Waneta W. Strout, Appellant, v. Cross, Austin & Ireland Lumber Company, Respondent, 283 N.Y. 406

Summary

The shareholder owned a large portion of the cumulative preferred stock issued by the company upon which there were unpaid accumulated dividends. The company attempted to discharge its arrearages by declaring and paying a dividend to the preferred shareholders using cash and income notes issued by two of its wholly owned subsidiaries. The shareholder never consented to this method; she kept the cash, but rejected and returned the income notes. The trial court dismissed the shareholder's action, but on appeal, the court reversed and remanded the action for further proceedings. The court concluded that the certificates of preferred stock issued to the shareholder were a contract with the company and declared the company's obligation to pay to the shareholder cash cumulative annual dividends of seven percent of the par value. The shareholder could not be compelled to accept the income notes in lieu of cash. The court concluded that the trial court erred by not exercising its powers in ...