McLean v. Pittsburgh Plate Glass Co.

Citations

• 159 Pa. 112
• 28 A. 211
• 1893 Pa. LEXIS 1485

Syllabus

<p>Corporations — Preferred stock — Dividends—Discretion of directors.</p> <p>The directors of a corporation have the discretionary power to determine not only the amount of all dividends, including dividends on preferred stock, but also the circumstances under which they will or may declare them. They are not entitled to refuse to declare them either arbitrarily or when, in view of all the considerations which should properly affect the question, they ought to grant them. Their action or refusal to act is subject to review by the court, but, within the regulated limits of their discretion, they have the exclusive control of the whole matter, and their action is binding upon the stockholders.</p> <p>The stockholders of a corporation authorized the issue of preferred stock. The certificates set forth: “The holders of preferred stock of said company are entitled to dividends out of the net earnings of each year, when declared by the board of directors, to the extent of twelve per centum of the par value of said stock, before the payment of dividends to the holders of common stock, but the dividends on the preferred stock are not cumulative.” On a bill in equity by holders of preferred stock to compel the directors to declare a dividend upon it, it appeared that the corporation had greatly increased its plant, and had thereby incurred large indebtedness, and that the directors had deemed it expedient to apply all the earnings of the year to the payment of this indebtedness. It also appeared that the liabilities of the company apart from its stock were almost double the amount of its assets. Held, that under the circumstances the discretion of the directors had been properly exercised, and that plaintiffs were not entitled to relief.</p>