The daily exchange. [volume] (Baltimore, Md.) 1858-1861, 1860-09-14
OFFICE BALTIMORE AND ONO r. r. Co
.Hdy oh, 1860.
JOHN LEE CHAPMAN, ESQ,
Chairman Committee of Ways and Means:


imo the Board of Directors of the Baltimore Ohio
Railroad Company, and am instructed, by their unan
nous vote, to submit the Suhjoned reply.
After thorough investigation subject by special
committee the extra dividend to which you refer
ing resolution:
Whereas, There has been appropriated by the Bai
more and Ohio Railroad Company from time to time the
sum OF three millions of dollars and upwards of the net
earnings of the main of the road the purpose of
construction with the intention, in conformity with the
practice OF the Company of paying the same to the stock
holders IN the shape of dividend at such time they
might seem iu1icous, therefore be it
"ReSOoed, That an Extra Dividend of thirty per cent
be declared on the Stock of the Company be paid
or after the 18th of January next to all Stockholders
owning Stock the ODD day of December, 1856,
| tifcaes of Indebtedness bearing interest from the
first day of June, 1857 of six per per annum paya
bic half yearly, the first Of December and June in
each year. until the first day of june 1862 inclusive
after which the said certificates of Indebtedness shall be
| converted into Stock of the Company at par"
Prior to its declaration the counsel of the company J.
H. t. Latrobe, Esq consulted in regard to the le
gality the dividend in the form proposed His reply
addressed to the chairman of the special committee, is
annexed, viz:
BALTIMORE December l. 1856
Sir-I have your note the 25th utmo in which you
ask my opinion to the legality Dividend
which 1t has been suggested should be made the Bal
timore and Ohio Railroad Company, the Company issu-
ing bonds for the purpose, and have also the resolution
Of indicating the net balance of
| as the measure Of the proposed dividend
am ofopnion that such dividend would be legal and
| .hat bonds may be issued in payment of it.
The question has been settled by of Appeals
in the of the State Baltimore and Ohio Railroad
| Company. Giil's Reports, S63.
In November, 1876 the Board of Directors declared
dividend of three dollars share their capital stock
payable thus t. all stockholders of less than fifty shares
cash. to all of fifty shares and over per share
IN cash. and two dollars share in Company's bonds
gahg interest payaoie quarterly, and redeemable in
The State of Maryland holong shares of
the Company in Baltimore County Court the case came
before the Court of Appeals in 1S47 was here decided
that the Company had right TO discriminate between
its large and small stockholders question that does not
arise now but it decided also that it competent
Tor the directors to appropriate net earnings to
OF construction, which equivalent to borrowing so
much from the stockholders who ought afterwards Ne
repaid rep in the bonds of the Company The language OF
the Court of Appeals is as follows:
We are satisfied that they 1.-THE drecors might agree
TO refund the net profits which they may have used
might under the granted them by the charter
borrow money to supply the place of that which had been
used and that they might borrow from the Stockholders
as well as from any one else and that they had perfect
right with The consent of the Stockholders treat the
money thus used as loan, and for this purpose might
pass to the Stockholders who willing receive
| them, their bonds"
The whole ground involved in the inquiry you have
made seems to be so well covered by the above decision
that it is unnecessary for to add anything in the way
| Of argument in this connection.
(signed,l JOHN II B. LATnoBE,
| Counsel, &c.
In order to present the the principle in
vOlved well the integrity practical propriety of
this dividend the report of the affairs the
the fiscal half year terminating 3lst March last accompa
MED by the Treasurers full exhibits of its financial
| ditiOn, is herewith submitted.
twill be noted that the profit and loss of
Company presents surplus on the 3lst March of &c 2
695 50. This sum has accumulated during many years
by the diversion of the net earnings from the purpose
annual semiannual dividends, for investment in
construction of the Main Stem Branches and for
the purchase of new and additional machinery.
The usual system in railway management in America
and Europe to supply capital by the issue Of Stocks and
| Bonds.
To illustrate the difference policy pursued by the
Baltimore and Ohio Railroad Company, clear that if
the funds for the completion of the road buildings
water stations and machinery had been supplied by
in the usual manner and the issue of bonds that interest
of six per cent. at least have been paid the
necessary amount Applying therefore, this rate of in
stockholders, it will be that the advantage which
has thus been realized for the Company amounts to
| $50 S4950.
The aggregate of capital stock 1I2 700 90
| OF surplus arising from of net earnings
for the purposes Of capital, viz: Profit and
Simple interest at six per cent for amounts
thus used $3O07 S4950
sl0,G4s, SO
For the fiscal year terminating the Both of September
last the profits exceeded lS4 per cent. and for the
past six months per cent upon the nominal capital of
SlOll2,7OO 90. This average result of134 per cent
per year, but the actual capital dScerained on rail
roads generally 1t coud be but per cent per annum
The financial history of the company thus deyelope the
fact that the present net earnings but reasonable
and moderate return on the actual capital inrested
AS but So 900 100 added to the nominal capital
ny the maintenance of this Dividend it will be observed
that the earnings for the past eighteen months afford lOH
! per cent of net gain on the increased sum.
