New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1875-07-09
THE COURTS.
DIES SHIT AGAINST VANDERBILT.

CONTAMINATION OF JUDGES DONoHUE AND
LAWRENCE ORDERING NEW TRIAL
In the first of the set of suits in when the
r Railway was engaged after the accession to IFS dec
ry of James Fisk and Jay Could the contest was over
Tho ,ssue of 900 Of convertible bonds ana te
- vors,on into stock The issue had been previowiy
the report Of the Chief Engineer that the
,oad was in q bad condition, but the actual issue
,ras a sxrprse 10 the market. large hnmoer
. lifts were be- gun to restrain the issue and conversion
., these bonds and the litigation which was begun early
- ,sc7 ras protractcd the middle Of 1865, when
rvtag was settled. Later suit was brought by the
Erie Ralway Company 10 recover back the sums pad on
tha, settlement to Cornelius Vanderbilt
In thu complaint and the testimony OF the late James
rs # was stated that after the first suits had been
,oou Daniel Drew then the Treasurer OF the Company
e,d negotiations with Mr. Vanderbilt, and that after
.ny struggle Mr.. Fisk and Mr. Could finding them
selves abandoned by all the other directors, aceeded
In a compromise. The terms OF the compromise
x~c the payment of Sl,O0o,0oO outright to Mr.
Vanderbilt for his losses which, however. he took in
$50 bonds OF the Boston. Hartford and Eric Railroad
cennauy at Sc and the repuchase from him OF 10000
,sares OF Erie stock for S3,5OO,OOO Nearly nall "a
million dollars also TO he paid to Richard schen
and smaller Others including the payment OF
,,unsel fees The suit against Cornelius Vanderbilt was
to recover the amounts paid him The suit tried he
fore Judge George G. Barnard at Special Term without
a iury and he, after some delay, gave Judgment Tor
1he defendant From that Judgment the Erie Rallway
romiEy appea ed, and after some delay III was argued
before Judges Lawrence DoDohue, and Daniels. The
majority of the Judge Donohuc giving the OPINION
sirect new trial. Judge Daniels disserts
Judge Donahue says The substance, in fact OF ale
cation and denial is that the plaintiff contends and de
PENDANT denies that certain suits trOught al
tic time compel the performance ofjus;ce by certain
deiautng officers to the Company were settled by
the defendant and his friends, not by takag the money
from the alleged dcfaul;ers but that they settled with
them by taking money out of the COMPANY 70 settle
stock specuatiOs in which such officers had obtained all
advantage crer the defendant and bus friends
Judge Donohue Af;cTward states substantially that
while Drew and others in control Of the Company
Vanderbilt gave an unlimited order to hay Eric stock
The Erie directors. the former suits aese, randr
iently converted bonds into stack and used these Ill
filing contracts 10Y stock sold 10 VANDERBILT The latter
nc ocntend such Issue valid for il lie does
there was nothing settle proceedings for settle
mont were 81 law fraud gu the Enc company, INC
tre directors after having violated le ,1o
Ncw-seisey that u only relief was settlement
Here The wrong existed. Vanderbilt and his
frianas had the right under the decision of
liz schuyler frauds to hold the Company
stork hut tie facts showed that that would 10; meet
object; aad they chose Their own course iLo i'
InSuev out of the Erie company 10 settle an alleged
fraud court of lis to dir sfoW SAYS jude "O Donchuc
whether the courts Of this country, VII consent
fats i, high time that TIC courts take
stand condeunatory CT such Transactions WIN nt
ncion what rh, Tie defendant or hi> associates had
arns unfathful agents, bu; what is lust TO the s!ocE
holders who are bound rely the trustees for Justice
and what duty was cast Oh the deieaal ana asSoG'ies
wien dealing with these trustees AS mas bC'h sau ny
authority while technical rules may be used to preserve
rights the Court should never be astte to ma or 10 en-
force technical rules which viii permit wrong As to
fhe claim that there privty OF contract between
Vanderbilt and the Company while III the abstract II
might be so, it was hardly an answer 10 shleu 'hc
former, who had the Commnys money ln ms h33nuS
sch trustee The redress asked for depended not on
an contract pryity and the claim thai lc dealt with
that Eres money used with Nandeibits knowledge
70 slIe liyaic stock dealings gewesn the soeaied
As 70 the claim 10y MIR. Vanderbits counsel that
cedins the dealing be directly with the Eie Company
~ InSre ponohue saws should be sorry to think
that law ia this country WAS III sueh condlOn thdt
Lad dealt in that with knowledge of those they
are dealing with for their own benefit their wrongful act
could upheld merely because they used then cesu
a., nreaSred n TO discuss such question 1t
is IN ny judgment clear that the law allows no such
defense worst OF wrongs II Is no answer TO sa!
