Pennsylvania Co., for Ins., on Lives and Grantlng Annuities v. Cox

• Decision Date: 19 April 1938
• Court: United States State Supreme Court of Delaware
• Parties: THE PENNSYLVANIA COMPANY FOR INSURANCES ON LIVES AND GRANTLNG ANNUITIES, a Pennsylvania Corporation, and A. MERRITT TAYLOR, Trustees under the will of John Sellers, Jr., Deceased, and FRANK S. GARRETT, Holders of Common Stock of Edge Moor Iron Company, a dissolved corporation of the State of Delaware, Appellants, v. FRANK G. COX and JOHN H. SHIVELY, Receivers by appointment of the Chancellor of the State of Delaware of said Edge Moor Iron Company, Petitioners Below, and FRANK G. COX, JOHN H. SHIVELY and WILMINGTON TRUST COMPANY, a Delaware Corporation, Trustees under the Will of William F. Sellers, Deceased, holders of preferred stock of said Edge Moor Iron Company, and EDGE MOOR IRON COMPANY, a dissolved corporation of the State of Delaware, and HELEN S. GARRETT, Appellees

199 A. 671

23 Del.Ch. 193

THE PENNSYLVANIA COMPANY FOR INSURANCES ON LIVES AND GRANTLNG ANNUITIES, a Pennsylvania Corporation, and A. MERRITT TAYLOR, Trustees under the will of John Sellers, Jr., Deceased, and FRANK S. GARRETT, Holders of Common Stock of Edge Moor Iron Company, a dissolved corporation of the State of Delaware, Appellants, v. FRANK G. COX and JOHN H. SHIVELY, Receivers by appointment of the Chancellor of the State of Delaware of said Edge Moor Iron Company, Petitioners Below, and FRANK G. COX, JOHN H. SHIVELY and WILMINGTON TRUST COMPANY, a Delaware Corporation, Trustees under the Will of William F. Sellers, Deceased, holders of preferred stock of said Edge Moor Iron Company, and EDGE MOOR IRON COMPANY, a dissolved corporation of the State of Delaware, and HELEN S. GARRETT, Appellees

Supreme Court of Delaware

April 19, 1938

APPEAL from a decree of the Court of Chancery.

Edge Moor Iron Company, a Delaware Corporation was in process of dissolution. Frank G. Cox and John H. Shively, were, on December 18, 1935, appointed receivers by the Chancellor.

In 1919, the charter of the company was amended so as to provide for the issuance of preferred stock, the pertinent provisions of the amendment being as follows:

"The preferred stock shall primarily receive dividends, when and as declared out of the surplus or net earnings of the corporation, at the rate of six per centum per annum, payable semi-annually on the first day of April and October in each year; the dividends on the preferred stock shall be paid or set apart before any dividend shall be paid on the common stock. In the event of any liquidation or dissolution or winding up of the Company, whether voluntarily or involuntarily, the holders of the preferred stock shall be paid in full the par value of their shares with all unpaid dividends thereon to the date of such payment before any amount shall be paid to the holders of the common stock. The preferred stock shall be subject to redemption in whole or in part, at One Hundred and Two Dollars and Fifty Cents per share on the first day of April, nineteen hundred and twenty or on the first day of April or October at any time thereafter. If less than the whole number of preferred shares shall be redeemed at any time, the shares to be redeemed shall be selected by the treasurer of the Company by lot; or in such other manner as the Board of Directors may determine. Both the preferred and common stock of the corporation shall be entitled to vote on all questions coming before the stockholders.

"The common stock shall be entitled to receive all other dividends that may be declared by the Board of Directors from surplus or net earnings, but no such dividends shall be payable until after the dividends shall be paid on the preferred stock."

At the time of the amendment, Section 13 of the General Corporation Law (Revised Code 1915, Sec. 1927, as amended by 29 Del Laws, c. 113, Sec. 7) was, in part, as follows:

"Every corporation shall have power to create two or more classes of stock, with such designations, preferences and voting powers or restrictions or qualifications thereof, as shall be stated and expressed in the certificate of incorporation; and the power to increase or decrease the stock, as in this act elsewhere provided, shall apply to any or all of the classes of stock. Any or all classes of preferred stock may, if desired, be made subject to redemption at such time or times and at such price, not less than par, as may be expressed in the certificate of incorporation or an amendment thereof; and the holders of any preferred stock shall be entitled to receive and the corporation shall be bound to pay thereon dividends at such rates and on such conditions as shall be stated in the certificate of incorporation, or an amendment thereof, payable quarterly, half-yearly or yearly, before any dividends shall be set apart or paid on the common stock; and when any such quarterly, half-yearly or yearly preferred dividend shall have been paid or set aside as herein provided, a dividend upon the common stock may then be paid out of the remaining surplus or net profits of the company; and such preferred dividends may be made cumulative * * *."

At the time of the appointment of the receivers, the corporation had issued and outstanding preferred and common stock. Regular semi-annual dividends on the preferred stock were paid by the company on the preferred stock until April 1, 1932, when it passed the...