Ten thousand shares of preferred capital stock in defendant corporation were left in trust for plaintiff by her father. This stock was issued to discharge a debt due by the corporation to plaintiff's father, who, together with his son and his attorney, owned all the stock of the corporation. In certain of the preliminary papers the word "non-cumulative" was used, but the certificate itself, in regard to dividends, merely spells out that the "preferred capital stock shall receive annual dividends of 6%, and not more to be declared by the board of directors." For several years no dividends had been declared, and plaintiff claims a right to dividends for those years before any can be paid to the common stockholders. The court held that defendant corporation could not pay any dividends on its common stock until payment of cumulative dividends at the rate of six per cent per annum was made on the preferred stock. The court observed that the intention of the plaintiff's father at the time the stock was originally issued controlled the case, and that, since his intention was to secure an annual income to his daughter, the stock was cumulative. Warburton v. John Wanamaker Philadelphia, 320 Pa. 5, 196 A. 506 (1938).
Michigan Law Review,
CORPORATIONS PREFERRED STOCK CUMULATIVE IF NOT OTHERWISE SPECIFIED,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol36/iss8/13