Warren v. Queen & Co.

Citations

• 240 Pa. 154
• 87 A. 595
• 1913 Pa. LEXIS 644

Syllabus

<p>Corporations — Preferred stock — Contract to redeem — Act of April 28, 1878, P. L. 79 — Public policy — Action upon certificate— Affidavit of defense.</p> <p>1. An instrument executed by a corporation incorporated under the Act of April 29, 1874, P. L. 73, which has every essential feature of a certificate of preferred stock, and which is in the usual and ordinary form in which such certificates are issued, except that it provides for the redemption of the stock by the corporation at par on a certain day, is a certificate of preferred stock and not a contract for the payment of money.</p> <p>2. Under the Act of April 28, 1873, P. L. 79, a corporation may issue preferred stock, and make appropriations for its redemption, but only provided “that no injustice shall thereby be done to the existing fights of any other stockholders or creditors of the company.” The purpose of this provision was to put a preferred stockholder under the act in the same position as he would be in at common law, where the funds of the corporation are first applicable to the payment of its creditors. Under the act, therefore, a preferred stockholder cannot enforce payment of his stock in preference to the claims .of creditors of the corporation. ' - ■■</p> <p>3. Aside from the Act of April 28, 1873, P. L. 79, it- would be against public policy to permit a preferred stockholder to assert his claim as such against the funds of a corporation in preference to the claims of creditors. The stock of a corporation is its capital, is responsive'to the claims of creditors, and is held in trust for the payment of the corporate indebtedness. The relation of a stockholder and a creditor to the corporation is entirely different; a stockholder cannot be both a creditor and a debtor by virtue of his ownership of stock.</p> <p>4. Where the.holder of a.certificate of preferred stock sues.the corporation in assumpsit to compel redemption of the' stock as provided in the certificate, an affidavit of defense av