Hay v. Hay
Washington Supreme Court
230 P.2d 791, 38 Wash. 2d 513 (1951)
- Written by Eric Miller, JD
Facts
The Big Bend Land Company (Big Bend) issued several thousand shares of preferred stock. Big Bend’s articles of incorporation stipulated that the holders of the preferred stock were entitled to yearly cumulative dividends at 6 percent per share, payable out of the company’s surplus profits. The articles also provided that upon liquidation the preferred stockholders were entitled to any accrued unpaid dividends. Big Bend later went into liquidation, at which point no surplus or net profits had been accumulated. The liquidating trustees (the trustees) (plaintiffs) sought a declaratory judgment as to the treatment of Big Bend’s cumulative preferred stock. The trial court declared that the holders of the cumulative preferred stock were entitled to receive accumulated dividends upon liquidation, payable before the holders of the common stock could receive anything in a distribution. Edward Hay (defendant), acting as an individual stockholder and as the administrator of the estate of Fayette Imhoff, an heir of one of Big Bend’s founders, appealed. Hay’s argument was that Big Bend’s lack of net profits prevented payment of dividends. The Washington Supreme Court granted certiorari.
Rule of Law
Issue
Holding and Reasoning (Donworth, J.)
Dissent (Grady, J.)
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