Stokes v. Continental Trust Co. of City of New York
Court of Appeals of New York
78 N.E. 1090 (1906)
Continental Trust Co. of City of New York (Continental) (defendant) is a New York corporation, organized in 1890 with 5,000 shares with the par value of $100 each. Stokes (plaintiff) is an original shareholder, holding 221 shares of stock in the corporation. Blair & Co., a private banking firm, offered that if Continental doubled its capital stock from $500,000 to $1,000,000, consisting of 5,000 additional shares, Blair would then purchase the new stock at $450 per share. In January 1902 Continental’s stockholders, including Stokes, met and agreed to increase the stock. Stokes then demanded from Continental the right to subscribe and pay for another 221 shares of the new stock at par. His demand was refused. The majority of the stockholders also voted to sell the new stock to Blair & Co., which Stokes voted against. The trial court held that Stokes had the right to subscribe for a proportionate number of shares of the new stock as he held of the old stock, that the stockholders and directors could not deprive them of that right, and that Stokes was entitled to the difference between the market value of the shares as of January 1902, which was $550 per share, and their par value, for a total of $99,450. The court of appeals reversed, and Stokes appeals.
Rule of Law
Holding and Reasoning (Vann, J.)