Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/593

 CHAP. IX.] CORPORATION AND SHAREHOLDERS. [§ 567. Supreme Court, preferred shares had been issued with certifi- cates in the following form : " The preferred stock is to be and remain a first claim upon the property of the corporation after its indebtedness, and the holder thereof shall be entitled to receive from net earnings of the company seven per cent per annum, payable semi-annually, and to have such interest paid in full in each and every year before any payment of divi- dend upon the common stock." The holders of these shares were held to be merely shareholders, and entitled to no lien on the property of the corporation prior to the lien of the corpo- rate indebtedness contracted after their issue ; but were enti- tled only to a priority over the common shares. 1 § 566. If a dividend has been paid from funds of the cor- poration other than those out of which dividends „ r. . Recovery of may legally be paid, the corporation may recover it dividends back. Thus an insurance corporation is not justifi- pa id. able in treating premiums received upon unexpired risks as profits subject to division when it has no independent fund sufficient to meet all liabilities that may accrue on pend- ing risks. And dividends paid from such a source may be reclaimed by the corporation. 2 § 567. A share has been defined as " a right to partake, according to the amount of the party's subscription, of the surplus profits obtained from the use and dis- f t ock. S ° f posal of the capital stock of the company to those purposes for which the company is constituted." 3 It is to be noted that a share is called a right to partake in profits 8 R. I. 310; Branch v. Jessup, 106 U. S. 468; Belfast and M. L. R. R. Co. v. Belfast, 77 Me. 445. Compare preceding note. i Warren v. King, 108 U. S. 389. 2 Lexington Life, etc., Ins. Co. v. Page, 17 B. Mou. (Ky.) 412; Daven- port, Rec'r, v. Lines, 74 Conn. 118. The statute of limitations runs in favor of shareholders bona fide re- ceiving such divideuds, from the time they were declared, as against the corporation and its creditors. Ih. Compare, also, Scott v. Eagle Fire Co., 7 Paige, 198; De Peyster v. American Fire Ins. Co., 6 Paige, 486; see, also, § 708. 3 Angell and Ames on Corp., § 557. " The capital stock is that money or property which is put into a sin- gle corporate fund, by those who by subscription therefor become mem- bers of the corporate body. That fund becomes the property of the aggregate body only. A share of the capital stock is the right to par- take according to the amount put into the fund of the surplus profits of the corporation, and ultimately on the dissolution of it, of so much of 573