Also known as: pro-rata allocation · prorata allocation · pro rata allocations · pro rata · prorata
Written by attorneys — see sources below.
A method of apportioning assets, liabilities, or benefits among multiple parties in proportion to their respective ownership interests, claims, or entitlements.
Pulse Media decided to dissolve and distribute its remaining cash and equipment to shareholders. The board calculated each shareholder's ownership percentage and transferred assets accordingly. Phoebe Park received her portion based on her shares without any special adjustments for other classes.
Precision Tools' board approved a stock dividend of additional common shares. The company issued the new shares to existing holders in direct proportion to their current holdings. Parker Phillips received ten percent more shares matching his ownership stake.
Philip Powell bought multiple appliances under a single installment contract with overlapping payment terms. When he defaulted, the seller applied each payment proportionally across all outstanding balances rather than to one item first. This allocation determined how much remained due on each appliance at the time of repossession.
Appellee Walker-Thomas Furniture Company operates a retail furniture store in the District of Columbia. During the period from 1957 to 1962, each appellant purchased several household items from the company, with payment to be made in installments. The terms of each purchase appeared in a printed form contract that set forth the value of the item and purported to lease it to the purchaser for a stipulated monthly rent payment. Title remained in the company until the total of all monthly payments equaled the stated value, after which the purchaser could take title. In the event of default on any monthly installment, the company could repossess the item. The contract further provided that the amount of each periodical installment payment would be inclusive of and not in addition to payments under prior leases, and that all payments made would be credited pro rata on all outstanding leases, bills, and accounts due the company. This provision kept a balance due on every item purchased until the balance due on all items was liquidated. As a result, the debt from each purchase was secured by the right to repossess all items previously purchased by the same buyer, and each new item became subject to a security interest from previous dealings. On May 12, 1962, appellant Thorne purchased a Daveno, three tables, and two lamps with a total stated value of $391.10. Shortly after this purchase, Thorne defaulted on the monthly payments, leading the company to seek replevin of all items purchased since the first transaction in 1958. On April 17, 1962, appellant Williams bought a stereo set of stated value $514.95. At that time her account showed a balance of $164 from prior purchases. The total of all purchases over the years came to $1,800 with total payments of $1,400. Williams also defaulted shortly thereafter, prompting the company to seek replevin of all items purchased since December 1957. The Court of General Sessions granted judgment for the company in these cases. The District of Columbia Court of Appeals affirmed the judgments. This court granted the appellants' motion for leave to appeal. Prior to the last purchase by Williams, she had reduced her account balance to $164. The reverse side of the stereo contract listed the name of her social worker and her $218 monthly stipend from the government. At the time of the purchases, the company was aware of Williams's financial position and her need to support herself and seven children on that amount.
View caseA corporation distributes assets pro rata to the holders of one or more classes or series of its shares under Model Bus. Corp. Act § 12.01(d). This occurs during certain transactions such as sales of assets outside the ordinary course. The allocation follows ownership percentages without regard to other factors unless the articles provide otherwise.
Supporting sources
Shares may be issued pro rata and without consideration to the corporation's shareholders or to the shareholders of one or more classes or series of shares under Model Bus. Corp. Act § 6.23(a). The issuance constitutes a share dividend. The board may fix a record date to determine which shareholders participate.
Supporting sources
Some states apply pro rata allocation to divide liability equally among triggered policy years. Other states use variations that divide liability based on the percentage of policy limits relative to total triggered coverage. This approach contrasts with all-sums allocation that allows the policyholder to select specific years.
Surplus proceeds stand in place of the foreclosed real estate. Junior liens attach to the surplus in order of their priority rather than through pro rata sharing. Only after all junior liens are satisfied does any remainder go to the equity holder.
Supporting sources
…consistent with prorating insurance obligations to Keene for the years in which it was not insured. Judge Wald believes such a pro-rata allocation is fair, and we do not think her view is unreasonable. As we have just shown, however, such an allocation is inconsistent with the terms and underlying principles of the insurance policies…