stockholder of record is not the stockholder in fact. The party to whom the dividend is to be paid is always the proper party to notify. If there is doubt in any particular case as to whom a dividend is to be paid, responsibility may be avoided by sending notices to all the parties interested, leaving the ownership of the dividend to be settled later.

In some of the larger corporations, notice of a dividend and the time and place of payment and the period for which the stock books are closed, is usually mailed to every stockholder and is published in the newspapers as well-this latter not entirely as a legal requirement but as a general notification to the stockholders and to the general public as well that the corporation is paying dividends. The publication of the dividend notice is presumptive proof of notice to the stockholders but is not alone conclusive. If the stockholders see the notice, it is sufficient, but if any particular stockholder does not happen to see the newspaper announcement, he cannot be held to have received notice and the corporation is liable for any resulting loss.

Thus a dividend had been declared and the amount re quired to pay it was deposited in a certain bank, where the stockholders were to call and receive payment upon signing the dividend book. Notice of the time and place of payment was published in the daily newspapers. One stockholder failed to see the notice, did not call, and the bank failing some seven months later, his dividend was lost. He thereupon brought suit against the corporation and recovered its amount, the newspaper notice being held insufficient.4

At the present time corporations when paying dividends usually mail checks to the stockholders, and this, if properly done, avoids any possibility of failure of notice. The dividend checks are nothing more than orders upon the bank for payment of the amount due the stockholder, but the recipient of such a check has in the check itself sufficient notice of the

4 King v. Paterson, etc. R. R. Co., 22 N. J. L. 81 (1860).

time and place for the payment of his dividend. Where checks are mailed, a newspaper notice of dividends is usually deemed entirely sufficient.

Dividend notices are frequently signed and issued by the secretary but more commonly are issued over the signature of the treasurer. The legal effect is the same in either case.

A stockholder of record is one whose name appears upon the stock books of the corporation as an owner of its stock. Dividends are ordinarily payable to those who at the time the dividend becomes effective are stockholders of record. The stock book, therefore, at this time, shows to whom the dividend must be paid.

The rule is not, however, invariable. It may be that stock is pledged and the pledgee has not had the stock transferred to his own name, though dividends are payable to him. Or occasionally it happens that stock has been sold before the declaration of the dividend, but the transfer through neglect or other cause, has not been recorded on the books. The equitable ownership of the stock and the right to the dividend then vests in the party to whom the stock has been assigned, but the ownership of record still remains in the former owner.

The treasurer, in the absence of notice, has no concern as to these equitable owners. The stock books of the corporation are conclusive for his purposes until their evidence is impeached by the presentation of duly assigned certificates, or other satisfactory evidence of a different ownership or by information that would put the corporation "on notice." Therefore, even though it proves later that the holder of record is not the rightful owner of the dividend, the treasurer and the corporation are protected in payments made according to the unimpeached record of the stock books. They have

See Chapter XXXV., "Dividend Notices."

used all reasonable care and cannot be held for the results of negligence on the part of others."

If, however, the treasurer or the corporation receives notice of some unrecorded transfer involving the ownership of the dividend, i. e. a transfer made before the dividend became effective or perhaps thereafter with an assignment of the dividend, he is bound to take notice of the facts and pay the dividend to the rightful owner.7

As the stock books, if unimpeached, control absolutely, the production of a stockholder's certificate of stock is not necessary, nor can it be required to prove either his ownership. of stock or of dividends, if this ownership is shown by the stock books. If the true ownership is not so shown, the duly assigned certificate is good evidence thereof and sufficient to justify the treasurer in paying the dividend to the owner of the certificate, provided only that the assignment was made before the effective date of the dividend.

The conclusive nature of the unimpeached stock books and the function of stock certificates in dividend matters are clearly brought out in a cases where stock had been sold by the owner of record and the sale was evidenced by a duly assigned certificate, but for years was not entered on the books of the company. The stockholder of record died before the transfer was recorded and his administrator discovering the estate's apparent ownership of this stock and not finding the certificate representing it, filed a bond of indemnity with the corporation, secured another certificate and thereupon received dividends on the stock in question for a term of years. Finally the original, duly assigned certificate of stock turned up in the hands of the transferee, who not only demanded transfer of the stock on the books of the corporation but payment of all dividends declared upon his stock from the date of its assign

Cleveland, etc. R. R. v. Robbins, 35 O. St. 483 (1880).

Rose v. Barclay, 191 Pa. St. 594 (1899).

8 Brisbane v. Del., etc. R. R., 94 N. Y. 204 (1883).

ment to him, and upon a refusal, brought suit against the corporation to enforce his demands.

The courts promptly confirmed his rights to a transfer of the stock on the books of the corporation, but as promptly refused to hold the corporation responsible for the lost dividends, stating that "the books containing the lists of the stockholders are evidence of the ownership of the stock and a corporation is justified in being governed thereby until proof or notice is given showing that other parties than those named therein are the owners of the stock." Also as to dividend payments to the stockholder of record, "His title as it appeared on the books was conclusive until impeached and the defendant was bound to pay the same unless it had some notice of a change of the title or of a transfer of the stock, or such knowledge or information as would put it on inquiry as to the ownership thereof." In such a case the equitable owner has no claim against the corporation but must proceed against the owner of record to recover his dividends.9

If there is any real doubt as to whom a dividend is properly payable, the treasurer's only safe course is to withhold. payment until the matter is satisfactorily settled by the parties themselves, or until the ownership of the dividend is determined by proper legal procedure. This litigation may involve only the disputants but may also be directed against the corporation. If in any case the corporation is likely to suffer, it may interplead and ask the court to decide to whom the dividend belongs.

In case stock stands in the name of a married woman, the treasurer must pay the dividends declared thereon to the wife or to the husband according to the requirements of the state in which the corporation is chartered. 10 In most states of the Union dividends are payable to the wife when stock stands in her name.

Houser v. Richardson, 90 Mo. App. 134 (1901).

10 Graham v. First Nat. Bank of Norfolk, 84 N. Y. 393 (1881).

If stock is pledged, the pledgee is entitled to any dividends declared meanwhile even though he is not a stockholder of record, provided the corporation has had due notice of the pledge. But the pledgee must account for these dividends to the pledger when the pledge is redeemed.11

If a corporation holds stock of other corporations, it is entitled to receive dividends on this stock as is any other stockholder. It cannot, however, pay dividends on its own stock held in the treasury of the corporation. When dividends are payable to a corporation the dividend check may be made either in the name of the corporation, or to the treasurer as treasurer of the corporation. If stock belongs to an estate, payment of dividends should be made to the administrator. If, however, the stock passes to a legatee, all dividends declared after the date of the testator's death belong to the legatee, but if any dividends have been declared before that date but are not yet paid, they will belong to the general estate.

§ 253. Payment of Dividends.

It is customary to close the stock books a certain number of days before a dividend is to be paid, in order to give the treasurer an undisturbed opportunity to make up his dividend statement from the books. The "closed" period usually begins on the effective date of the dividend and continues until the date of its payment, or if this period is lengthy, for such reasonable time as will enable the treasurer to secure from the books the data he requires for his dividend statement. During this period no transfers of stock will be made.

As a rule the closing of the transfer books works no hardship. They are not usually closed until the day on which the dividend is effective. Transfers of stock made after that date do not, therefore, carry the dividend, unless by special agreement between the parties, and the fact that the transfer cannot be immediately recorded is in most cases immaterial.

11 II Cook on Corps., § 468.