ration of his property and, consequently, he has not availed himself of the only promise the United States has as yet offered to make, looking to that end. The Court of Claims may act upon promises made, but cannot make them. There is here no question of confiscation. The title of the United States, whatever may be the rights it carries with it, is by authorized capture or appropriation of enemy's property on land. But the same statute which authorized the capture gave a right to certain persons to demand and receive a restoration of their property taken. Coupled with the right to demand was a provision for the remedy by which it was to be enforced. Both the right and the remedy are, therefore, created by the same statute, and in such cases the remedy provided is exclusive of all others. The demandant in this case neglected to avail himself of the remedy provided and, consequently, he is now without any. That remedy was the only one of which the Court of Claims or any other court has been authorized to take jurisdiction. It is for Congress, not the courts, to determine whether this jurisdiction shall be extended and other remedies provided. The judgment is affirmed. WILLIAM S. LANE et al. v. UNITED STATES: [No. 176.] Mr. Chief Justice Waite delivered the opin ion of the court: This action, like that of Haycraft v. U. S. [ante, 738], in which the opinion has just been read, was commenced in the Court of Claims, after the expiration of two years from the close of the rebellion, to recover the proceeds of the sale of cotton, taken under the authority of the Captured and Abandoned Property Act. The judgment of the Court of Claims is affirmed for the reasons assigned in that opinion. Cited 92 U. S., 194; 97 U. S., 58. THOMAS ST. JOHN, Appt., v. THE ERIE RAILWAY COMPANY. (See S. C., 22 Wall., 136-150.) Dividends on preferred stock-net earnings. 1. An agreement to pay dividends on preferred stock of a railroad, out of the net earnings of the road, does not mean the net earnings of the road as it was when the preferred stock was issued. 2. The company may, after the agreement, incur new obligations which would diminish the net earnings applicable to such dividends. 3. The net earnings from which the preferred dividends were to be paid, must have been earned in the current year. Whether the business of such year were large or small, or of what it consisted, is immaterial. 4. If there were no net earnings earned in a particular year, which could be properly applied in payment of preferred dividends, the company cannot be required to pay them. (No. 140.] Argued Jan. 14, 15, 1875. Decided Jan. 25,1875. APPEAL from the Circuit Court of the United States for the Southern District of New York. St. John, the appellant, a citizen of Alabama and the owner of certain shares of preferred stock of the Erie Railway Company, filed his bill in the court below on his own behalf and on behalf of the other holders of the preferred stock, to obtain a judgment as to the rights of such stockholders, and to protect them against the alleged wrongful acts of the company. The court below dismissed the bill, and the complainant appealed to this court. The case is stated in the opinion. Mr. Dorman B. Eaton, for the appellant: The holders of the old unsecured bonds and judgment debts of the New York and Erie Company made a contract with its stockholders, mortgage bond holders and trustees, that such bonds and debts should be converted into a new and unique form of security, which they called "preferred stock;" which stock should hold the same place and have the same interest as then belonged to the bonds and debts, that is, next after the existing mortgage debt of the Company. The unsecured creditors surrendered the possible gains of litigation; they waived the right to interest each year, if not earned in that year, even though the last or next year might show a surplus, however large; but they secured for each year a certain and abiding position next to the then existing mortgage bond holders, upon the net earnings of the property of the Company, then well defined. They were no more than mortgage bond holders, to be subject to the contingencies of new loans and leases, extended enterprises and risks of expansion of business. The fact that the existing security is called "stock" and that its holders may vote with the common stockholder, must not be allowed to mislead us as to the real object and meaning of the contract. The general associations and rights attending the holding a security bearing that name, are no elements for importing a meaning contrary to the language and spirit of the contract. The great difference between a position which gives a right of payment "after mortgage interest," meaning the same as next after in the connection used, and one which merely gives a right of payment "before dividends on the common stock," which is the position of an ordinary preferred stockholder, is sufficient to answer all such arguments. There is nothing in the use of the word "dividend" which impairs our argument. If there is any discretion in a company as to the fund from which a dividend is declarable, or as to declaring it