New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1883-01-03
RAILWAY INTERESTS.
A DIVIDEND ON ERIE PREFERRED STOCK.
IMPORTANT DECISION OF JUDGE WHEELER AS TO
THE RIGHTS OF STOCKHOLDERS.

A DIVIDEND ON ERIE PREFERRED STOCK
IMPORTANT DECISION OF JUDGE WHEELER AS TO
THE RIGHTS OF STOCKHOLDERS
| judge Wheeler, of the United States circuit
Court yesterday rendered important decision ia INC
action OF T. Nichols and others against tine ioA
Lake Erie aud Western Railroad Company ana Others
in favor OF the orators II sought to esaohsh IN
the action that the holders OF Erie preferred stock are
entitled 10 dividends The of per cent per annum
In every the profits OF the year. as decred
by the Board OF Directors, sufficient TO pay these
dividends far the net profits as so declared WI"
suffice therefor that the net profits of the year end
ing December 80 $780, may be ascertained ana tne
dividends holders of the preferred stock In
respect those profits be directed be paid The Erie
directors for the year ending in September 1885,
reported earnings, SlS693,lO5 50i operating
expenses. s11 643.925 80; net earnings from trano
81. OA9,1s3 5li earnings from other sources, $685.
95s Is making a total Of S7,sS3100 10. From this
was deducted interest on funded debt, etc., Soo42-
$40 as; leaving net profits of s1,79O.62o IL dvi-
demo per upon the outstanding preferred stock
wond amount to S4s94O3 so The whole amount OF
net profits. together with S737119 3d. received during
the year assessments stock, was applied By the
directors to the building OF double tracks, erection or
buildings and acquiring other property. And they re-
solved that II not wise or eIpedient TO DECLARE
dividend upon the preferred stock
Judge Wheeler said 1.-THE orators holders OF
preferred stock transferred to them snoe 1880 There
is question made. apparent room for any Dnt
that all tho rights which the orators have are the rights
OF stockholders SUCH and not OF creditors nor but
that holders OF preferred stock have rights under the
law Of the organization superior TO those Of tho common
stockholders There IL nothing more inoongruous
about the declaration OF profits than OF net earnings by
board of directors OF rail- oad company and 1t Is nat
ura TO infer that the payment Of dividends to preferred
stockholders intended to be made dependent In one
respect upon declaration OF profits by the directors,
the n payment OF interest 10 bOndhoders was
upon declaration of net earnings b. the same board
They have expressly stated net profit. after de-
Quoting from the earnings the cost Of maintaining the
property by which the earnings made and all nIed
charges for interest and rentals several times larger
the other hand stated tho improvements and resoved
that they do not deem i wise or e1pedent to declare
Is no pretenee but what the statement .td,
nor bat that what they nave Done they have acted IN
good faith There IA here net profit over all tho ex
1t judicious improvements the property
looking future profits. This does lot take away Ls
character as a present profit It would be pront
whether 1t should be laid the property to en-.
hance it's value loft in the treasury OF tho com any or
divided among the stockholders There ia difference
in respecls between net earning and profits,
but not in this respeet What would be ne, ne5
be some liability outside the earnings to be met
before there coud be any prom, let linda. uhs.,or
continued When it comes to the estion OF using
the benefit OF smother set, rigid rule should be
applied The question becomes one OF right 10 be de-
termlned by law rather than OF policy TO Do deter
mined at the discretion OF the directors. Here were
PROFITS In fact aud The preferred stockholders had rights
dependent upon this TACT. These rights lawfully could
not be ased by the benefit Of other nterests how
ever Intimately connected. any more than other prop
ery OF the preferred could be appropriated
to the purpose the ground that such appropra
ton Of II would be for the best good or the whole.
II Is further suggested that II these prof.
its SO situated that any one became
entitled 10 them account OF the preferred
stock right would attach 10 the holders at that
time would not pass tho orators by mere trans
fer o the sock aiteTward. Fully declared dividends
might or might pass. But here declaration OF
dividend upon this sock separating the snare OF the
profits tue other assets belonging TO the stock Inc
right TO share In these pohis remained as mere ncre-
uleut OF tae STOCK wOuld pass as incident "a IT.
The court ordered decree to be male In accordance
with the PRAYER IN the bill of complaint.
An executive officer of tue Et0 Railroad said last
night had not read the fun decision but that IN
general way b. undcrs II its purpprt lie said that
the company would carry the the United States
sHpTe Court which in silar had rendered de-
c-lOus eIaot opposite 20 she present one. lie said
that the company law abiding, and that as Que or
It's officers, he did not wish 10 orlticise tho
action II the decision the aw In sueh
casts. the Erie Railroad would obey It, The company
wished TO know the Jaw, however, just as soon as pos
able.