The Portland daily press., 1884-11-04

obligations imposed upon the Eastern Railroad by
the act and mortgage The receipts under such
law would still be net earnings, TO be applied &C
cording to the requirements Of the act. In other
words, net earnings may be ascertaned by contrast
as well as by tn actual and direct operation of the
road by the company itself. Looking, however at
each of the two special objections to the mode of as
certaiDing the to be paid by the lessee by itself
in the light of the averments Of the bill and the
grounds upon which it rests we Go not see any such
departure from IL g plan of expenditure contemp-
lated by the mortgage to call for the issue of
injunction against the issue of the lease The next
specific objection that the property which the East
ern Railroad Company has power 10 sell will under
the lease be diverted from the sinking fund, is una
Vailing also. because under section 13 of the act
the creditors their trustees have no right to re-
qu1re the corporation to sell any property for the
purpose OF applying the proceeds as therein provid
to make such sales. The inclusion of such property
in the lease furnishes of itself no ground of com
plant, there being no charge of want Of good
faith. The final objection, founded in
the provision fer the payment Of dividends
upon. preferred stock, in case such be
issued, rests upon different ground and
raises the question whether this provision looks to
a substantial misapplication of the net earnings
when ascerJained or other substantial injury to the
creditors. Article of the lease provides that the
lessee shall pay upon the preferred stock of the
lessor. when issued under chapter 1877 of the acts
OF 1882, semtannually at the same times as the in
terest of the debt extinguished by said preferred
STOCK would have been payable in lieu of said inter-
est and as fixed charge entitled to the like priori
ty under this lease, an amount by way of dividend
extinguished. The judge says that as the rent of
the road is to be considered as net earnings, each
creditor has right to insist that the creditors shall
receive the benefit of the whole of it in the manner
provided for in the statute until the indebtedness
is actually and in good faith and to all intents and
purposes reduced to an amounG not exceeding $1O,-
oOO.OOO, and this result is not accomplished by is
sued preferred stock, with provisions making hold
ers of it to be substantially the creditors.
Ii, ON the other hand, the payment of the sum
stipulated for in Article of the lease is to be made
to the lessor it NAV be, and probably u.s. true that
It would be within the jurisdiction of the Court of
Equity to compel the lessor to dispose of the money
according to law upon proper proceedings hereafter
to be instituted for that purpose, and thus to pre-
vent any appropriation thereof, by paying dividends
to the preferred stockholders long different
disposition might be required by the terms of the
statutes of 1876. 1t may well be considered that
the money would come into the hands of the lessor
clothed with the trust created by that statute in be-
half of the creditors which the rights of the pre-
ferred stockholders would be subordinated, not
wthstanding the terms of the lease to the contrary
But lease which contains provisions contemplat-
ing breach of this trust, ought to receive the
sanction of the court. Article . of the lease does
plainly contem ulate unlawful disposition of the
net earnings of the road by premature payment
OF dividends to preferred stockholders which would
amount TO such breach of trust. In either view of
Article of the lease and BECAUSE of that only the
entry must be demurrer overruled."