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court, or by payments made directly to or 57 N. C. 455; State v. Atkins, 53 Ark. 303, for the benefit of the parties entitled there- 13 S. W. 1097. And for the reasons that to, though made without the authority of have been stated this defense pro tanto is the court, or otherwise. This was the doc- equally available to the principal and the trine of Browne v. Doolittle, 151 Mass. 595, surety. 25 N. E. 23, although that was a proceeding against the administrator and not an action upon his official bond. So in Forbes v. Allen, 166 Mass. 569, 44 N. E. 1065, payments made by an executor to the beneficiary of a trust created by the will but not actually established by the executor, although they were made without authority from the court, without special application to any particular claim or demand, and in excess of the amount of a legacy given directly to that beneficiary, were yet credited to the defendants (principal and surety alike, as we have seen must be the case) in a suit upon the executor's bond.

[5, 6] Applying the principle stated to the facts before us, it appears that until the death of William H. Weston in May, 1905, the income of the fund was payable to Henry E. Weston and William H. Weston, one half to each. But upon the company's paying the amount of this defalcation in both principal and income, it would by operation of law be subrogated to the rights of these life tenants from the date of the bond by which its liability was created. Stetson v. Moulton, 140 Mass. 597, 5 N. E. 809; Blake v. Traders' National Bank, 145 Mass. 13, 12 N. E. 414. And by the joint agreement of these trustees with the company, made when the bonds were executed, they expressly created a conventional subrogation against both of them. Accordingly, if this income or any part of it should be included in the amount now to be paid by the company, as soon as it was received by the new trustee it would be his duty to pay this income over to the company as the equitable assignee of both the Westons, and this would of itself create a satisfactory accounting for that income; that is, the case would stand as if the income up to May, 1905, had been properly accounted for by the principal in the bond; and that result would have been brought about by the forced payment of that income upon the execution now to be issued, and its immediate repayment to the company. This is a needless circuity, such as the law does not favor and ought not to allow. Railway Co. v. Smith, 21 Wall, 255, 22 L. Ed. 513; North Chicago Rolling Mill v. St. Louis Ore & Steel Co., 152 U. S. 596, 14 Sup. Ct. 710, 38 L. Ed. 565. It is true of course that the right to subrogation strictly so called does not arise in favor of a surety until he has paid the debt for which he is bound, and there is no occasion to cite authority for the rule; but it is also true that to avoid circuity of action equity will protect those who by an enforced payment will become at once entitled by subrogation to indemnity from the one who is to receive that payment. Belknap

It follows that neither the income misappropriated by William H. Weston nor interest on the principal sums so misappropriated, up to the date of his death, or the date of the judgment if as appears that preceded his death by some days, should be included in the amount for which execution is to issue. [7] William H. Weston had a power of appointment by will over one half part of the fund. He exercised this power in favor of one Pratt, a creditor of his. We need not determine the validity of this appointment as against William's other creditors. Disregarding for the moment the claim set up by the company, it is manifest that if the appointment comes under the general rule that its effect was to subject the appointed property to the claims of his creditors, then the fund must be paid to the administrator of his estate for distribution among them, for his estate was insolvent. Olney v. Balch, 154 Mass. 318, 322, 28 N. E. 258, explaining O'Donnell v. Barbey, 129 Mass. 453; Clapp v. Ingraham, 126 Mass. 200; Tuell v. Hurley, 206 Mass. 65, 91 N. E. 1013. See Fleming v. Buchanan, 3 De G., M. & G. 976, and In re Hadley, [1909] 1 Ch. 20, 35. If it could be successfully contended that Pratt was not a volunteer and was entitled to take the appointed property in spite of any claims of creditors (as to which see Beyfus v. Lawley, [1903] A. C. 411; In re Lawley, [1909] 2 Ch. 673, 911; and Patterson v. Lawrence, 83 Ga. 703, 10 S. E. 355, 7 L. R. A. 143), then Pratt would be entitled to receive it. But the company contends that Pratt as William's appointee claims merely under the latter, and that as William's negligence was at least partially responsible for Henry's defaults, and as it is entitled against William both to the equitable subrogation of a surety and also to a full conventional subrogation under the joint agreement of Henry and William which has been stated, so it now is entitled to the full benefit of William's own interest and also of that of all who claim under him, including the principal of the one half part of the fund of which William made an appointment. But we cannot adopt this contention. William had himself no interest in any part of the principal of the fund. Crawford v. Langmaid, 171 Mass. 309, 50 N. E. 606; Sise v. Willard, 164 Mass. 48, 41 N. E. 116.

