The Republican journal. [volume] (Belfast, Me.) 1829-current, 1882-03-02

L am asked my opinion as to the re-
spective rights OF the preferred and non
preferred stockholders in the Belfast and
Moosehead Lake Railroad to the earnings
Of the road.
The charter authorized the company
to issue both classes Of stock. and | NJ
derstand the by laws were adopte by the
corporation before subscriptions 10 stock
were obtained. The 18th bylaw pro-
vldes that
dividends on the preferred stock shall
first be made semi annually from the net
earnings Of said road, not exceeding six
per ceDtum per annum, after which uiyi,
dend, If there shall remain surplus, a
dividend shall be made upon the non
preferred stock up to like per cant. per
annum, and should surplus then re I
main OF the net earnings after both OF
SAID dividends III any one year, the same
shall be divided pro rata Oh all the stock. =
AS the subscriptions for stock were
made under the charter and this by law
the bylaw would be regarded as enter
ing into the contract. Davis vs.. Propri-
etors, Met. 321.
Article 20 of the original by laws pro-
vides for all alteration Of the by laws at
certain meetings This Of course must
be regarded as assented to by the sub
scrlbers to stock, but I do not think an
amendment could have the effect 10
change the substantial riqhts Of the stock
holders, as they existed at the time of
subscription.
Preferred stock, rs we caIlit, or prefer
ence shares, as it is called in England.
by the name itself indicates its character.
Ii is a stock entitled to benefits in pref
errnce to other stock, and it may be in
exclusion of it while it is stock, aud to
creditors of the corporation holds no high
CT rights than common stock, as The cred
itors are to be paid if 1t takes the whole
income, or the whole property, AS be
tween the stockholders it large ly pat takes
OF the character of preferred loan to the
corporation, the principal never to be re-
paid, but the stipulated interest or divl
dends to be absolutely paid out Of a des-
'gnated .tund, ordinary earnings, - if
sufficient from year to year to do it.
Preferred stock is only form of mort.
gage, says Judge Redfeld il his work on
Railways, S. 237. S Green's Brice's
Ultra Wires, % ed. p. 1914, note Union
Pacific r. r., vs.. United States, SO, U.
S. 1913
Such stock can only be issued when
the charter or some statute gives the au-
thority, or all the stockholders assent.
In this case the authority is in the char
ter, and it was exercised before any sub
scriptions for stock were made, so that
the assent of all the stockholders has been
given to this issue. Green's Brice's Vi
ira Wires p. 164, note.
The 18th by law expressly provides for
preference in dividends to the preferred
stock. AS between the stockholders all
the burden of debts of the corpora ION
should fall on the non preferred stock.
The fair construction of the bylaw re
qulres the net earnings to go first to pay
a dividend of 6 per cent to the preferred
stock, If the net earnings are sufficient to
DO 80. The bylaw is to have a reason
able application, having reference to the
business and common experience in such
matters. Under similar provisions the
courts have uniformly held that as be-
tweer the stockholders, the net earnings
are to be applied first to the payment in
full from year TO year of the agreed divi-
dends on the preferred stock whether the
non-preferred stock receives anything or
not. Bailey vs.. Railroad, II Wal. 96 (U.
$. Supreme Court.) Bates vs.. A. & T.
Railroad, 40 Me. 491.
This right of preferred stockholders
will be enforced by the courts, aud such
stockholders may have an injunction from
the court to restrain the payment of divi-
dends to non preferred stakeholder, or
otherwise to divert the income of the cor
poration to the detriment of the preferred
stock. Redfield on Railways, S. oil.
Henry VS.. Great Northern Railway, 80.
Law Times, PIP. 10, al. Clifford VS.. N.
Jersey Railway, 2 Stockton's Oh. Rep
III. Green's Brice's Ultra Wires p. 1874,
note, p. 173. 67S Williston VS.. Mich.
Southern & N. Ind. r. f. IS Allen. 4O5
Samuel vs.. Holiday (per Miller J, N.
s. Supreme Court Am. Cor. Gases,
Vol. l, p. Isl.
Dividends to ordinary or non preferred
stockholders are declared at the discretion
of the Directors, and Of such portion of
earnings as they deem desirable, and if
they act in good faith the stockholders