The evening telegraph. [volume] (Philadelphia [Pa.]) 1864-1918, 1867-08-07
TIE PETO BANKRUPTCY.
Lessons from the Failures OF Sir Morton
PetO and Overend, Gurney a. Cos

Lessons from the Failures OF Sir Morton
PetO and Overend, Gurney a. Gee
RFom the London Times, July 90.
The proceedings in bankruptcy against the
firm of Messrs Peto, Belts q CHAMPION have
passed their first stage, and four trad asslgnees
body of creditors. The enormous claim of the
London, Chatham, and Dover Railway Com
pany against the bankrupts estate for e6 900 900
was, Of course, not admitted TO proof out
memorandum of 1t, handed in by Mr.. Linkater,
was received by the Registrar by way of notice.
II is, indeed, manifest that everything depends
upon the validity invalidity OF this claim, the
liquidation of which in full would exhaust the
resources of many considerable state II it
be established the other creditors, except those
who may hold collateral securities, must re-
fshi II It be be fSsRd defeaRted we infer rom the State
ments of Messrs PetO's solicitors that the
assets, when realized, VIII go far TO cover the
sary that all consideration Of tt should be post
poned for the present, and IL Will probably en-
gross the attention OF the court during the
autumn. MIR. Linklater gave all parties fair
warning, on behalf of the directors, that it was
their intention TO insist upon their rights, and
that all the circumstances of Sir Morton PeJo's
connection with the company would be fully
disclosed. Messrs Peto, on the other hand, re-
peated, through Mr.. Lawrence their former
allegation that, instead of their being indebted
TO the company In six millions and half, the
company are in fact, indebted to them in some
G300,0t0. AT first sight such q discrepancy seems
wholly inexplicable, If not inconsistent with
good faith, on one side, at least IL is not how
ever impossible to suggest somewhat less
favorable construction of II. The difference be-
stock in the London, Chatham, and Dover Com
pany was great enough to bridge over even this
obasm. Let US suppose, without presuming to
enter upon detailed conjectures, that whereas
the one calculation represents the result of esti
mating them at their market price at a given
date and the mystery ceases to be inscrutable.
Now, we know quite enough of Sir Morton
Peto's relation to the company, in his double
capacity of contractor and Financial adviser"
To render this hypothesis both Ineligible and
probable The stock Of the London, Chatham,
and Dover Company is now quoted at I6 or H.
would n at hat nrin
to replace every fl 900, 900 sterling. How such a
question as this could have been left open in
transactions conducted on SO colossal a scale
we do not profess to explain; but, assuming IL
TO have been left open, the previous difficulty
Several minor complications which may lead
to serious embarrassment, were brought to
light at the meeting on Wednesday. In the
first place there appears to be some confusion
of accounts between the old firm of Messrs.
familiar TO the public for eighteen years, and
the new firm of Messrs Peto Bolts & Cramp-
ton, formed in 1862 for the special purpose of
this great contract. Sir Morton Peto himself
was called, and deposed that while the liabili-
ties of the former might amount TO something
more than half million, those of the latter,
apart from the disputed claim of the London
Chatham aud Dover Company, were estimated
at about two millions. Many creditors are at a
loss to know against which estate they should
prove and the Registrar consented to receive
the claims OF such persons without prejudice,
upon the understanding that after further in
quiry, they should be put in against the right
hrln. Again, the case of creditors armed with
discussion. The law on this subject is by no
mi ans clear. and it often becomes doubtful
whether the holder of security ought first to
realize upon 1t, and to prove against the bank
| rupt's estate for the residue, or may prove for
| his fun debt against the estate, setting forth
the existence OF his security, but without giving
| IL up so long as he does not obi ain, upon the
| whole, more than his due. Here 1t seems that
| in certain of the proofs no mention was made
| of mortgages held by the claimants upon the
surplus lands of the London, Chatham, and
originally deposited with the Imperial Meroan-
| tile Credit Company by Messrs Peto and OBJ
tanned by the claimants as security for advances
to this last company.
1t is not without sense of nationa;
humiliation that we contemplate the failure of
a house which is identified with some of the
| grandest mechanical achievements of the pre-
sent century. Perhaps no one, except Mr..
Blrassey, has filled so high q position among
English contractors as Sir Morton Peto. Not
only throughout Europe. but In Canada and
other parts OF the world, he will always be
| remembered as leading pioneer of the railway
system and a great master in the art OF
organizing labor. His fall has probably been as
| severe a shock to public confidence, in It's own
way, as that of Messrs. Overend & Gurney. 1t
to be- derived Tom IL W be- ne eaTsl9 essH9
laid TO heart. That lesson is the essential
UnSoundness Of contractors lines" Such lines
may doubtless weather the dangers of their
infancy, and prosper in spite of their principle;
but the principle itself is demonstrably bad.
Common sense tells us that contractors bust-
ness is to execute works and receive payment
for them, not to advance money or place shares
on commission. Common sense also tells us
that when persons engaged in hazardous con-
Germs deviate from their own business, and
even reverse their normal position, there is
+, | likely TO be something wrong. Experience
more than confirms the dictates of common
| sense in this respect, and shows that con.
tractors financiering is expedient to disguise
q want of credit, for which there are generally
very good reasons The invention of what are
known as "Lloyd's bonds" though useful and
, legitimate under proper conditions, has noto-
riousy facilitated operations ef a very different
, nature. Their object is to enable company
10 go constructing its line without avail
| able funds-whether enough capital has not
been paid up to justify the exercise of its bor-
: | rowing powers, or those borrowing powers have
1 been exhausted The contractor having carried
out orders for work which never ought to have
| been given, then receives on acknowledgment
| of debt on which he can raise money, since IL
i constitutes legal obligation. Knowing, how
| ever, the position of the company, he usually
takes them and negotiates them at discount
| to the injury of debenture holders and share.
4 | holders We shall never recover or deserve oul
( | lost character for high commercial integrity
r | until we return to old-fashioned and straight
{ forward rules ofdealing in our most gigantic al
well as in our smallest enterprises. IL is hardly
too much TO saythat all sound undertaking
rest on simple principles, capable of beinl
{ | grasped by ordinary minds 1t is desperate TO
| fraudulent speculation that requires an elabo
rate machinery which cannot even be eXplaine,
to the public, and the man who invests witt
his eyes open in an unfinished contractor
? line" must blame himselfalone If he should bt
ruined.