, 1888-01-18

OF a company that was TO build the road,
subscribed for its stock, and were only the
subscribers. Therefore, it is difficult
to see how anyone was wronged by their
action. The rule of equity invoked, which
has its origin in the injunction that no
man can serve two masters, certainly did
not apply to them, because they were act
ing In their own interests, and were not
charged with the duty of caring for
others rights. there being no other per-
sons interested in the subject matter"
In view of the statementsa and facts
developed IN the commissioners report it
seems proper to recall the grants and ben.
efits derived from the general govern
ment by both the Union and Central Pa
cific for the purpose Of aiding the con
structlon of their roads.
BY an act passed in 1862 it was pro-
vided that there should be advanced to
said companies by the United States to
aid in its construction bonds oil the gov
eminent and lands from the public do
main, and that to secure the repayment
of bonds so advanced and interest, said
bonds should constitute the first mortgage
on the whole line of their roads and on
their property of every kind and descrip-
ton. Liberal donations, advances and
privileges provided for in this law were
granted by the general government for the
purpose of securing construction of the
roads. which would complete connection
between the eastern and western coasts,
and they were based upon the considera-
ton of public benefits which would accrue
to the entire country from such construc-
ton.
But the projectors of these roads were
not content, and the sentiment which
then seemed to pervade congress had not
reached the limit Of its generosity.
Two years after the passage of this law
it was supplemented and amended in
various important particulars in favor of
these companies by an act. which pro-
vided, among other things, that the gov
ernments mortgage should become a
junior lien and be subordinated to the
mortgage which the companies were, by an
amendatory act, authorized to execute to
secure bonds which they might from
time to time issue in sums not exceeding
the amount Of United States bonds which
should be advanced to them. The i'm
mease advantages to the companies by
this amendatory act are apparent. and in
these days we may well wonder that even
the anticipated public importance of the
construction of these roads induced what
must now appear to be rather a reckless
and u%nguarded appropriation of the pub
lie funds and the public domain.
1t is almost needless to state that the
companies have availed themselves to
the utmost extent of the permission given
them to issue their bonds and to mortgage
their property, and to secure payment Of
the same by the incumbrance having
preference over the governments lien and
precisely equal to it in mount. When
the relations created between the govern
ment and these companies by such lcgis-
lation referred to is considered, it is aston
ishing that a claim should be made that
the directors of these roads owed no duty
except to themselves in their construc-
ton; that thew need regard no interests
but their own, and that they were justi-
fed in contracting with themselves and
making such bargains as result ed in con-
veying to their pockets all the assets of
the companies.
AS llenor the government was virtually
interested in the amount of mortgage to
which its security had been gubordinated.
and it had the right to insist that none of
the bonds secured by this prior mortgage
should be issued fraudendy or for the
purpose OF division among stock holders,
without consideration. The doctrine of
complete independence on the part of the
directors of these companies and their
freedom from any obligation to care for
other interests than their own in the CON
struction Of these roads seems to have de-
veloped the natural consequences its APP
| plication portrays, as follows in the ma
jority report of the commission:
THE result is that those who have
controlled and directed the construction
and development of these companies
have become possessed Of their surplus
assets through the issue of bonds, stocks
and the payment of dividends voted by
themselves, while the great creditor, the
United States, finds itself substantial
ly without adequate security for the re-
payment of its loans"
The laws enacted in aid OF these roads,
while they illustrated the profuse liberal
ity and generous surrender of the govern
ernment advantages, which it is hoped
experience has corrected, were neverthe-
less passed, upon the theory that the
roads should be constructed according to
the common rules of business fairness
and duty, and that their value and their
ability to pay their debts should not be
impaired by unfair manipulations, and
when the government subordinated Its
lien to another it was in expectation that
TIE prior lien would represent in its
amount only such bonds as should be ne
cessarily issued by the companies for the
construction of their roads at fair prices
agreed upon in an honest way between
real and substantial parties.
1t is quite time that the troublesome
complications surrounding this entire sub
iect. which has been transmitted to us as
a legacy from former days, should be ad-
iusted and settled. No one, | think ex-
poets that these railroad companies will
be able to pay their immense indebted
ness to the government at its maturity.
Any proceeding or Arrangement that
would result low. or at any other time in
putting these roads or any portion of
them in possession and control of the
government is in my opinion to be re.
jected, certainly as long as there is the
least chance for indemniiication through
any other means.
| suppose we are hardly justified in in
dulging in the irritation and indignation
naturally arising from a contemplation of
the malfeasance to such an extent as to