The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1869-02-06

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document creating no debt and imposing no obliga-
uon and 10 fact giving no right which the stock
ali snd belongs the x
holders, and each one has share In such
property proportionate to the amount OF stock neld
property Is worth or less than the amount OF the
capital stock subscribed for, and such certificate
Of the stockhoder Tne statement that it is payable
out OF the earnings OF the company at their pleasure
also seems 70 reserve the entire action In regard TO
time except by the win OF the directors To this ex-
tent there s nothing creating any liability or impos
authority in the statute authorizing these corpora
lions TO issue any evidences Of debt or to incur any
os Cr the q
for making dividends; nor can any such
scrip be issued creating . debt for
for the purpose Of distribution among the stock
holders Any one who purchases such scrip must
and character Is such as not 70 make any asalanee
As evidence Of indebtedness i could not Be-
the purposes stated In the se'' statute. Giving
it the. eject whicn the defendants' counsel
past earnings appropriated to the purposes OF con-
structi0n. and not of indebtedness-it be-
comes immaterial whether such certificate be
issued or not; and H. the other hand 1t should be
considered certificate OF Indebtedness the peculiar
position OF the company In relation to 1t is such
as to render an injunction as to the issue OF the
small comparative amount not already delivered
unnecessary. So large portion OF these certif-
Gates nave been delivered to the stockholders that
prohibition against the issue Of the balance to
those stockholders who have not yet received them
would not be productive OF good either to the plain
III or any other stockh0der The great delay OF the
plaintiff in procuring the last Injunction might
almost be construed into an implied assent on his
part to their delivery after he knew OF the passage
OF the resolution to issue Them The objection to the
passage OF these resolutions by the board. that
q 'ne 10 :. wo " tine
OF the directors Mr. Stone, is out OF the country.
II cannot for moment be supposed that such alb
sence can be good reason to deprive board Of its
powers. II 80 any director, by wilfully absentng
himself from this country could prevent the meet
ings OF the board and perhaps cause or ruin to
try he puts out Of the power OF the board to give
him notice Of iIs meetings, and their acts with
ne had informal notice Of the meeting and
OF its object: He expressed his assent to the
and wished the board to act without him. think
this was SUFFICIENT notice. He explained his In
tended absence and having no objection to the
meeting. Nor do l think the suggestion that these
certificates were issued for q much larger amount
than was ustifable from the actual condition OF the
company renders necessary to enjoin the issue OF
the portion which has not been delivered. There is
certainly great difference between the estimated
amount Of profits upon which the issue of GER
tifcates was based and the statement contained In
the annual reports Of the company to the Legisla-
the board for the time being which made the report
was best acquainted with the amount OF profits re-
include the amount expended for necessary repairs
OF interest on the amount expended for new work
would hardly be proper i this was to be considered
necessary TO examine this branch OF the case, be.
cause ! am Of the opinion that an injunction
above referred te against the issue OF the bal
ance OF these certificates not yet delivered.
The 11s third inquiry s whether The defendant can
resolution adopted they declared q dividend upon
the certificates before they are issued and the eer
same dividend that shall be paid upon the shares Of
the company. 1t Is well established principle in
road and is beoDg 70 the fad
II is equally well settled that they have right to
the profits arising from the earnings OF the road.
OF the road to declare dividend except upon the
stock, or 70 any person except the stockholders;
receive the same dividend as the stocKnoder it be-
comes OF the same value and diminishes to the same
extent the value Of the stock. 1t is said that the
stockholders are not injured, because each one re-
ceives proportionate amount In scrip, and there
fore he receives the same as II the whole
would be true as to the present dividend;
but when the scrip and the stock become separated
ana tne earnings o. another year are to be divided
the earnings OF the company after payment OF the
necessary expenditures, would be deprived Of that
portion OF sucn earnings paid as dividend on
these certificates. Although tine present stock
holders might take their certificates ana receive the
dividend upon them without affecting their interests
still when such certificates are sold and separated
from the stock and other persons become stock
houer5 tney nave right to claim the profits of the
corporation as the property OF the stakeholder and
not OF the scripholder. Ii would be no answer TO
them to say that they purchased with knowledge OF
the issue OF the scrip and were therefore bound by
It's conditions, II the terms which such scrip was
issued were Illegal The Railroad act evidently con-
templated no Dividend except upon stock, for IL
dends on stock and the rate. 1t nowhere
makes provision for dividend to any other person.
and requires full return Of all earnings and OF all
payments during the year. II dividends legally
be paid on such scrip, then the scrip becomes equally
valuable with stock, being transferable on the books
as stock and entitled to the same share In the pro-
hts or the corporation. It would possess all the
attributes OF stock except the right OF the holder
vote for directors II such an arrangement can be
sanctioned the law regulating the mode OF increas-
to see any ground on which the payment OF div-
dends on this scrip can be sustained II Is viola
ton OF the provisions OF law regulating corporaons
II takes rom the stockholders rights which belong
exclusively to them BY Introducing a new
to the same dividends as the stockholders,
and thereby diminishing the income from
the earnings OF the company, to which they are
Justly entitled. / have been unable to End any
authority for the establishment OF any such class
pica,on TO the Legislature Tor authority 10 convert
the scrip into stock, would, OF course relieve the
difficulty which exists on this point: but until such
law Is passed see no authority for paying any div-
dends on this scrip or deprivng the holders OF stock
q al the profits OF the company which are divided
by the Board OF Directors. The application OF these
views 10 this VIII render necessary dissolution
Of the nrst and second injunctions. and all OF the
tird except that portion which restrained the pay
nent OF dividends on the interest certificates, and
q dividends on those certificates until the further
order OF the Court.