Burlington weekly free press. [volume] (Burlington, Vt.) 1866-1928, 1883-11-02
An Important Railroad Decision.
from the New York Times


The Slprcmc Court of the State OF New
Hampshire rendered a decision a few weeks
ago which is worthy OF far mole attention
than i, has yet received. The princpl,
which it involves has wide application, and
would, if iisidly euforced,put stop to many
operations by which the interests Of stock.
holders are sacrificed to promote the schemes
of powerful monopolis,s. The facts in the
case rendered it to certain extent typical.
The Boston, Concord and Montreal railroad
and the Northern railroad OF New Hamp-
shire, both terminating at Concord, were de.
pendent on the Concord railroad TOR connec.
ton TO the roads on the south which enabled
them 10 reach Boston with their traffic
arrangements. Being dissatisfied with
the terms of their contracts with this
connecting link between Concord and
Nashua the presidents of the two northern
roads, with other persons whom they Sc
cured IN their interest, bought n majority of
the stock Of the Concord road and got them
selves olectei on its board of direction,
which they thereafter controlled. They
were then IN position to make their own
terms with the connecting road, as they were
in effect contracting with themselves. They
not only sacrificed the interests of the other
stockholders in the Concord road by making
arrangements altogether favorable to the
northern roads, but presented certain heavy
claims against that corporation, and had
them paid by their own action as controlling
direct RS of the latter.
Suit was brought by one of the minority
Stockholders of the Concord road to have the
contracts made by its board of directors set
aside, tohavc,tb the directors whoscinterests were
adverse to those of the company by reason of
their connection with the other companies
removed or suspended, and to have suitable
person or persons appointed to act in behalf
of the Concord road in all matters where
those directors were disqualified from acting
on account Of their adverse interest. The
court held vc.y positively and clearly that
these directors were disqualified. 1t said
that diiector!of arailroad corporation stands
in fiducary relation to the corporation and
is under the disability Of trustee. He can
not buy of himself, sell to himself, contract
with himself, or secure advantages to him
self not common to other stockholders.
Many authorities are quoted in support of
this position, and it is shown TO apply to di
rectors of one corporlion who are also dlrec-
tors Of another aud acting in its interest. 1t
made no difference whether the contracts
made between the Concord road and the
northern reads were Just and mutually advan-
togeous or not, the same men acting as dlrec-
tors for both parties had no right to make
them at all. Their interests as directors of
the northern roads were hostile to those of
the Concord road, aud that fact disqualified
them from action.
The wide application Of the principle of
the New Hampshire decision is very evil
dent. Under it the directors of a railroad or
company can not lawfully act as
directors in another company in making con-
tracts or traffic arrangements between the
two, or in any way subordinate the interests
Of one company to those of the other. The
principle thus clearly set forth aud firmly
by judicial authority would pre-
vent all such operations as are calculated to
sacrifice one corporation to promote the
Of another where the same set of
nen are acting for both.