8 FEDERAL msronrun.
der the eighth article, the unearned interest becomes principal, and
is to be paid as principal out of the proceeds of the sale. The cou-
pon-holders have the first lien upon the surplus earnings for the pe-
riod represented by their coupons, but as to earnings from any other
period they have only the rights of certificate-holders; and whether
they surrender their coupons or not, if the earnings are insuiiicient
to pay the interest in full they stand as certiticate·holders for their
interest unearned. It has been suggested that the surrender of a
coupon, and the acceptance of a scrip certificate in lieu, is a release
of any claim by the coupon-holder upon the surplus earnings of the
interest period represented by the coupon. But, as has been stated,
the obligations of the company towards the coupon-holder, and his
lien upon the surplus earnings, are the same .whether he surrenders
his coupon or does not. If he does not surrender it, the unearned T
interest which it represents is solvable by a certificate, and his lien
upon the income is restricted to such as arises during the interest
period of his coupon. If he does surrender it, there is no new con-
sideration to support a release of interest which belongs to him, or of
his lien upon the income for it. If he accepts a certificate for his `
coupon, he does so upon the representation of the company that there
are no net earnings applicable to the present payment of his inter-
est. If this representation is a falsehood, the coupon-holder cannot
be prejudiced by it. Every certificate, according to the true construc-
` tion of the mortgage, represents the unearned interest of the period
of a particular coupon or set of coupons; and the coupon·holder and
the certificate-holder stand in the same category of creditors, and are
entitled to be paid pro mm out of the earnings of the interest ppriod
represented by their coupons or scrip.
By reason of the obligation of the company, as expressed in the
bond and mortgage, to devote the net income semi-annually to the
payment of interest, a duty arises by implication, and rests upon the
company, to keep such an account of its earnings and its expenditures
as will show the net income of each semi-annual interest period ap-
- plicable to the payment of the interest. The company has not at-
tempted to fulfill this duty, and the trustee for the income bond—
holders has apparently supinely relinquished to the oihcers of the
railway company the supervision of the accounts which the trustee
should have exercised itself. The railway company now produces an
account of its income and expenditures, not divided into income pe-
riods, but covering a series of years in which there are charges against
earnings so palpably unwarranted as to suggest the inference that its
officers have strained their ingenuity to conceal a fund which it was
their duty to pay over to the bondholders of the bonds. If upon such
an accounting as the railway company will be directed to make it
should appear that so large a sum has been withheld as there is now
reason to suppose, it may become the duty of the court to appoint a
'receiver to protect the interests of the bondholders which seem to