The Vermont watchman. [volume] (Montpelier, Vt.) 1883-1911, 1883-09-19
The Hazard Snit.

The decision Of Judge Wheeler in the suit of
Hazard against the railways and the American
Loan and Trust Company in equity is In favor
OF the railways The case and the arguments
Of counsel have previously been set forth in
THE WATCBMAN. The court reviews the his
tory Of the lease of the Vermont & Canada to
the Vermont Central, showing that the lease
was perpetual and that the two roads formed
practically one line owned by the latter COM
pany. The property OF the Vermont & Canada
was simply enough OF the income of the two
roads to pay the rent. The court cited the de-
cisions OF the state courts upon the subject OF
the relations and rights of the two roads under
the lease and rs affected by legislation showing
that 1t bad been decided that, " The property
OF the Vermont Central railroad was its roads
and incidents, subject to certain fixed burdens.
The property of the Vermont & Canada was a
leasehod estate and susceptible of valuation
and alienation like other property" "On ques-
tions like these" says Judge Wheeler, "touch-
ing rights of property under the laws of the
state, those laws, and the decisions of the state
courts constituting them, are of binding force
and govern in the federal courts. Under these
decisions OF the state courts, which this court
Is SO bound to respect, the Vermont & Canada
company had no railroad to mortgage, or to be
affected by its mortgage either separated from
or connected with the road of the Vermont
Central, now of the Consolidated company
The latter company is the proprietor of the
whole of this line of railroad property and the
charge upon, or what Judge Redfied calls the
leasehold estate in the income of the whole
line. The roads and their property are covered
wholly by the mortgage of the Consolidated
company, and the rent charge only is covered
by the mortgage OF the Canada company. The
question, therefore, is not whether the Can
ada company had corporate power to mortgage
its road to raise money to pay rent due to itself
Tor us stockholders, or to pay them for their
stock, but whether 1t has power to deal with
mi hu avnh HrNn . TO-. -.AG.
OF less amount, but greater value, for its stock
holders. The disposition Of the rent and the
claim for 1t in future is the principal thing, for
that represents substantially the corporate as
sets OF the Canada company; and when that Is
gone the transfer or surrender of the stock
would be mere nominal formalty. Power to
deal with the rent is implied in the power to
make the lease and reserve the rent which IL
was held the corporations had. And powers
necessarily implied from those expressly
granted are as well granted as the express
powers. Power to lease would include power
TO nix the rent in money or money securities,
which might be done from time to time by
modifying it in amount, or by changing it
from one security to another. This Is what
is attempted in effect here. Again, power for
this purpose may be found in another direc-
ton. When the Canada company was in
danger of losing its charter by failure to COM
ply with its conditions, the legislature made
provision for its continuance, but provided
also that the original charter and all its
amendments should be subject to the control
OF the general assembly, and might be al.
tered, amended or repealed as the public good
might require, and for the acceptance of the
act. The company proceeded under the act and
became subject to it, as it did to the law
authorizing leases Of railroads passed after the
charter was granted, under which this lease
was held valid vermont Canada Railroad
Company Us. Vermont Central Railroad Com
pany., "a VT, ~ This brought the company
within the reach Of the act of 1882, which pro-
vides that When two railroads are encum-
bered by lien or liens upon the two roads, the
company owning either road may issue bonds
for the purpose of extinguishing such lien or
liens. and compromising disputes, secured by
mortgage or mortgages OF both roads by vote
OF the stockholders of the companies owning
SUCH roads. flaws Vt, 1882, 46, S2.) The
rent of the Canada company was lien
upon the income of both roads, which encum-
bered the roads themselves. 1t was due to the
company as trustee for the stockholders These
bonds were to extiDguish this lien, and the
mortgage to secure them is directly within the
terms OF the act, If it can operate as mort
| gage upon any property at all. When the rent
| Is extinguished the property represented by
the stock will be practically extinguished, as
before alluded to, so far as railroad interest
will be concerned. The stock of
the Canada company represents a nominal Sc
curity of the roads; the bonds are to extinguish
| the securities as such, and not for the pur-
chase of the stock as such. The original lease
provided for an absolute grant and release of
the road in perpetuity at any time after twenty
years, subsequently changed to fifty, upon
payment of an amount sufficient to pay to each
stakeholder the par value of his stock The
! plan now sought to be carried out is in line
with this provision, and not new scheme to
crush out any rights of a minority of the
stockholders. The corporate powers OF the
company should be exercised with due regard
| TO the Just rights of all the stockholders, and
not for the purpose of sacrificing the interests
| OF the minority for the advantage of the ma
jority. This plan does not appear to be prose
cuted for any such purpose, but presents the
aspect of an honest and fair endeavor to save
to these stockholders remnant of their prop
erty, as mentioned by Judge Redfied to be so
desirable, in Langdon Us. Vermont & Canada
Railroad Company, before cited. When this
scheme for settlement was begun, there were
besides the holders of this debt of So 357 600
OF which "a, 357 900 was bonded and 81, 900, 600
was floating, and the Central Vermont's re-
ceivers claim OF S6430OO and the Canada
stock, already mentioned, the first mortgage
bondholders to the amount of, originally,
| S2,OOO,OOO, and second-mortgage bondholders
to the amount of, originally, 81, SOC 200 of
bonds, on all of which the interest had long re-
manned unpaid, and each class was contending
for priority. In the plan some concessions
were made by all, and some provision was
made for all. That it was, at large Just and
fair, is shown by its general acceptance The
consideration for its acceptance by each was its
acceptance by the others. When the orator
commenced proceedings the Consolidated COM
pany had been formed by the mortgage bond
holders; the Canada rent had been reduced to
nominal sum; the mortgages had been made
and delivered, and the bonds had been deliv-
cred to the loan and trust company and some
OF them to the security holders entitled to
them, so that the scheme could not be aban-
doned and the status restored. The Vermont
Il Canada stockholders all stood together in
interest, with the advantage over bondhoders
and single creditors of having the power of
corporate action Such as has been taken by
the orator associates does not now appear to