The Portland daily press., 1888-07-26
The city's Interest in the ogdens-
hIIHR.

In 1872 the city of Portland was author
lied to loan its credit to the Portland & Og-
densburg Railroad to an amount not ex-
ceediHg 81, 100000. This act was accepted by
the citizens of Portland on the express
pledge of the directors that they would new
er call for more than 81, 35O, 600 of the munich
pal scrip. The loan was completed August
5. 1875, the city having at that time issued its
bonds to the amount of 81, 100000 The bonds
had been issued from time to time in patches
of $4,000, and delivered to the officers of the
road, who sold them with the understanding
that their proceeds were to be applied en-
ttrely to the construction of the road. The
city received as security from the road a
penal pond In the sum of $2,700,000, and
along with 1t were deposited with the city as
collateral security 100000 shares of Ogdens-
burg stock and $1.350,0O0 of bonds secured
by second mortgage ON the road. Subse-
quently the city surrendered to the company
the penal bond and the stock: it:held as secu-
rity, on the condition that the second mort
gage bonds, which up to that time it had held
as collateral should become its absolute prop
erty Neither the principal nor coupons of
these bonds, nor any part of them, was ever
paid by the company to the city. When the
second mortgage was foreclosed the city held
these bonds and coupons, and in the leor
ganization which followed bonds and
coupons overdo became stock. Now the city
claims that it should receive stock for the
principal of the second mortgage bonds,
which it held at the time of the foreclosure
($1,3500Oo), and all their coupons, from the
first which matured, May l, 1872, down to
and including the one which matured No
vember !, 1875, amounting to 81, 134, 900, max
ing the city's stock in the new company
~, 900, or 24,S40 shares of 800 each. II is
not disputed that the city should receive
stock for the principal Of the bonds it held.
namely, 81 900, nor is 1t disputed that the
city should receive stock for the coupons ac
cruing after May /, 1875, down to and includ-
ing the last coupon that matured prior to
the foreclosure, namely that which matured
November l, 1875, amounting to $751;, 900.
The only thing in dispute is the coupons
maturing from May /, 1872 to May /. 1875.
both inclusive, amounting to $4,000
The minority bondholders resist the
issuing of stock to the city on these
coupons, because, as they say the road paid
coupons of city bonds issued in aid of
the road of corresponding amounts. In other
words they say that the city has received the
value of the coupons maturing from Nav 1.
1872 to May l, 1875, both inclusive by being
relieved by the road from paying the cou-
pons ON its own bonds issued practically in
exchange for Ogdensburg bonds between
those dates. The city replies in the first
place that the road did not pay those coz
pons, but as matter of fact they were paid by
the city. That is to say the Ogdensburg
unlawfully diverted the money it raised on
city bonds delivered 20 it on condition
that their proceeds should be used in the
construction Of stho road to the payment of
kheSe coupons, and that consequently as a
matter OF law and fact the city paid them.
In the second place the city saws that even
II this transaction should be held payment
by the road still in equity the city is entitled
TO stock based on these coupons These
bonds were originally held as collateral Sc
curity and afterwards by agreement of the
road became the city's absolute property.
The road never asked that an amount of
coupons corresponding to an amount paid by
1t on the city bonds should be cancelled but
waived any such right if any existed. The
city had paid dollar for dollar for the bonds
it held, and was getting even with the cou-
pons in dispute, very small proportion of
its debt. The minority bondholders who
were resisting the claims of the city paid
very small sums for their bonds, vet they
were getting stock in exchange for coupons
that matnred before the date of their pur-
chase.
The question is one of coed deal of inn
portance to the city of Portland. If the pro-
posed lease to the Maine Central is ratified
and the claim of the city is sustained by the
law court then the citywil get $1,000 year
more than it will otherwise receive. Or
assuming that the value of the stock If that
lease is ratified will be half of its par value
or $50 share then, if the city's claim is sus-
tained, the city's interest in the road will be
worth about $150.000 more than if it is de-
feated. If the road is leased to the Maine
Central it makes no difference to the minor
lty stockholders whether the city is allowed
the additional stock or not, inasmuch as the
Maine Central agrees to pay so much on every
share. But it win make a good deal of diff
ference to the city and to the leasing cor
nnrotiop