at all, then this contract controls that discretion; for it is to be declared from "net earnings," and is payable absolutely, each year, if earned, immediately after the mortgage interest is paid. There is nothing in the phrase "net earnings" which impairs our argument, or presents any practical difficulty. Net earnings, plainly means gross earnings, less the expense of operation, and has been so judicially declared. The defendant should have kept separate accounts of its newly leased roads, and been prepared to sustain its losses or demonstrate its profits. The plaintiff is entitled to have counted as gross earnings on the line, as it existed when his stock was created, all the money thereon received and earned, and from this can be deducted only the expenses of operating such line, including, of course, rents payable for any portion of it. Such accounts are easily kept. On that basis the plaintiff will take his chances of a divi dend, as the contract provides, and will regard his prospects as greatly improved. The Com pany denies that right, and refuses such account and payment. The defendant's argument as to "net earnings" falls little short of conceding all we claim; for the defendant admits that the contract, the laws and the stock certificates, all define a particular class of earnings, out of which a dividend is to be made. The moment that is admit-mortgage, and that it constitutes a lien, in the ted, it follows that there must be some specific property from which such earnings are to come, and that they cannot be used otherwise than according to such provision, unless the provision is illegal. Now, in regard to common stock, no class of earnings is mentioned from which the dividends are payable; and hence the directors have the discretion which the defendant claims as to increasing the property, making new application of earnings and judging when dividends can be paid. But the specific provisions as to the preferred stock preclude the idea of such general discretion; and hence the defendant cannot establish in favor of the directors the same control over the net earnings from which preferred dividends are payable. The only open questions as to that are these: (1) What is the property from which such net earnings are to come? and (2) What is meant by net earnings? When these questions are answered, the directors have no authority for applying the earnings otherwise than the contract, laws and certificate provide. To hold otherwise would reduce the provision as to payment from the net earnings of each year to a mere nullity. Corry v. Londonderry & E. R. R. Co., 29 Beav., 263, 272; Taft v. Hartford, etc., R. R. Co., 8 R. 1., 310, 334; 2 Redf. Railw., 516, sec. 237, declares that preferred stock is a form of mort gage; sce, also, R. & B. R. Co. v. Thrall,35 Vt., 536, 545; Bates v. Androscoggin R. R. Co., 49 Me., 491; McLoughlin v. Detroit R. R. Co., 8 Mich., 100; Henry v. Great N. R. Co., 27 Law Jour. (Eq.), 1, 16; Matthews v. Great N. R. Co., 28 Law Jour. (Eq.), 375; Sturge v. E. U. R. Co., 31 Eng. L. & E., 406; Maryland v. Baltimore, etc., R. R. Co., 6 Gill., 363; Luling v. Atlantic, etc., Ins. Co., 45 Barb., N. Y., 510; Thompson v. Erie Railway Co., 45 N. Y.. 468; Shelf. Railw.. 4th ed., p. 206, secs. 22-24, 31; * Dodge v. Woolsey, 18 How., 331. 341 (59 U. S.. XV., 401, 404); N. Y. and N. H. R. R. Co. v. Schuyler, 17 N. Y., 599; March v. Eastern R. R. Co., 43 N. H., 515. Messrs. W. W. McFarland, Larocque & Barlow, for appellee: There is no foundation for an argument that the word "preferred" is relative to anything else than the common stock, or that the holder of the preferred stock has any other or different rights than the holders of common stock, except merely that of a prior right to a dividend. The preferred stock is a part of the capital stock of the Company, conferring upon the holder all the rights of a stockholder, and subjecting him to all the burdens of a stockholder. He is a stockholder, and nothing else, having the same power and no other or greater than any other stockholder in respect to the management of the affairs of the Company by its Board of Directors. There is no ground for argument or inference that there was any in tention in the premises to limit or restrict the lawful authority of the Board of Directors in the application of the current earnings of the Company, to any and all purposes within the scope of the authority conferred by the charter of the Company, and it is manifest that it is only upon the theory that the preferred stock not only possesses all the qualities of the capital stock of the Corporation, but also those of a nature of a mortgage lien, by virtue of which it is entitled to priority over any obligations which the Corporation may incur. This argument, carried to its logical conclusion, would, in case of the bankruptcy of the Corporation, entitle the holders of the stock to priority over the other creditors of the Corporation in respect to the capital of their shares-certainly a very absurd conclusion from any point of view. Preferred dividends are to be paid out of the net earnings. It was not necessary to declare what should constitute net