CHAP. IX.] CORPORATION AND SHAREHOLDERS. [§ 563. business, its decision would probably rest with the body corpo- rate ; and if the extension is within the powers of that body, and a majority in a duly summoned meeting decide in favor thereof, the minority cannot prevent the application of the corporate funds thereto. 1 § 563. A court of equity, however, may interfere when there is a palpably wrongful refusal to declare a dividend ;« Butcourts especially when a certain percentage of dividends is promised or guaranteed on certain shares. " While, as a general rule, courts of equity will not exercise visitorial powers over a corporation, and its officers are the sole judges of the propriety of declaring dividends, and in this respect the court will not interfere with a proper exercise of their discretion, yet where the right to the dividend is clear and fixed by the contract, and requires the directors to take action before it can be asserted in a court of law, 3 and a restraint by injunction is essential to maintain the right of the stockholder, the injunction of a court of equity is a proper exercise of its power, and should be upheld. 4 In general it may be said, with regard to the payment of divi- dends on preferred shares, that the decision of the directors is not conclusive ; and if the corporation has funds applicable to the payment of dividends, preferred shareholders may compel will some- times interfere, especially in favor of preferred share- holders. 1 See Durfee v. Old Colony, etc., R. R. Co., ante, § 534. 2 Scott v. Eagle Fire Co., 7 Paige (N. Y.), 198, 203. See Beers v. Bridgeport Spring Co., 42 Conn. 17; Browne v. Monmouthshire R'y Co., 13 Beav. 32. If the body corporate by vote in- structs the directors to pay a divi- dend at some future day specified, if the corporation shall then have sufficient funds applicable to the payment of dividends, though a court will give due weight to the decision of the directors on the point of the corporation's ability to pay the dividend, the court will not treat that decision as conclusive. Barn- ard v. Vermont, etc., R. R. Co., 7 Allen, 512; Richardson v. Railroad Co., 44 Vt. 613. 3 In general, a shareholder can- not sustain an action for a dividend without proof of a making of the dividend and a demand of payment. Scott v. Central Railroad, etc., Co., 52 Barb. 45. 4 Boardman v. Lake Shore, etc., Ry. Co., 84 N. Y. 157, 180. See Park v. Grant Locom've Wks., 40 N. J. Eq. 114. Where the certificate of incorporation provides for dividends at a certain rate on the preferred stock and the share certificates are so issued, a stockholder may enjoin the alteration of the organization certificate which reduces the divi- dend rate. Pronick v. Spirits Dist. Co., 58 N. J. Eq. 97. 569
