show by competent proof that he has sustained damages by reason of the breach complained of; otherwise he will be limited in his recovery to merely nominal damages. Boyd v. De Lancey (1895) 91 Hun, 542, 36 N. Y. Supp. 245. In the absence of competent evidence of the value of the land at the time of the breach, a verdict for more than nominal damages is without support. Mooring v. Warnock (1924) 95 W. Va. 539, 121 S. E. 732. It is held in Hennershotz v. Gallagher (1889) 124 Pa. 1, 16 Atl. 518, that where there is no evidence of the value of the land except the contract price, no part of which has been paid, the vendee in an action for breach of the contract to convey can recover only nominal damages. In Sutton v. Page (1849) 4 Tex. 142, where the vendee was limited in his recovery of damages to the amount paid, and interest thereon, it is pointed out that he did not allege that the land had become enhanced in value at the time of the breach, or any other fact or circumstance to entitle him to special damages. But where there is no evidence of any change in the value of the land, the consideration paid, and interest, will be taken as the correct value. Where, however, there is evidence of a change in the value, the value of the land when the conveyance ought to have been made will furnish the standard of damages recoverable by the vendee. Kirkpatrick v. Downing (1874) 58 Mo. 32, 17 Am. Rep. 678. In Munson v. McGregor (1908) 49 Wash. 276, 94 Pac. 1085, where the vendor put it out of his power to perform by conveying to an innocent third person, and there was evidence tending to show that the property was worth at different times a sum considerably in excess of the contract price, but the value was fluctuating, it was held that the best evidence of the market value was the price the vendor received for it, when he sold pending his contract with the plaintiff. Where there is no evidence as to the value of the land which is the subject of the contract at the time fixed for performance, the vendee is limited to a recovery back of the amount which he has paid upon the purchase price, together with interest. Francis v. Brown (1915) 22 Wyo. 528, 145 Pac. 750. On rehearing, the court adhered to this doctrine, but held that it should not apply to the case before it, for the reason that the exception to the instruction of the trial court as to measure of damage was not sufficiently broad to raise the question as to what the true measure of damage should be; the measure of damage applied in the case by the trial court was the difference between the contract price and the market value of the land at the time of the breach. In Donath v. Germanía Land Co. (1898) 25 Misc. 641, 56 N. Y. Supp. 313, where no damages were shown except by evidence as to the amount paid on the purchase price, the recovery was limited to this amount, although the breach was due to the fact that the vendor disabled himself from performing. In Armstrong v. James (1920) Tex. Civ. App. —, 220 S. W. 420, where the only payment upon the purchase price of land was by a check, which the vendor returned to the vendee after finding himself unable to obtain title so as to convey the land in accordance with his contract, it was held that in an action by the vendee to recover damages for breach of the contract, in the absence of evidence of any special damage sustained, the court properly instructed a verdict for the defendant. A. G. S. (12 F. (2d) 671.) JAMES C. COLLINS V. PORTLAND ELECTRIC POWER COMPANY et al. WILLIAM B. KURTZ et al. V. JAMES C. COLLINS et al. JAMES C. COLLINS V. WILLIAM FULTON KURTZ et al., Exrs., etc., of William B. Kurtz, De ceased. United States Circuit Court of Appeals, Ninth Circuit (12 F. (2d) 671.) ·April 30, 1926. Corporations, § 255 — appropriation of profits to preferred dividends. 1. Where profits applicable to payment of dividends on noncumulative preferred stock of a corporation are made in a particular year without declaration of the dividend, and they are not devoted to some corporate purpose, the directors may in a subsequent year appropriate them to the passed dividend. [See annotation on this question beginning on page 80.] Corporations, § 226 - preference of preferred stock. 2. Preferred stock in a corporation does not represent a debt or a pledge of profits in favor of holders thereof, in preference to others. [See 7 R. C. L. 201; 2 R. C. L. Supp. 311; 5 R. C. L. Supp. 395; 6 R. C. L. Supp. 435. See also annotation in 6 A.L.R. 813.] Corporations, § 256-duty to declare dividends. 