New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1902-03-27
DIVIDENDS NOT EARNED.
PRESENT METROPOLITAN NET EARNING
CAPACITY PLACED AT PER
CENT PER GENT PAID


The briefs in the Injunction suits brought by
Herry and Walter Content and Isidor Wormser
Jr.. TO restrain the transfer Of the property OF
the Metropolitan Street Railway Company to the
Interurban Street Railway Company under the
recently executed lease. submitted yester-
day to Justice Gildersleeve. After recting the
facts OF the agreement by which the transfer
through lease to be made. the brief for the
plaintiffs that the stock Of the Metropoli-
tan Street Railway Company has for the last
three years been paying a dividend of per
cent while the earnings increasing from
year to year
AS a reason for urging that permanent in
Junction be issued. the plaintiffs contend that
railway corporation cannot ALLEVIATE its prop
eriy and franchises without the consent of the
State through the medium of the legislature
where such alienation consists Of transfer to
another railroad corporation The lease of the
Metropolitan company to the Interurban
pany, + is asserted is in direct contraventon Of
this legal prohibition.
The brief then proceeds to attack clause by
clause, every portion of the lease. and attempts
to show through the citation OF laws and the de
cisions of courts that the conveyance is illegal,
and consequently should be stamped as void
through the medium of an injunction. Further
on the brief characterizes the transfer scheme
fraud upon the minority stockholders even
though 1t appears legal on its face because it
aims to deprive the minority stockholders of
their legal rights, and will therefore materially
depreciate the value of their property. The
brief closes with prayer that the injunction be
continued.
In their brief the defendants assert that the
provisions of Section ~ OF the Railroad law,
thorizing lease from one railroad corporation
to another have been strictly complied with.
This brief adds
The Court is not to pass upon the policy Of the
lease or the eNpedienCy OF its conditions or the
suffciency of the rental # not grossly made
quatc nor is II called upon TO balance probaoih-
ties OF profitable or Improbable results. In
word the Court cannot substitute It's own judg-
ment upon business question for that of the
directors and a majority OF the stockholders,
provided they are acting honestly. Surely the
directors and stockholders entitled to every
presumption of good faith and TO have every
reasonable doubt resolved in their favor. The
decision of more than the ma jorty required by
the statute ought not to be reversed by court
except for conclusive reasons. nor the Will Of a
factious minority substituted for the Judgment
of the directors and of four-ifths Of the holders
OF stock. Particularly are the settled rules TO
be applied by the Court when. as in the case at
bar, an overwhelming majority approves OF
lease or other corporate transaction.
The brief states that the elements Of fraud
lacking and denies that the Metropolitan
company is TO secure inadequate rental. 1t also
denies that the two companies are controlled by
the same persons and that the trustees are 10
share in any profits from which the stockhOld-
be barred The question of policy
acted upon by the directors and stockholders
quite urgent. The plan adopted was to
lease the railroad system a guaranteed rent
al OF per cent and to sell for $23,Opo.0D Sc
curities which could not have been sold for
more than that amount to any other party than
the Interurban company. AS this sale included
almost SIS 600 900 par value, of the Third Ave
nue. company's stock which the Metropolitan
company had guaranteed dividends soon be
come payable. Notwithstanding that the Third
Avenue lease yet Improbable and In
Guided S11 600 OF Metropolitan per cent
bonds the inevitable result OF any sale would
be 10 increase the fixed charges ahead of the
Metropolitan stock and necessarily reduce, Tor
least a number of years, its net earning ca
pacity and rate of dividend. unless protected by
the guarantee under the lease The Metropoli-
tan company has thus done. the brief asserts,
what the plaintiffs urge should have
been done; that is. II has sold the treas
ury assets and the bonds 10 the
ing capacity of the Metropolitan company
is said in the brief be substantially less than
3 per cent Notwithstanding this fact, rental
of per cent is secured under the lease and
this il is urged. shows that no fraud has been
committed The holding OF the stock and de
ropolitan Securities Company constitutes a good
business move, the brief asserts, az II would
place those securities the custody OF a cor
porat ton with unlimited financial backing. The
the lease were not honestly seeking Information
at the Metropolitan meeting.
,4TIOSi IfTITERS' FEEDER TTON