The morning call. [volume] (San Francisco [Calif.]) 1878-1895, 1894-11-19
Moons Phases.
CAN THE GOVERNMENT RECOVER

- Inc sacramento Bee warns the aQV0-
Gates of the foreclosure of the Governme en-
mortgage on the Pacific road who also
. think: that the original holders of the
stock may be made to disgorge some of
their lll-gotten gains, not TO in sist upon the
second part of the proposition lest it may
endanger the first. aaving thus entreated
the other side TO be silent the Bee pro-
cseds to establish its theory. II contends
in effect. that the mortgage given is the
only security the Government required
and that when the property mortgaged
has been. surrendered according TO the
provisions of the law, the mortgage is not
personally responsible for any balance that
may be due. Section 1928 of the Civil
Code, which was 10 force at the time the
mortgage was made. provides that "a
mortgage does not bind the mortgagor per-
soDally to perform the act for the perform
anee of which il is security unless there
is an express covenant therein to that eff
feet" AS the stakeholder of the Central
Pacific gave no personal note containing a
provision to- pay the bonds the Govern
ment Endorsed, the Bee contends that the
stockholders are not legally liable for any
balance which may remain after the prop
CAl1 ASuSOO hdo USOA dppllCQ w tu6
satisfaction of the debt. The Bee con-
cludes, therefore. that the Governments
Investment in the Central Pacific is lost
except as to the mortgaged property and
unsold lands.
Admitting the correctness of the posi-
ti0n that the Government is not enthused
to proceed against the private fortunes of
the stockholders to recover balance due.
itdoes not follow that the managing stock
holders may not be held to an accounting for
the earnings of the road, which they should
have applied to the payment Of interest on
the amount loaned them by the Govern
ment If they gave o personal obligations
10 pay the bonds the Government, mad right
TO see that the bonds were paid to the ex-
tent the net earnings of the road would
permit of their payment. If the security
for The payment of the debt had been
ample. 1t might he held that the stock
holders had right to use surplus earnings
10 their own best advantage. But as the
security was not ample unless the surplus
earnings OF the road were used in creating
a'sinking fund or in payment of interest.
the party holding the mortgage had q
right to prevent the diversion of the earn
ings OF the road to other purposes than In
making provision for the payment of its
debt. The Government did take steps to
ascertain what the stockholders were
doing with the earnings of the road.
although, pending the maturing of the
mortgage, no attempt was made to take the
road out of the hands of the stockholders.
The: Bee now takes the position that
whatever amount of money the stock
holders diverted from the earnings of the
road has become the lawful property of
the stockholders. The Government, having
acquired proof that tens of millions were
so divided, cannot. according to the argu-
ment OF our contemporary, proceed to re-.
cover any part of such diverted earnings.
In other words it is commended that the
four stockholders might appropriate to
their personal use several millions of dol
lars and remain in undisturbed possession
of the same, while the Government SUBJ
mits to loss of as many millions accruing
in consequence of such unlawful appro-
priations,