a creditor of the corporation, entitled to enforce payment to him at all events, since, unless the holder of the certificate were a stockholder, and not a creditor, the provision for 7 per cent. dividends would be usurious, and his contract with the corporation void, while it is only in cases where the corporation is solvent and the rights of creditors will not be injuriously affected that agreements as to preferences among stockholders, as between the holders of common and preferred stock, can be enforced, since the entire capital of a corporation, without regard to arrangement between common and preferred stockholders, is at all times subject to and liable for the debts of the corporation, and no part of the capital can be withdrawn from the business until discharge of the debts.
[Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 624-632; Dec. Dig. 170.]
to declare a dividend, a preferred stockholder occupies the position of a corporate creditor to the extent of the accumulated profits due him. [Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 581-583, 593-603; Dec. Dig. 156.]
5. CORPORATIONS 95 CONSTRUCTION OF PARTIES "INTEREST"-"DIVIDEND."
Where a certificate of preferred stock in a corporation provided that it bore interest at the rate of 7 per cent. per annum, payable annually "interest" did not require that the certificate be in the way of dividends, such use of the word construed as a certificate of indebtedness, rather than a certificate of stock, since a further provision of the certificate, that "the said annual dividends shall be paid before any dividends shall be declared or paid on the common stock," showed that the words "interest" and "dividends" were used interchangeably.
[Ed. Note.-For other cases, see Corporations, Cent. Dig. § 436; Dec. Dig. 95.
For other definitions, see Words and Phrases, First and Second Series, Dividend; Interest.] 6. CORPORATIONS 152
CRETION OF DIRECTORS.
DIVIDENDS - DIS
NUNN, J. The question here is whether ownership of a certificate of preferred stock made appellant a corporate creditor or stock
The Southern Foundry Company is a Kentucky corporation organized March 9, 1901. By provision of its charter its capital stock is fixed at $40,000, consisting of 800 shares of $50 each. These shares are divided into two classes, viz., common and preferred. The corporation was authorized to issue $25,000 of its capital as common stock, and $15,000 of it as preferred. We quote clause 6 of the charter:
"(6) The preferred stock shall constitute a prior and preferred lien on the plant and stock and all property of the corporation. And it shall be entitled at the end of each fiscal year to a dividend of 7 per cent., and no more. At the end of the third fiscal year 10 per cent. of said preferred stock shall be redeemed and retired, and at the end of each fiscal year thereafter 10 per cent. of said preferred stock shall be redeemed and retired until the entire amount shall have been redeemed and retired. However, it is provided that at the end of second fiscal year the board of directors of said corporation shall have the option of redeeming and retiring all or any part of said preferred stock, provided that said part shall be equal to 10 per cent. of said stock."
The charter fixes $20,000 as the maximum | whereupon he will amend and make the holdindebtedness of the corporation, and exempts ers parties in order that they may set up the private property of the stockholders from the payment of corporate indebtedness otherwise than as provided by section 547 of the statute as it then existed; that is, no more than double liability.
Appellant was not one of the original incorporators. His interest in the corporation began five years later, the 1st of June 1906, when the corporation issued to him a certificate for "40 shares of $50 each of preferred capital stock of the Southern Foundry Company, fully paid and nonassessable." The following provision is contained in the certificate:
"The stock is preferred stock and constitutes a prior and preferred lien on the plant and stock and all the property of the corporation, and bears interest at the rate of 7 per cent. per annum payable annually in the way of dividends, and the holder shall be entitled to receive said interest in the way of annual dividends, on the 9th day of March in each year, and the payment of said annual interest or dividend and the payment of the par value of said stock (when same shall be payable) shall have preference over the common stock issued by said corporation, as provided in the articles of incorporation of the company. The said annual dividends shall be paid before any dividends shall be declared or paid on the common stock of said company. And at the end of the third year after organization 10 per cent. of said preferred stock shall be redeemed and retired, and each year thereafter 10 per cent. of said stock shall be redeemed and retired. After two years from the date of its organization said corporation shall have the right and option to redeem and retire any part or all of said preferred stock, provided said part shall be equal to 10 per cent. of said stock. This stock shall not be entitled to participate in the profits or earnings of the said company, or to receive any dividend on said stock in excess of the annual 7 per cent. dividend as aforesaid."
