Pronik v. Spirits Distrib. Co.

• Decision Date: 17 February 1899
• Citation: 42 A. 586,58 N.J.E. 97
• Parties: PRONIK v. SPIRITS DISTRIBUTING CO.
• Court: New Jersey Court of Chancery

42 A. 586

58 N.J.E. 97

PRONIK

v. SPIRITS DISTRIBUTING CO.

Court of Chancery of New Jersey.

Feb. 17, 1899.

Bill by Louis Pronik against the Spirits Distributing Company for injunction. Heard on bill, affidavits, and answering affidavits, on application for temporary injunction. Granted.

R. V. Lindabury, J. E. Howell, and Mr. Curtis, for complainant.

W. H. Corbin, Mr. Wickersham, and Mr. Hogan, for defendant.

EMERY, V. C. The complainant is the holder of preferred stock in the defendant company, and seeks to enjoin the alteration of the organization certificate of the company, under which his stock was issued. The alteration is proposed to be made at a meeting of the stockholders specially called for the purpose, and it has already been consented to by the holders of more than two-thirds of all the stock issued by the company, common as well as preferred, the consenting stockholders having deposited their stock with a trustee, who is authorized to represent them at the meeting, and amend the certificate. The amendment proposed is the reduction of the rates of dividend now fixed in the certificates of stock held by complainant from 7 per cent. to 6 on the first preferred stock, and from 6 per cent. to 2 on the second preferred. The 7 per cent. dividend on the first preferred stock has always been paid hitherto, but no dividend has yet been paid on the second preferred. The preferred stock of complainant was issued under the law then in force,—the statute of May 9, 1889 (P. L. 412; 1 Gen. St., p. 951, pl. 212),—which authorized companies to create and issue certificates of two kinds of stock, general and preferred, which preferred stock might be made subject to redemption at par at a fixed time, to be expressed in the certificate. The statute further provides "that the holders of such preferred stock shall be entitled to receive and the said company shall be bound to pay thereon a fixed yearly dividend, to be expressed in the Certificate, not exceeding eight per cent. per annum, * * * before any dividend shall be set apart or payable on the common stock." And it was further declared that, unless otherwise provided in the organization certificate, the preferred stock should not be created, or certificates therefor issued, except by authority to the board of directors, given by a two-thirds vote of the stockholders at a meeting called for the purpose.

In the present case the original certificate of incorporation authorized the creation and issuing of two classes of preferred stock,—the first preferred providing for 7 per cent. cumulative dividends; and the second preferred, 6 per cent. noncumulative dividends,—with an ultimate participation in further dividends, along with the common stock. In reference to the point now in question, the organization certificate declared that the holders of the first preferred stock "shall be entitled to a cumulative dividend in each year, of an amount equal to seven per cent. upon the amount actually paid in on said stock payable from profits, if earned, and which shares, both as to dividends and as to the distributive share of the assets of the dissolution or winding up of the company, shall have preference over the common stock and over any other stock at any time issued," and also declared that "the holders of the second preferred stock shall be entitled to a noncumulative dividend not to exceed six per cent. in any year, payable from profits after the payment of all accumulated dividends on the first preferred stock, and before the payment of any dividend on the common stock." There is no express reservation in the certificate of any right in the stockholders to alter, amend, or modify these provisions. Certificates for this preferred stock (first and second) were issued pursuant to these provisions of the organization certificate, and the certificates of stock which...