Lyon County times. [volume] (Silver City, Nev.) 1874-1907, 1890-05-03
TEIE SUTRO TUNNEL.
Answer to the Suit Brought by Frank
j. Symmes and Others.


Union Trust Company of New York, Selig-
mann & Seligmann, and others, by their at
torneys, Edmund Tauszky and W. E. F..
Deal, Monday filed their answer in the United
States Circuit Court for Nevada, in the suit
brought by Frank J. Symmes and others, as
stockholders of the Sulro Tunnel Company,
against these parties. The object OF the
suit is to have it declared that the Comstock
Tunnel Company, holds the legal title to
tie Su;To tunnel, as the constructive trustee
of the Sutro Tunnel Company, on the ground
the mortgage of McCalmont Bros. & Co., OF
London for about 81, GOO, 900 on the Sutro
Tunnel was purchased from the mortgages,
by the Union Trust Company, with the funds
of the Suro Tnnncl Company, which, it is
claimed, had been raised on subscription to
income bonds Of the Sutro Tunnel Company
and belong to that company. The Union
Trust Company foreclosed the mortgage and
transferred the property to the Comstock
Tunnel Company.
The defendants state in their answer that
the foreclosure suit of McCalmont Bros. &
Co. against the Sutro Tunnel Company, was
commenced in March, 1886, and was ready
for trial about January, 1857, and that
neither the then trustees Of the company nor
the stockholders seemed to trouble them
selves about the matter, and that the suit
would speedily terminate in the foreclosure
of the property, thus rendering the stock abb
solu,ely valueless. AT this time, Theodore,
Sutro of New York took hold of the matter,
succeeded in getting sufficient proxies to
control the election of trustees in March,
1887, and Immediately entered into negota-
tons with the stockholders for the settlement
OF the mortgage. In July, 1887, he succeed
ed in effecting very satisfactory settlement,
provided the money was paid on or before
January I, 1888. Thereupon he matured
plan for the issuance of income bonds, bear
ing ieterest, to be sold to the stockholders at
so per cent Of their face value, in order to
meet the conditions of settlement. He pre-
pared an elaborate report 10 the stockholders
informing them of the condition Of the set
Element and OF the property. and urged Their.
TO subscribe for the bonds. An executive
committee Of stockholders was appointed 10
take charge of the matter, and the Union
Trust Company Of New York was made
trustee to receive subscriptions. Notwith-
standing the most strenuous efforts, however,
only about $500 ,ooo had been subscribed
previous to January 1, 1888, and as about
$1,000, 900 was needed for the settlement,
and McCalmont Bros. & Co, would not listen
to any other terms, or extend the time. il ap-
peared as If the plan would fall through.
AT this juncture, however, Theodore Sulro
succeeded in getting a syndicate Of capital
lists 10 subscribe $3.50, 900 TO the bonds, and
thus assured the safety of the property, The
tgcEh nl an had 70
1883, subscribed to the bonds, did so on the
condition that enough should be subscribed
by that date TO settle the mortgage; but such
not being the case, they were entitled 10 the
return OF their money and the rights Of the
Sutro Tunnel Company in the subscriptions
terminated.
These subscribers, however, all changed
the form OF their subscriptions under new
plan, which was adopted, whereby the mort
gage was to be purchased for subscribing
stockholders and the syndicate, and if SUI
ficienr number Of stockholders should come
in, the mortgage would be satisfied without
foreclosure, but if not, the mortgage was TO
be ioreclosed, and the property bought in for
the benefit of subscribing stockholders and
the syndicate. Under this plan, which was
called The reorganization plan, and under
which Reorganization Committee was ap-
pointed, stockholders representing about
million and half of the shares of the Sutro
Tunnel stock, subscribed for the bonds. 1t
was distinctly understood both by the stock
holders, who had originally subscribed for
the Sutro Tunnel bonds and those who SUBJ
scrbed under the reorganization plan, that
this might and would, in all probability, in
volve foreclosure OF the mortgage and the
formation of anew company. The mortgage
was subsequently purchased for the benefit
of the subscribing stockholders and the SYM
dictate for $500, 900 and the property fore
closed and bought in by the Union Trust
Company for these parties and by ii trans
ferred to the Comstock Tunnel Company,
which was formed under the laws of New
York for that purpose.
Particular stress is laid upon the fact that
notice was given to every stockholder of the
company, by numerous advertisements and
circulars, of the entire plan, and that every
thing was done with the fullest publicity and
in the most absolute. good faith, and that,
had the plan not been carried out, the
property would have been absolutely lost to
the stockholders. AS it is, three quarters Of
the stockholders holding the two million
SUiicS VI CutlO StoSk are NOW, as
stockholders of the Comsock Tunnel Com
pany the owners of the Sulro Tunnel prop
erty, and the holders of their own income
bonds, which they purchased at 50 per cent
of their par value, and which bear interest
at per cent per annum on the par value;
and of the other fourth of the two million
shares, many are lost and destroyed, and the
three plaintiffs in this suit are the only stock
holders who have raised any objection to the
plan pursued; and it is alleged that they
have brought the suit in bad faith and with
out any ground for the charges made in the
complaint. The answer covers ninety print
ed pages, and is very specific in its denial of
all charges of fraud or conspiracy against
each and all of the defendants, and would
tend to show that the course pursued was the
only one possible under the circumstances in
which the Sutr" Tunnel Company was placed
at the time. The suit promises to be on in
teresting one, and it certainly appears that
the defendants propose to contest every inch
of the uround taken nv the plaintiffs and