Wabash Ry Co v. Barclay Austin v. Same

• Decision Date: 06 January 1930
• Docket Number: Nos. 37 and 38,s. 37 and 38
• Citation: 74 L.Ed. 368,50 S.Ct. 106,67 A.L.R. 762,280 U.S. 197
• Parties: WABASH RY. CO. et al. v. BARCLAY et al. AUSTIN v. SAME
• Court: U.S. Supreme Court

280 U.S. 197

50 S.Ct. 106

74 L.Ed. 368

WABASH RY. CO. et al.

v BARCLAY et al.

AUSTIN

v. SAME.

Nos. 37 and 38.

Argued Dec. 2, 1929.

Decided Jan. 6, 1930.

Messrs. Charles E. Hughes and Winslow S. Pierce, both of New York City, for petitioners Wabash R. Co. and others.

Mr. Charles E. Hughes, of New York City, for petitioner Austin.

[Argument of Counsel from page 198 intentionally omitted] Messrs. Joseph S. Clark and Ellis Ames Ballard, both of Philadelphia, Pa., and William R. Begg, of New York City, for respondents.

[Argument of Counsel from pages 199-200 intentionally omitted] Mr. Justice HOLMES delivered the opinion of the Court.

This is a bill by holders of first preferred stock (called Class A) of the Wabash Railway Company, to have it declared that holders of such stock are entitled to receive preferential dividends up to five per cent. for each fiscal year from 1915 to 1926 inclusive to the extent that such dividends were earned in such fiscal years but were unpaid, before any dividends are paid upon other stock; and that the Company may be enjoined from paying dividends upon preferred stock B or common stock unless it shall first have paid such preferential dividends of five per cent. to the extent that the Company has had net earnings available for the payment and that such dividends remain unpaid. The case was heard upon bill and answer. The bill was dismissed by the District Court but the decree was reversed by the Circuit Court of Appeals, one of the Judges dissenting, 30 F.(2d) 260, and a writ of certiorari was granted by this Court. Wabash R. Co. v. Barclay, 279 U. S. 828, 49 S. Ct. 265, 73 L. Ed. 979.

The railway company was organized in 1915 under the laws of Indiana with three classes of capital stock: Shares of the par value of $100, of Five Per Cent. Profit Sharing Preferred Stock A; shares of the same par value of Five Per Cent. Convertible Preferred Stock B; and shares of the same par value of Common Stock. At the date of the bill there were 693,330.50 shares of A, 24,211.42 B and 666,977.75 common. From 1915 to 1926 there were net earnings on most of the years but for a number of years no dividend, or less than five per cent., was paid on Class A, while $16,000,000 net earnings that could have been used for the payment were expended upon improvements and additions to the property and equipment of the road. It is not denied that the latter expenditures were proper and were made in good faith, or that the money could not have been applied to dividends consistently with the duties of the Road. The Company now is more prosperous and proposes to pay dividends not only upon A but also on B and the common stock, but the plaintiffs say that it is not entitled to do so until it has paid to them unpaid preferential dividends for prior fiscal years in which it had net earnings that might have been applied to them but were...