Appellant brought this suit in equity on the certificate referred to, claiming that thereby the corporation promised and agreed to pay to him the sum of $2,000, with 7 per cent. interest thereon annually from its date until paid, and also "promised to pay him one-tenth of said principal sum at the end of the third year after the organization of said corporation, and one-tenth at the end of each year thereafter until all of said principal sum was paid." This allegation was made in the face of the fact that the certificate was not issued to him until five years after the corporation was organized. Except the interest up to March 9, 1908, he alleged that no part of the principal or interest was ever paid. He alleged further that by the certificate the corporation gave to him a prior lien on the plant and all its other property. After describing the corporate property, he alleged that on January 15, 1909, the corporation executed a mortgage thereon to H. B. Eagles, as trustee, to secure a bonded indebtedness aggregating $50,000. Averring that he does not know to what extent the bonds have been negotiated or sold, if at all, nor to whom, he asks that the corporation be requir
their claims. He prays judgment against the corporation for $2,000, and accrued interest at 7 per cent., and that he be adjudged a prior lien on all the corporate property, and that the lien be enforced. The court sustained demurrer to this petition, and, appellant refusing to plead further, it was dismissed. The appeal is prosecuted from that judgment.
Waiving the question as to whether his debt, if such it may be called, was due at the time the action was instituted, we take up the real question in the case, and the one passed upon below, and that is whether the appellant, by virtue of the certificate, became a stockholder or a creditor of the corporation. His petition is framed upon the idea that he was not a stockholder, and that the writing upon which the action was founded, although styled a "stock certificate," was, in fact, a certificate of indebtedness to him on the part of the corporation. The question is one of interpretation, and in this case depends upon the certificate, charter, and statutes of the state. Section 564, Ky. St., authorizes a corporation to classify its capital stock into common and preferred shares, and it may give to each of the several classes such priority of right in the payment of the dividends and in redemption of the shares as may be prescribed in the rules and regulations adopted by the shareholders; and on the voluntary or other dissolution of the company the holders of preferred stock are entitled to have their shares redeemed at par tled to have their shares redeemed at par before any distribution of the assets is made among the holders of common stock. This section was not intended to, and must not be construed to, give a stockholder of either class a preference over creditors as to the corporate assets. The charter itself recognized the holders of preferred shares as stockholders in the corporation, for such shares are included within the total capitalization of the company. To construe the charter otherwise would mean to limit the authorized indebtedness of the corporation to $5,000; for, if the $15,000 preferred stock be held to be corporate indebtedness, it would practically nullify the provision for $20,000 indebtedness elsewhere authorized by the charter. Such an interpretation of the charter would be unreasonable and one which would not be given by any person considering an extension of credit to the company. The authorized $20,000 indebtedness was certainly not intended to embrace any of the capitalization.
 Priority as to dividends, liens, and redemptions relate to stockholders, and they are rights which the preferred stockholder has over the common. The charter and certificate must be construed in connection with the statute, and in this state there is
are past due. He might be treated as a corporate creditor to that extent, if it had appeared that the directors had declared a dividend or that profits had been earned and the directors had wrongfully refused to declare a dividend.
ferrred stock a lien upon the property of the | tion. As we have already noted, the petition company to the prejudice of creditors. By shows that some of the dividend payments the charter the preferred stock is a part of the $40,000 capitalization, and by the certificate in question it is stipulated to be a part of the capitalization. The organization tax was paid thereon. Unless that was the purpose of the certificate, and unless the holder thereof be considered a stockholder, and not a creditor, then the provision for 7 per cent. dividends would be usurious-in conflict with the statutes.
 Except as to preference in the payment of dividends and distribution of the assets, as provided by the certificate and charter, and when authorized by statute, the holders of common and preferred stock have the same rights and are subject to the same liabilities.
"As against creditors a preferred stockholder has no greater rights than a common stockholder, and the corporation cannot give them greater rights in the assets of the corporation as against the creditors, unless by virtue of an express statutory provision." 2 Clarke & Marshall on Private Corporations, § 413.
This text was approved in the case of
Fryer v. Wiedemann, 148 Ky. 379, 146 S. W. 752, 39 L. R. A. (N. S.) 1011, and, reasoning therefrom, the court concluded that:
 The use of the word "interest" in the certificate does not require that it be construed as a certificate of indebtedness rather than stock. The provision is that:
"It bears interest at the rate of 7 per cent. per annum, payable annually in the way of dividends, and the holder shall be entitled to receive said interest in the way of annual dividends," etc.
