St. Paul daily globe. [volume] (Saint Paul, Minn.) 1884-1896, 1886-12-08
SCORING JAY GOULD.
Judge Gresham Delivers a Decision in
the Wabash Railroad Receiver
ship Case.
He First Reviews the Facts in Connec-
tion With the Suit at Great
Length,
And Severely Comments on the
Means Used TO Wreck the
System.
Receivers Removed and Permission
Was Given to Foreclose Mort
cages.

CHICAGO, Dec. Judge Gresham, in the
United States circuit court for the Northern
district OF. Illinois. to-day gave decision in
the Wabash railway receivership case. In the
course of his opinion lie was very severe upon
the present receivers and the methods they
had employed in the management Of the
system. as well as upon various OF the prom
/ inent owners of the road. The decision re-
/ cited that in May, 1854. Uil was filed in the
circuit court of the United States Tor the
Eastern district of Missouri by the Wabash
Railroad company, for the appointment OF a
receiver of The system. That court assuming
! jurisdiction, SOlOn Humphreys and Thomas b.
Tut were appointed receivers and qualified
May II, 1854. similar bill was
/ fed in the circuit court for the
Northern district of Illinois May 2S. 1884
/ which appointed the same receivers, the ap-
poiniment concluding with these words:
! AND this court further reserves to itself
power 10 make such further orders in the
premises as may seem to be necessary"
George Gresham then gave very lengthy
rev lew OF the entire litigation respecting the
/ Wabash road from the time The receivers
were appointed in 1884 to date, together with
THE LEASE BY THE WABASH
company to the St. Louis & Iron Mountain
company. He said Beers in behalf of him
self ana other land hode' s of the same class.
( filed bill TO toreclOSe the mortgage on The
amounting to $500 700, the bill being filed on
the theory that all IheiI property in this state
was takeE into the cuStOd, OF TINS cOuII
4 The mortgages o 1866 and 1879 and the Chi
! cagO division mortgage and ten other secure
outstanding bonds amount ing TO S27.U U,OOO
I upon which nearly twoand one-half years in
/ terest s due. The interest in arrears was about
! 81, 600 in August last. The validity OF
! the thirteen mortgages is not denied. The
income arising from the operation Of the
! lines east OF the Mississippi river was pledged
/ by the mortgages. The main line, not IN
Guiding the Chicago division, made in 1850,
over and above expenses, S3,925.S5 which
lett, after making deduction of lakes. over
S60U UU0. This money was used in paying
losses on non renumerative lines i'll the sys-
TEN. In the two suits which have been
! brought here the court IS asked to remove
Humphreys and Tut on the ground that they
are not tit persons to act as receivers, and 10
/ appoint some capable, trustworthy person in
! their place
! JUDGE GRESHAM SEVERELY CRITICISED
the procedure under which the receivers were
! appointed by the court in Missouri on the ap-
plication of their company itself. Judge
| Gresham said: ut was claimed that the Mis-
! souri, Pacific was not able to operate the
Wabash lines at a profit, and May Is, 1884
! under actual lease, notice was given to the
Wabash company that the lessee had sus-
/ tanned loss in the operation. The Wal ash
]
/ representing Coating Indebtedness amount
! ing to Sl.00O.OeO. Soou Humphreys, Jay
/ Gould, Sidney Dillon and Russesl Sage were
liable as indorsers on all this paper. All, with
/ the exception of perhaps Humphreys,
J were Stockholders and directors in the
| Missouri Pacific. of the Iron Mountain COM
pany and ALL including Humphreys. were in
| terested in the last II AIMED corporation. or as
! indorses on the outs anding notes. They re-
solved that steps should at once be taken to
! secure the appointment of receiver, and a
/ bill was Gled III St. Louis This bill avowed
| that the Wabash lines were then operated
under the lease to the Iron Mountain CON-
| pany. On Nav 80. Uhe Wabash company
TILED ITS PETITION
| representing that IT'S promssory notes
amounting to about S2.3)0,0OU were outs and
! ing, some of which would soon mature. and
| that these notes were indOrsed by sundry
