Mueller v. Kraeuter & Co.
New Jersey Court of Chancery
25 A.2d 874 (1942)
- Written by Heather Whittemore, JD
Facts
Kraeuter & Co. (defendant) issued approximately 1,400 shares of redeemable preferred stock. The stock would mature 15 years after it was issued, at which time each share would be redeemable for $110 plus any unpaid dividends. Fifteen years after the redeemable stock was issued, a group of shareholders (the plaintiff shareholders) (plaintiffs) who owned 120 shares of the redeemable stock sought to redeem their stock. Because dividends had not been issued for several years, each share was redeemable for $187—the $110 redemption price plus $77 in accumulated unpaid dividends. Kraeuter refused to redeem the shares, arguing that it was not required to redeem the shares until it had accumulated enough money to pay for the redemptions without harming the corporation. Kraeuter needed approximately $250,000 to redeem all the redeemable stock. At the time, Kraeuter owned 70 percent of the outstanding stock of another company, the Kroydon Company. Together, Kraeuter and Kroydon had earned profits of over $400,000 in the five-year period before December 31, 1940. The plaintiff shareholders filed a lawsuit in the New Jersey Court of Chancery, seeking to compel Kraeuter to redeem all the redeemable shares.
Rule of Law
Issue
Holding and Reasoning (Bigelow, J.)
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