The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1875-01-31
TIE LAKE SHORE INJUNCTION.


TIE LAKE SHORE INJUNCTION.
Some time ago temporary injunction OBJ
tanned from Judge Tappen enjoining the Lake
. shore and Michigan Southern Railroad Company
from paying a dividend OF three and quarter per
cent declared last December. motion To make
The Injunction permanent has been denied. Judge
Tappen writing
TIE OPINION.
SUPREME COURT, SPECIAL Term. January, 1876
jacob RoDino vs.. fne Lake Shore Railroad Com
pany and others-rappen, J.-Fne plainun, being
an owner oil certain shares OF STOCK and OF certain
D0nos oil the railroad, brings this action against
the company and the several persons forming the
Board oil Directors, TO restrain them from paylD
TO the shareholders a DIVIDEND upon the stock.
The Union Trust Company are also made defend
ants upon certain allegations.
1t may otherwise be stated as an action in
equity 10y the paintn, alleging that the defendants
are making, or about TO make, an lmprovldent OF
amen assets are required 10 satisfy demands and
obligations against the company, which are past
due, and the omission 10 satisfy which Will render
the property OF the company liable to immediate
seizure and sale, thereby placing IN Imminent
danger and jeopardy the rights OF property therein
Of the shareholders, to Their great prejudice and
damage.
The Lake Shore Company is a railway corpora
ton owning and operating a line OF railway from
Bunal0 10 Chicago, being distance OF between
800 and 600 miles, with branch railways 10 other
places to the extent OF ABOUT 400 miles
The capital stock Is $50, 000, O00, and there Is
standing bonded debt, which Is stated at some
tnng over $50 00O, 0O0 secured Dy mortgage on the
railway property ana purchases.
On the lst day OF July. 1870, the company exc
cuted 10 the Union Trust Company
MORTGAGE LIEN,
secure bonds TO the amount OF SIS 600 900 to be
ISSUED with the interest thereon. Twenty one
millions OF dollars OF those BONDS we're reserved TO
DE issued to meet the outstanding mortgage DEBT
the several distinct portions OF the railway. BY
phe company's annual report OF December, 1871.
lhe proceeds OF sale OF 81 $50 600 OF new bonds
stated at So $500 and the total issue OF bonds
under this consolidated mortgage Is now stated at
$4,000. OuC. In ADDITION TO paying interest on the
bonded deot. ana all taxes assessments
and other charges II was stipulated in the
mortgage that the railway company should pay TO
The trust company an annual sum OF at least
$3.50, COO on the lst day OF July In eacn year as
sinking iund Tor the gradual redemption OF the
debt, this Judgment TO DE made in money or by
denvery to the trust company oil the same amount
VI outstanding mortgage bonds.
In case the railway company made default 10
any Of the payments OF the principal interest o.
bonds due or becoming due, or oil the payments 10
The sinking Iund, or
IN other payments specified In the mortgage the
trust company were authorized to take possession
OF the railway, It's branches rolling stock and
property generally, to hold the same as NOR cages
III POSSESSION, and to use and operate the same
and they were further authorized in case of any
such default to sell the m0rtgaged property al
public action in the city oil New York, and apply
The proceeds TO expenses debts, &c.
