The sun. [volume] (New York [N.Y.]) 1833-1916, 1906-11-14
CAN'T SELL STOCK INCREASES
IF A SHAREHOLDER DEMANDS
HIS PROPORTION OF 1T.
Court OF Appeals Hands Down Important
Decision In StOkes's suit Against the
Continental Trust Company. which
MRde q Decker With blair a. 90.

Court OF Appeals Hands Down Important
Decision In StOkes's Suit Against the
Continental Trust Company. which
Made . Decker with Blair a. 90,
ALBANY. Nov. 13.-An important de-
cision declaring the right OF stockholders
Of a corporation to participate in all sub
scriptions to increases Of the capital stock
Of the corporation was handed down by
the Court of Appeals to-day in the action
Of William E. d. Stokes against the Con-
tinental Trust Company OF New York city.
The company increased it's capital from
$500 900 to 81, 600, 900 and then voted to sell
the increase to Blair a Co. private bankers
Of New York city, for $3.50 a share. Blair
&Co. represented Marshall Field and others
Of Chicago. Stokes own POI shares of
the stock and voted for the increase, but
voted against the resolution granting all
the stock to Blair a Co. .
Stokes insisted he should get his pro rata
share OF the new stock at par. The trial
Judge found that Stokes was entitled to
his share at par and found his damages
to be 500, $50, or the difference between
the par value and the market value OF the
stock at the time of the sale to Blair 4 Co.
The Appellate Division reversed the
Trial Term and now the Court of Appeals
reverses the Appellate Division, though
modifying the rule Of damages by awarding
Stokes $22, 100, being the difference be-
tween the price he would nave had e pay
for the stock, $3.50 a share, which was the
price to Blair Il Co, and the market value
of the stock on the day of sale to Blair 4 Co.,
which was $3.50.
Judge Vann wrote the opinion of the
court, which was concurred in by Chief
Judge Cullen and by Judges Werner and
Hiscock. Judge Haight wrote a dissenting
opinion, concurred in by Judge Willard
Bartlett. Judge O'Brien was absent. Judge
Vann says:
"The subject is not regulated by statute
and the question presented has never been
directly passed upon by this court. The
issue Of the new stock and the sale thereof
to Blair d Co. was not only a transfer to
them Of one-half Of the voting power OF the
old stockholders, but also an equitable right
OF one-half Of the surplus which belonged
to them.
The new stock belonged to the stock -
holders IA an inherent right by virtue OF
their being stockholders, to be shared i'm
proportion upon paying its par value, on
the value per share fixed by vote OF a ma
JOrlty OF the H~JocknOluerS as aSCertalned
by a sale at public auction. While the cor
poration could not Compel Stokes to take
new shares at any price, since they were
issued for money and not for property, il
could not lawfully dispose Of those shares
without giving him a chance to get has pro-
portion at the same price that outsiders
got theirs.
He had an inchoate right to one share
Of the new stock for each share owned by
him OF the old stock. provided he was ready
10 pay the price fixed by the stockholders.
II so situated that he could not take it him
self he was entitled to sell the right to one
who could, as is frequently done. OF course
there is q distinction where the new stock
is issued for property, but that il not this
case.
This rule is just to all and tends to pre-
vent the tyranny Of mn ~iorities. which needs
restraint. as well as virtual attempts at
blackmail by small minorities which should
be prevented"