New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1890-11-09
ISSUES IN A RAILROAD SUI.
QUESTIONS GROWING OUT OF WALL
STREET FAILURE.
CONTROL OF THE smRPAUG, IhrCHFIELD AND
NORTHERN ROAD INVOLVED

CONTROL OF THE snEPAUG, IhrcHFIELD AND
NORTHERN ROAD INVOLVED
Bridgeport, Conn.,, Nov. tspeciaD-An m'cfo'S
ing case to lawyers and to railroad men has ooen ou
trial during the last two weeks In the Superior .o'
OF Far1ied County, at bridgeport, Conn, befoe '"us'
Robinson. The case Is Instituted ly W. H. starpu0n'
president OF the HousatonIc Railrosd Company .. "
Bostwick and others, against the Mercantile Trust oo
pany Of this city. George W. Chapman and Others ae
PENDANTS. The case involved the management on"
control OF certain railroad, or branch lnc' III '.0
State OF Connecticut. known tile Shcpaug Li'ch
field and Northern Railroad This road Is ho" =,
operation, and runs from Hawley vile In hor."
oastcrly direction to LItchneld The plaintiffs ca,
to be the OF q majority Of the stock Oh "'o
shepaug, Litchfed and Northern Railroad Company
and to be entitled b the and control Oh c
said railroad company, and such owners they nave
brought an action In court Of equity to restrain to
present management Of said railroad from certain
action contemplated by the Board OF Directors namely
the negotiating Of certain bonds and the carrying OUT
of certain traffic and building contracts with o'her
railroads. prospective and otherwise.
IL seems that the present condition Of affaIrs a. to
CARDS the Shcpaug Litchfeld and Northern Railroad
Company, grew out Of the attempt Of Mr.. Chapman,
one OF the defendants and others to gain contro o'
the road. Sometime during last year Mr. chapman"
and others formed a syndicate for the purchase Oh
majority of the stock Of such railroad, and In the
carrying out Of the contract OF purchase OF such stocR
they entered into contract with the Mercantile Trust
Company whereby they contracted to deposit WIN the
Mercantile Trust Company 5000 and odd shares OF the
stock of the Shepaug Ltchfed and Northern Railroad
Company out OF total OF 1900 shares OF stock OF
their railroad and to pay into such trust company .c
purchase price thereof (about $20O,OOO); ana the
trust company In consideration thereof was to issue
trust certificates based upon such stock, whereby the
beneficial ownership Of such stock might be conveyed
and at the time the parties entered into con-
tract with the committee of three whereby they en-
trusted to such committee tie power to vote upon
stock deposited with the trust company at all the
meetings OF the road The contract with the trust
company carried out, THE 5000 and more shares
Of the stock Of the road deposited with the
trust company, the purchase price paid and trust
certificates issued upon such stock These certhcatcs
Of trust delivered to George X sisares sons as
the fiscal agents of the syndicate, and the purchase
price of the stock paid by tho firm OF George X
Sistares Sons. The trust certificates delivered to
George X. Sistares Sons were pledged collateral
for loans raised by George X Sistar;s Sons In the
interests Of the syndicate and on the failure OF George
X. sstarcs last spring still outstanding as
collateral to the NJ the defunct firm. and on the
failure OF the firm to meet these loans they were sold
and large proportion Of the stock pledged as such
collateral WAS purchased by the plaintiffs
In the meantime Mr.. Chapman, the chief manager
Of the syndicate, had been elected president Of the
Shepaug. Litchield and Northern Railroad Company,
and, through the voting trust established by the
contract with the Mercantile Trust Company, had Sc
cured board OF directors in his interest After tho
failure OF George X Slsarc's Sons and the sale OF the
trust certificates based the stock In the possession
of the Mercantile Trust Company, and their transfer
into the hands Of third parties the directors of the
railroad company at monthly meeting AUTHORIZED
the issue of large quanttes-upward Of $3oO,OOo-of
4x, he
of extending the lines Of the road and forming con
nectons with other roads, more particularly with the
socalled Croton Valley Railroad prospective road In
the State Of NewYork. Such action was authorized
by vote of the stockholders the majority represent
ing the stock deposited with the Mercantile Trust
Company, and voted upon in accordance with the
trust created by the agreement with the Trust Com
pany while the real ownership of such stock was out
standing I'm parties who had purchased Tie same IN the
shape Of the trust certificates pledged by George X
such parties, the plaintiffs in this action, have
instituted suit to restrain the Mercantile Trust Com,
R te Other se DEFENDANTS from further acting the
above Indicated, from negotiating the bonds OF te
manaceinent Of the railroad company until the rights
Of the plaintiffs, the real owners OF the stock n
The s' Questions involved novel and not
comnlceiy settled By the law OF the different states
The question as to the validity and legality Of the
voting trust created by the with the Mercan
the beneficial ownership Of the stock. Is raised In TINS
Mitigation The case for the plaintiffs Is being pre-
santed nv Simeon E. Baldwin Of New-IIaven, and G c.
Beaman Of Evarts Choate Beamaa' and a. a. Ans'
Of Kenneson. Grain Alling, ,,o Oh Ne% i sax
ard of Judge stOddaId, Of bridgeport ana
Mcssrs Glover Higgins. There arc Other IN, IN,
itlrstion: but the important question to be decided
is the power resident in the ownership M STOCK III
Of such stock from the beneficial ownership OF such
stock whether such separation Is valid ana ieSa III te
te face of Its transfer into the hands OF third pares
and whether such separation must be limited III Ime,
or whether any such separation Is tenatc IN law or
In enuifY.