The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1868-12-27
NEW YORK HERALD SUNDAY DECEMBER a.

this acr is found 20 be insufficient for constructing
and operating us road" Section twenty-eignt au-
ing finishing operating their railroad and. for
the purpose OF enabling them TO make better terms,
ege OF conversion into stock. This privilege may
perhaps never be claimed. Till then It cannot be
known that the increase OF capital Is Needed. the
take has failed to make its capital large
iefe:t In the organization. Section twenty-eight
however, seems to have In view the necessities OF
railway occurring during tine period Of active opera
ton when, for instance, line OF rail is TO be
laid by reason OF accident or diminished traffic
the income for time has fallen short OF the expen
diture. Imagine board OF directors deliberaiing
after q season Of duness and disaster about the
means OF relief. They may reason thus with them
seIves:"We cannot yet say that we have found our
capital insufficient for constructing and operating
our road We need only temporary relief II we can
borrow million till the next season we shall
retrieve ourselves; win make the attempt and In
order 10 pr0cur5 the best terms Will offer this In
ducement TO the lenders that If they prefer ut the
end OF the year to turn their bonds into stock they
may doso.' Here Is u contingency In which section
twentyeght may be brought into instead OF
ton nine. The proceeding under section nine would
possibly, prove LOO slow Tor the exlgences OF par
tcuar occasion. There might not be time to Call the
stockholders together. More than a third OF them
might reside abroad or be interested ID rival lines.
Section nine Is certainly inconsistent with
those provisions Of other laws which authorize d.
recors of railways 10 increase their capital by taking
In leased roads-provlslons which were In force
when the Erie Railway was chartered and TO which
Railway act Whatever restrictions may be found in
section nine can always be evaded by stating the
amount OF capital in the articles OF association large
enough to cover any possible contingencies The
minimum is declared In the act; the MAXIMUM Is not
declared The practical effect therefore, OF holding
that section twenty-eght applies only to untaken
capital within the limits fixed by the articles would
be simply this IN respect TO al new enter
prlses-that the associates IN their agree
menI OF association, desiring to provide for
all possible probable emergencies, would
put in an amount far beyond their present wants,
pnts tn YAH IN
dIure. In that case the directors would be able TO
meet every emergency without calling on the stock
less one SHARE 10 the control OF the minority Of
third with . share added II there were now
million, and another railway between the same ter
mini were TO be started tomorrow, in which the
associates for this were to state the capital at
So 00l 600, the latter would have this great ad-
vantage in the competition for tra1ic--that
In every possible contingency the majority OF
the stockholders, acting through majority OF
the directors, could obtain reie on the most favor
able TERMS Under section nine. the increased cap
ta could not be used a. price below par Under
which the cxigcncies Of the company require.
When 1t is in high credit. section nine may be
sorted to with success; when IL s In low credit,
tina. section would be valueless and II section
twenty-eght could not be resorted to, the company
the special inierpositlon Of the Legislature.
But II IS clearly the policy, both OF the
% sSer aI general s Of assS Is
LETT very much to Themselves and with as
little interference from the Legislature as possible.
ii at any limit in the beginning and to increase it
by any additional amount afterwards. SO that the
question OF construction IS after ALL but question
which Of two bodies created by the charter shall
make the increase, the body OF stockholders or the
body Of directors the body which is rarely in ses-
body which must act slowly In an emergency or the
body which can act promptly. II the Legislature in
se fol- TIE and acon OF
through all stages Of their existence and In all cases
which experience had shown as likely to arise, 1t
could not fail to provide for both the contingencies
contemplated In the two sections, and by very much
such machinery as is there created But after ali,
II there were really an inconsistency between the
two provisions, the latter would prevail under the
rule OF Interpretation, that when two parts OF the
same statute irreconcilable the latter IL to pre-
preston OF The win OF the lawgiver.
Harrington VS.. Rochester. II Wend SAT;
Bac Abs. Statutes d. The other argument that Is,
the danger OF abuse not more tenable than the FIRST
board OF directors has power to ruin corporation
by negligent administration extrayagant expend
ture, borrowing at losing rates and burdening the
property with mortgages. The directors OF the Erie
Railway had, beyond dispute, authority 10 borrow
$50 O00o 00 and 20 fasen that burden with its half
yearly interest the shoulders or the stockhold-
ers Would not that he as destructive to their In
tercsis as The conversion or this borrowed capital
into stock capitas The danger OF abuse OF power L.
however, no just argument against Its existence. All
power may be abused. The test the skill OF the law
giver Is how TO cOntrve the best safeguards against
abuse and 70 inlet the most eIIectua punishment
when It occurs Now, as to the construction by the
aud the public III general. The annual reports OF
the dinerent railways Of tho state made to the En-
gineers department show many instances OF con-
yertible bonds. issued when the stock was already
taken. These reports have been arranged, tabuated
and submitted to the Legislature. Not word OF dis
sent was heard fron any quarter till the Erie hga
lion began last spring. have before me the report
made by the State Engineer to the Legisla-
ture In 1867 The stock OF the Erie Rail-
way corporation Is here mentioned as
not fixed by the charter. Its increase
from time to time through the issue OF convertible
bonds is clearly set forth In the different yearly
ports. And now. sir, after this long discussion,
extending through fortnight, to which you have
listened with so much patience may | not conf
IDENTITY say, that, however the may have appear
ed when the complaint with all its detailed charges
was published in the newspapers, as II to forcstall
the judgment OF the courts and OF tue public here,
taking into consideration the character and
position Of the palntiifs and their confeder-
ates, the faint upon their case in its origin and
the proofs and deenccs OF the other side may not
repeat, say that there is cause IN fact In law,
IN conscience policy, Tor this appointment OF
receiver and that the best disposition you make
OF IL is that which Mr. Justice Nelson made OF the
order In Whepleys case direct 10 To DC discharged.
The case was then fully submitted to the Court Tor
decision, IL beng consented that counsel should
hand IA their briefs on Monday next.