The decree of the Circuit Court is reversed and the cause remanded, with instructions to dismiss the libel. True copy. Test: James H. McKenney, Clerk, Sup. Court, U. & It is no doubt true that the Scotch law "takes | to sue at all. No one will pretend that the suit cognizance of the loss and suffering of the in Pennsylvania, or the indictment in Massafamily of a person killed," and gives a right of chusetts, could be maintained if brought or action therefor under some circumstances. found after the expiration of the year; and it Bell's Prin. Laws, Scot. 7th ed. p. 934, § 2029; would seem to be clear that, if the admiralty Cadell v. Black, 5 Paton, 567; Weems v. Mathie- adopts the statute as a rule of right to be ad8on, 4 Macq. 215. Such also is the law of ministered within its own jurisdiction, it must [213] France. 28 Merlin's R. 442, verbo Reparation take the right subject to the limitations which Civile, & IV; Rolland v. Gosse, 19 Sirey, 269. It have been made a part of its existence. It matis said also that such was the civil law, but this ters not that no rights of innocent parties have is denied by the Supreme Court of Louisiana attached during the delay. Time has been in Hubgh v. N. O. & C. R. R. Co. 6 La. Ann. made of the essence of the right, and the right 495, where Chief Justice Eustis considers the is lost if the time is disregarded. The liability subject in an elaborate opinion after full argu- and the remedy are created by the same statment. A reargument of the same question was utes, and the limitations of the remedy are, allowed in Hermann v. N. O. & U. R. R. Co. therefore, to be treated as limitations of the 11 La. Ann. 5, and the same conclusion reached right. No question arises in this case as to the after another full argument. See also Grueber's power of a court of admiralty to allow an Lex Aquilia, 17. But however this may be, we equitable excuse for delay in suing, because no know of no country that has adopted a differ- excuse of any kind has been shown. As to this, ent rule on this subject for the sea from that it only appears that the wrong was done in which it maintains on the land; and the mari- May, 1877, and that the suit was not brought time law, as accepted and received by maritime until February, 1882, while the law required it nations generally, leaves the matter untouched. to be brought within a year. It is not mentioned in the laws of Oleron, of Wisbuy, or of the Hanse Towns, 1 Pet. Adm. Dec. Appx., nor in the Marine Ordinance of Louis XIV., 2 Pet. Adm. Dec. Appx.; and the understanding of the leading text writers in this country has been that no such action will lie in the absence of a statute giving a remedy at law for the wrong. Ben. Adm. 2d ed. § 309; 2 Pars. Ship. & Adm. 350; Henry, Adm. Jur. 74. The argument everywhere in support of such suits in admiralty has been, not that the maritime law, as actually administered in common-law countries, is different from the common law in this particular, but that the common law is not founded on good reason, and is contrary to "natural equity and the general principles of law." Since, however, it is now established that in the courts of the United States no action at law can be maintained for such a wrong in the absence of a statute giving the right, and it has not been shown that the maritime law, as accepted and received by maritime nations generally, has established a different rule for the government of the courts of admiralty from those which govern courts of law in matters of this kind, we are forced to the conclusion that no such action will lie in the courts of the United States under the general maritime law. The rights of persons in this particular under the maritime law of this country are not different from those under the common law, and as it is the duty of courts to declare the law, not to make it, we cannot change this rule. [214] ACALUS L. PALMER, Piff. in Err., v. ERWIN A. HUSSEY. (See S. C. Reporter's ed. 96-99.) Bankruptcy-claim of immunity under section 1. This court has jurisdiction of a writ of error 2. Under section 5119 R. 8., the certificate of dis- 3. Upon the facts disclosed by the record this Submitted Nov. 1, 1886. Decided Nov. 15, 1886. This brings us to the second branch of the IN ERROR to the Supreme Court of the State of New York. On motion to dismiss, (denied), with which is united a motion to affirm. Affirmed. The history and facts of the case appear in the opinion of the court. Mr. Archibald W. Speir, for plaintiff in error. question, which is, whether, with the Statutes Mr. Samuel W. Bower, for defendant in error. Mr. Chief Justice Waite delivered the opinThis record shows that on the 18th of Apri. 1874, Acalus L. Palmer recovered a judgment in the Supreme Court of New York against [9€ 8] [97] Erwin A. Hussey for $32,128.57 on account of certain bonds of the United States which had been placed in his hands by Palmer, and for which he bound himself by a writing, the material part of which is as follows: "These bonds we hold subject to the order of A. L. Palmer, at ten days' notice, agreeing to collect the coupons for his account, free of charge, and to allow him two percent per annum interest on the par value of said bonds, said interest to commence and count June 1, 1866; interest on the 7-30 bonds payable June and December 15; on 5-20 May and November 1. "É. A. HUSSEY & Co." In the complaint it was alleged that the bonds "were received by the defendant from the plaintiff as his agent and broker, in a fiduciary capacity, upon the arrangement and agreement as contained" in the foregoing paper; "that the said defendant, without the authority or permission of the plaintiff, has fraudulently and willfully sold, disposed of, and misapplied the said bonds, and has refused to deliver up the same to the said plaintiff, who has frequently demanded the same from him, and given the notice so to do as required by the agreement." This was denied in the answer. The suit was begun September 7, 1868. On the 20th of January, 1868, Hussey filed his petition in bankruptcy, and was duly adjudicated a bankrupt January 24. On the 17th of May, 1880, he received his final discharge. The record does not show when his application for a discharge was made to the bankrupt court. On the 12th of June, 1880, he moved the supreme court to perpetually enjoin the collection of the judgment in favor of Palmer because of his discharge. In his affidavit in support of this motion, and which presents the grounds of the relief asked, it is stated: "That, among other grounds of objection to my discharge in bankruptcy made by the plaintiff, it was charged that I have been guilty of improper and undue delay in said proceedings. That that question was presented to the court and fully explained, and the court decided that I was not guilty of laches, and was entitled to my discharge.' In opposition to the motion the counsel of Palmer filed a counter affidavit setting forth the grounds of defense, and, among others, that the judgment was an adjudication that "The bonds were received in a fiduciary capacity," and were "fraudulently and willfully sold, disposed of, and misapplied by Hussey." The supreme court, both at special and general term, denied the motion on the ground that the judgment on its face showed that the debt was created by fraud, and while Hussey was acting in such a fiduciary capacity as to prevent the discharge in bankruptcy from operating as a release. This order was reversed by the court of appeals, and the execution of the judgment perpetually enjoined, because the fraud and trust established by the findings were not of a character to bar the effect of the discharge. To reverse that judgment this writ of error was brought, which Hussey now moves to dismiss because no federal question was raised or decided, and with this motion he has united a motion to affirm under Rule 6, section 5. The motion to dismiss is denied. Palmer in his affidavit, which in this case takes the place of technical pleading, specially set up and claimed an immunity under section 5117 of the Revised Statutes from the operation of the discharge in bankruptcy, because of the fraudulent and fiduciary character of his debt, and the decision was against him. This gives us jurisdiction, since the exemption depends on the construction and effect of section 5117, which provides that "No debt created by the fraud *** of the bankrupt, or ***while acting in any fiduciary character, shall be discharged by proceedings in bankruptcy." As the affidavit of Hussey set forth the date of the adjudication in bankruptcy and the date of discharge, the question of delay in making an application, and the construction and effect of section 5108 may also, perhaps, have been raised on the record. The opinion of the court of appeals shows that both of these questions were actually presented to and decided by that court. Palmer v. Hussey, 87 N. Y. 303. Upon the facts set forth in the affidavit of Hussey, which are not denied in the counter affidavit of the attorney of Palmer, and upon the facts as they appear in the record of the judgment to be enjoined, it is clear that, under the ruling of this court in Hennequin v. Clews, 111 U. S. 677 [Bk. 28, L. ed. 566], there was no such fraud in the creation of the debt, and no such trust in respect to the possession of the bonds by Hussey, as to bar the operation of the discharge. By section 5119 of the Revised Statutes, the certificate of discharge is made conclusive evidence in favor of the bankrupt, of the fact and regularity of such discharge." We must presume, therefore, that