Warren v. King,
108 U.S. 389 (1883)

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U.S. Supreme Court

Warren v. King, 108 U.S. 389 (1883)

Warren v. King

Decided May 7, 1883

108 U.S. 389


Certificates of preferred stock of the Ohio and Mississippi Railway Company were issued, containing the following language:

"The preferred stock is to be and remain a first claim upon the property of the company after its indebtedness, and the holder thereof shall be entitled to receive from the net earnings of the company seven percent per annum, payable semiannually, and to have such interest paid in full, for each and every year, before any payment of dividend upon the common stock, and whenever the net earnings of the corporation which shall be applied in payment of interest on the preferred stock and of dividends on the common stock shall be more than sufficient to pay both said interest of seven percent on the preferred stock in full, and seven percent dividend upon the common stock, for the year in which said net earnings are so applied, then the excess of such net earnings after such payments shall be divided upon the preferred and common shares equally, share by share."

Held that the preferred stockholders had no claim on the property superior to that of creditors under debts contracted by the company subsequently to the issue of the preferred stock, and that their only valid claim was one to a priority over the holders of common stock.

Bill to foreclose two railroad mortgages, and cross-bill by preferred stockholders to have their stock declared a lien on the property prior to one of the mortgages. On a demurrer the cross-bill was dismissed. The plaintiffs in that bill appealed.

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