Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1885-10-10

stockholders nor bondholderS other than Them
selves, l see no reason why they might not do so
The same reasoning applies III the same way
to the matter OF e., 6i0 II the bonds issued 10
them after the compromise by the Northern
! Railway and san Pablo and Tulare Here the
/ company owned also all the stock and bonds of
the roads. There was here, however con-
tract which Wilson must be held to have known
! Having consulted freely with Douty, do not see
! how we can avoid charging Wilson with knowl-
edge OF the basis of this EX. L. In regard to the
| sinking-fund bonds said to have been appropri-
ated by s., H., IL. d c. at less than their value
| IL Is hardly necessary to speak. There is no
charge with reference to it in the Complaint
! and on reflection feel bound 10 hold thai there
I Is no competent or sufficient evidence of their
value. 1t seems this sort OF thing had occurred
before, or during Colton's lifetime. feel a sus
picion that the bonds were acquired for S. H.
ii. ~ c. and that all parties knew that their
temporary rest i'll the Golfers of that company
was merely stage in the process of deglutitiOn
the subscription to the stock of the Northern
Railway and the san Pablo and Tuare is a
matter not SO easily disposed of. This / have
Z said consider admissible on the issue as TO the
/ solyeney of the W. d. Co. Yet il ought TO be
considered, in view of the fact that the defend
ants counsel did not understand until the argti-
ment that they were claimed as assets
These subscriptions were made in 1871 by the
/ individual defendants and Mark Hopkins as
| organizers of the corporations. The statute re
| CURED subscription of $1,000 for each mile of
| the proposed road. These subscriptions were
| evidently made to comply with the law Cotton
was not then associated with the defendants in
| railroad matters, nor was the W. D. Co. formed.
| The ten per cent. required by law was paid but
! nothing more. The stock was surrendered to
! the W. d. Co. The W. d. Co. debited itself with
the portion unpaid. Il is now sought to charge
| the defendants with this amount as an omitted
| asset of the w. D. Co.
"JoINT ADVENTURES"
| have said that the relation between these
parties was that OF joint Adventures or at least
OF persons Jointly working to accomplish q com
! mon end; We End that when a new corporation
I n fhErr
| been formed under the auspices of the W D. Co.
| winch is their common agency that sometimes
the employers become corporators, and the stock
| Is held for the associates
Pfior to Colton's advent into the association.
/ the relation of the other parties To each other
| was the same, all the stock of the corporation
! formed would naturally belong TO the gsso-
| cietes The balance of the stock not subscribed
! for they got on the construction contracts. and
| since 1t seems, the value of the bonds exceeds
the cost of construction, the stock really ff we
! lock upon the bonds as assets cost them moth
/ ing. Indeed, it has been said as to some of
these corporations. it is only valuable Tor pur-
! poses OF control. II is impossible to SUPPOSE
otberWlse thar that the subscriptions would be
regarded as Burdens which the associates would
expect to bear equally. l think it was admitted
that IN some cases of corporations being formed
! the subscriptions were really paid by the W. D.
%: can see no real reason for different rule
| being applied to these Cotton allowed these
subscriptions to remain unpaid for years, and
10 not doubt but he thoroughly understood that
they were not to be paid.
As to the unfinished contracts, Wilson knew
ali about them. He teStes that he told the
| defendants that they could not take the assets
OF the W. ID. Co. to themselves by the pretended
sa TO the ?. l. Co. That he did not recognize
/ the transfer and that there were unfinished
| contracts on which large profits would be made
ana That the w ID. Co. was entitled to these
profits. This, independently of the fact that
these main contracts had tallenby lapse of time
and failure to perform before the death of Col
ton, VIII dispose of that matter
There are many other items claimed to be adj
United assets OF the w. d. Co.-that is, assets not
mentioned in Elk. Z. Some of these are confess
cdly So Among them the item of 100000 paid
out by Huntington, and which he is unable or
unwilling TO explain, and other small items
which 1t Is not necessary to mention here On
the other hand the defendants claim, and have
shown, That there are many assets in En- K
which did not, in fact belong to that corpora
ton, also certain liabilities not there enumer-
ated. 1t Is strenuously insisted by plaintiffs
counsel that these matters are entirely inmate
rial; that having furnished statement of the
assets and liabilities, they are bound by the
statement; that the statement was the basis of
lS aia II II De materially incorrect
either way plaintiff is at liberty to avoid the
| contract But think, in the first place. this
shows amlsapprehensionsof the character and
purpose OF the statements. 1t was in effect only
understood to be showing of what was con
! tanned IN the books as already stated To this
extent it was correct. Then the parties plainly
did not settle on the idea that they knew the as
sets or liabilities but evidently recognizing the
fact that there was very great uncertainty in
that respect. But distinct issue, as elsewhere
stated, was made as to the solvency of the W. D.