the application was made within the time required by section 5108, or, if not, that any delay there may have been was satisfactorily explained before the discharge was granted. The certificate is conclusive on this question. As these are the only federal questions presented, and one has been already settled by our decision in Hennequin v. Clews, and the other needs no further argument, the motion to affirm is granted. Affirmed. True copy. Test: James H. McKenney, Clerk, Sup. Court, U. 8. [99] NEW YORK, LAKE ERIE AND WEST- [296] ERN RAILROAD COMPANY, Appt. 0. TOM NICKALS ET AL (See 8. C. Reporter's ed. 296-311.) Railroad corporations—“ plan and agreement" for reorganization of the Erie Railway Com pany-directors may devote profits to improvements instead of dividends. 1. The provision of the "plan and agreement" for the reorganization of the Erie Railway Company (which was also contained in the articles of associa tion of the new Company), that certain preferred stock should be issued "entitling the holders to noncumulative dividends, at the rate of 6 per cent per annum in preference to the payment of any dividend on the common stock, but dependent on the profits of each particular year, as declared by the board of directors," did not operate to deprive the directors of the discretion with which managing agents of corporations are usually invested when distributing the earnings of property committed to their hands. 2. The words" as declared by the board of directors" in this passage refer to dividends," and not to "profits." The directors therefore had the power to devote the profits of any given year to improvements of the property to the exclusion of any dividend to the preferred stockholders. 3. The fact that the report of the directors to the shareholders and bondholders for the year 1880 showed a net profit from the operations of the year of $1,790,620.71," does not enable the preferred stockholders to maintain an action against the Company for a dividend. [No. 22.] Argued Nov. 1, 2, 1886. Decided Nov. 29, 1886. APPEAL from the Circuit Court of the United The complainants, therefore, being prefer stockholders entitled to dividends, and not creditors entitled to the payment of a debt, what are their rights in the eye of the law under the thirteenth section? The answer is that they have a right to be preferred to the common stockholders in the distribution of the profits. In other words, if the directors consider it proper, in view of the affairs of the Company as a whole, to declare any dividend, they must first declare one at the rate of 6 per cent, payable to the preferred stockholders. In administering the affairs of a corporation the directors have many implied powers, one of which is to determine whether a dividend should be declared or not, and at what rate. States for the Southern District of New The law invests them with a discretion in this York. Reversed. The case is stated by the court. In no aspect can these preferred stockholders be deemed, either in law or equity, to be creditors or quasi creditors of the Company. Their relation to the Company is, pure and simple, that of stockholders. On this point the authorities are not only decisive, but in their scope and effect go further, and hold that where a party subscribes for and takes preferred stock, the payment for which is substantially a loan or advance of money to the company, he is still a stockholder and not a creditor. This has been repeatedly held where the stock was not only preferred, but dividends thereon at a given annual rate guarantied by the company issuing it. particular. If they deem it wise and prudent to accumulate a portion of the surplus earnings to meet future contingencies, or to apply them to the improvement of the property for its more efficient and profitable working and the better security of all concerned, including the bond. holders and other creditors, the stockholders and the public, so far as their duty to the public is concerned, they have the right and power to do so. To this every stockholder, preferred as well as common, assents when he becomes an owner of shares. Clearwater v. Meredith, 1 Wall. 25, 40 (68 U. S. bk. 17, L. ed. 604, 608); Morawetz, Private Corp. p. 351, § 348; Union Pac. R. R. Co. v. U. S. 99 U. S. 402 (25: 274). This discretionary power of the directors must be exercised bona fide and in a reasonable manner, and within these limits the courts regard their action as final and do not disturb it. Barnard v. Vermont & Mass. R. R. Co. 7 Allen, 521; Karnes v. Rochester & Gen. Val. R. R. Co. 4 Abb. Pr. N. S. 107; Culver v. Reno Real Est. Co. 91 Pa. 367; Richardson v. Vermont etc. R. R. Co. 44 Vt. 622; Stevens v. South Deven R. Co. 9 Hare, 313, 326. Still further; the directors' report shows that the surplus over and above