Opinion
Argued April 5, 1928
Decided May 1, 1928
Appeal from the Supreme Court, Appellate Division, First Department.
Austin T. Foster for appellant.
J.M. Richardson Lyeth for respondents.
We have here again to consider, as we considered in Sullivan v. Mount Carmel Cemetery Association ( 244 N.Y. 294), a series of statutes relating to rural cemetery associations. We must endeavor to give a reasonable construction to somewhat conflicting provisions. The precise question before us is whether upon stock issued in 1888 the trustees may declare dividends to be paid from moneys received from the sale of lots.
Under chapter 133 of the Laws of 1847 and chapter 122 of the Laws of 1853, rural cemetery associations might acquire the land needed for their purposes in two ways. They might agree with the vendors that one-half or more of the proceeds of all sales of lots should be appropriated to the payment of the purchase price until all is paid. Any balance, received before or after such payment, is to be used solely to improve the cemetery and for incidental expenses. Obviously the agreement with the vendors is to be shown by some written document. Obviously too, before a lot is or can be sold some indebtedness must be incurred also for improvements, or such indebtedness may arise thereafter, and be similarly evidenced. But apparently these classes of indebtedness are to be paid from the balance remaining after the portion applicable to the payment of the purchase price has been met. It is said in chapter 163 of the Laws of 1860 that the evidence of any such indebtedness may take the form of certificates. But these certificates, representing as they may two classes of debts, payable from different funds are to be kept in separate accounts and they are to be redeemed, the ones from the agreed half or more received from the sale of lots and the others from the balance.
The second method of purchasing land gives the vendor a speculative interest in the success of the association. The agreement may be that he is to receive in perpetuity a specific share, not exceeding half, of the gross receipts from the sale of all lots. The balance is to be used for improving the cemetery and for incidental expenses. However such an agreement is evidenced, it is not by such a certificate of indebtedness as is referred to in the act of 1860. So the act of 1853 is of no immediate concern.
In the case before us all certificates, if such existed, for the payment of the land purchased have been paid and redeemed. There remained certificates for debts incurred in the administration of the cemetery. Their form does not appear. We may assume that they bore interest. Probably they provided for payment of the principal at some future time. Whether they did or not the defendant could not obligate itself to make payment at a fixed date. The only remedy of the certificate holder was an action in equity for an accounting and for the application to the payment thereof of the proceeds derived from the sale of lots. And not all the proceeds. Lot owners are also entitled to protection. The statute contemplates that such proceeds, so far as reasonably and currently necessary, shall first be applied "to the improvement, embellishment and preservation of such cemetery and for incidental expenses," and only any balance to the payment of certificates. True it says that all receipts shall be applied to the purposes quoted "and to no other purpose or object." But the Legislature, recognizing the existence of certificates of indebtedness, recognizes that in some way they are to be paid. This is made clear by chapter 108 of the Laws of 1879, which adds to this phrase the words "unless expressly authorized by law."
The certificate holders, therefore, held an obligation of the defendant enforcible in equity. They were entitled to resort for payment to a certain fund. In this condition of affairs came chapter 107 of the Laws of 1879. It permitted the certificates to be changed into certificates of stock. The certificates were to be canceled. No interest was thereafter to be paid "but in lieu of interest the holders of said stock shall be entitled to claim and receive semi-annually a dividend for their proportional part of the surplus or net receipts of the said cemetery, over and above current expenses."
The expression "proportional part of the surplus" should be fairly interpreted to mean such part of the total dividend as each stockholder's shares bear to the total shares issued. We can find no other reasonable meaning for it. But in spite of the words "claim and receive" the trustees need not declare a dividend semiannually of the whole sum divisible, whatever that sum may be. We refer to the general power of directors over the subject of dividends and say they have discretion in the matter.
Then what of the expression "surplus or net receipts of the said cemetery, over and above current expenses?" The Legislature in a much later act (L. 1894, chap. 267) explains its meaning. Stockholders in lieu of interest, it says, may claim dividends "if, after deducting all current expenses incurred by said trustees from the total receipts from all sources of said cemetery, there shall remain a surplus." This act speaks of a dividend agreed upon when the stock was issued. Perhaps such an agreement may be necessary thereafter. It was not required when the stock we have to consider was issued.
The "total receipts from all sources" include receipts from the sale of lots. The "surplus" is stated to be those receipts less current expenses. We define "current expenses" as including those reasonably necessary for the improvement, embellishment and preservation of the cemetery.
If this is so, the decision reached below was right. It is admitted that the directors intend to distribute as dividends "the entire surplus or net receipts of the corporation, over and above current expenses." They may do so if they define "current expenses" as we have done. The answer, whose truth is admitted, says they do.
The judgment appealed from should be affirmed, with costs.
CARDOZO, Ch. J., POUND, CRANE, LEHMAN, KELLOGG and O'BRIEN, JJ., concur.
Judgment affirmed.