Lancaster daily intelligencer. [volume] (Lancaster, Pa.) 1864-1928, 1883-10-06
Lancaster fntrlliGenrer.
SATURDAY EVENING, OCT, o. 1893
Watering Corporations.

VNtTtHg toipVihuVhos
The Western Union telegraph COM
pany, having issued many millions of
stock to represent what it claimed to be
accrued profits, the courts of New York
were asked to declare, by an aggrieved
stockholder, tia. the issue was unlaw-
ful. The Judge to whom the application
was made refused the injunction, finding
that the company had the property to
represent the increased capital con-
clusion, which, in fact is believed to be
untrue. The first appellate court re
versed this decision but now the final
state court of appeals has reatlrmed 1t,
declaring that 1t hi s to take the facts as
found by the trial judge, and that the
conclusion must be that the issue was
lawful, since there is no legal limit in
New York to the increase of their capi-
tai by corporations, provided there is
actual property to represent the amount
OF the increase.
The public feeling upon this decision
Is we'll represented in the action taken
regarding it by the New York chamber
of commerce, which has just directed a
committee to consider what legislation
is needed to check the growing evil Of
stock watering, since it is thus judicially
notified that there is no existing law
to prevent flagrant stock watering oper-
a.ions, such as those perpetrated by the
telegraph companies" 1t will thus be
seen that the chamber of commerce
denies the premise upon which the su
preme courts decision rested. 1t de.
clares that the Western Unions increase
of capital stock was not represented by
actual property, but that 1t was flag
rant case of stock watering. AS this
opinion ia that of the community it may
be assumed without hesitation that the
court of appeals, in accepting the decis-
ion of the trial judge to the contrary,
accepted false conclusion and one
that the court could hardly have failed
to know was false since it was matter
of such common nOtoriety. The laws
of New York which are thus construed
by its court of appeals as atfOrding no
appeal from trial judges conclusions
of fact seem to be very lame indeed. The
finding by jury of facts is conclusive
and only to be avoided by new trial :
but it seems that a judge in New York
has even greater power than a jury, as
his decision is irreversible, however much
against the weight of the evidence. The
e "
need to frame law to take away this
great power from single judge. 1t will
a'so need to suggest law limiting the
possible capital of corporations. We
have such laws in p Pennsylvania. The
capital is limited always in the charter
and we can hardly believe that it can
be otherwise in New York. The public
safety requires that corporations shall
not be permitted to grow beyond the
bounds absolutely necessary. They should
be strictly limited in the objects Of their
creation and to the capital really needed
for their business. The general railroad
law OF Pennsylvania, for instance, Inn
tied the capital stock Of railroads 10
sixty thousand dollars and d
bonded debt of equal amount
aud these figures seemed to be sutlic
lent for the needs of any railroad
At the late session OF the Legislature,
however, those interested in Mr.. Wander
bilt's projected road through southern
Pennsy lyauia, appeared with demand
for the enlargement of this limit, claim
ing that it was wholly insufficient for
this magnificent enterprise which pro
posed to level mountains and to create
a straight aud level railroad from the
Susquehauna 10 the MOnOngAheia. The
whole of the demand made was not
recognized, but large increase was au
thorized in the possible amount Of bonds
and stock that could be lawfully issued
by railroads. Subsequent developments
in the histOry.of this road seems to show
that the Legislature and the governor
were imposed upon by false pretences as
to the capital needed to construct it =:
since the American construction com
pany is understood to have been organ
lied to build it, and the stock is to be
given as a bonus to the subscribers to the
bonds. No one will deny that railroads
should be authorized to raise the capital
really needed for the honest and econ.
omical construction of their works !;
but no one OF discrimination will deny
that 1t Is wrong aglins. the public to
allow railroad projectors to capitalize
these roads at figure above their actual
cost for no other purpose but to put
money into their pockets and with the in
evitable consequence that the railroad
customers will be charged unduly high
rates to secure dividends upon the
watered capital. Pennsylvania limits
this possible fraud and in this is better
than New York, where it appears to DE
il,imitable. The New York chamber of
commerce has the clearest occasion to
demand an amendment of its state laws,
that the business community may be
protected from the avaricious labors or
those who seek To enrich themselves in
corporation projects, not by working but
by watering the corporations they man.
ipulate rather than direct.
The Democratic senator's have placed
on record vigorous protest against the
action of the Republican majority I'm