Petry v. Harwood Electric Co.

Citations

• 280 Pa. 142
• 124 A. 302
• 33 A.L.R. 1249
• 1924 Pa. LEXIS 481

Syllabus

<p>Corporations — Preferred stoch — Merger — Dissolution—Amortizement of under valued securities — Costs.</p> <p>1. Where a contract between, a corporation and its preferred stocHiolders provides for preference dividends, and that, on dissolution, the preferred stock without voting power shall be first paid at its par value, in preference to the common stock, out of the assets of the company, and the common stockholders bring about a merger with other corporations, the merger works a dissolution, and the preferred stockholders are entitled to full payment for their shares out of the assets of the company, and not payment at market value. Reproduction costs are adfuissible in finding value.</p> <p>2. From the circumstance that stock in the new company was given to common stockholders of the old in exchange for their shares, the conclusion could be drawn that the assets of the merging company were sufficient to pay the preferred stockholders par for their shares; otherwise the common stockholders would have been entitled to nothing on the merger.</p> <p>3. Where the common stockholders, through the control of the company, do not pay dividends on the preferred stock, but divert the earnings of the company to the amortization of the difference between the hook values and the supposed real values of securities acquired by .the company at the time it was organized, and the result is greatly to lessen the market value of the preferred stock, the preferred stockholders, on the merger of the company with other corporations, are entitled to he paid out of assets, the full par value of their stock.</p> <p>4. In such case, the attempt to amortize the value of securities owned, which, if the account remains unchanged, in no way depletes the capital, by retaining net earnings, is a breach of the contract with the preferred stockholders.</p> <p>5. *t£ the preferred stockholders are compelled to resort to litigation tó establish their rights, the costs thereof should be imposed upo