| individuals of high credit and financial stand
| ing"
Judge Gresham said the name of Solon
| Humphreys was disclosed as one of the in
dOrsers, but the names of Gould. Dillon and
! Sage, the three other indorsers, were with
held because the personal Inconvenience
and injury which might result to them from
the publicity thereby given 10 their business
| affairs. This petition prayed that receivers
certificates be issued to enable the receivers
| to meet the outstanding notes as they ma
| tured, but on the same day an order was en-
| tered directing the receivers TO use their obli-
| cations as such to protect these notes. The
| St. Louis court subsequently directed that
This order shall not be construed as estab-
| fishing any priority of lien in favor of such
receivers obligations or of the obligations of
! said railway company now outstanding. but
| such priority shall be subject to the further
| direction of the court" June9
| A FURTHER ORDER WAS ISSUED
directing that receivers certificates he issued
| amounting to 81 000,000, .ch should be a
! first lien on the entire property of the Wabash
/ COMPANY TO enable the receivers to pay off
/ specified classes of claim. The masters ap-
; pointed for that purpose sold the mortgaged
| property. with few exceptions, to the purchas-
! ing committee April 2s, 1856, for S625,000
| which sale was confirmed by the court June
! Is. Jude reSham reviewed the efforts of
! the purchasing committee to reorganiZe the
! com mmiItee and place il on a new basis, and
| indicated that the committee had signally
! failed in all of its endeal ors, and that there
| was now no probability of IT'S ever succeeding
! in putting the corporation on a sure founda-
| ton. The judge severely criticised the course
of the purchasing committee in obtaining
| court authorizing the receivers to
use the net earnings of the lines
| 10 pay the coupons of such bonds, the holders
| of which assented to the plan pursued by the
committee for the reorg aniZation of the road.
while the coupons of other bonds were
!
order adverted to, taken with the $4,000, 900
| floating Indebtedness of the Wabash. had
been held as 8 menace over the heads of nom
assenting bondhOiders as measure of
coercion by the purchasing committee. The
order referred was made Sept. 21, 1856.
| Judge Gresham
QUOTED FROM THE ADDRESS
made by the judiciary committee to the bond
holders. and an ADDRESS made by james F.
Joy, president OF the Wabash company. at a
meeting of bondbolders in New York City.
| Judge Gresham said: The orders OF Sept. 21
were obtained by the purchasing committee
or by the persons whom that committee rep
| resented. These orders so far changed the
terms of the sale and the order of confirma-
ton to allow the earnings in the hands of the
receivers, which were covered by the under
/ lying mortgages, to be used in payment of
| coupons belonging to bOndholders who as
sented to the funding scheme while the same
| right was denied to nOn-assenting bOndhold-
ers. and permitted the purchasing committee
to keep alive receivers certificates amount
ing to S4,00O,OG0 against the non-assenting
| bOndhOlderS.
After referring to the explanations made
by counsel on this point, Judge Gresham says:
| ''The bodness of this scheme to aid the pur-
chasers by denying equal rights TO all bond
holders secured by the same mortgages is
equa ed only by its injustice. The right is
asserte by the purchasers of the property
in court of equity TO take the earnings of a
| road covered by q mortgage and pay part of
/ the coupons secured by that mortgage, to
! the exclusion of coupons secured by the
! same mortgage and falling due at the same
! time. Doubtless the counsel who obtained
| the order Of Sept. 81 was not as frank in
| avowing to the conrt at II. Louis the pur-
| pose of the purchasers IS he has been here
| in defending his utter Jretation of them. 1t
/ is not to be presumed, then, that the court
entered these orders intending or expecting
that they would be used as
| MEANS OF COERCING
| dissenting bOndholders into the funding
] scheme. ] prefer TO infer and do infer that