The news & observer., 1897-02-13
February 13, 1897.
THE DIFFERENCE BETWEEN
RENTAL AND INTEREST.

In the execution of the lease of the
North Carolina Railway to the Southern
Railway for ninety-nine years, the rental
was settled upon the basis of 6k and Z
per cent on the four million dollars OF
stock in the road This fact has given
the friends OF the lease chance for
urging against the bill line of argu-
ment that is said to have some weight.
The argument, in brief, is: The State
of North Carolina has passed law for
bidding its citizens TO receive more than
six per cent interest; if that is right, why
should not the State be satisfied when the
directors OF the North Carolina road
have made a trade whereby the State
gets seven per cent interest?
There is one complete answer to this.
If the question of interest enters into the
matter at all, the directors have violated
the State law by receiving more than six
per cent, and they ought to be punished
for violating the provisions of that law.
A State ought not to permit its trustees
to violate any law for the profit of the
State
But If he will reflect at all, the most
ignorant man in the State will see that
the question of interest is in no way con-
nected with the lease. Interest is de-
fined to be:
"a premium or sum of money Civ
en- for the use or loan of another
sum Of money
It is plain that no sum of money has
been lent to the Southern Railway, and
therefore that the question Of interest
has been raised without thought of the
meaning of the word or for the purpose
of deception.
The Southern Railway has rented the
North Carolina Railroad for ninety-nine
years at rental Of $210,000 per year
Because there are many stockholders,
for convenience in the distribution of the
money received for the rental of the
property, it is expressed as at seven per
cent on the capital stock Of the company
But it is nothing but rental as this def
milton of "rent' from Blackstone shows:
A certain profit in money, proYi-
sions, cattels, or labor issuing out
Of lands, and tenements in return for
the use.'
The Southern Railway says it will
give $2S0,000 per year rental, or seven
per cent on the capital stock, while the
Seaboard Air Line road offegs to give
100000 per year rent, or ten per cent
on the capital stock, a difference in favor
of the State and private stockholders
of $4,000 per annum for ninety-nine
years.
Ii it is interest that is being paid, the
State cannot legally receive but six per
cent, or $240,000 per annum. If it is
rent, the State has right in law and
equity to receive whatever parties desir-
ing the property are willing to pay. The
State and the private stockholders have
invested in the North Carolina railroad
$4,975, ,627.53, or exactly $975, ,627 SO
more than the amount of stock issued.
1t is perhaps the only prosperous rail-
road in the country that has not at some
time or other in its history watered it's
stock. Instead Of reducing by water,
the stock of this company has been en-
riched by this more than nine hundred
thousand dollars. AS matter of fact,
in securing the rental and expressing it
in per cent, rental should have been re-
auired on the $4,975, ,62753, the actual
cost of the property.
1t was the high duty of the directors,
acting as trustees for all the taxpayers
of the State, TO secure the highest rental
possible. When a trustee has property
Of a cestui que trust to rent, he is COM
PEELED to advertise and rent it to the
highest responsible bidder. If he fails
he is accountable. The directors Of this
property, having rented II for a sum out
Of all proportion to it's value, are in strict
equity chargeabIe for the $4,000 addi-
tisnal rental that could be secured. In
asnush as EAere is no legal methsS Of