The San Francisco call., 1895-10-13
SUIT FOR s15,oO0,0o0
The Question of Individual
Liability Is Exhaustively
Considered.
STATUS OF THE GOVERNMENT
The United States Supreme Court
VIII Be Asked to Pass Upon
the Question.

1t is our judgment that the terms of the
contract between the United States and the
Central Pacific Railroad Company, so far as
concerns the waiver of the individual liability
OF the stockholders of that company, fully meet
the requirements of this exposition of the
law. =
1t has been urged upon the argument that
the directors of the Central Pacific Railroad
Company, one of whom was the defendants
testator, have wrecked that company, have de-
pleted its treasury and haye thereby acquired
private fortunes of great magnitude. This argu-
ment is foreign to the question under consid-
Grafton. This suit is brought to enforce liabil-
ity, which, if it exist, is purely creature of
statute. The question before the court is one
of the Interpretation of the law and the con-
tract of the parties in interest. The inquiry is
not aided by reference to the inequitable con-
duct OF the directors of the Central Pacific
Railroad Company after the contract was
entered into. The rights of the defendant
in this case are to be measured by the same
rules that would apply to an obscure stock
holder, innocent of wrong to the Government,
and unclothed with power to direct the action
of the corporation as an officer thereof. The
rights of the defendant here depend upon the
contract and the law applicable thereto They
may not be impaired by reason of the inequity,
if any there were, of the defendants testator
in his dealing with the United States. If it be
true. as alleged, that the money and the land
of the United States, which were given in aid
of the construction of the Central Pacific Rail-
road, have been diverted from the purpose for
which they were bestowed, there is, undoubt-
edly an adequate remedy in a suit brought to
reach such diverted assets. There is no such
remedy in this suit. The view we have taken
of the main question involved in the contro-
versy renders it unnecessary to consider the
other questions which were discussed. 1t is
our judgment that the demurrer to the bill was
properly sustained for want of equity, and the
decree OF the Circuit Court is accordingly
affirmed.
This was the conclusion reached yester-
day in the appeal handed down by the
Circuit Court in the case of the United
States VS.. Jane L. Stanford, executrix of
the last will of Leland Stanford, deceased,
for the sum of S15 900, 900. The decision was
read by Judge Gilbert and was conc urred
| in by District Judges Hawley and Morrow,
who sat with him.
The opinion, which covers some thirty =
| six pages Of typewriter matt er, first pro-
ceeds to reheaTse the facts connected with
the creation of the debt. 1t quotes the
various acts of Congress relating to the
building of the road and its bonding. 1t
then continues:
1A6 question arises WnSIner OF not IL was
the intention of the United States to hold the
stockholders of that corporation individually
liable for the default of the railroad company
in case of its failure to paw its debts to the
the provisions of those statutes and the course
OF dealing of the United States with the cor
porations therein mentioned were such as to
Justify the stockholders OF the Central Pacific
Railroad Company in believing, at the time
| they became stockholders in said company, or
| in either of the companies subsequently, CON
| SOliQdted therein. and at the time the dahf RI
| the Government was incurred, that they were
as free from individual liability for such debt
| as were the stockholders OF the Union Pacific
Railroad Company, or the stockholders of the
other corporations which were aided in like
manner.
The relation of the United States to the
| railroad corporations is touched upon,
reference being made to the condition of
the country, the situation of the territory
affected by the railroad improvements and
the purposes that the United States had in
view in fostering the enterprises con-
templated in the act. In the last connec-
ton authorities are cited, one opinion
given being as follows:
But the primary object of the Govern
ment was to advance its own interests, and it
endeayored to engage individual cooperation
as d means to an end-the securing q road
which could be used for its own purposes
The obligations, therefore, which were i'm
| posed on the company incorporated to build it.
must depend on the true meaning of the
enactment itself, viewed in the light OF con-
temporaneous history.
The important point of the whole case
that of the individual liability of stock
holders-is treated at considerable length
| 1t is pointed out that in incorporating the
| Union Pacific Railroad Company Congress
was silent upon this subject. 1T is there
fore deduced that these stockholders can
not be individually held for the payment
of the debts of the corporation for the rea-
| son that individual liability of stock
holders is creation of statute law, a nd
must affirmatively appear by the pro-
visions Of the law controlling the corpora
ton when the debt was incurred; and
further it is stated:
1t thus appears that the attitude of the
United States to each company was such that
| 1t was matter OF indifference to the Govern
ment whether the Central Pacific Railroad
Company or the Union Pacific Company built
the road that was to be aided by the Govern
ment bonds and subsidy.
In support of this it is stated that the
United States was not dealing with the
Central Pacific Railway of California
solely as a corporation created under the
laws Of that State, but as corporation en-
dowed with the powers which the Gov
ernment had itself bestowed.
TnvVarH he Of ha