That is, the interest is payable in the way or manner of dividend payments; in other words, the payments are due and payable at such times and in the way dividends are paid-out of the net profits, 7 per cent., and no more. That the words interest and dividends are used interchangeably is shown by the following quotation from the certificate:
fore any dividends shall be declared or paid on the common stock of said company."
"The said annual dividends shall be paid be
guilty of bad faith or a willful abuse of dis
 Dividends are payable out of the prof"As preferred stock is a part of the capital stock of a corporation, holders of such stock are its and surplus funds of the corporation as not preferred to the creditors of the corpora- the directors may, in the exercise of a sound tion in the distribution of its assets. Conse- discretion, declare. Unless the directors are quently, the preferred stockholders cannot be reimbursed before the corporate debts are paid."  The Fryer Case, supra, followed the rule laid down in Rider v. John G. Delker & Sons Co., 145 Ky. 634, 140 S. W. 1011, 39 L. R. A. (N. S.) 1007, where a holder of preferred stock sued a corporation, as in this case, and insisted that he be treated as a creditor, rather than a stockholder. The court said:
"The capital of a corporation is the sum total of its stock, whether common or preferred. Certificates of stock are mere evidences that the holders thereof have invested the sums called for in the
cretion, the courts will not interfere. There being no allegation of profits or of bad faith or abuse of discretion on the part of the directors, the presumption follows that there are no profits out of which to pay dividends. We are of opinion that the petition and exhibits show that appellant is a stockholder and not a creditor. It follows, therefore, that he is not entitled to a judgment against the corporation for any investment he made in the corporate stock.
The judgment of the lower court, sustaining demurrer to the petition, is therefore affirmed.
certificates in the enterprise. They run the risk of losing their stock if the business is not a success. As between themselves and third persons who deal with the corporation and give it credit, their stock is equally liable. It is only in cases where the corporation is solvent and the rights of creditors will not be injuriously affected there- RAMEY et al. v. IRONTON LUMBER CO.
by that agreements as to preferences among themselves may be enforced. The entire capital, without regard to any arrangement which may exist between common and preferred stockholders, is at all times subject to and liable for the debts of the corporation, and no part of the capital can be withdrawn from the business until the debts of the corporation are satisfied."
 But appellant says that this rule does not apply because there is nothing in the case to show that the corporation is insolvent, and therefore, he argues, we cannot infer that the rights of any creditor will be prejudiced. This argument is inconsistent because it is based upon the theory that appellant is a stockholder and entitled to have his stock contract enforced with the corpora
1. LOGS AND LOGGING 3-ACTION FOR ADVANCES-SUFFICIENCY OF EVIDENCE.
In an action to recover the balance of money advanced on a timber contract, in which defendants admitted an indebtedness and alleged its overpayment by an order on the cross-defendants, and in which plaintiff by an amended petition sought to recover against the cross-defendants, and in which the measurement of logs sold by defendants to the cross-defendants was the issuable fact, evidence held sufficient to sustain a judgment for defendants against the cross-defendants.
[Ed. Note.-For other cases, see Logs and Logging, Cent. Dig. §§ 6-12; Dec. Dig. 3.]
2. APPEAL AND ERROR 877-RIGHT TO AL- | Company for the difference between $1,379.LEGE ERROR-INSTRUCTIONS-ESTOPPEL.
In such action the cross-defendants were estopped to complain of instructions with reference to a branch of the case affecting only the plaintiff and the defendants and authorizing a verdict for cross-defendants against plaintiff, since neither had any bearing on the verdict upon which the judgment for defendants against cross-defendants was entered.
[Ed. Note.-For other cases, see Appeal and Error, Cent. Dig. §§ 3560-3572; Dec. Dig.
3. LOGS AND LOGGING 3 ACTION FOR
ADVANCES INSTRUCTIONS AND ISSUES.
In such action and cross-actions an instruction that the jury would find for the defendants against the cross-defendants the value of all timber delivered by defendants to the cross-defendants under a contract with them, after deducting the amount paid by the crossdefendants when the contract was made and a certain other payment, and find for defendants the amount admitted by cross-defendants to be due, was proper.
