Morning journal and courier., 1889-04-24

ley, R. c. Amber and George Merriman, therefore submit their report as finding of facts. After the conventional Introductory formalities the report, which will be very in teresting reading to persons interested in se- curities of the Housatonic, as well as the general railroad struggle, continues substan- tially as follows:
 FINDING OF FACTS.
 First, on September 30, 1887 that company reported to the railroad commissioners that on that date the
 Common stock was .......-.............s Seo00o Bonds outstanding -.....-----. 1,!2VooO Estimated amount of bonds and stock. s,1sooGO The same year the company resggsortipg
 common stock was. ...........--.... S2500 Preferred stock Tas ssss ssss 5oo 50o
 Total tal....---..--.-..-- ........-.$ 6,23oooO
 It further appeared that the outstanding stock was subject to exchange by the execu- tive committeee of the directors for per cent. preferred stock on such terms ss the committee thought best. It therefore ap peared that the stock and bond issue had increased $3,115, ,000 in one year. Second, the general balance sheet as reported Sep. tember 30, 1887, showed that the construc-
 
 766. 61 and the real estate was valued at s61, ,646.69.
 The return made September 30, 1888, showed that the construction account was 8, ,993, .92 and the equipment $1 ,S1S, ,399.- 19, total of $5, ,312 1855. Il, an increase in ons year of $2, ,151, ,36s 50, while the real es. tate is returned at $373, ,S09. 93, an increase of $312, ,000. The increase ln the real estate account was explained to have been made by revaluation of the real estate, while the other increase was explained in the railroads commissioner report, page 2S7.
 Third. In 1886 the legislature chartered the Housstonic Railroad company, which charter it reserved the right to amend. Down to 1877 the capital stock of the com wany was 20, 900 shares, of which s, 200 were common stock and Il 800 preferred. The latter was issued about 1S45 under contract with old common stockholders which enti- tied the holders of preferred stock to receive per cent. dividends annually before any dividends could be paid on the common stock. In most of the years between 1S45 and 1870 these dividends were not paid, and preferred stockholders claimed the company was liable to them. In 1870 the legislature authorized the company to settle with the preferred stockholders for back dividends by issuing to them new stock or bonds or pay ing cash upon such terms as might be agreed upon at a meeting of all the stockholders. The company after accepting this amend ment took no action under it until Septem- ber 30, 1887.
 In 1878 the legislature passed an act pro- hibiting any increase of stock by any rails road except as therein provided, section 3 of which is as follows:
 'No railroad company shall increase it's | capital stock except by special authority of the general assembly nor shall such authority be given except upon recommendation of the | railroad commissioners as herein provided" j" In 1882 general statute was passed reRu- lofi irarf h0 rk nf vwhfoh oOUl6 he legally issued and prescribing the manner of issuing the same, the applicable sections of which are as follows:
 Provided that the whole amount of bonds outstanding at any one time shall not exceed half of the actual cost of construction of such railroad" All acts and parts of acts incon- sistent herewith are hereby repealed. Before 1882 railroads had been permitted to issue bonds to one-third the amount of money actually expended.
 From 1870 to 'S7, period of seventeen years, no action whatever was taken by the of 1870. In 1887 8 few gentlemen in New York holding large majority of the pre- ferred stock, paying for it an average of $40 per share, obtained control of the cor poration. On October 5, 1887, meeting of common and preferred stockholders was held, and it was agreed to pay each pre- ferred stockholder for each share $100 cash or bonds and give him two shares of the so- called stnew preferred stock" of par value of $1O0, and also give holders of three shares of common stock one share of the "new pre- ferred." The cash required to effect this settlement was raised by sale of bonds to ] the amount of $1, ,160, 900, which was paid to holders of old preferred stock. Seventy eight hundred and twenty-five shares of common stock had not been exchanged Sep tember 30, 1888, but were in the hands of
 directors to make such terms as they saw fit. | The original capital stock was thus increased \ in one year S1, ,150, 1000 and the outstanding bonds $1 ,960, 900. The act of 1878 provid- ing that no stock increase shall be made ! without special authority is declared to be an amendment to the charter of every railroad l in the State.
 The outstanding bonds September 30, 1888, were in excess of half the actual cost of the construction of the road. The Housatonic company claimed the act of 1882 did not re- peal the amendment of 1870. Of the in- crease $1, ,666, ,388.81 in the apparent cost of the road during the year was made up by adding two items, one of which was revalu ation of the construction account, which was done by making an estimate of the claimed present value of the road instead of its cost. This revaluation of construction and real es- tate accounts did not include separate re- valuation of real estate of over $500, 900. The other item of $903, GALS increase consisted largely of moneys expended upon leased U construction of the Housatonic railroad, in regard to which the Supreme court has de- eided in 4S Conn. page A, that they are not part of the property of the Housatonie rail road company.
 It appeared that one item of the increase $365, ,504 O3 which had in 1867 been charged to the profit and loss account had in 1888, rwenty-one years later, been carried to the construction account on the books of the company. The equipment account in 1887 was $1 ,21S. .103. 02 and the construction &C., count $1, ,942, ,663. 59.
 To ascertain the true construction account September 30, 1888, there should be added the amount expended for construction in that year, to wit, $383, ,784 52, which would be $2, ,326, ,448. Il. Onehalf of this actual cost of construction is $1, ,163, ,224.06. The amount of bonds outstanding September 30, 1888, was $3, ,O80, ,0e0, about $1 ,800, ,000 in excess of half the actual cost of construction.
 It further appeared before the committee that in addition the Housatonio railroad con- pany had in 1888 guaranteed the bonds of corporation known as the New England Ter minal company to the amount of $500, 900. It was not claimed that these bonds were issued under authority of the act of 1870 in settle mant of the accumulated dividends.
 The officers of the company testified be- fore your committee that their construction accounts had been marked up in the manner above get forth by advice of counsel after the now stocks and bonds had been issued in