Memphis daily appeal. [volume] (Memphis, Tenn.) 1847-1886, 1873-11-27
ANOTHER CREDIT MOBILIER.
The Case Of the Gilman, Clinton and
Springfield Railroads. Case OF
Gross Mismanagement.
The Morgan improvement Company
Receive $4,OOO,OOO for Building
$I,5OO.OOO Railway.

CHICAGO, November 25.-Judge Tip.
| ton, of the Mclean county court, ren.
dered his decision yesterday in the case
brought against the directors of the
Gilman, Clinton and Springfield rail-
road, charging them with gross mis-.
management of the company's affairs,
and praying for the appointment of 9
receiver. 1t appears from the evidence
assumed by the judge that the actual
cost of constructing and equipping the
road was about one million five hundred
thousand dollars, while the Morgan
| Improvement company received for rem
dering this service about four million
dollars. The Morgan improvement
company was incorporated in Pennsyl-
vania on the sixth day Of May, 1870,
and so far as the evidence in this case
disclOses ii was organized for the sole
purpose of constructing this road. II
| had capital of half million dollars,
divided into ten shares of fifty thousand
dollars each. Fourteen days after its
| incorporation it entered into a contract
with the Gilmln, Clinton and Spring
field railroad. The directors and presi-
dent of the road, who had been prin-
| cipaIly concerned in letting the
contract to the improvement company
are shown to have been let into its enor-
nous profits on merely nominal consid-
erations. 1t is also charged against the
railroad officials, that they made a ruin
Gus contract for the road with the Bar
clay coal company, of which they owned
three-quarters interest; that they
made an unlawful lease of the road to
the Pennsylvania Central railroad conn.,
pany; and that, in other respects, they
were guilty of breach of trust. The
court then recapitulates the grievances
complained of, and discusses at length
the English and American law concern
| ing the circumstances under which trust
property will be taken out of the hands
of trustees, who are mismanaging and
fraudulently applying the trust
funds. TIE modern doctrine and
the theory of the Illinois law
is that railroads are public highways
created by the foreign power of the State,
and that the corporation is authorized
through its board of directors to con-
struct, equip and operate the same as
long as such directory shall remain true
to the trust conferred on them by the
law; that they are so far public cOrpor-
ations; that at the time of the construc-
ton of this road, and at the adoption of
the present constitution of Illinois my
property could, by vote of the county,
town or city, not only be converted into
the capital stock of railroad company
against the will but by like course
could be compelled to donate my prop
erty to the capital stock of the railroad
company, and that the property
of the corporation is trust fund in the
hands of the board of directors. Town
ships that have become parties to this
proceeding did not donate their bonds
voted to the company, but, on the con-
trary, they subscribed to the capital
stock, for which they issued their bonds,
dollar for dollar, and no reason is shown
by this proof why the capital stock Of
the railroad company is not worth par
value of the cost of constructing and
eQuipping the road, which did
not cost to exceed one and one
half million, and the road has
paid running expenses and interest
on the two millions SINCE its completion.
With the lands voted along the line,
and loan of one million dollars upon
the road, which ought to and would
have constructed and equipped the
road, the stock should be worth par
to-day. l assume this fact upon the
evidence in this record, that the Penna
company could operate the road, pay
interest on the two million first-moTt-
gage bonds and the current expenses of
the road, and leave surplus
to apply on the three million
income bonds intended to be issued in
lieu of the one million second-mortgage
bonds now in the hands of ThOs. A.
Scott, if It is true that the stock of this
railroad company ought to be worth dol
lar for dollar. We are led to enquire
whether it is proper to so manage such
trust property that the stock
should become substantially worth
less and iacu1bered with three
mil ons Of debt. TIE company,s books
do not show the cost of construction
and equipment, nor do the defendants
deny the proof OF the complainants as
TO the cost. Another thing, which is
apparent from the proofs, is that the
board Of directors are controlled by the
Morgan improvement conapanY. The
court then proceeded to discuss other
points Of law In the case, and to cite au-
thority which would lead to the con-
clusion that the relief prayed for in this
case should be granted, concluding as
follows: The court Is of opinion that
under the circumstances of this case,
that II Is proper to appoint receiver to
take charge OF and manage said railroad
until it can be aseertained who sre It's lee
gitimate stockholders, and to whom the
custody and management of said rail-
road should be committed.