New-York tribune., 1908-03-02
no SCRIP DIVIDENDS.
p. s. BO4RD DECISION;
Application Of the Erie Railroad
Com PAM Denied.

sihzry. March The Public Service COMMISSION
nss decided thet scrip dividends cannot be author
t-,s under rhe Public Service commissions law and
has denied fhe application Of the Erie Railroad
Company Cor authority from The commission TO
sssue ss,ch dividends its first and second pre-
ferret stock In an opinion written by Chairman
Stevens the commission states that, after careful
consideration uraavoidably occupying considerable
period Of tine holds that. in order 10 authorize
TIE issue q stock. bords otheF evidence Of in
heb;edness. pursuant 10 Section - of the Public
Service commissions law. three conditions must be
compiled Nitfs-
That capital must ne secured by the issue
: That the use cf such capital must he necessary
rc~ cre or more of the four purposes specified In
tire section
3 That 5ae amount authorized Is reasonably re
CURED for such purpose cr purposes.
7 further held
That dividends must. in obedience TO Section %
81 the stock corporations law, be declared only
from surplus profits
snd no1 70 the stockholders until dividend s de
clsre5
s, That hy the declaration Of a dividend payable
future tire no capital Is secured a cor
poration proposing 10 issue warrants evidencins
such dividend
TEat an ISSUE ~ such dividend warrants is not
necessary for any Of the four purposes specified in
Section 55
The commission denied the application for the
foregoing reasons. and hcld that evidence OF
Indebtedness payable more than twelve months
after the date thereof can he issued by a railroad
corporation except for more Of the purposes
specified IN Section 55
IRE board Of directors Of the Ere Railroad Com
Rsny on august & lsG- declared dividend os >
Per cent on IS preferred stock payable on October
:. 80 and dividend : Ter cent on lis second
preferred stock payable on November J. 1917. II
fa-T-eT determined 10 issue interest bearing divi-
dend warrants eviGencing the right Of the stock
holders 10 the dividends declared subject the
approval Of The Public Service Commission and
aTPled for the approval Of the commission Of the
issue of slch warrants
he surplus net earnings or the company on July
1857 S53l - s. Of which e s1g ~ % was
undivided surplus net profits for the fiscal wear
ended jane 81 1867. and SIl9z76sS s. undivided sur
P-n= net profits remaining from previous years
I he first preferred stock outstanding amounts 70
1he sum - 81 s- 43 and the second preferred stock
outstanding 70 the SUN Of Sl6rtopa The dividend
G pe- cent The first preferred stock amounts n
'e4s and he dividend o. 7e- cent on The second
preferred STOCK 10 oooa, making an aggregate Of
IN F-dends declared Of & .5q6s4s
Chairman Stesers IN MS opinion sa7s.
ASSUMING that tne dividends declared vvoul5 b7ya
heen lawful prior July : ieJ7 the inuurz- = a
te me proper construction 5f Section - ~ inc rb
-- s-Islce commissions isv. which provides Tor rio
lss1irE 81 stocks bonds. uoes OF o1her eyi6e7cs -
80. ~ -4 "a sahis a nerlods OF more than
rallroad corporation organized or existing under
@ ~ write of The laws OF The State Of New Yor,
SO 5tocAS heIos, notes or other evidences
l-oeLstdl-sS payable Il periods Of more than
strGc;5on coTrpleJst1 Slsi- ~ - - - -, lne .oa.
Is IallilleS or 50 Tor tt Improvement or rnaiu.-
harcH II SIS service "A for Ihe discharge ,,r
lawful refgn5inE Or is obligations PROVIDED and
ei olfeT"lse- hat there shall have been secured
lsein n proper commission an rider authorizing
SCI ssue and ne amount thereof. stating tha;
p n opinion 81 The commission The ol she
taEltal % oe secured by tn issue Of such storl
-os- -l3l's o- o'ier evidences of Indebtedness is
Teasooably required for me said purposes of the
When any one Of he conditions Of the statute
rs-o. - = -9IllFlee with IA given case lhe com
iziu- -. desired fez-l-
BE rhe declararioi- or 2 scrip dividend and the
issGi1e of In. warrants evidencnc The same trt
COMPANY secures Hotling which I did possess
among 5he stockholders: il The direct opposite ii
Tr5iee n i ~ 3 y ei5 = 1 -s i 5 paTirng with il =
- 1@I5 w,5h mai property in The future The cor
daring the dividen5 il possesses 40 rsntsi zz5fr
il did not possess before The money winch ),
an, Lawful r.irnose 90 rb.- lcr,o-a-i5,5 M ~
crefon of TIE clre'tors. ana after the declaration
power or authority o.e, tie fund which i promises
df15= than - had before the declaration Of rh4
dividend Every dollar Il The money or property
which warrants he declaration II such a dividend
IS already The property Of The company. and moth
y ne" 5 secured IIere9y eLlge one @f the COZ
ness under Section = is The capital
mus certify that The capital 50 10 be secured Is
reasonably required FOR certain purposes II Is clear
-ra- warrants ev1deucuC scrip dividend cannot
that 10 capital : secured rserefz No- can he Is
purposes enUTlerateT statute the equally
plain reason rEat after their issue rhe directors
have no more power 90 apply the surplus ot
The required purposes -.laU they possessed before
1ne declaration Of the dividend.
The issuing OF these aViGeuceS rF Indebtedness
IS ~Aearly necessary for ne s-ioU OF prop
erTE. Gle construction completion. extension
p-oVenlent or n1alntellance q It's service. since
every dollar of he surplus IS applicable a. rh-
discretion of The directors 70 any all of rhese
purposes The further question arises whether the
company can lawfully issue these warrants with
he - tlfe SSiou The answer I'd
-1is question depends entirely The proper con
srrucGor - Section - III that section 10 he
construed % uniting The corporations named
evidence of Indebtedness what
for rire purposes named therein and
permitting long -trnc Indebtedness SO be incurred
or1v [or such purposes then the declaration Of a
dividend pavahle IN tie future = not now w2~-
-artad bv ar. r. rhe other hand the section
s7rls ~ commission Tor lis authorization only
rzsr -7e ind .f=reCuesS hr Incurred Tor one
more purposes named IN f.IH S'cllof
s7d a- designed ~. -naE-r HE nf l01E
--re fn5er- rrf other purposes without me
~c-e-- ~ comm ssiou tlar il IS not 1@0"ssar -
-r@ corporation q" Apply Tor s}-2 'r1s1nt ana
= ma the warrants
re opinion. - winch al -he cornrrissloners con
c--- ~cE-lu6r=-
+ should ne added thar IN The o0ir."1 II this
commission. AFTER r- discussion power ~H0.--N %.
Fz--- 4.- hr-=za the ISSUE n stock BONDS anp
1--e- evidence 5-denIe5uesS -o- some r'Fi'ors- =
--7r~rErz NOT NOW enumerated n Ne-tlon 7- y
CONSTRAINED fes5e-e -}=a- TIE -"Fr'n eouio ne
rs5~ r7~-e ror7--efl=,asise without danger 10 the