Corporations – Dividends – New Jersey Dividend Credit for Non-Cumulative Preferred Stock

Defendant, a New Jersey corporation, paid no dividends on its non-cumulative preferred stock after 1933, although it had annual earnings exceeding the total amount of the preference in each of the years 1941 through 1948, and again in 1951 and 1952. In 1955 defendant had earned surplus exceeding $12,000,000. Plaintiffs, holders of non-cumulative preferred shares, brought this action asking for a declaratory judgment as to the nature of their preference rights over the common holders. On appeal from a summary judgment for defendant, held, affirmed. In the absence of any impending or threatened declaration of dividends to common shareholders, there was no actual controversy between the parties and the trial court acted within its discretion under the declaratory judgment statute in refusing to grant declaratory relief. The court reaffirmed obiter, however, its disposition to protect preferred shareholders by continued application of the “dividend credit” doctrine. Sanders v. Cuba R. Co., (N.J. 1956) 120 A. (2d) 849.