operating expenses and fixed charges has been expended upon improvements absolutely necessary to fully develop the business and economically operate the road. There are therefore no surplus profits arising from the business of the Corporation; for expenses such as these are a part of its business and are chargeable against the earnings before any dividends can be paid. They are liabilities which the directors are authorized to incur. According to well established rules, therefore, they must be discharged before anything is payable in dividends. Williston v. Mich. S. & N. 1. R. R. Co.13 Allen, 400; Taft v. Hart. Prov. & F.R. R. Co. 8 R. I. 310. The phraseology of the thirteenth section of the plan and agreement is consistent with no other view. It places the holders of preferred stock in the same category as the holders of common stock, with only one qualification. It uses the words "dividends" and "dividend" in the same sense, and as equally applicable to both. The words, as declared by the board of directors," are clearly used in the ordinary sense, and refer to the setting apart net profits for distribution through the declaration of a dividend. There is no such thing known in our law, or in the practice of our corporations, as a "declaration of profits," as distinguished from a declaration of dividends. The words, "as declared by the board of directors," refer to a formal, official and final act of the board on the subject matter. 'Profits" are not in any official or legal sense "declared." As they may appear on the books, they are the result Mumma v. Potomac Co. 8 Pet. 281, 286 (33 of the particular account of which they are the U. S. bk. 8, L. ed. 945, 947), Curran v. State, outcome. The account is made up by the book-51 How. 304 (56 U. S. 14: 705); R. R. Co. v. keeper or auditor and speaks for itself. A cer- Howard, 7 Wall. 392 (74 U. S. 19: 117). tification or repetition of the account, or its Mr. C. E. Tracy, for appellees: result, in a report does not change its status or The special contract of the articles of associquality, or the relation of the stockholders to ation overrides any discretionary power the the fund. In any other view the words, "as directors might otherwise have. declared by the board of directors," have no meaning and perform no office. See St. John v. Erie R. Co. 22 Wall. 136-148 (89 U. S. bk. 22, L. ed. 743-746); Warren v. King, 108 U.S. 389 (27:769); St. John v. Erie R. Co. 10 Blatchf. 271, 279. Bates v. Androscoggin & Ken. R. R. Co. 49 Me. 491; Boardman v. L. S. & M. S. R. R. Co. 84 N. Y. 157. Were it not for the expressions "noncumulative dividends," and "dependent on the profits of each particular year," the dividends in ar [298] rears would have to be made up before divi- | to secure its obligations known as first consoli- Prouty v. M. S. & N. I. R. R. Co. 1 Hun, Such a provision or contract necessarily ab- ors. Barnard v. V. & M. R. R. Co. 7 Allen, 521; In the case at bar, there were certainly profits dated mortgage bonds and sterling loan bonds, and the other of February 4, 1874, to secure its obligations known as second consolidated mort gage bonds and gold convertible bonds-and having also brought ancillary suits for the foreclosure of the same mortgages in the States of New Jersey and Pennsylvania, certain parties, on the 14th of December, 1877, entered into a plan and agreement for the readjustment of their rights in the mortgaged premises upon an equitable basis. Those constituting in that agreement the parties of the first part were holders of common and preferred stock of the Erie Railway Company, of coupons of the first consolidated mortgage and sterling loan bonds, and of bonds and coupons both of the second consolidated mortgage and gold convertible series. The parties of the second part, Edwin D. Morgan, John Lowber Welsh, and David A. Wells, were purchasing trustees. The agreement provided for co-operation in all proceedings for final foreclosures and sales in the respective States under the mortgage of Febru ary 4, 1874; for the purchase of the mortgaged premises and franchises by the trustees with bonds and coupons and other means to be placed at their disposal for that purpose by the parties of the first part; and for the organization by such trustees, in conformity with the laws of New York, of a new corporation, with an amount of stock not exceeding the then amount of the stock of the Erie Railway Company, and which should hold the property, rights and franchises so purchased, subject to six prior mortgages then resting upon the premises or upon part of them, including the first consolidated mortgage of September 1, 1870. The new Corporation was required, as the consideration for the prop erty, rights and franchises purchased, to deliver to the parties of the first part its