[Ed. Note. For other cases, see Logs and Logging, Cent. Dig. §§ 6-12; Dec. Dig. 3.] 4. APPEAL AND ERROR 216-REVIEW-IN
The contention on appeal that an additional instruction should have been given in the terms indicated by appellants' brief would not be considered, where no such instruction was offered or asked by appellants.
[Ed. Note.-For other cases, see Appeal and Error, Dec. Dig. 216; Trial, Cent. Dig. 8 627.]
72, for which the order had been given the Ironton Lumber Company on them, and $1,254.78, the amount they (Greers and Burke) admitted owing the Ironton Lumber Company. The Ironton Lumber Company filed an amended petition making J. B. Ramey, Grant Thornberry, and L. R. Thornberry, partners composing the Breaks Lumber Company, defendants to the action, setting up the
order on them received from Greers and
Burke, their acceptance of same, and asking judgment against them for the amount thereof, to wit, $1,379.72. The acceptance of the order in question was in the following language:
"We hereby accept the above order to the amount that we will owe Greer under timber contract."
The acceptance was signed by Ramey and the two Thornberrys. It was further alleged in the amended petition of the Ironton Lumber Company that after their acceptance of the order appellants became indebted to Greer under the timber contract to the full amount of the order accepted by them.
After being served with summons upon the amended petition of the Ironton Lumber Company and the cross-petition of Greers and Burke, the appellants filed, as applicable to both, a pleading styled an answer, counAppeal from Circuit Court, Pike County. terclaim, and cross-petition, much of which Action by the Ironton Lumber Company was properly stricken out by the circuit against W. M. Greer, Franklin Greer, and court. Included, however, in the parts not M. M. Burke, with cross-complaint by de- stricken out were allegations to the effect fendants against J. B. Ramey and others, that they had, by a written contract made composing the partnership of the Breaks in March, 1911, with W. M. Greer, bought of Company, and amended petition him what he falsely represented to be 300 making Ramey and others defendants. Ver- logs in Shelby creek, Pike county, for which dict for plaintiff against defendants, for cross-defendants against plaintiff, and for defendants Greer against cross-defendants, and the cross-defendants appeal. Affirmed.
they agreed to pay him certain prices set forth in the contract, $2,000 of which was paid when the contract was made, the remainder to be paid when the logs were rafted
J. S. Cline, of Pikeville, for appellants. and measured. The writing evidencing the J. F. Butler, Roscoe Vanover, E. J. Picklesi- | contract was filed with and made a part of mer, and J. J. Moore, all of Pikeville, for appellees.
the answer, counterclaim, and cross-petition. It was also alleged in the answer, counterclaim, and cross-petition that there were, in SETTLE, J. The appellee Ironton Lumber fact, only about 200 logs in the lot purchased Company sued in the court below to recover by them of Greer, that when delivered and of the appellees W. M. Greer, Franklin Greer, measured the price of the 200 logs amounted and M. Burke $1,530.70, alleged balance due to only $2,297, $2,000 of which had previousit for money advanced them on a timber con- ly been paid, and that out of the $297 retract. The answer of Greer and Burke, maining they paid one Sol Tackitt the sum which was made a cross-petition against the of $168 for assisting them in, and other exappellants, J. B. Ramey, Grant Thornberry, penses growing out of, the running of the and L. R. Thornberry, composing the partner- logs to the mouth of Shelby creek, which ship known as the Breaks Lumber Company, left them owing Greer only $99.80. They admitted an indebtedness to the Ironton Lum- denied, however, that the $99.80 should be ber Company of $1,254.78, and alleged its paid to the Ironton Lumber Company on the overpayment by an order for $1,379.72 they order given on them by Greer, and alleged gave it upon the Breaks Lumber Company; that the Ironton Lumber Company was init being alleged that the latter company was debted to them in the sum of $119 for some then owing them in excess of that amount. of their timber which that company had Judgment was asked in the cross-petition of wrongfully converted to its use, for which the Greers and Burke against the members sum they prayed judgment against that comof the partnership of the Breaks Lumber pany.
Such being the meaning of the contract, the question that next arises is: Did Greer deliver in the river a sufficient number of logs to amount at the contract prices to a sum that would equal the $2,000 paid him at the making of the contract, plus $168 which appellants admittedly paid Tackitt, plus $1,200, the amount of the verdict and judgment recovered by the Greers. If this proposition has been established by the evidence, the right of the Greers to recover of appellants the $1,200 awarded them by the verdict of the jury and judgment of the court cannot be doubted.