[8] It is from the donor of the power that the property comes to him who takes it, either through the exercise of that power by its donee or by reason of the latter's failure to exercise it. ure to exercise it. Emmons v. Shaw, 171 Mass. 410, 412, 50 N. E. 1033, and cases there collected. "The donee of the power is not the owner of the estate." Hammond, J., in

351.

161. William's power could be exercised only | Wentworth, 209 Mass. 585, 95 N. E. 951; by will; he could not himself by any other Norton v. Lilley, 210 Mass. 214, 217, 96 N. E. act or deed give any interest in the property after his death, nor could the law by reason of any agreement or conduct of his create such an interest against those entitled to the property either by his appointment or by reason of his failure to make any. It is true that if he had failed to make any appointment, it might have been contended that under the provisions of Nathaniel Weston's will the title to one half of the fund vested upon William's death in Henry and William as heirs of Nathaniel, and so could be taken by the company under its right of subrogation and their agreement; but that is not the case, as an appointment was made, and we need not consider what then would have been the rights either of the company or of the general creditors of William.

It follows that the company is to be charged with one half of the principal sum found by the assessor.

For the reasons already stated the interest on the other half of this sum is not to be included in the amount for which execution is to issue. That income did belong to Henry; the right to it now is vested in the company; and it is satisfactorily accounted for by giving the benefit of it to the company. As to the principal of this half part, it is not yet ascertained who will be entitled to receive it upon the death of Henry. If he should marry and have issue, they doubtless would claim to be so entitled. If he should have no issue, but should make an appointment of the fund by will, the same questions would arise which have been stated in regard to the appointment made by William in his will. If he should die without issue and having made no appointment, it may be that

his estate or the estate of William would be

come entitled to the fund, and there might be a question between the creditors and the company as to their respective rights. But we do not know what the facts will be, and it would be useless to attempt to state the rules of law which will be applicable thereto. The remaining half of the sum found by the assessor must be included in the amount for which execution is to issue, but without interest. This whole amount will come into the hands of the new trustee, and will be administered by him under the direction of the probate court; and the rights of all parties, under whatever circumstances may arise, will then be passed upon and determined, and the accounts of the new trustee will be stated in that court. Cathaway v. Bowles, 136 Mass. 54; Cummings v. Cummings, 143 Mass. 340, 9 N. E. 730; Murray v. Wood, 144 Mass. 195, 10 N. E. 822; Ricketson v. Merrill, 148 Mass. 76, 19 N. E. 11; Thorndike v. Hinckley, 155 Mass. 263, 29 N. E. 579; Upham v. Draper, 157 Mass. 292, 32 N. E. 2; Green v. Gaskill, 175 Mass. 265, 56 N. E. 560; Fletcher v. Fletcher,