The plaintiff, on eXhlDitlng his complaint, OBJ
txined temporary Injunction restraining the
payment OF dividend, which had been declared
by the directors IN December, 1874, upon the stock
OF the company, payable on the lst OF February,
1875. aud on the return day OF the injunction the
L
The defendants opposed the motion and asked a
dissolution OF the Injunction, upon the ground
that the plaintln Is speculative aud not bona
tdR owner OF the STOCK, ne appearing TO nave sc-
quIred Inc same the 9tn OF January 1875 some
days after the dividend was declared and known
to him, and upon the further ground that the
Court viii not exert It's equitable jurisdiction TO
restrain or direct tue Board OF Directors in the
management OF the ROAD and us resources and
properly unless some papable violation OF law
shan be established or waste OF the trust estate be
made manifest and the defendants claim that
such is not the here. Ii Is further averred
that material statement OF fact In the plaintiffs
complaint is untrue, the fact being TO the
stalments toward the sinking fund, and the de-
endants' afhdavts, showing that such sinking
rnnd has been provided Tor. II appears oy the
proofs that there were retired and delivered to
the Trust Company TO be cancelled the sum OF
Railroad Company. beng one Of the roads owned
by the Defendants. rms transaction Is SAID TO
have been in July. 1874; and urtner that the rail-
road company have since paid TO the Trust Com
pany the sum OF f5ll,00O Ia cash, making
AL the sum OF sl.ooo,OoO, which 1t Is al
tne four years following the making OF tne
mortgage, to W.T. for the years 1s7l-23-4. The de-
fendanLs claim that the sinking fund instruments
cannot be exacted by the Trust Company until the
Larger part or entire sum OF the mortgage bonds
have themselves gwen construction TO the
clause, by making present payment VI the sinking
fund ms AILMENTS. deposition OF Cyrus P. Leland,
audited by the railway company, is submitted
showing the substance OF a statement made by
him TO the Board Of Directors on December %.
1874, and on which the directors acted in ascer
tanning and
DECLARING THE DIVIDEND IN QUESTION.
II is entitled business oil the SIX months, ending
with December 81 1874, December partly estim-
sLed."
The statement shows
earnings ........... ..... ........ 575e7j
Cperaung expense. and taxes ........... sac 80
Interest on funded debt dividends on guaran-
Iced stock leases oiher roads 81 $50 EGO
Lo,ves....,...... s6loss3
Tie capital Stock. loyIb6l
Baianet.......A..... ....................... S72l
Tie piaintin questions the accuracy OF TINS stare
nens hnu the run OIL the aileg&ton tnat zee
snsHH inud mas been provided with t1,000Oo0 In
cash ana oonds, as alleged by the defendants; II
wis oe observed that no provision Tor the SINKING
Innd ~ made Ia the above statement.
J 30 MOI think II necessary TO discuss the facts
OF sne case going 10 the merits Of the action any
!uItper lor tne purposes OF TINS return. All the
iacts may become the iurtner subjects OF INQUIRY
an The further prosecution Of the action at the
Lral.
Courts OF equity Will assert Jurisdiction 20 In
CURE INTO The proceedings OF corporation on a
through It's officers and directors; yet, while they
bsve greater powers they nave no greater rights
than stock holders; they are the agents or frus.
tees, as the case may be- OF the latter and mar Oe
called 10 an account 10 an acton IA equity, within
the chartered powers and general statutes, and
by laws governing or touching a body corporate
the directors ana Officers may exercise fun
authority and discretion as 70 the management Of
corporation and its assets.
such management IL always deemed 70 be for
the interest OF the stockholders, and Jet II tue
onlcers and directors, projecting themselves IN
power ~ majority oil the shares, shall commit
clear violation Of duty or refuse TO be guided W
she aw and the rules touching their powers aud
duties. the Court will give audience TO and enter
tam an action for suitable reiief by stakeholder.
whose property In the corporation rs therefore
placed IN jeopardy.
TINS question ~ very fully examined In Heath ys.
brle Railway Bla CHORD. 49,, aud tie discus
sion thereon largely noted, aud both the directors
and the corporation MAY be Joined as parties de-
fsndant M ROBBINS rs; smith, Paise, 222. A
ehaftb Oder was awarded standing In court TO
maintain such an action, and this latter case was
oil ia chanccry by stOckholder OF she New YORK
coal Company against the directors, charging
them Win mproyident conduct IN the manage
nent or the trnst and the Chancellor held tnat
the corporation ana the directors might be Joined
~ oefendants
TIE Court Is given Jurisdiction over corpora
AepsJ ae4 tUkiGsas -glxs&i11 ~asA aaaGszA "