3. A declaration of a dividend out of net profits of a corporation, contrary to the judgment of the directors, is not required by the fact that they have guaranteed payments of dividends on preferred shares, under a statute permitting a guaranty of such dividends payable cumulatively out of net profits. [See 7 R. C. L. 285.] Corporations, § 255 cumulation of preferred dividends. 4. The right of preferred shareholders of a corporation to dividends is ordinarily confined to the profits in each particular year, and unless it is expressly so provided such dividends do not accumulate, so that, if they can not be paid in any year, they are not chargeable on the profits of the succeeding year so as to be payable thereout, to the prejudice of common stockholders. [See 7 R. C. L. 287; 2 R. C. L. Supp. 341. See also annotations in 6 A.L.R. 824; 13 A.L.R. 426.] Corporations, § 255 provision against cumulation of dividends effect. 5. The provision in a corporate charter that dividends shall not be cumulative is not conclusive of the question of the rights of preferred stockholders to dividends out of cumulative earnings. Corporations, § 255 effect of provision for payment of six months' dividend. 6. A provision in articles of incorporation fixing a dividend rate at a specified percentage upon noncumulative preferred stock, that dividends may be paid upon the common stock, provided dividends upon the preferred stock at the prescribed rate have been paid for a period of six months immediately preceding the day on which the common stock dividend is paid, does not impair the primary right of the preferred stockholder to payment of the full yearly dividend, if earned, so as to authorize the directors to split the earned dividend and pay on the preferred stock at the prescribed rate for six months and appropriate the residue to the common stock. CROSS APPEALS from a decree of the District Court of the United States for the District of Oregon (Wolverton, J.) in favor of complainant in suits brought to enjoin the payment of certain dividends alleged to have been unauthorized under the defendant company's charter and the stock contracts; complainant appealing from so much of the decree as denied relief as to dividends declared upon second preferred stock for 1921 and 1923; and cross complainant appealing from the portion of the decree enjoining payment of dividends upon preferred stock for the year 1920. Affirmed. Statement by Gilbert, Circuit J.: Prior to July 1, 1915, the Portland Electric Power Company had outstanding but one class of stock, its common stock. On that date it created and issued two new classes of stock, its 6 per cent preferred stock and its 6 per cent second preferred stock. In 1921 it created its 7 per cent prior preference stock, and in 1924 its 7.2 per cent first preferred stock. On March 27, 1925, its board of directors declared a dividend of one-half of 1 per cent upon its second preferred stock for the year 1920, a like dividend upon such stock for the year 1921, and a like dividend thereon for the year 1923, a previous dividend of 1 per cent. having been declared and paid upon such second preferred stock for the year 1923. The articles of incorporation, after providing for dividends upon prior preference stock and first and first preferred stock out of the surplus or net profits before any dividends shall be set apart for or paid upon the second preferred stock or the common stock, provide as follows: "The dividend upon the prior preference stock of every series and the first preferred stock shall be cumulative, but accumulations of dividends shall not bear interest. The holders of the second preferred stock are entitled to receive, when and as declared, out of the surplus or net profits of the company dividends at the rate of 6 per cent per annum, payable as the board of directors may determine, before any dividends shall be set apart for or paid upon the common stock. The dividends upon the second preferred stock shall not be cumulative. The board of directors may pay dividends upon the first preferred stock provided the dividends upon the prior preference stock, with all accumulations, including accrued dividends to the date of payment of the first preferred stock dividend, shall have been paid in full or a sum sufficient for the payment thereof shall have been set apart for that purpose, but not otherwise and may pay