[9, 10] Judgment was entered for the penal sum of the bond, with interest thereon. If the amount for which execution is to issue exceeds that penal sum, this was correct. Harris v. Clap, 1 Mass. 308, 2 Am. Dec. 27; Warner v. Thurlo, 15 Mass. 154; Brighton Bank v. Smith, 12 Allen, 243, 90 Am. Dec. 144; White v. French, 15 Gray, 339; Bassett v. Fidelity & Deposit Co., 184 Mass. 210, 68 N. E. 205, 100 Am. St. Rep. 552; George H. Sampson Co. v. Commonwealth, 202 Mass. 326, 339, 88 N. E. 911; Rogers v. Abbot, 206 Mass. 270, 275, 92 N. E. 472, 138 Am. St. Rep. 394; Rowe v. Peabody, 207 Mass. 226, 237, 93 N. E. 604. It this was not so, we cannot say that it was wrong. Certainly the defendant was not aggrieved, for it can be held only for the amount for which execution is to issue. The defendant has not argued this point; but we cannot pass it over, for it was expressly reserved by the report for our consideration.

It follows that the judgment must be affirmed, and that execution must issue for the sum of $123,825.99.

So ordered.

The second case is a bill in equity, in which the company, the defendant in the first case, seeks to enjoin the prosecution of that action

farther than to ascertain the amount of the
deficit for which the Westons are responsible,
to enjoin the issue of any execution therein,
and to have a receiver appointed to hold the
interest of Henry E. Weston in the trust es-
tate so far as made good by the company, and
account to the company for the income there-
of during the life of Henry, and if he should
die without issue, to pay the principal to the
company. For the reasons already stated,
there are no grounds upon which these
prayers for equitable relief can be granted.
The bill is not supported by the decision in
Belknap v. Belknap, 5 Allen, 468. That did
not at all concern the liability or the rights
of a surety on a probate bond. It was a
dispute between a cestui que trust on one
side and on the other side the other cestui
was also the
the defaulting
que trust, who
trustee, and an assignee of his interest in
the trust estate. As applied to the facts of
this case, that decision goes merely to uphold
the contention that if Henry Weston had con-
tinued to hold the office of trustee, neither
he nor an assignee of his interest would have
been allowed, against the objection of the
other cestui que trust, to take any benefit of
the trust by receiving either commissions
or any part of either the income or principal
of the trust fund until he had made good his
default, and that neither he nor his assignee
could be heard to say that the surety on his
bond must make compensation therefor and

to come to him and leave his default to be | amount of stock as the board of commissioners made good by his surety.

In Stetson v. Moulton, 140 Mass. 597, 5 N. E. 809, the bill was brought after the facts had been settled and the equitable rights of the plaintiff had become vested, and the decision merely upholds the right of the surety to be subrogated to the rights and remedies which those whom he has been compelled to pay held against his principal. Both that

may from time to time deem reasonably neces sary, deals only with the issue of stock within the limit fixed by general law or special charter, and does not change that limit.

[Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 173-180, 449; Dec. Dig. § 66.*]

2. CORPORATIONS (§ 61*)-ISSUANCE OF STOCK
-STATUTES-CONSTRUCTION.

whether the first or any subsequent issue.
The statute applies to every issue of stock,

[Ed. Note.-For other cases, see Corporations, Cent. Dig. § 163; Dec. Dig. § 61.*1

-STATUTES-CONSTRUCTION.

case and the decision in Commonwealth v. Gould, 118 Mass. 300, 307, go to show that the present bill cannot be maintained. Nor can this plaintiff find any comfort in such 3. CORPORATIONS (§ 66*)-ISSUANCE OF STOCK cases as Ingersoll v. Coram, 211 U. S. 335, 29 Sup. Ct. 92, 53 L. Ed. 208, or Coram v. Davis, 209 Mass. 229, 95 N. E. 298, in which equitable claims against the shares (determined or to be determined in the probate court) of distributees in an estate in the course of administration were litigated. Here it has not been determined, it is not for us now to determine, and as to the share of which Henry Weston was to take the income it cannot now be determined by any court, who are the parties that will become entitled.