earnings, inasmuch as this is a term free from ambiguity and perfectly well understood. It means the sum which shall remain for distribution among stockholders, after provision has been made for all the just ob ligations of the Company incurred by the directors, by the exercise of that broad and general discretion in the management of the affairs of the Company which was conferred upon them by law. Welliston v. Mich., etc., R. R. Co., 13 Allen, 400; Taft v. Hartford, P. & F., etc., R. R. Co., 8 R. I., 310; Burnes v. Pennel, 2 H. of L. Cas., 497; Corry v. Londonderry & E. Ry. Co., 29 Beav., 263: Ulster Ry. Co. v. Bainbridge, etc., R. R. Co., Irish Rep., 2d Eq., 190. Mr. Justice Swayne delivered the opinion of the court: This is an appeal in equity from the Circuit Court of the United States for the Southern District of New York. The facts of the case are undisputed. By an Act of the Legislature of New York of the 24th of April, 1832, a Corporation known as the New York and Erie Railroad Company was created. The Company issued five successive series of bonds amounting in the aggregate to about $20,000,000. The first series was secured by a lien upon the road given by statute. The other series was secured by mortgages. The bonds were usually designated as first, second, third, fourth and fifth mortgage bonds, according to their places respectively in the suc cession. The Company also issued unsecured bonds known as "sinking fund bonds," to the amount of about $7,000,000. In 1859 the Company became bankrupt. Foreclosure proceedings were instituted to enforce the last two mortgages, and a receiver was appointed. He held and operated the road until the affairs of the Company were re-organized. This oc curred in 1862. Prior to that time the line of the road extended from Piermont to Dunkirk; but the Company had taken leases of other roads in New Jersey, and of the long dock property on Hudson River opposite New York. These . latter roads gave the Company access to Jersey City, and the dock property was the eastern terminus of the road. Leases of other roads to the Company, not necessary to be specifically mentioned, also existed. On the 22d of October, 1859, the shareholders and creditors of the Company entered into an amicable agreement providing for the adjustment of its liabilities. Thereafter all the property and effects of the Company were sold under a decree in the foreclosure suit, and were bought in by trustees for the benefit of the parties in interest, pur suant to a clause in the agreement. A new Cor poration, under the name of the Erie Railway Company, was organized, pursuant to Acts of the Legislature of New York of the 4th of April, 1860, April 2, 1861, and March 28, 1862. All the property of the old Company bought by the trustees was transferred to the new Corporation, but still subject to all the liens and incumbrances upon it which subsisted before the foreclosure and sale. The agreement of 1859 was incorporated into the decree of sale, and was recognized and sanctioned by the several Acts of the Legislature under which the new Corporation was organized. It was also made a part of the articles of association or charter of that Company. Its obligatory effect in this case is not questioned. The 3d article declares: The capital stock of said Company is divided into common capital stock and preferred capital stock. The whole amount of said common stock of said Company is 115,500 shares, each of the par value of $100, being in amount equal to the outstanding capital stock of the New York & Erie Railroad Company. The whole amount of the preferred capital stock of said Company is to be equal to the amount of the total unsecured and judgment debt of the New York & Erie Railroad Company, with interest thereon as provided by the contract referred to in said Acts and by the provision of the said Act passed April 2, 1861, when ascertained pursuant to the provisions of said Act." The amount of preferred stock outstanding in 1862 was $8,535,700. On the 31st of December, 1868, it was $8,536,910. The fifth article of the agreement was as follows: "Fifth. Such of us as are holders of the convertible sinking fund and other unsecured bonds of said Company, hereby agree to exchange our respective bonds for preferred stock of like amount with the principal of our bonds, with coupons now overdue, and for two years in advance added, and to deposit our bonds with said trustees to be so exchanged, receiving therefor receipts, of the form marked B. Such preferred stock is to be entitled to preferred dividends out of the net earnings (if earned in the current year, but not otherwise), not to exceed 7 per cent. in any one year, payable semi-annually after payment of mortgage interest and delayed coupons in full." The Act of April 2, 1861, enacted the last paragraph in these terms: Sec. 4. Said preferred stock shall be entitled to preferred dividends out of the net earnings of said road (if earned in the current year, but not otherwise), not to exceed 7 per cent. in any one year, payable semi-annually after payment of mortgage interest and delayed coupons in full. And the holders thereof may vote per