The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1886-11-30
THE SUPREME COURT.
Decisions Affecting the Validity of Railway
Aid Bonds and Dividends.

Aid Bonds and Dividends.
WASHINGTON, Nov 20 -Asdaeaina was rem
dered by the United States Supreme Court to-
day in the bond case of Moses r. Grow against
the township of Oxford, Sumner county, Kansas.
This was suit to recover the amount due on
certain bonds and coupons issued by the town
ship of Oxford, to aid in the construction of a
bridge across the Arkansas river. The same
bonds have already been once before this court
In the case of Mcclure against the township of
Oxford (94 United States 420] The court then
held that the bonds if issued under special act
of the Legislature of Kansas, approved March l.
1872, were invalid. On the present suit an at
tempt is made to sustain the validity of the
bonds by alleging that they were issued under
authority Of a general act of the Legislature of
Ka nsas, passed March 2 1872. The court holds
that the bonds their face excluded
the possibility of their having been issued under
the latter act, the public records show that the
proceedings were not taken under that act, and
the auditor had no right to decide, ms matter
of law, that these were bonds which he was au-
thorized to register and certify, when, mat
ter of law, they were not The decision of the
court below. in favor of the township, Is af-
frmed Opinion by Justice Blatchford
decision was also rendered by the court, in
the case of the New York, Lake Erie & Western
hallrOau company against IDOmaS Nlcn0iS ana
Sidney Claws, brought here by appeal from the
United States Circuit Court for the Southern
district of Now York This was q suit brought
by preferred stockholders Of the railroad com
pany, to compel the latter to make dividend
of ner cent upon its preferred stock for the
year ended Sept 30, 1880, payable out of the net
profits accrued that year after the payment of
operating expenses. interest, etc. In the court
below judgment was rendered against the COM
pany for $40, $50, which is the amount TO which
md uov ic hoxVa hpa A1o-l.
the dividend in question had been made upon
the preferred stock. The case was also referred
to special commissioner to ascertain the names
of all other persons entitled to receive similar
dividends. The contention of the stockholders
In this case Is that the sum of ST. 100 620 which
the board of directors stated In their report to
be the net profit for the fiscal year 1S79-80 con-
stituted a trust fund chareeable primarily with
the payment of per cent. dividend upon pre-
ferred stock. The use of that fund for any other
purpose was. it is maintained. breach of trust
on the part of the company and violation Of
the rights secured 10 preferred stockholders as
well by the plan and agreement OF Dec. IA, 1877,
as by the companys articles of association.
ms view OF the case the United States
Circuit Court adopted and re ldered
decree in favor of the stockholders.
The United States Supreme Court, however in
carefully prepared opinion by Justice Harlan,
reverses that decree and holds that while the
agreement of 1877 and the articles of association
imply the right of preferred stockholders to
dividend in advance of common stockholders.
neither of them are entitled of right to dividends
in any year when there were profits from the op-
GRAFTON of the company, unless the directors de-
clared dividend payable out of such profits
AS the evidence shows that the profits for the
year ended Sept 30 1880, were applied by the
company to objects that were legitimate and
proper in view of the condition of it's property as
a unit and of its affairs as a whole, there is no
ground TO suppose that the directors acted in bad
faith when they refused to declare dividend
for that year The court is therefore satisfied
that the complainants are not entitled to re-
cover The decree is reversed, and the case re-
manded with directions to dismiss the BILL