The only question is whether, under the prayer for further relief, the bill should be retained, as was done in Lenz v. Prescott, 144 Mass. 505, 11 N. E. 923, to secure to the plaintiff such rights as may come to it upon facts that may arise in the future. But the administration of the fund must be had in the probate court; and it is uncertain what facts will be hereafter developed. For example, it is not for us now to determine the liability to a succession tax of the property that has been appointed by William, or of that which will or will not be appointed by Henry. St. 1909, c. 527, § 8, and 1912, c. 678, § 3; Emmons v. Shaw, 171 Mass. 410, 50 N. E. 1033; Minot v. Treasurer and Receiver General, 207 Mass. 588, 93 N. E. 973, 33 L. R. A. (N. S.) 236; Attorney General v. Stone, 209 Mass. 186, 95 N. E. 395; Burnham v. Treasurer and Receiver General, 212 Mass. 165, 98 N. E. 603. Nor can we now declare the right of the parties to the fund, as was done in Holmes v. Holmes, 194 Mass. 552, 80 N. E. 614. No present ground is shown for equitable relief; and the decrees of the single justice sustaining the demurrers of the several defendants and dismissing the bill with costs must be affirmed. So ordered.

(214 Mass. 529)

FALL RIVER GAS WORKS CO. v. BOARD
OF GAS & ELECTRIC LIGHT COM'RS.
(Supreme Judicial Court of Massachusetts.
Suffolk. May 23, 1913.)

1. CORPORATIONS (§ 66*)-ISSUANCE OF STOCK
-STATUTES-CONSTRUCTION.

Rev. Laws, c. 109, § 24, providing that public service corporations shall issue only such

The legal effect of the statute, when considered in the light of the history of legislation on the subject, is to change the method of the issue of stock by public service corporato determine the general question of the reasontions, and to invest in public officers the right able necessity of the issue; but the general question of necessity of an issue must be decided in the first instance by the corporation cided on the same considerations, whether deitself or by the public officers.

[Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 173-180, 449; Dec. Dig. § 66.*]

4. CORPORATIONS (§ 66*)-ISSUANCE OF STOCK -STATUTES-CONSTRUCTION.

The decision of the board of commissioners on an application for the issuance of stock is final, unless based on some error of law. [Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 173-180, 449; Dec. Dig. § 66.*]

5. CORPORATIONS (§ 151*) - PUBLIC SERVICE CORPORATIONS-RIGHTS AND OBLIGATIONS.

A public service corporation must maintain a plant sufficient to perform the service for which it is established, and it has the right to have the plant fairly capitalized, and where it performs its duties it may distribute the surplus, if any, among its stockholders in dividends.

[Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 555-559; Dec. Dig. § 151.*]

(§ 66*)
6. CORPORATIONS
STOCKS AND BONDS
TION.

ISSUANCE

OF

STATUTORY REGULA

The board of gas and electric light commissioners, in determining whether a gas corporation shall issue additional stock to meet liabilities incurred in increasing the efficiency or value of its plant, cannot, under Rev. Laws, c. 109, § 24, providing that public service corporations shall issue only such amount of stock as the commissioners may deem reasonably necthe liabilities were incurred, which profits were essary, consider undivided profits at the time thereafter distributed as dividends.

[Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 173-180, 449; Dec. Dig. § 66.*1

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tributed as dividends.

the increase is not a violation of the provision | shares at the price of $185 per share and reagainst an issue of stock dividend, though the quired the proceeds, amounting to $101,750, expenses could have been paid by the funds dis- to be applied to the payment and cancellation of an equal amount of the notes. board stated, as its reason for imposing this limitation on the number of shares then to be

[Ed. Note. For other cases, see Corporations, Cent. Dig. §§ 173-180, 449; Dec. Dig. § 66.*]

Petition by the Fall River Gas Works Company presented to the Board of Gas & Electric Light Commissioners for leave to issue additional stock. The board dismissed the application, and the petitioner prayed

for certiorari. Writ issued.

Gaston, Snow & Saltonstall and Arthur A. Ballantine, all of Boston, for petitioner. J. M. Swift, Atty. Gen., and Frederic B. Greenhalge, of Boston, for respondent.