dividends upon the second preferred stock, provided the dividends upon the prior preference stock and upon the first preferred stock, with all accumulations including accrued dividends to the date of the payment of the second preferred stock dividend, shall have been paid in full, or a sum sufficient for the payment thereof shall have been set apart. for that purpose, but not otherwise, and may pay dividends upon the common stock, provided the dividends upon the prior preference stock and upon the first preferred stock with all accumulations, including accrued dividends, to the date of the payment of the common stock dividend, and dividends on the second preferred stock at the rate of 6 per cent per annum for a period of six months immediately preceding the day on which the common stock dividend is paid, shall have been paid in full, or a sum sufficient for the payment thereof shall have been set apart for that purpose, but (12 F. (2d) 671.) not otherwise. The holders of the common stock are entitled to receive all additional surplus or net profits distributed in dividends after the dividends above provided for shall have been paid or set apart." The appellant, a holder of common stock, brought suit to enjoin the payment of the dividends so declared on the ground that they were unauthorized under the company's charter and the stock contracts. On April 23, 1925, the board of directors declared a cash dividend of 10 cents a share on the common stock of the company for the year 1924, payable June 1, 1925. The cross appellants being second preferred stockholders, joined in a suit against the company to enjoin the payment of that dividend. The court below held the appellant entitled to the relief prayed for as to the dividend of one-half of 1 per cent upon the second preferred stock for the year 1920 and enjoined the payment thereof out of the surplus of net profits for the year 1920, on the ground that the said profits were no more than sufficient to pay prior charges thereon, but denied relief which the appellant prayed for as to dividends for the years 1921 and 1923. At the suit of the holders of the second preferred stock the court enjoined the payment of the dividend of 10 per cent per share declared upon the common stock out of the net profits of the year 1924, on the ground that the charter and stock certificates required that dividends be declared upon the preferred stock out of the surplus of the earnings for the year 1924 before any dividend may be set apart upon the common stock. In the first suit the appellant appeals from that portion of the decree which denies the relief he prayed for as to the dividends declared upon the second preferred stock for 1921 and 1923. The holders of the second preferred stock appeal from the portion of the decree which enjoins the payment of the dividend upon that stock for the year 1920. The appellant also ap peals from the decree rendered against him in the second suit. Argued before Gilbert, Hunt, and Rudkin, Circuit Judges. Messrs. Earl C. Bronaugh and Robert T. Swaine, for complainant: The dividends declared by the board of directors upon the second preferred stock for the years ending December 31, 1920, 1921, and 1923, are wholly unauthorized. Scott v. Baltimore & O. R. Co. 93 Md. 479, 49 Atl. 327; New York, L. E. & W. R. Co. v. Nickals, 119 U. S. 296, 30 L. ed. 363, 7 Sup. Ct. Rep. 209, 21 Blatchf. 177, 15 Fed. 575; Henry v. Great Northern R. Co. 1 De G. & J. 606, 44 Eng. Reprint, 858; Lockwood v. General Abrasive Co. 210 App. Div. 141, 205 N. Y. Supp. 511; Johnson v. Johnson & Briggs, 138 Va. 487, 122 S. E. 100; Norwich Water Power Co. v. Southern R. Co. (Va. Law & Eq. Ct.; June 27, 1926); Conyngton, Corporate Organization, 3d ed. p. 97; Machen, Corp. 1908 ed. § 561; Cook, Corp. § 273; 1 Cook, Corp. 8th ed. 920; Cotting v. New York & N. E. R. Co. 54 Conn. 156, 5 Atl. 851; Hazeltine v. Belfast & M. L. R. Co. 79 Me. 411, 1 Am. St. Rep. 330, 10 Atl. 328; Burk v. Ottawa Gas & E. Co. 87 Kan. 6, 123 Pac. 857, Ann. Cas. 1913D, 772. The common stockholders are entitled to the dividend upon the common stock declared by the board of directors April 23, 1925. Norwich Water Power Co. v. Southern R. Co. (Va. Law & Eq. Ct.; June 27, 1926); Day v. United States Cast Iron Pipe & Foundry Co. 95 N. J. Eq. 389, 123 Atl. 546. Messrs. Paul C. Wagner, Henry A. McCarthy, Percy H. Clark, and Joseph S. Clark, for cross complainants: Out of the surplus net profits of each year, an amount equal to the noncumulative preferred dividend provided for in the charter, or whatever part of such dividend has been earned, less whatever dividend has been declared and paid or set apart upon the noncumulative preferred stock, although it may be used in the corporate business, must be segregated on the books for the benefit of such preferred stock. It can never be distributed as dividends to the common stock. Staples v. Eastman Photographic Materials Co. L. R. 2 Ch. Div. 303; Dent v. London Tramways Co. L. R. 16 Ch. Div. 344; New York, L. E. & W. R. Co. v. Nickals, 119 U. S. 296, 30 L. ed. 363, 7 Sup. Ct. Rep. 209, 21 Blatchf. 