Montgomery County sentinel. [volume] (Rockville, Md.) 1855-1974, 1881-01-07
NO RECEIVER APPOINTED.
Complete Vindication of the Manage
ment of the C. 0. Canal.

Complete Vindication of the Manage
ment of the G. 0. Canal.
In the United States Circuit Court at Balti-
more, on Monday last, Judges Bond and Nor
ris presiding, the opinion of the court ia The
celebrated suit of Daniel X. Stewart VS.. the
Chesapeake and Ohio Canal Company, Hon.
A. p. German, president, snit in equity to
have receiver appointed to take charge Of
the company's affairs, was delivered, the court
denying the motion 10 appoint receiver.
Court assembled at II O'Clock and Judge
Morris read the opinion, which covered eight
cen pages Of foolscap closely written. II is
as follows
Daniel X. Stewart VS.. the Chesapeake and
Ohio Canal Company, Arthur p. German ct
al. This is an application for the appointment
of a receiver to take possession OF and operate
the Chesapeake and Ohio Canal. The COM
plainant, an alien, is the holder Of $l50, 900
of the preferred construction bonds issued by
the canal company under the Maryland act Of
1874, chapter 28l. By this act the State of
Maryland, which held, S., 600, 900 of the stock
Of the corporation--about iive-eighths OF the
whole capital-and which had also loaned to
the corporation about $4,000, 600 on first
mortgage of all its property, including tolls
and revenue, agreed TO waive aud postponed
its first lien in favor of the bonds to be issued
under the above mentioned act, and author
lied the corporation to execute first mort
gage of its tolls and revenue to secure them.
Accordingly the corporation did execute such
a mortgage, dated June 5, l84S, and Issued
about 81 700, 900 of bonds thus secured. This
mortgage conveyed 10 certain trustees the rev.
enues and tolls of the canal to secure, after
paying the repairs of the canal and the salar-
les o: its officers, the payment of interest on
the bonds so issued and sinking fund for
their ultimate redemption. By the terms of
the mortgage in case of failure of the corpo-
ration TO fulfill its obligations TO the holders
of these bonds and subject TO the conditions
hereafter mentioned the trustees we're given
power and authority 10 collect the tolls and
revenue OF the canal, and after applying suffi-
Gent 10 put and keep the canal in good condi-
tiou aud repair aud to provide the required
supply Of water and to pay the salaries of the
officers and agents of the corporation and its
current expenses, they were to apply the re-
mainder in satisfaction OF the bonds and in
terest. II was further provided that the cor
| pOraiion should retain possession Of the canal
80 long as it should comply with the agree
ments in the mortgage, and If it should fail TO
comply with these agreements from any cause
except deficiency OF revenue, arising from
failure of business without fault on its part
the default TO be made to appear by the trus-
tees-then the trustees might demand and
should receive possession and should appro-
pirate the tolls and revenue in the manner
aforesaid. The bill alleges and the proof shows
that the last payment ofinterest on complain
ants bonds and on all bonds issued under this
mortgage was made in the month OF Decem-
Der, 1876, when the coupon which had fallen
due July l, 1864, was paid, and no payment
has since been made This default, however,
by the express terms of the mortgage, gives
the complainant no ground to ask TO have pos
session Of the canal either through the trus-
tees or by the appointment of a receiver unless
he has made IL appear that the default in the
payment of interest has been caused by some
transportation or msmanagement on the
part Of the corporation, ana not by failure
| of business without its fault, or else has shown
| TO the court sgch corporate misconduct in-
furious to the bondholders as demonstrates
the necessity of taking the property out 9th
hands OF the corporation for the protection OF
| their rights. The complainant alleges and
has endeayored 10 show by testimony that he
| is entitled to relief on both of theGe grounds.
/ The first of the causes charged in the bill
! for the deficiency of revenue is that the pres
ent management under President German,
who was elected in 1872, has been so entirely
| political that the canal has been, aud now is,
used primarily and mainly in the interest OF
partisan political objects, without regard TO
the rights of its creditors, aud that the pres-
dent and those with him who control the
management of the canal have during the
last three years, under the pretense OF en-
I ploying persons 10 perform services for the
l lo,, fla,r pal;ltoa1 10, a.
pay when not performing any service for the
canal, and have employed large numbers of
unnecessary aud useless employees for the
purpose of promoting their own political
schemes. Undoubtedly the fact that the
State OF Maryland is the owner ola majority
Of the capital stock an6 does, through her
board vi public works, appoint the president
aud directors, has always connected the mana
ment Of the canal with the political changes
in the State government. This has been al
ways II subject OF regret 10 those interested
in the financial success of the work, and TO
the consequent lack of fixed aud stable policy
in its management, has been attributed the
disappointment OF the expectations of its pro-
jectors. The evils arising from the control
Of the State over the management of the canal
have been the frequent theme of comment in
the reports Of iis officers and the ground of
applications TO the Legislature for relief. But
this is not aa evil which the courts can
remedy. IL existed al the time when con-
plalnant purchased his bonds, aud has al
ways been an element IN the estimate OF their
value. II, however, the complainant had
produced proof TO establish the abuses al
legged in his bill to have grown out OF this
political connection, and had shown, as al
legged, that the revenues of the corporation
were being squandered In paying persons kept
in it, service for Us political reasons, aud not
really necessary for its business, We should
have no doubt of tue duty OF the court TO in
terpose to prevent so gross an abuse OF trust.
For the corporation being iusolyenl to the
extent that for years at time its revenues
have barely met lis working expenses, II is
manifest that the property Is held By the
corporation as trustee for lis creditors aa3
the utmost good faith, economy and prudence
are to- be exercised 10 It's management; so
that Il the allegation OF payiHg useless om-
ployees had been proved such an abuse Of
this trust would have been made apparent as
would have required the intervention o: the
court as the only protection left TO the bond
holdors agejpst 0 iailhless trustee OF prop
eriy which is their ogy security But we 40
nol find this allegation established by the
proof The complainant has urged upon the
attention OF the court the falling Off In the
net income Of the canal aud the increase of
expenditures 10 proportion TO It's receipts
since 1878 aud charges that these arc sgis
dcnce Of exlrgvagance aud mismanagemeni.
The fact tina, the net income Of the canal,
which 10 the years 1871, ~, 10 ~ and 70
had bern over S20Q,Q0Q 10 each VI those
years, fol- 1876 to S6I, Ia, and that ip 1871,
10 aud 10 the lqAal earned no net Income at
ali, 10 a matter which, as trustees, the corpor-
alton was bound 10 explain aad account ioT.
Tue explanation given Ia its answer and sup.
ported, as we ihiak, by the proof Is that 10
hose years the canal so suffered from hostile