Counsel will recall the manner in which the foregoing facts were presented. When the final hearing was moved, counsel on both sides desired to take the opinion of the court upon the question of law which appears so prominently on the face of the bill before proceeding- to offer proofs. In considering and deciding this question, I have taken as true the undisputed and acknowledged facts set out in the bill. If after reading my conclusions counsel desire to submit proofs, I will fix a day for that purpose.
The case, as now presented, must be adjudged in accordance with the well-settled principles of the Contract Ia,w which apply to corporate action. The complainant can succeed only by showing either an express contract or a contract which may be implied from the documents in the case, or an obligation or duty cast upon the defendant by the law, for the protection of what the complainants claim to be tlieir right. A careful examination of the amended certificate of incorporation discloses no express contract on the part of the defendant to provide any such fund as the complainants desire to have established. This the complainants concede, but they say that taking together the Brownsville Company contract, the amended certificate of incorporation, and the stock certificates which were issued to the complainants out of all these writings, arises an implied contract to establish such a fund. The documents must be construed with reference to the common and ordinary meaning of the words. I have sought therein to find facts from which a contract might be implied, but have not succeeded. I must therefore say that there is nothing in the documents in the case - which indicates to the slightest degree any purpose on the part of either the complainants or the defendant to establish a deficiency fund for the benefit of the preferred stockholders.
On the other hand, still treating the case as a ease of contract, we find that the amended certificate of incorporation expressly provides for a situation quite at variance with that sought to be established by the complainants; it provides for the preferential dividends “before any dividends shall be set apart or paid on the common stock. The remainder of said net earnings shall be de*503dared as dividends upon the common stock.” The same genera] idea is expressed in the stock certificates which the complainants hold; there the phrase is “the remaining net earnings shall be available for the purpose of dividends upon the common stock.” If these words mean anything it is that the preferred stockholders bargained for a stated dividend and consented that all the remaining net earnings or profits might be divided among the common stockholders.
But it is said on the part of the complainants that the amended certificate and the certificates of stock do not coincide entirely with what the defendant agreed to give to the Brownsville Company by tlio contract. This may be true; there are verbal variations which may or may not be important. But this is not a case for the reformation of the contract or for the correction of any errors or mistakes winch may have crept into the transaction between the two companies. The Brownsville Company, and through it the complainants, accepted the certificates of stock tendered to them by the defendant in the form in which they are without objection thereto and without objection to the form of the charter amendment which authorized the issue, and to this extent they ratified any variation that may exist between the terms of the Brownsville Company contract on the one hand and the amended certificate of incorporation and the stock certificates on the other hand.
It is obvious that the Brownsville Company and the complainants might have protected themselves by their contract, but no mention of a deficiency fund or sinking fund appears in the negotiations or in the contract itself. I think therefore that under-the contract the defendant is not bound to make any provision of the character demanded by the complainants.
But it is urged that a duty or obligation is cast upon the dofendant by the law to see to it that in case of dissolution at some distant and indeterminate period of time, the current assets of the corporation shall he maintained at such a value over and above the liabilities as will protect the complainants. There is no statutory warrant for this contention, nor do the complainants’ counsel call my attention to any case in which such a posi*504tion was taken and was maintained. On the contrary, the principle seems to have been decided by the English court of appeal in Lee v. Neuchatel Asphalt Co. (1889), 41 C. D. 1; 58 L. J. Ch. 408. That was a bill by a common stockholder to restrain a corporation from paying a dividend out of profits for a certain year upon the ground that the fixed capital of the company was an asphalt deposit which was being reduced from day to day and so became what was termed a wasting asset, the theory being that if the dividends continued the fixed capital would be eventually entirely consumed in dividends. It was decided that when the assets of a company are in the nature of a wasting character depreciated by efflux of time or exhaustion of material, such as mines, patents ox leaseholds, if, for the purpose of carrying on the business of the company and getting a profit the annual consumption of that capital is necessary, then apart from any regulation in the articles, there is no obligation by law or statute, to create a reserve fund out of revenue to recoup the wasting nature of the capital, and that the division among the shareholders of the surjDlus produced from such wasting property, after retaining enough to pay the company’s creditors, is not a return of capital and as such prohibited by the statute.
This case did not reach the house of lords, nor has the principle been decided, so far as I can find, by the English court of last resort, but it has been followed and approved in many cases, and its principle is practically adopted by our court of errors and appeals in the case of Goodnow v. American Writing Paper Co., 73 N. J. Eq. (3 Buch.) 692.
This appears to me to be decisive of the case as now presented; if there are no other facts than those which are here mentioned, the defendant must have the decree.