58 N.J. Eq. 97 | New York Court of Chancery | 1899
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 seven per cent, to six on the first preferred stock, and from six per cent, to two on the second preferred. The seven 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 9th, 1889 (P. L. of 1889 p. 412; Gen. Stat. 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 seven per cent, cumulative dividends and the second preferred, six per cent, non-eumu
“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 non-cumuiative 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 altei’, 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 were signed by the company and delivered to the stockholders themselves, contain the same provision as to the rights of the holders of the preferred stock as is contained in the.organization certificate, and they do not contain any reservation of right in the company to alter, amend or modify the amount of dividends payable. It will be observed, therefore, that the statutes in force when this company was organized and these certificates were issued expressly provided for an organization certificate authorizing the issuing of certificates of preferred stock, and also for the insertion in the stock certificate to be issued by the company under this authority, of ■the time for redemption (if any were fixed) and of the fixed yearly dividend. As to the rights of the preferred stockholders and the company upon such certificates so authorized and issued, the statute then provided that “ the holders of such preferred .stock shall be entitled to receive, and the-company shall be bound to pay thereon, the fixed yearly dividend expressed in the certificate,” &c.
The company was organized January 4th, 1896, and the statute then in force, act March 21st, 1893 (P. L. of 1893 p. 444 § 6; Gen. Stat. p. 964), authorized corporations, with the assent of a majority in interest of the stockholders, to “amend its original certificate,” and provided that “such amended certificate shall take the place of the original certificate of incorporation and shall be deemed to have been recorded and filed on the date of the recording and filing of the original certificate.”
These provisions as to amendments are, under our decisions, to be regarded as incorporated into the original certificates of corporations subsequently organized, and are relied on by the company as authorizing the amendments now proposed, jin my judgment these general powers of amendment of the certificate, which originally fixed the relation between the stockholders inter sese, do> not confer the power of altering the previous contract of the company itself with the stockholders, as to the rate of dividend which was created by a stock certificate, or contract of the company, which was required by the statute to express this rate of dividend, and which reserved no power in the company to change. Such alteration would impair the obligation of the contract created by the stock certificate issued under the company’s charter.
I express no opinion upon the question whether there is power under our statutes to amend an original certificate which provides only for common stock, by creating an issue of preferred