The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1875-06-26

bonds, 10 the amount OF about 100000. In ls5a
the company became bankrupt. Foreclosure pro-
ceedings were instituted TO enforce the two Iase
mortgages, ana . recsiyer was appointed. He
held ana operated the road until the anAlrs Of the
company were reorgahzed. This occurred IN
1862. Prior to that Tune the line OF the road ex-
panY had taken leases or other roads ia New Ter
sew aud or the Long DOCK property on the Hudson
gave the company access To Jersey city, ana the
dock property was the eastern terminus or the
ROAD. leases oi OsbeI LOUIS " the company
not necessary 70 % sPeclhc@lly mentioned also
existed. on the I'D or october, 1862 the share
holders ana creditors Of the company entered
into an amicable agreement providing for the adj
lustment OF ibs liabilities. Thereafter al TINS
property and enects OF the company were sold un-
der a decree in the foreclosure SUIT anu We're
bought Ia by the trustees for tue benefit OF the
parties IN interest," pursuant to clause In the
agreement. A new corporation, under the name
OF the Erie Railway, was Organized, pursuant 10
acts OF the Legislature Of New YORK or the Atm OF
April 1850 April 2 1861 and March 2s 1862 All
the property OF the old company bought Dy tho
trustees was transferred TO tae new corporation,
but stil subject to all the liens and encum-
the foreclosure and sale. Inc agreement OF
J $50 incorporated into The decree OF sale, anu
acts OF the Legislature under which the new cor
poratton WAS organized. IL Was also made part
OF The arLcies OF association or charter OF that
company. It's obligatory elect ia tins case - not
questioned. The third article declares :-"Ihe
capital stock OF SAID company company Is dlviaed
ferred capital STOCK. The whole amount OF said
common stock OF said company Is h5,3oo
being Ia amount equal TO the outstanding
capital stock OF the New York and Erie Railroad
Company. The wnole amount oil the preferred
capital stock OF said company TO be equal
to the amount OF the total unsecured and
road Company, with interest thereon, as provided
by the contract referred TO Ia said acts and by the
provisions of the said act passed April 2 1851
when ssoertained pursuant TO the provisions OF SAID
act.u Inc amount OF preferred stock outstanu-
Ing In 1862 was ss535. 700. on the 3Ist of Decem-
hqf gaA < a q
agreement was as 0li0Ws-"Futh-Such OF US az
are holders OF the convertible, sinking iund ana
other unsecured bonds or said company hereby
agree to exchange our respective bonds for pre-
ferred stock OF like amount with the principal or
our bonus. with coupons now overdue, ana Tor
two years in advance added, and TO deposit onr
BIO nds WITH said trustees, To ne so exchanged, re-
such preferred stock IS 70 oe entitled 70
preferred dividends out OF the net earn
ings o. earned IN tue current rcaas year.
per cent In any one year. payable seni-aanualU,
alter payment Of MORTGAGE interest ana delayed
coupons IN fun" The act OF April 2, 1861, enacted
the last paragraph, III these ms:-sSectton A.
Said preferred stock shall be entitled 10 preferred
dividends out Of the net earnings OF SAID road II
earned In tne current year. but not otherwise;
not 10 exceed seven per cent IN any one year. pay
aple semi-annuaiiy, after payment OF mortgage
interest and delayed coupons in full: aud the
holders thereo may vote, personally or by proxy,
at all meetings OF the corporation, In the same
manner as the holders OF common stock, but not
otherwise The complainant Is the holder OF 300
SHARES OF the preferred stock. The company paid
the delayed coupons and dividend OF i've pes
cent on all the preferred stock ior the
year 1868 and seven Yer cent annually
nothing has been paid. After the issuing OF the
preferred ock the company took leases Of sew
eral additional roads Some OF them have been
profitable ana some not. rne new company TOOK
the leases neld by the old company, with an 0Dli-
gati0n 70 pay the annual rents wnlcm tne Iatt LET
year 1862 TO S372 400. The animal rents OF the adj
dltional leases taken by the new company
amounted in the year 1865 TO ss70l0 sunse-
quent 10 1882 the company borrowed $4,000, 0oO,
for which II gave sterling bonds, bearing interess
at the rate oil SIX per cent per annum payable
in gold. The interest paid upon THIS debt in
1868 was S3ss,l9i 6s. me money was Dor
rowed for tine repair and equipment or the
roads OF the company and was expended accord
iaTly. The net earnings OF the company during
the wear 1898 after de quoting the Interest paid
the mortgage debts existing when the preferred
stock was issued, was less than $3.50 o00 rhe pay
ment OF all the rents and interest upon the ster-
III no rents and no interest npon the sterling
bonds had been paid during thatyear there would
nave been more than enough OF the net earnings
lett TO pay the dividends claimed by the complain
ant. III no interest had been paid on the sterihR
bonds ana rents under the leases made since
the preferred stock was issued there would
have been enough remaining to have pai1 a
small part OF the dividends; but no part OF SUCH
dividends could have been paid without leaving
unpaid some part OF the interest ON the sterling
bonds, and Of tue rents under the leases made
since the preferred stock was issued. The COM
plainant claims that his rights are TO be deter
mined by the state or things which existed when
his STOCK was Issued, ana that they are IN novice
affected by the leases taken and the bonds Issued
by the company thereafter. Hence he contends
that full dividends snouid have been paid before
any part Of Lne net earnings were applied in pay
ment OF the interest on the sterling bonds and the
rents underline leases OF other roads 20 the new
corporation. The defendant Insists that this In-
terest and the rerts OF all the leases were necea.
sariJ TO be first fully paid. The complainant MED
this bill In 1862, 10 enforce his view OF the case.
The question presented depends Tor us solution
wholly upon the construction gwen 20 the hsth
clause OF the agreement Of 1889 and the foartn
section OF the act OF 1851. They are Identical la
effect as regards the point 10 be considered.
The original takers OF the preferred stock wefo
creditors. they abandoned mat position ana be-
came stockholders. they thereupOn ceased 70 DO
tue former and can only be regarded as the latter
They surrendered their debts ana received In re-
a chance for annual dividends OF seven per csnt
aud voice ny voting IN tue choice 81 those by
wnom the AFFAIRS VI the company were 70 he adj
mlnistered. WHAT they were 70 receive was
not interest but dividends. ana they were
10 receive them IN priority 20 the holders OF the
common stock. Tue latter could receive nothing
until the former were satisfied. TIE maNinum
payable on the preferred stock was specihea. IL
might be less or n0lning. Ii could not DO more.
The amount subject To the limit prescribed
depended wholly upon tue residue OF the net
earnings applicable Ia that wag. Tie language
employed y apt 70 express the relation ~ the
stockholders. None To express the relation OF
creditors is iound IN the Instrument, and there is
nothing from which the intent 70 continue mat
relation any longer can 81 Inferred. After q
lengthy discnssion OF tae points presented the
Court say:-We hold that rhe computa-
lion By the company Tor the year 1865
COMPLAINANT Is concluded by if. We are Of the
opinion That the rents for that year, accrulng
under leases taken ~ the company after the
Issuing OF the preferred stock, ana the interest,"
up0n the sterling bonds for mat year were prop
erly paid, and that there were no net earnings
ear. I'D IN that year which could be properly ap-
Piled Ia payment OF preferred dividends. These
Vie VS. are fatal 20 the complainanPs case We
have carefully examined All the autaorities re-
ferrcd 70 by MS learned counsel. None OF them
are IN hostility 10 tue concluslons al Whca We