sonally, or by proxy, at all meetings of the Corporation, in the same manner as the holders of common stock, but not otherwise." The complainant is the holder of three hundred shares of the preferred stock. TheCompany paid the delayed coupons and a dividend of tive per cent. on all the preferred stock for the year 1863, and seven per cent. annually thereafter, until the year 1868. Since that time nothing has been paid. After the issuing of the preferred stock, the Company took leases of several additional roads. Some of them have been profitable and some not. The new Company took the leases held by the old Company, with an obligation to pay the annual rents which the latter was bound to pay. These rents amounted in the year 1862 to $372,400. The annual rents of the additional leases taken by the new Company amounted in the year 1868, to $376,107. Subsequently to 1862, the Company borrowed $5,000,000, for which it gave sterling bonds bearing interest at the rate of six per cent, per annum, payable in gold. The interest paid upon this debt in 1868, was $388,494.68. The money was borrowed for the repair and equipment of the roads of the Company, and was expended accordingly. The net earnings of the Company during the year 1868, after deducting the interest paid on the mortgage debts existing when the preferred stock was issued, was less than $680,000. The payment of all the rents and interest upon the sterling bonds absorbed more than that entire sum. If no rents and no interest upon the sterling bonds had been paid during that year, there would have been more than enough of the net earnings left to pay the dividend claimed by the complainant. If no interest had been paid on the sterling bonds and no rents under the leases made since the preferred stock was issued, there would have been enough remaining to have paid a small part of the dividend; but no part of such dividends could have been paid without leaving unpaid some part of the interest upon the sterling bonds and of the rents under the leases made since the preferred stock was issued. The complainant claims that his rights are to be determined by the state of things which existed when his stock was issued, and that they are in nowise affected by the leases taken and the bonds issued by the Company thereafter. Hence he contends that full dividends should have been paid before any part of the net earnings were applied in payment of the interest on the sterling bonds and the rents under the leases of other roads to the new Corporation. The defendant insists that this interest and the rents of all the leases were necessarily to be first fully paid. The complainant filed this bill in 1869 to enforce his view of the case. The question presented depends for its solution wholly upon the construction given to the fifth clause of the agreement of 1859, and the 4th section of the Act of 1861. They are identical in effect as regards the point to be considered. The original takers of the preferred stock were creditors. They abandoned that position and became stockholders. They thereupon ceased to be the former, and can only be regarded as the latter. They surrendered their debts and received in return stock of the same amount, which gave them a chance for annual dividends of seven per cent., and a voice by voting in the choice of those by whom the affairs of the Company were to be administered. What they were to receive was not interest, but dividends; and they were to receive them in priority to the holders of the common stock. The latter could receive nothing until the former were satisfied. The maximum payable on the preferred stock was specified. It might be less, or nothing. It could not be more. The amount subject to the limit prescribed depended wholly upon the residue of the net earnings applicable in that way. The language employed is apt, to express the relation of stockholders. None to express the relation of creditors is found in the instrument; and there is nothing from which the intent to continue that relation any longer can be inferred. If the mortgages were foreclosed and there were a surplus left insufficient to satisfy the general creditors, it is quite clear that the holders of the preferred stock could have no right to share in the fund. The dividends were to be paid after the mortgage interest and delayed coupons were paid in full. of them, what was there to prevent it? Upon what ground can it be claimed that the category "net earnings of the road" was not intended to embrace the net earnings of all the business of the Company for the time being, whether done upon one or many roads? There is nothing in the agreement or the statute, and we are aware of no legal principle which would authorize the stockholders in question to analyze the business, select out a part of it, and to say that the net earnings specified must be a predicate of that part, and of none other. The Company had the right to conduct its operations, in good faith, as it might see fit; and it was from them and all of them that the materials for the computations of earnings were to be derived. The only qualification prescribed in this connection is not as to the