177, 15 Fed. 575; Belfast & M. L. R. Co. v. Belfast, 77 Me. 445, 1 Atl. 362; Hazeltine v. Belfast & M. L. R. Co. 79 Me. 411, 1 Am. St. Rep. 330, 10 Atl. 328; Star Pub. Co. v. Ball, 192 Ind. 158, 134 N. E. 285; Bassett v. United States Cast Iron Pipe & Foundry Co. 74 N. J. Eq. 668, 70 Atl. 929, 75 N. J. Eq. 539, 73 Atl. 514; Day v. United States Cast Iron Pipe & Foundry Co. 95 N. J. Eq. 389, 123 Atl. 546, affirmed in 96 N. J. Eq. 736, 126 Atl. 302; 1 Machen, Corp, § 551; Cotting v. New York & N. E. R. Co. 54 Conn. 156, 5 Atl. 851. Messrs. Griffith, Peck, & Coke for defendant company. Gilbert, Circuit Judge, delivered the opinion of the court: The two suits present the same controversy from the viewpoint of diverse interests. They were heard together in the court below, and by the appeals and the cross-appeal they are brought to this court and are here presented as a single controversy. It is the contention of the crossappellants that their stock contract gives them the right to receive dividends in preference to the common stock at 6 per cent per annum out of the earnings of each year, and that the contract, notwithstanding the clause, "shall not be cumulative," creates a mandatory charge upon the annual earnings of the company as if it read, "shall be cumulative to the extent that such dividends are earned in each year," and that dividends may not be paid in any year upon the common stock until all these dividends upon second preferred stock have been paid, and this notwithstanding the express provision of the contract that the company may pay dividends on the common stock provided dividends on the second preferred stock at the rate of 6 per cent per annum for a period of six months immediately preceding the date of the payment of the common stock dividend shall have been paid. On the other hand, it is the contention of the appellant that no part of the unpaid dividend on the noncumulative second preferred stock shall accumulate from year to year, whether or not the company had earnings from which the directors might in their discretion have paid dividends upon that stock, and that the stock contract expressly permits the declaration of dividends upon the common stock as against holders of the second preferred stock upon the fulfillment of the single condition of the payment of dividends on the noncumulative second preferred stock at the rate of 6 per cent for six months immediately preceding that date, irrespective of the accumulations of the noncumulative dividends. It was shown that the corporation earned for the year 1920 $187,545 in excess of the full dividends for that year upon all stocks having priority over the second preferred stock, and that for the year 1921 the company earned more than $300,000 in excess of all dividends for that year having priority over the second preferred stock, and for the year 1923 earned a like sum, out of which two dividends upon the second preferred stock of $75,000 each were paid at the close of that year and on March 1, 1924, so that they received $150,000 out of the earnings of 1923. The controversy between the parties on this appeal is narrowed to the issue whether dividends upon the second preferred stock are lost if not declared and paid within the year, notwithstanding that there may have been earnings sufficient to pay all or part thereof, or whether the fact that the earnings were made gave to the holders of the second preferred stock a positive right to dividends out of the said earnings, with the result that the directors might lawfully declare and pay such dividends in subsequent years. Upon this issue the respective parties rely largely upon the same decisions, but they derive contrary conclusions therefrom. The mere designation of stock as preferred has little significance. Its meaning depends upon the con |