The city is entitled to 81 900 of the principal of this
dividend and her proportion Of interest due lt June
until lst June, 1862 The entire amount of interest due
June ls is S540O0O 1t will be quite convenient to the
Company to pay this the periods stated in
your interview President as satisfactory to the
city, viz oneha on July 1st and the remainder Oc
The Company feels assured of its ability with iudcous
management, to maintain its large sinking funds and
regularly and reliably the interest besides the
| semi annual cash dividends.
| With great respect, your obedent scrvant
JOHN W. GARRETT President
The report made condition of the affairs of
this Company and the fair disposition indicated by the
Councils, to have created fresh alarm in the minds
of those who anxious to prevent the payment of this
dividend For, while the correspondence still in
progress this subject another suit brought against
the Company in the Circuit Court for Baltimore city
the 25h of June 1860 to restrain the payment of this
| dividend in which suit George F. Eckey of Pennsylva
MIA and afterwards William Harris of New Jersey were
compainants. George +. Eckey owned three shares,
and William Harris FIVE shares transferred to him on the
25th OF June 1860. need say you that the same
criticism is applicable to the character of this suit as was
applicable to the suit brought by Pearse New York
| and Sennickson of Pennsylvana-the only change in
the programme being the Introduction of another sptor
| from Pennsylvania and one sutor from New Jersey
If this suit had any effect it served to convince the
State and city of the true motive of the desire exhibited
to make them continue parties to the proceedings against
the Company. Both State and city undertook to
inc the dividend question for themselves.
The Governor of the State directed Messrs. Randall
and llagner of Annapolis, and VIM Price, of Baltimore,
to investigate the subject of the dividend declared in
1856 by the Company and to make report to him. This
report made and the written opinions Of these emf
gentlemen, counsel for the State, filed with
| the Governor.
take occasion to lay them before the Board part of
this communication, and commend them to your atten
direct, able confirmation of the which
this company has deemed itself bound to pursue 1t is
enough here to that the counsel for the State, to
whom have already referred, advised that the State
the city of Baltimore thought best in the exercise of
their unbiased discretion to withdraw their client from
its position of antagonism to the dividend When these
steps aken the only parties opposing the dividend
were Messrs Pearse of New York, with twenty shares
Mr. Sennickson, of Pennsylvania, with two shares; Mr.
Eckey, of Pennsylvania with three shares; Mr. Harris
of New Jersey with FIVE shares; all purchasers stock
after this litigation commenced; all actually pecunary
gamers by the purchase, and all holders of
stock which makes it impossible for to believe that
these suits were intended to protect their interests.
know very well indeed that these suits not in
tended protect the interests of these compainants
do misntepret the absence of the every c
of Maryland from the number of thess igants; and
although it is true that it would be difficult to find any
willing this dividend ask if it may not be
true that these suits are in reality intended to from
loss parties who have speculayev sold tho stock of the
Company with the dividend attached who have sold
dividend orders without at the time possessing them and
are an h Tn Ian T g by the
dividend orders whatever. This is subject which will
bear probing and it will be probed the bottom
suits now existing proceed in their regular course.
do not deem it necessary to pursue this subject be
| yond this general intmaton
1t is enough to state that executive has refused
to entertain, and with the approval of the Board will
to accept propositions which have been
| for the settlement of these cases.
The Board may have observed that there has been
added to the attack in the Courts in this dividend
tain other public statements to which deem it proper
to call your attention 1t has been asserted that the
notes issued in payment Of part of this dividend
|
and that officers of this Company holding stock enjoyed
advantages not shared by others The first part Of the
statement and the last part and the whole allie
cations made in that connection, without the least
foundation in fact The d gdend declared by the COmpa
So 033 060, upon which the interest due
June, 1860 S545 $50 80, of which it proposed
pay Immediately onehalf, say s272 975 49, and the
mander September 29th in accordance with the
| imous action of the Board.
Before any notice Of the setting down for hearing of the
pending in the Circuit Court the United States
communicated to this Company, it had paid in cash
$3 S0 and in notes payable the Goth September
Sl7S 40 OF cash it will be noted $50 s55
| maned unpaid.
The instructions the Treasurer furnish notes
to all parties who might prefer and apply for them and
the notes given properly entered his drec
ton in the regular and only bill book used by the
pany, The of this payment demonstrates that
| the idea of preferences wholly untrue
| But to make this matter finally plan:-I take the
liberty of announcing to the Board that the further
men of the cash and notes of this Company in
tion of the dividend suspended by the positive ad
vice of counsel when notice of the setting down Of this
case for hearing served the Company The day
| of hearing itself postponed by Judge Giles
count of the absence of the counsel for the Company
ment was ordered by the Judge he alluded to the fact
that the Company had acquiesced in Withholding further
payments until the heard, sufficient
for setting down the for hearing for future day.
| which might be convenient to counsel.
This understanding has been the only why the
Company has proceeded to pay the dividend as de
clared entirely convenient and desirable
While this statement is made, it is desired that
further understood that this Company does require
the delay Of hour to enable pay the iUole
cash. The ready, awaiting this and that