scope, means or elements of the business, but is one in point of time. The net earnings from which the preferred dividends were to be paid must have been earned "in the current year." Whether the business of such year were large or small, or of what it consisted, is immaterial. The Corporation never agreed to be limited in the exercise of its faculties and franchises, and the complainant must abide the result. If errors were committed, and a loss ensued, a court of equity cannot relieve him. It is one of the chances of the enterprise in which he embarked. The business of the road was a unit. If it had been disintegrated as proposed by the complainant, we apprehend it would have been found that the correlations of the main stem and the branches were such, and that the expenses and charges incident to the entire business and those of the several parts were so interwoven and blended, that an accurate ascertainment of the net profit of the main line and any of the auxiliaries, taken separately from the rest, would have been impracticable. An ancillary road may be short and yield but little income, yet by reason of its reaching to coal fields, or from other local causes, its contributions to other roads of the series may be very large and profitable. Whether in this case the partial computstion insisted upon could or could not have been made, the process was one upon which the Company was neither bound nor had the right to enter. This clause was inserted, doubtless, out of abundant caution, to prevent the possibility of a claim being set up to the prejudice of the holders of the mortgage securities. Whether the restriction was necessary for that purpose, we need not consider. The preferred dividends were to be paid out of "the net earnings of the road." The lexical definition of net is "clear of all charges and deductions." Webster. "That which remains after the deduction of all charges or outlay, as net profit." Worcester. The pop ular acceptation of the term is the same. There is no controversy between the parties on this subject. Such net earnings must have been earned in the current year. There are these four specific limitations. There are no others. It is not said that the preferred dividends shall be paid next after the mortgage interest and delayed coupons, nor after, nor pro rata with anything else, nor before anything else except dividends upon the common stock. Beyond the four restrictions named, the matter is left to be regulated wholly by the principles of law and discretion of the Company. Suppose in this case the holders of coupons of the sterling bonds and the holders of preferred stock claimed payment at the same time and the fund was insufficient to meet both demands, can it be doubted that the rights of the creditor would be held paramount to those of the shareholder, and that the interest must be fully satisfied before a dividend could be paid? The plainest princi- We hold that the computation by the Comples of reason and justice as well as the law pany for the year 1868 was made upon the would require this result. A question is raised proper basis, and that the complainant is conas to the source to which the phrase "net earn- cluded by it. We are of the opinion that the ings of the road" refers. The term "road" is rents for that year, accruing under leases taken used as an appellative, and was clearly intended by the Company after the issuing of the preto include the principal road and all its adjuncts. ferred stock, and the interest upon the sterling The complainant insists that the "net earnings" bonds for that year, were properly paid, and must be the net earnings of things as they were that there were no net earnings earned in that when the preferred stock was issued. We find year which could be properly applied in paynothing in the case, express or implied, to war- ment of preferred dividends. These views are rant this view. At the time referred to, the fatal to the complainant's case. We have careCompany held certain leases. If it was deemed fully examined all the authorities referred to by best, and was found practicable, could not the his learned counsel. None of them are in hosCompany have rid itself of them? If the com-tility to the conclusion at which we have arplainant's view be correct, this could not be done, at any rate not without the consent of the preferred stockholders. So if the Company deemed it proper to take leases of other roads, in addition to those previously held, or in place rived. The decree of the Circuit Court is affirmed. Cited-108 U. S., 400. THE UNION PACIFIC RAILROAD COM- tion 3, Act of July 1, 1862, viz.: "And all such PANY, Appt., D. lands so granted by this section, which shall not be sold or disposed of by said Company within three years after the entire road shall have been EDWARD C. McSHANE, Treasurer, etc., completed, shall be subject to settlement and ET AL.; and preemption like other lands, at a price not exceeding $1.25 per acre, to be paid to said Company." That the lands in controversy are simi EDWARD C. McSHANE, Treasurer, etc.. larly situated to those in issue in the Prescott ET AL., v. and Culp cases, will not be denied. Both were granted under the same Acts of Congress, to be THE UNION PACIFIC RAILROAD COM- used in the same way, to be held by the same *1. The Railway Co. v. Prescott, 16 Wall., 603 [83 U. S., XXI., 373], modified and overruled so far as it asserts the contingent right of preemption in lands granted to the Pacific Railroad Company, to constitute an exemption of those lands from state taxation. 