Co ana Its inability to pay its debts without the
return OF the dividend. Upon this issue it was
clearly admissible. The showing made i'm the
exhibit was in support of the representation of
insolvency. but still only of the condition of the
books with such vast mass of assets of such
various kinds, and so widely scattered in bust
| ness of such dimensions still going on. It
couid not be that the books would ever be en-
trely up or fully show the assets and liabili-
ties.
QUESTION OF THE INSOLVENCY OF THE WESTERN
DEVELOPMENT COMPANY.
Under such circumstances common sense and
ordinary ideas OF Justice would suggest that it
might be shown that at least the statement was
| fair one; and since, if we take the position
that the values Were relied upon, the statement
becomes merely list of money items; what diff
ference can 1t make how each amount was
made up? OF these counter claims there can
be no doubt that Exhibit includes the So
called Miller assets, valued at $4,000 which
qua not, IN fact, belong to the Western DeyeloD-
ment Company, and omitted of its liabilities a
demand in favor of the Southern Pacific for
| failure to furnish the road of about one million
OF dollars. At all events, the deductions tn Inc
made from the enumerated assets, and the adCii-
tons to be made to the liabilities will more
than counterbalance the errors on the other
side In short, on the subject of concealment
or Intentional misrepresentation as to the corpus
OF the assets, ind no evidence of such in
the record. The case could hardly have af
torded more conclusive evidence that there was
nothing OF the kind. Every one knew and
must have known, that no human being could
accurately know the vast business in ali its de-
tails. The books were thrown open to Wilson
or TO any expert he might see fit to employ He
did spend many days-I may. indeed say
months-in the examination of the books and
papers, and had the assistance for this purpose
OF the bookkeepers and officers of the different
| corporations, who were directed to and did af-
ford him in good faith all the aid in their power
Wilson, for months, devoted great deal of time
to the investigation, and only desisted when he
convinced that further pnorts in, hat Il;
ton would be of no further use.
Plainly, the defendants represented their own
views in the negotiations, and sought to make
as good a trade as possible. l believe the values
i'll Exhibit were, as already stated for that
purpose Within few months afterwards they
were able to realize enormous profits over these
prices upon the property acquired from the
plaintit. There is a natural inclination TO
judge the transaction in the light Of this after
event. In fact, it requires strong effort not to
do so. But the values were present values
made in response to the determination. or per
haps the necessity, on the part of Mrs Cotton 10
sell out: and it was not denied at the time that
the defendants hoped to realize large advance
on those prices. She insisted upon immediate
settlement. She was promptly told that the
value of her interests could not be ascertained
except by liquidation of the affairs Of the W ID
Company. She still insisted upon obtaining
some definite balance, and being allowed to re-
tire free from the business without further liza
bllities or complications. These values were
furnished rs a basis for a settlement being an
estimate OF values which might be realized by
immediate liquidation. But they admitted that
they all the time expected to get more for the
assets Wilson says they represented that with
out the return Of the dividend the corporation
was insOlvent; the assets would not pay the
debts without careful nursing and management
which would take Il very considerable period of
time. By watching and carefully nursing the
assets could be made to pay, and would. In
such event, OF course, they would have had the
dividend clear after paying debts. This is all
Wilson claimed and it seems they admitted 10
Wilson that at least they hoped to do as much
Mr.. TEyIs' OPINION AS TO VALUES.
Tevis shows that he understood the matter of
these relations. He was very familiar with the
railroad system, and particularly with the South
ern Pacific. He thought the values merely CON
jectural, highly problematical. He says the
values in Elk. were at the time fair estimates
That, in his interview with the defendants
while acting for the plaintiff in the negotiations
he stated in effect that, under their administra-
ton and what they would do, the connecting
roads they would build, considering also the
lease to the c. p, they would ultimately make
the bonds par. They, in reply. claimed his esti-
mates were in advance of actual values that
they were not bound TO go and create a
market for these securities. That other roads
were being built in competition, and the whole
country was fun of gloomy prospects and they
would do nothing, but preferred Mrs. Cotton
should go on with them, pay Cotton note and
contribute her share. Tevis replied that she
was not able to do this, but would sell for less
than she could make ont of it. Here we see ad-
mitted that plaintiff expected that they might
realize par for these bonds, and understood-or,