That there was an alteration in the preferential rights of the shares of the petitioners is not in dispute. But it is claimed that the change is benevolent and advantageous to the protesting shareholders, so that they have no real grievance. They had shares preferred upon distribution of assets. There seems to have been no stated preference as to dividends, but as a right practical in its nature the holders of the second preferred shares had received each year ten per cent in dividends. So far as it appears this stock was a permanent issue and non-callable. This gave each shareholder a fixed right in the division of the profits or earnings of the corporation so long as it existed, and a definite right to share in its assets with a limited number of other shareholders when it was dissolved. (Kent v. Quicksilver Mining Co., 78 N. Y. 159, 179, 180; Campbell v. A. Z. Co., 122 id. 455.) If changes are made in the capital structure, the provisions of statutes permitting reorganization must be strictly followed, if existing rights are affected. Here the “ reclassification ” advanced the preference of the substituted preferred shares to an equality with the old first preferred. This was a distinct advantage. The new stock was limited in its rights as to dividends to seven per cent and it lost its right to permanence by being callable at 110 which would naturally affect its investment value. Apparently it also lost its right to greater annual profits and to share in the increment of capital accumulated from undistributed surplus; and in case of losses followed by dissolution, the distribution of assets would be among a greater number of shares. As a matter of individual judgment these new conditions might be deemed disadvantageous.
The rights given in the original shares, taken together, seem to be preferential in their nature. Now the objecting stockholders must surrender their old shares representing vested rights and accept in lieu thereof new shares containing conditions which they deem less favorable as an investment. Some consideration must be given to the judgment of the stockholder himself as to whether the change is advantageous, if his decision is based on reason. If he desired a fixed dividend on a callable stock, then he has been benefited. But if he wished greater possibilities of return and a permanent investment having greater market value, he is a loser by the change. In a practical test he will no longer have the right to receive a larger dividend; and his interest in the company may be *276discharged against his will by the call of the stock. Alteration there has been in preferential rights and it cannot be said as a matter of law that the alteration is entirely beneficial.
It has been the policy of the courts to protect minority stockholders from illegal or unreasonable invasion of their rights. Originally it was necessary for such shareholders to bring an action in equity to protect themselves against the action of a corporation which “ takes hold of the shares of its capital stock already sold and in the hands of lawful owners,” and makes changes destroying the equality of shares and taking away rights which originally existed. (Kent v. Quicksilver Mining Co., supra, 180.) I think the statute relied on here is intended to provide a more simple and summary remedy to a shareholder who objects to a new plan of organization which impairs his vested rights. Those who have faith in the success of the venture may readily relieve themselves of the incubus of less sanguine associates. There is no injustice in paying to the holder of shares the fair value thereof from the vested property interests, and selling the new shares to those more hopeful and venturesome.
In Matter of Dresser (247 N. Y. 553) it was decided in the Court of Appeals by a narrow majority that superimposing a new preferred stock upon the old issues of stock did not so alter the preferential rights of the latter that appraisal would be granted. There the stock remained as it was. There was not, as here, destruction of the identity of the shares, and no surrender of shares to be replaced with others containing different conditions. I do not find that case decisive of the question to be determined here.
I favor affirmance.
Hill, J., concurs.
Order reversed on the law and motion denied, with costs, as stipulated by the parties.