2. But affirmed, so far as it holds that the lands on which the costs of survey have not been paid, and for which the United States has not issued a patent to the Company, are exempt from state tax ation. 3. But where the government has issued the patent, the lands are taxable, whether payment of these costs have been made to the United States or not. [Nos. 491, 492.] Argued Dec. 15, 1874. Decided Jan. 18, 1875. CROSS ROSS APPEALS from the Circuit Court of the United States for the District of Nebraska. These are cross appeals from a decree of the court below, in which the bill of the Railroad Co. herein praying for an injunction against the collection of certain land taxes, was dismissed as to all lands patented to the companies, and sustained as to the lands not patented. The case is fully stated by the court. Mr. A. J. Poppleton, for the Company: In the cases of The Kansas Pacific Railway Company v. Prescott, 16 Wall., 604 (83 U. S., XXI., 373), this court held: First. That the right of the State of Kansas to tax lands granted to that Company by the same Act of Congress which granted the lands in controversy to this complainant, did not attach until the right to the patent was complete, and the requisite title was fully vested in the party, without anything more to be paid or any act to be done going to the foundation of his right. Payment of the cost of surveying, and the expense of making the conveyance, was held essential to the perfection of this right. Second. That the lands were not subject to taxation, because of the contingent right of the United States, of offering them to actual settlers, at $1.25 per acre, in case the Company did not sell the same within three years from the completion of the road. The first ground of this decision is based on sec. 3, Act of July 2, 1864, which requires, before any lands granted by that Act shall be conveyed, that There shall be first paid into the Treasury of the United States, the cost of surveying, selecting and conveying the same by the Company." The second ground rests upon a part of sec *Head notes by Mr. Justice MILLER. tenure and upon precisely similar conditions. The rule, therefore, must be the same for both. That all lands in controversy which are unpatented, and upon which the costs of surveying have not been paid, or patents to which are withheld by the Government for non-completion of the road, according to the standard fixed by its charter, and as security therefor, are within the rule laid down in the cases of Prescott and Culp and, therefore, not subject to state taxation, seems too plain for argument. It will be impossible to subject such lands to taxation without the reversal of those decisions. They are clearly within the first ground assigned for the non-taxability of the land in issue in these cases. This class embraces all the unpatented lands. It was conceded that, in respect to all the patented lands in controversy, the exemption must rest solely upon the second ground laid down in the Prescott and Culp cases, viz.: "The contingent right, in the Government, of offering the land to actual settlers at the minimum price asked by the Government for its lands." But it is insisted that this ground in the present case, is effectual and conclusive. It also operates upon both classes of lands. Does this ground of exemption operate upon the patented lands? The court below held that. in respect to patented lands, the cases of Prescott and Culp do not or may not control this, be cause: First. At the date of the assessment in those cases, the patent had not been issued. Second. They were assessed when, by reason of the non-payment of the cost of surveying, the Company was not entitled to a patent. Does this statement, after all, amount to more than this, that the first ground of exemption assigned in the cases of Prescott and Culp would have been sufficient upon which to rest the determination of those cases, without going further and resting it upon the additional ground that "The continued right of offering the land to actual settlers at the minimum price asked for its lands by the Government, forbids the State to embarrass these rights by a sale for taxes?" Yet both questions were made, and were before the court. The real question is, therefore: what is the principle of exemption thus laid down by this court, and does it apply less to patented than unpatented lands? In the one case, failure of the Company to perform all conditions precedent to a perfect right to a patent, exempts from taxation; in the other, an interest or right of the United States in these lands, operates as an exemption. The first is referable to the conduct and interests of the Company; the second, to the rights of the Government. Is this right of the United States any less |