Washington Law Review


Louis Rousso


A corporation's articles of incorporation provided: "In the event of any liquidation, dissolution or winding up of the Corporation the holders of the preferred stock shall be entitled to be paid in full the par value thereof, and all accrued unpaid dividends thereon [italics added] before any sum shall be paid to or any assets distributed among the holders of the common stock." During the corporation's existence, it had never declared a dividend. Furthermore, there was no surplus on hand at date of dissolution. In an attempt to determine the rights of the respective stockholders, the liquidating trustees of the corporation obtained a declaratory judgment construing the words "accrued unpaid dividends" to entitle the preferred stockholders to receive, in addition to the par value of their stock, an amount equal to the total amount of dividends which would have been paid on the stock had there been a dividend paid every year since date of issue. Since there was no surplus, the amount which the preferred stockholders received in excess of their own capital contribution was paid out of the capital contributions of the common stockholders. Because of the number of years during which no dividend had been paid, the net effect of the judgment was that the preferred stockholders received all of the remaining assets of the corporation and the common stockholders received nothing. Appeal. Held: Affirmed. Hay v. Hay, 138 Wash. Dec. 485, 230 P. 2d 721 (1951).

First Page