that the Company had the right TO purchasS its owe
stock 10 retire a spurious issue ma is mol !
set up ~ the ansTsr Lae S Gs n sSon9
b., held have taken the corioraticns money without
sn ,d5os wa" Of no its c%n stock %n by the ca
pany or to retire a spurious issue. Al pan,
T. was to settle contest between The defendant and
directors Of corporation who had been declared as The
sTs stS Ie to the State from which the defendant
n hrs % a s' @ ScHe NTH ahf he
Judge Donohuc examines the argument OF tho de
o,s1,t thai these itigatiOns rinOus Ia the plain
i'm aud that their settlement was relief to the Com
puny. He says IT'S ialacy Is shown ny me iacl
faf the pretended object OF these suits was to pcA-
EFT the Company by replacing the STOCK, WINE
the settlement 10 throw the loss O me paintln %
he cts claimed to be fraudulent and 90 take TIE Com
pany 70 pay the loses "deh tne dFes %l tGe
lie trustee TIL precnse OF Vanderbilt that these were
not his suits negatyed by the iact mat when drew
made his peace in these suits the settlement was WIN
Vanderbilt and when Vanderbilt received inc money tnc
that whichever way the case turned the same result
presents itself and unless tio couits are PfelaiS ~ ~
trust property sacrificed to IN, Eauds VI IT. trustees
the defendant here must DC heid."
The result Judge DOnOhue arrives at if that all who
deal with trustees must keep Themselves ready To defend
their right TO moneys obtained If he was III error az
TO facts lis conclusions of course erroneous out
# seemed 10 him that nothing in those facts
cent the use of the process of the Court against nd
sdasi for a9 that t1e e alleged ea papose
of benetiing the plant, which obtains the plaintiffs
leaves the plaintiff without redress To sustain the de
fendants views would it seemed 10 him on this evidence
lay down the law that trusting stockholders We're help
less and their property beyond the protection OF the
courts. II seemed 10 hun that me evidence was
cicar that the suits for the settlement OF wm""
he m6nev was paid were settled in fraud Of tn -,,-
tGs rights and with Iunds, ana that Sach funds
shoud be returned; that there was e'iHonce tending to
nnds or some part o. Them ID that Justice required
the refunding OF them He therefore holds Tat find
n, OF the court Low We're erroneous and directs new
J-..vc Lawrence concurs with Judge D0nolme.
- Judge Daniels in his dissenting opnioh, holds that
tanly mistaken i'll making It, The litigation against the
COMPANY was al dropped VIII his claims set
Ied Mi first tried unsnc cessully TO make such
a settlement with him, and Zdr1dge afterward mace
T. Vanderbilt having gwen on unlimited order 10 Se
cheated by the issue Of ad tona stock In that view lie
supported by enine 1t counsel He stood hroughq4.
III hostile position TO (he Company and it's trustees lie
party to any fraud the part OF the directors
II under those crcp instances they chose TO
litigation whose j1sue doubtful, and whose contMu
ance ruinC.ns TO the Company, that compIomlse