Following the filing of the above pleading, the whole, which, after deducting the $2,000 Greers and Burke filed an amended answer, previously received by Greer, they were reply, and cross-petition containing a trav- to immediately pay. erse of the averments of the answer, counterclaim, and cross-petition of appellants, and alleging that W. M. and Franklin Greer delivered to the latter in Sandy river at the mouth of Shelby creek, under their contract with them, 337 logs, the contract price of which amounted to $4,004, and, after deducting therefrom the $2,000 which they were paid by appellants when the contract with respect to the logs was made, and the $168 which the latter paid to Tackitt, there was left due them from appellants $1,836, for the difference between which and the order of $1.379.70 they had given the Ironton Lumber Company they asked judgment against appellants. The Ironton Lumber Company, by reply to the pleading last mentioned, waived all of its claim against Greer and Burke, except $1,254.78.
After the filing of the voluminous pleadings referred to the case went to trial, and the jury returned a verdict in favor of the Ironton Lumber Company against Greer and
It is not to be overlooked that the logs which were sold under the contract were in Shelby creek at the time of the sale, and that appellants, or some of them, then saw the logs and joined with Greer in making the estimate as to the number. If there were then less than 300 of the logs, they
would hardly have agreed with Greer that
such was their number. It was also their
Burke for $1,254.78, of which the latter do estimate, as well as his, that the $2,000 they not complain. They also returned a verdict estimate, as well as his, that the $2,000 they in favor of appellants against the Ironton then willingly paid him did not exceed half Lumber Company for the sum of $119, of the estimated value of the logs then in the which the latter company makes no com- creek. Otherwise it is not reasonable to supplaint; and, finally, a verdict in favor of pose that they would then have paid him $2,W. M. and Franklin Greer against appel-000 as the estimated half of the value of the logs. There is no contrariety of evidence lants, J. B. Ramey and Grant and L. R. Thornberry, for $1.200. Judgment was enter- as to the fact that at the time of the instied in conformity to the above findings, and tution of this action all the logs which the court, on its own motion, credited the Greer had in Shelby creek he had delivered judgment of the Ironton Lumber Company at the boom or in the river, and that they of $1.254.78 against Greer and Burke with had been measured after their delivery both the $1,200 for which W. M. and Franklin by W. M. Greer and his brother, Franklin, Greer were given a verdict by the jury and also measured by the appellants when against appellants. Appellants complain of rafted by them. the verdict of $1,200 returned against them According to the evidence of the Greers in favor of the Greers, and by this appeal there were 337 logs delivered. W. M. Greer seek the reversal of the judgment entered testified, in which he was corroborated by his thereon. The grounds urged by appellants brother, Franklin Greer, that he and his for the reversal of the judgment are: brother measured all of these logs, and that (1) That the trial court erred in refusing by actual measurement there were 13,360 their request for a peremptory instruction directing a verdict in their behalf as against the Greers; (2) that the verdict is flagrantly against the evidence; (3) error of the trial court in instructing the jury.
cubes, which, at the contract price, amounted to $4,004, and that, after giving appellants credit by the $2,000 paid before the delivery and the $168 paid Tackitt, there was still left a balance in his (Greer's) favor of $1,836.  The first and second grounds will be The measurements thus made were also corconsidered together. In our view of the evi- roborated by the original tally sheets condence neither of them can be sustained. The taining the entries which were made by W. written contract between W. M. Greer M. Greer and Franklin Greer. The measureand appellants, properly interpreted, simply ment of the logs made by appellants at a means that appellants purchased of Greer, different time was not shown by the introat the prices therein stipulated, what they duction of original tally sheets, but only by and Greer estimated to be 300 logs then in the ledger, purporting to have been copied Shelby creek; that $2,000 of the purchase from the original entries, without showing money was then paid Greer by the appel- the details contained in the Greer tally lants; that these logs were to be delivered sheets.
by Greer at the boom or the mouth of Shel- The evidence introduced for appellants by creek, and, when delivered, were to be tended to prove that there were between 200 rafted by appellants, and by them then and 240 logs. In addition to the measuremeasured to ascertain the purchase price of ment shown by their ledger, the appellants