The opinion
SIMONS, Circuit Judge
(concurring).
Were the character of the so-called preferred shares in this cause to be determined solely by the terms of the instruments and admitted facts, I should be unable to agree that they represented a debt and not an interest in the capital assets of the taxpayer. This conclusion is based upon the apparently unequivocal refusal of the taxpayer to execute to its vendors a promissory note or definite obligation of like nature, on the ground that such obligation would have to be set up on the liability side of the taxpayer’s balance sheet, and would affect its credit. Moreover, notwithstanding a fixed maturity date, which, while some evidence of a debt obligation is not conclusive, the instruments here involved contain no provision for the enforcement of dividend payments in case of default, except the cumulative provision, *996 leaving the inference clear that they were not intended to be otherwise enforced. Moreover, the dividends were not payable in any event, but only as and when declared. These are criteria of preferred stock rather than indicia of a debt obligation.
We have consistently held that while the designating of securities as preferred stock is not conclusive upon the status of the holder, yet what the parties in a given case have called the subject of the contract is of no little significance in determining their purpose, and where the purpose authorized and the purpose declared is the issue of stock and not the creation of a debt, the intention to create a debt should be clear and convincing. Hamlin v. Toledo S. L. & K. C. R. Co., 6 Cir., 78 F. 664 , 36 L.R.A. 826 ; Matthews v. Bradford, 70 F.2d 77 ; Vanden Bosch v. Michigan Trust Co., 6 Cir., 35 F.2d 643 ; In re Phœnix Hotel Company of Lexington, D.C., 83 F.2d 724 . The approach to related problems by the courts of Ohio has been similar. Miller, Executor, v. Ratterman, 47 Ohio St. 141 , 24 N.E. 496 .
The two cases cited by the appellee which come closest to the present controversy upon their facts, are easily distinguishable. In Arthur R. Jones Syndicate v. Com’r, 7 Cir., 23 F.2d 833 , the necessities of a borrower led him to the door of the usurer who compelled him not only to pay an usurious rate of interest but required that he aid him to conceal the usury and avoid its consequences by denominating the evidence of indebtedness preferred stock. Clearly the actual situation there disclosed required the adjudication of the instruments as evidence of indebtedness. In Com’r v. Proctor Shop, Inc., 9 Cir., 82 F.2d 792 , there was a provision in the instruments that failure of the corporation for a period of two years to pay any quarterly interest, as the same became due and payable, entitled the owners thereof to declare the principal amount of the certificates due and to institute action for their par value and the accumulated interest. This provision was clearly incompatible with a holding that the obligations represented a stock interest rather than a debt..
We are, however, precluded from determining the meritorious question solely upon the terms of the so-called preferred shares. There was other evidence to show the intention of the parties, but it has not been brought to us for consideration. The trial court held the instruments to be evidence of a debt. Assuming this to be a finding of an ultimate fact in the determination of which we may exercise our own judgment, Helvering v. Tex-Penn Oil Co., 300 U.S. 481 , 57 S.Ct. 569 , 81 L.Ed. 755 ; Bogardus v. Com’r, 302 U.S. 34 , 58 S.Ct. 61 , 82 L.Ed. 32 , we are unable, in the absence of a complete record, to determine whether the inferences to be drawn from the terms of the instruments have or have not been successfully rebutted. Rule 52(a) of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, requires that findings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses. In the absence of the evidence upon which the court made its findings we are unable to say that they were clearly wrong. Sublette et al. v. Servel, Inc., 8 Cir., 124 F.2d 516 . I am therefore of the opinion that the judgment below should be affirmed.