The Indianapolis journal., 1886-12-08
THE WABASH RECEIyERSHIP
Judge Gresham Deposes the Receivers
Appointed at st. Louis in May, 1884,
And Improves the Opportunity to Severely
Criticise the Manner in Which the Prop
erty Has Been Managed Since Then.


Wabash railway receivership case. In the
course of his opinion ne was very severe upon
the present receivers and the methods they had
employed in the management of the system, as
we'll as upon various prominent owners of
the road. The decision recited that in May,
1884. bill was filed in the Circuit Court of the
United States for the Eastern district of Mis-
souri,, by the Wabash Railway Company, for
the appointment of receivers of the system.
That court assuming jurisdiction, Solon
Humphreys and Thomas E. Tut were appointed
receivers, who qualified in St Louis, May 20,
1884. similar bill was filed in the Circuit
Court for the Northern district of Illinois on
May %, 1884, which appointed the same rceeiv-
ers, the appointment concluding with these
words: "And this court further reserves to
itself power to make such further orders in the
premises as may seem to be necessary"
Judge Gresham then gave very lengthy re-
view of the entire litigation respecting the Wa
bash road from the time the receivers were ap
pointed, 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 himself and other bond
holders of the same class. filed bill to forecose
the mortgage on the Chicago division to secure
an issue of bonds amounting to 81, 600, the
bill being filed upon the theory that all the rail-
way property in this State was taken into custo-
dy of this court. The mortgages of 1866 and
1879, and the Chicago division mortgage and ten
others. secure outstanding bonds amounting to
over $27 ,000, 600, upon which nearly two and one
half years interest is due. The interest in ar
rears was about 81 400 900 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 including
the Chicago division, made, in 1885, over
and above operating expenses, 1878 920 50. = ch
left. after making fair deduction OF I
over 5000, 600. This money was used in pa :.
losses on nonremumerative lines In the sys.
In the two suits which have been brought here
the court is asked to remove Humphreys and
Tutt, on the ground that they are not fit per-
sons to act as receivers, and to appoint some
capable, trustworthy person in their places.
Judge Gresham severely criticised the pro-
cedure under which the receivers were appointed.
Their appointment was originally made by the
court in Missouri on the application of the rail
way company itself. Judge Gresham said:
sit was claimed that the Missouri Pacific was
not able to operate the Wabash lines at profit,
and ON May 49, 1884. under clause In the lease,
notice was given to the Wabash company that
the lessee had sustained loss in the operation of
aoout 81 900 000 The Wabash Company at this
time had outstanding paper representing
or more Solon Humphreys, Jay Gould. Sid
ney Dillon and Russell Sage were liable
as indorsers on all this paper. All, with the ex-
ception of perhaps Humphreys, were stockhold
ers and directors in the Missouri Pacific and
Iron Mountain companies, and all, including
Humphreys, were interested in the last-named
corporation, or as indorsers on the outstanding
notes They resolved that steps should at once
be taken to secure the appointment of a receiver,
and bill was filed in st. Louis. This bill
avoweds that the Wabash lines were then opera
ted under the lease to the Iron Mountain COM
pany. On May 80 the Wabash company filed
its petition representing that its promissory
notes amounting to about So, 300. 900 were out
standing, some of which would soon mature that
these notes were indorsed by sundry individuals
of high credit and financial standing"
Judge Gresham said the name of Solon Hum
phreys was disclosed as one of the indorsers but
the names of Gould, Dillon and Sage the other
three indorsers, were withheld "because of the
personal inconvenience and injury which might
result to them from the publicity thereby given to
their business affairs" This petition prayed that
receivers certificates be issued to enable the re-
ceivers to meet the outstanding notes as they
matured but, on the same day. an order WAS
entered directing the receivers to use their
obligations, as such, to protect these notes. The
ST. Louis court subsequently directed that this
order shall not be construed as establishing any
priority of lien in favor of such receivers OBJ
legation, or Of the obligation of said railway
company now outstanding, but such priority
shall DO subject to the further direction of the
court"
On June 9 further order was issued direct
ing that receivers certificates be issued amount
ing to 81, 900, 600, which should be first lien on
the entire property of the Wabash company, to
enable the receivers to pay off specified classes of
claims. The master appointed for that purpose
sold the mort tgaged property, with few excep-
tions, to the purchasing committee, April %,
1886 for $625, 900. which sale was confirmed by
the court June 15
Judge Gresham reviewed the efforts of the
purchasing committee to reorganize the COM
paDy and place it on new basis. and indicated
that the committee had signally failed in all of
It's endeavors. and that there was now no prob
ability of its ever succeeding In putting the cor
poration surer foundation. The Judge Sc
verely criticised the course Of the purchasing
committee in obtaining certain orders from the
st. Louis court authorizing the receivers to use
the net earnings of the lines to pay coupons of
such bonds, the holders of which assented to the
plan pursued by the committee for the reorgan-
ization of the road, while coupons of other bonds
were ignored and left unpaid. The court said
that the order adverted to- taken with the $4,
900, 600 floating Indebtedness of the Wabash
company, had been held as u menace over the
heads of non asserting bondholders measure
of coercion by the purchasing committee. The
order referred to was made Sept. 81 1856.
Judge Gresham quoted from the address made
by James +. Joy, president of the Wabash com
pany at a meeting of bondholders in New York
city and said: Inc orders or sept. II were OBJ
tanned by the purchasing committee by the
persons whom that committee represented
Those orders SO far changed the terms of the
sale and the order of confirmation as to allow the
earnings in the hands of the receivers which
were covered by the underlying mortgages to be
used in payment of coupons belonging to bond
bolders who assented to the funding scheme,
while the same right was denied to non assent.
ing bondhoders, and permitted the purchasing
committee to keep alive receivers certificates
amounting to 100000 against the non n-assent-
ing bondholders"
After referring to the explanations made by
counsel on this point Judge Gresham said:
''The boldness of this scheme to aid purchas-
ers by denying equal rights to all bondholders
secured by the same mortgages, is equaed only
by it's injustice The right is asserted by the
purchasers of the property in court of equity
to take the earnings Of road covered bv a
mortgage and pay part of the coupons secured by
that mortgage to the exclusion of coupons So