ALTERATIONS OF ACCRUED DIVIDENDS: II

If the present course of decisions is continued, it is a serious question whether investors can safely purchase preferred stock at a price above the common stock of the same corporation. In all frankness, such certificates should now bear on their faces a statement that they are subject to alteration in a great variety of ways, all to their detriment, and that if business is bad, losses will be visited upon them, regardless of the liquidation and other preferences which they have on paper. It seems not unlikely that corporations will find that the temporary expedients which they have adopted will make it more difficult to attract that part of the market which prefers security to speculation. The short term solution contains the germs of a long term problem in threatening destruction of the value of preferred stock as an investment

ALTERATIONS OF ACCRUED DIVIDENDS: I

When a preferred stock has cumulative dividends and the dividend period passes without payment, the dividend is said to accrue. The meaning of the term accrued has been the subject of much inquiry. Since a stockholder cannot sue for an accrued dividend for the same reasons that he cannot sue for any other undeclared dividend, the term clearly does not mean what it does in the law of debt, i.e., that a cause of action has arisen. It means only that no dividend can be paid on the common stock until that dividend has been paid on the preferred stock. Thus, if a preferred stock provides that a 7% cumulative dividend shall accrue on January 2 of each year, and if three years pass without payment, on the dividend date in the fourth year every share of preferred is entitled to $28 instead of$7 before any payment can be made to the common stock. Hence, accrued dividends are a measure of the preferred stock\u27s priority over the common stock, and nothing more. A preferred stock with dividends accumulated, is only a stock that has an extraordinarily high rate of preferred dividend due it before payments can be made to the common stock. As a matter of legal analysis, then, it seems that an accrued dividend is not different from a dividend rate, and that an amendment changing or removing it is not different in kind from one reducing a dividend rate. If this be true, the problems presented by accrued dividends are not different legally from those, say, presented by amendment of the dividend rate

A Study of “The Common Law Tradition: Deciding Appeals”

The chief object of this review is to give an accurate idea of the contents of Professor Llewellyn\u27s book, The Common Law Tradition: Deciding Appeals, thus supplying a general background for the other articles. The perfect review, for this purpose, would eliminate all personal reactions of the reviewer, but there are reasons why this ideal is impossible. The mere processes of selection and emphasis require some exercise of discretion, and, moreover, the book provokes responses which will probably show through to others even though they are unconscious. I have tried to compromise with the problem in this way: Part I is devoted to a quite extensive survey of the book, and in this I have suppressed my reactions as much as I could, (not entirely) and have let the author speak for himself a good deal of the time. In Part II I have tried to convey some impression of the book as a whole, an operation that obviously requires more subjective methods, and Part III is a collection of frankly personal comments which are offered for what they are worth and which may also serve to discount the less overt evaluations that have affected the rest of the review