funded coupon bonds, bearing interest at 7 per cent in gold, to an amount equal in the aggregate to the cou pons of the first consolidated mortgage to be funded by those parties; mortgage bonds, bearing 6 per cent interest in gold, to an amount By the decree below it was adjudged, in ac- equal to the principal of the second consolidatcordance with the prayer of the bill, that the ed and gold convertible bonds held by the parNew York, Lake Erie and Western Railroad ties and secured by the mortgage of February Company was required by its articles of asso- 4, 1874-the back interest to be represented by ciation to declare a dividend of 6 per cent upon funded coupon bonds. In reference to the sterits preferred stock, for the year ending Sep-ling loan bonds, the agreement provided that tember 30, 1880, payable out of the net profits accruing that year from the use of its property, after meeting operating expenses, interest on funded debt, rentals of leased lines and other fixed charges. A judgment was rendered against it for $20,280-the amount which the plaintiffs would have received if a dividend had been made with interest thereon from January 15, 1881, to the date of the decree, and also for their costs and disbursements. The cause was referred to a special commissioner to ascertain the names of all other parties entitled to receive similar dividends. The reported cases upon the preferred stock of the appellant's predecessor company (Thompson v. E. R. R. Co. 42 How. Pr. 68, and St. John v. Same, 10 Blatchf. 271; S. C. 22 Wall. 136 (89 U. S. bk. 22, L. ed. 743) turn upon the intendment of the special clause or contract there appearing. They demonstrate, however, the proposition that preferred stock represents a contract, the extent and legal effect whereof depend upon the terms and conditions of the contract itself, as interpreted under the ordinary rules of law. Mr. Justice Harlan delivered the opinion of the court: they should be regarded as having been ex- The provisions of the plan and agreement "13. Preferred stock, to an amount equal to the preferred stock of the Erie Railway Company now outstanding, to wit: eighty-five thou sand three hundred and sixty-nine (85,369) The case made by the pleadings, exhibits, shares, of the nominal amount of one hundred and proofs is substantially as will now be stated. dollars each, entitling the holders to noncumuThe Farmers' Loan and Trust Company hav-lative dividends, at the rate of six per cent per ing commenced an action in the Supreme Court annum, in preference to the payment of any of New York for the foreclosure of two mort- dividend on the common stock, but dependent gages executed by the Erie Railway Company on the profits of each particular year, as deupon its line of railway, property, rights, privi-clared by the board of directors. leges and franchises one of September 1, 1870, 14. Common stock, to an amount equal to [299] [300] [801] On the amount of the common stock of the said| April, 1878, and were purchased by the trustees, "19. In addition to the new common and preferred stock, the parties of the first part shall also receive for the amount of such pay ments, as mentioned in the last preceding paragraph, noncumulative income bonds, without mortgage security, payable in gold, in London and New York, on the first day of June, 1977, and bearing interest from December 1, 1879, also payable in gold, in London and New York, at the rate of six per cent per annum, or at such lesser rate for any fiscal year as the net earnings of the company for that year, as declared by the board of directors and applicable for the purpose, shall be sufficient to satisfy; these bonds to have yearly coupons attached. "20. Preferred stock, in respect of which two dollars gold per share has been paid or may be paid, and common stock, in respect of which four dollars gold per share has been or may be paid, may be exchanged share for share, but in conformity with and subject to the said trust for voting, for new stock of like class, without any liability to make any further payment in respect of such new stock; but no income bonds or other obligation or security shall be issued or delivered in respect of such reduced pay ments. “21. ***; and all payments made or to be made in respect of old, preferred or common stock shall be deemed to be in consideration of the concessions and agreements made by the holders of the said first and second consolidated mortgage and gold-convertible bonds, the available funds resulting from such concessions being used for the improvement or increase of the property of the new Company. " The theory of the present suit is that the The property and franchises in question were sold under decrees of foreclosure on the 24th of its preferred stock." It also clearly appears [302] [308 |