HAMMOND, J. The petitioner alleges in substance that the respondent board, hereinafter called the board, acting under R. L. c. 109, § 24, upon the application of the petitioner, hereinafter called the company, to the board for its approval of a proposed issue of additional stock, dismissed the application, being moved thereto by an erroneous view of the law, and prays that a writ of certiorari may issue to the end that the error may be corrected and the board directed to act upon the application in accordance with law. The board filed an answer in which was a return setting forth the record of its proceedings. By a reservation all questions of law arising upon the pleadings are before us, such entry to be made as law and justice may require.

There is little, if any, dispute about the facts. They are set forth in the return as follows:

"This is an application by the Fall River Gas Works Company for the approval of an issue of eleven hundred and fifty (1,150) shares of additional capital stock, of the par value of one hundred dollars each, at a price of two hundred and twenty-five dollars a share, as determined by the directors, for the payment of the company's obligations already incurred for construction and for future additions to plant.

The

issued, that there were 'available funds for the payment of a large portion of this debt.' The notes outstanding on June 30, 1906, amounted to $217,000. The new stock was issued in October and November, 1906.

"During the period covered by the plant expenditures stated above, the operating profits amounted to $1,085,763.06. The regular dividends, at the rate of 10 per cent. prior to June 30, 1908, and 12 per cent. annually thereafter, required $552,050, leaving for net earnings above such dividends $533,713.06. These net earnings exceeded by $226,417.90 the cost of the additions to plant after applying thereto the proceeds of the stock approved in 1906. Interest payments during the same time amounted to $32,038.51 and other minor charges to $27,467.45. During this period the company, in addition to the dividends above referred to, declared two extra dividends, one of 20 per cent. in July, 1907, and one of 15 per cent. in December, 1910, requiring for this distribution the sum of $241,500. The notes payable at the close of the year 1911 were within about $40,000 of the amount required for the extra dividends described, and the conclusion seems irresistible that, but for the declaration and payment of these extra dividends, these notes would not now exist."

Shortly stated, the facts in substance are that the company after paying dividends at the rate of 10 or 12 per cent. per annum, had remaining as profits an amount exceeding the outstanding obligations incurred in making the addition to the plant, and that instead of applying these profits to the discharge of these obligations it distributed them among its stockholders in the form of two extra dividends of 15 and 20 per cent. respectively.

Upon this showing the board dismissed the petition, stating the reasons for its action in the following language:

"Section 20 of chapter 109 of the Revised Laws provides that no gaslight company 'shall declare any stock or scrip dividend or divide the proceeds of the sale of stock or scrip among its stockholders.' If the out

"On December 31, 1911, the company had outstanding promissory notes amounting to $200,000, and it is to the payment of these notes and to proposed subsequent expenditures of about $40,000 for new plant that the proceeds of the new stock named in the company's petition are to be applied. Be-standing notes were issued for the express tween June 30, 1904, and December 31, 1911, the company's total expenditures for additions to plant were $409,045.16. Of this amount, $154,192.27 was expended prior to June 30, 1906. In August of that year, upon the application of the company for the approval of an issue of 1,150 shares of new stock to meet the cost of additions to its plant which had been completed, and was included in its promissory notes on June 30th, the board approved of the issue of 550

purpose of providing for these dividends, to issue stock for their payment would be a plain violation of this provision. Where net earnings are of such volume that they may readily supply the funds for all needed additions to plant, but the company, rather than so apply them, divides all these earnings among its stockholders and provides for additions by outstanding loans to be thereafter capitalized, the prohibition of the statute, if strictly construed, may perhaps be avoided.

But by the persistent pursuit of such methods be in writing, shall assign the reasons thereit is obvious that through a maintenance of prices necessary to produce such earnings, a company not only may compel the public to contribute all the additional investment required for the business, but also may have this contribution permanently represented by capital stock. Such a course, in the judgment of the board, is not only contrary to the public interest, but, even if it be not an actual evasion of the law cited, is a clear violation of its spirit and of the policy it is intended to declare.

