New York, Lake Erie, & Western Railroad v. Nickals

Citations

• 119 U.S. 296
• 7 S. Ct. 209
• 30 L. Ed. 363
• 1886 U.S. LEXIS 1989

Syllabus

<p>The Erie Eailway Company, being embarrassed and in the hands of a .receiver, appointed in a suit for the foreclosure of two of the mortgages upon the property of the company, its creditors and its shareholders, preferred and common, entered into an agreement for the reorganization of the company, to be accomplished by means o f a foreclosure. Among other things it was agreed that there should be issued “preferred stock, to an amount equal to the preferred stock of the Erie Eailway Company now outstanding, to wit, eighty five thousand three hundred and sixty nine shares, of the nominal amount of one hundred dollars each, entitling the holders to non-cumulative dividends, at the rate of six per cent, per annum, in preference to the payment of any dividend on the common stock, but dependent on the profits of each particular year as declared by the board of directors.’' The mortgage was foreclosed, and a new company was organized, and the new preferred stock was issued as agreed. Tito directors of the new company reported to its share and bond holders that during and for the year ending September 30, 1880, the operations of tiie road left a net profit of $1,700,020.71, which had been applied to making a double track, a,nd other improvements on the property of the company. A, a preferred stockholder, on behalf of himself and other holders, filed a bill in equity to compel the company to pay a dividend to the holders of ■ preferred stock. Held, That while the preferred stockholders are entitled to a six per cent, dividend in advance of the common stockholders, they are not entitled, as of right, to dividends, payable out of the not profits accruing in any particular year, unless the directors declare or ought to declare a dividend payable out of such profits; and that whether a dividend should be declared in any year, is a matter belonging in the first instance to the directors to determine, with reference to the condition of the company’s property and affairs as a. wh