The herald., 1894-10-18
Pacific RAILWAYS HISTORY
Their Construction and Finan-
cial Management.
Compiled From the @. S. Pacific Rail-
way Commissioners Report.
a Showing OF tho Aid the Gpvsrnment
Gave tho Railway building
and the Action OF ths
Companies.

history OF the construction and financial
management of the Pacific railroads,
compiled from the reports OF the United
States Pacific railway commission. ap-
pointed by President Cleveland under
the act OF congress OF March 8, 1887.
The history has been published in the
HERALD, the following being the last
installment
LEGAL REMEDIES OF THE GOVERNMENT.
These will be, at the maturity of the
bonds, to forecloss the government
mortgages and then to subject the other
assets OF the company, il any, to the de-
fciency judgment.
FoREcLosURE.
The original lien OF the government
extended only to the subsidized portions
of the roads OF the several companies.
But by section 0 of the Thurman act,
approved May Z, 1878. GO Stat. 56), the
lien is extended TO all the property OF
the companies, from whatever source
derived, and will, therefore. cover the
branch roads, subject, of course, to ex-
isting liens.
In the opinion OF the commissioners
the subsidized portion OF the Central
Pacific from Ogden 70 San Jose ia worth
less than the first mortgage bonds, and
the branch roads less than the mortgages
upon them at the time OF their consoli-
dation with the main line. The only
value OF the lien of the government on
this road will then consist simply in the
power it gives the government oyer other
competitors of acquiring the road. For
the collection of its debt it must look to
the other assets of the company.
The same observations will apply to
all the other roads, except the Union
Pacific.
This road, it appears from the report.
is worth, in excess of prior liens, more
than half, and probably not much lesa
than the whole OF the government debt.
(See ante, p. l9.) An offer was made to
the commission. by the parties inter
ested. to pay the government, for the
subsidized part of the road, $50 900, 900
TO extiaguish its indebtedness and as
the branches seem to have been
economically constructed, the value of
the whole was probably greater; and
since then, assuming the same efficiency
of administration to have continued, it's
value has probably largely increased.
DEFICIENCY JUDGMENTS.
The majority commissioners seem to
assume throughout their report that
beyond the visible assets of the Pacific
railroad compsnies-that is, the roads
and their eQuipments-there are no as
sets from which the government debts
or any part OF them can be collected;
and this view aeems to prevail almost
universally with the public.
With regard to the Union Pacific COM
pany and the minor companies, the
opinion is possibly correct; for the man
agerH OF thuse mpanies-with juster
appreciation OF the resources of the law
than seems to have characterized the
managers of the Central Pacfic-lost no
time in realizing the fruits of their fraud
ulent management and retiring from
participation in the affairs OF the COM
pany. They were doubtless originally
Responsible to the companies, but many
OF them have probably become insolyent,
and those who are solvent may be pro-
tected as against the company, and con-
sequently also as against ths govern
ment, by the statute OF limitations.
THE CENTRAL PACIFIC COMPANY.
But with regard to the Central Pacific
company, there is no room to doubt
that the whole, or at least the greater
part. of the amount due to the govern
ment from this company. as reported
by the commissioner-$75,9 ,995, ,90A-can
be collected. (Supra, p. 49,
The management OF this company has
continued practically unchanged
throughout its history. 1t originally
consisted of Stanford, Crocker, Hopkins
and Huntington; and it now consists
of the last named gentleman and the
personal representatives of the others,
and Mr.. Huntington and the estates of
the others are still in possession of the
assets of the company, fraudulently ap-
propriated; and profits frauduently
realized by them, out of their trust and
1t is probable that their eatates are suf-
fcient to satisfy the government in
debtedneHe.
therefore, is as to their personal liability
and that this question must be answer
ed in the affirmative is equally clear.
As to the facts. it ia established be-
yond question by the reports OF the
commission that these gentlemen by
contracts made with Themselves, and by
other fraudulent methods, have appro-
priated the whole OF the assets of the
company, and that this was done with
Ehe fraudulent intent of defeating the
collection of the debt duo from the COM
pany to the government. They are,
therefors, liable TO the company, as in
every case of actual fraud and, inde-
pen6ently of the doctrine of actual
fraud. they come directly under the
familiar principle that "where trustee
or other person standing in fduciarv
character makes a profit by means Of
any transaction within the scope of his
agency or authority, that profit bslongs
so the csstui que trust, and be is pre-
cluded from making any profit which
can only rebound to his own benefit"
q Spence'a Eq. Jur. 945.)
Upon this point it will De sufficient to
cite the opinion OF the supreme court of
the United States in the case OF the
United States va. the Union Pacific
Railroad company, 9S U. S. 609.10,
where the precise question was pre-
scented:
"The substance OF the charge ia that
the board OF directors OF the railroad
company made contracts for building
the road, and for running the Pullman
cars on il, and Tor mining its coal lands
end purchasing the coal 80 mined,
which were fraud upon the company;
that these contracts allowed exorbitant
prices for work done and material fur
niahed; that otherwise they were very
advantageous 10 the other contracting
2artieB and injurious 70 the company
that in ali of them the directors, or a
controlling majority of them, were in