"At the close of the year 1911 the company's accounts receivable amounted to nearly $50,000 and it had on hand upwards of $30,000 of supplies and $87,000 in cash. There is every reason to believe that the company's income will afford ample provision, in addition to its regular dividends, for the plant additions proposed subsequent to December 31, 1911, and render a new issue of stock unnecessary for that purpose.

"Whenever, because of increased costs not now apparent or of future reductions in the price of gas, profits shall appear inadequate for the reasonably necessary purposes of the corporation, the question of a new stock issue will be entitled to further consideration."

It nowhere appears that the board questioned the propriety or reasonable necessity of the additions to the plant made or to be made, or that the amount expended and to be expended therefor represents their cost and real value; and the fair construction of the answer and return is that making no question as to these matters the board dismissed the petition solely upon the grounds set forth in the return. And the question is whether there was error of law in dismissing the petition on those grounds.

for, shall, if authorizing such issue, specify the respective amounts of stock or bonds, or of coupon notes or other evidences of indebtedness as aforesaid, which are authorized to be issued for the respective purposes to which the proceeds thereof are to be applied, shall, within seven days after it has been rendered, be filed in the office of the board or commissioner rendering it and a certificate of the vote of the board or of the decision of the commissioner shall, within three days after such decision has been rendered and before the stock or bonds or coupon notes or other evidences of indebtedness as aforesaid are issued, be filed in the office of the secretary of the commonwealth, and a duplicate thereof delivered to the corporation which shall enter the same upon its records. A company which is within the provisions of this section shall not apply the proceeds of such stock or bonds or coupon notes or other evidences of indebtedness as aforesaid to any purpose not specified in such certificate."

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The case turns upon the true construction of this statute. The contentions of the petitioner are (1) "that the board has no general jurisdiction to refuse to approve an issue of capital stock merely upon the general ground that in its opinion such issue is 'contrary to the public interest,' or (2) upon the specific ground "that the company could secure or could have secured from earnings the funds sought to be thereby raised," and still further (3) that "the issue of additional capital stock as proposed for its fair market value in cash to secure funds to pay for additions to plant which might have been paid for by earnings, which earnings were used in part for extra dividends to stockholders, is not a * * stock dividend and is not contrary either to the letter or to the spirit and policy of the statutory prohibition of stock dividends."

R. L. c. 109, § 24, so far as material to this inquiry is as follows: "Railroad corporations and street railway companies shall issue only such amounts of stock and bonds, coupon notes and other evidences of indebt- The contention of the Attorney General, edness payable at periods of more than twelve who appears for the board, is that the board months after the date thereof, and gas and is vested with a discretion to refuse to apelectric light companies, corporations estab-prove an issue of stock if it does not "deem lished for and engaged in the business of such issue reasonably necessary to secure the transmitting intelligence by electricity, aqueduct and water companies, shall issue only such amount of stock and bonds, as the board of railroad commissioners in the case of railroad corporations or street railway companies, the board of gas and electric light commissioners in the case of gas and electric light companies, may from time to time vote, or the commissioner of corporations in the case of the other corporations hereinbefore specified may from time to time determine, is reasonably necessary for the purpose for which such issue of stock or bonds has been authorized. Said boards or commissioner shall render a decision upon an application for such issue within thirty days after the

funds to meet the expenses set forth in the application, notwithstanding that the purposes for which such expenses have been incurred or are to be incurred are lawful, and that the proceeds of the issue applied for would yield no more than is reasonably necessary in amount to meet such expenses," or in other words, that the board has "jurisdiction to determine not only whether or not the amount to be raised by an issue of stock or bonds is reasonably necessary for the purposes indicated, but also whether the issue itself is reasonably necessary therefor," or, stated in another way, that "the words reasonably necessary' are to be construed as applying to the issue of stock or bonds as

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