The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1895-06-30
He Knocks Ont the Government Suit
to Recover $4,000, 900 from the Es-
tate Of the Late Senator.
AN, IMPORTANT DECISION
INVOLVING LIABILITY OF PACIFIC
HALLWAY STOCKHOLDERS.
Uncle Sam May Forec1ose the Mort
gage, but Cannot Hold individuals
RcspOnsibIe for the Debt.

SAN FRANCISCO, June 29-United
States Circuit Court Judge Ross to-day
rendered his decision the demurrer of
Mrs. Jane l.. Stanford against the suit of
the government to recover 600 from
the estate Of her late husband, Leland
Stanford. The demurrer was sustained.
Judge Ross allowed the government to
amend its former complaint and reargue
its case If 1t so desired. 1t was intimated,
however, that this step would not affect
the case. the law, as construed by Judge
Ross, not favoring the case of the United
States. The sustaining of the demurrer
was surprise, the attorneys generally ex-
pecting contrary decision. The court be-
gan by reviewing and explaining the acts
and statutes, both State and federal, which
had any hearing on the construction of the
Central Pacific railroad and its branches.
Ali railroads west of the Missouri river
were, he said, constructed under the same
acts, so if one road was liable to the
government all of them were liable. In
nearly all of the corporations Leland
Stanford was stockholder. Together
with c. P. Huntington and the other in
corporators he owned 130SS0 shares of the
stock. The government, according to it's
contract, issued bonds to aid in the con-
struction of this road. Though the road
was built under that contract it was in
corporated under the laws of the State.
Therefore it became, in a way, amenable
to the laws of California.
The laws of California providing that
stockholders of corporations are individu-
ally responsible for debts contracted by
their companies would not affect Mr.. STAN
ford, as the government claimed, for the
reason that the stockholders liability acts
were passed after the government had
made it's contract with the Central Pacific
IL those laws had been passed before the
government bonded the Central Pacific,
however, it would have made no difference
as the government had no intention of
making the stockholders of the railroads
1T bonded personally responsible for the
debts contracted by the company. The Gen.
trail Pacific, the court continued, had some
thing of national tone to it. When it
was contemplated the country was in a
state of turmoil. The government wanted
quick communication between the Atlantic
and Pacific oceans. At that time the build
ing OF the road was a great undertaking
an undertaking too vast for private enter
prise. So the government, to assist in the
work, issued the bonds, and in this way
made the railroad builders practically
agents of the United States.
1T was very plain that in case the rail-
road did not pay the bonds upon maturity
that the Secretary of the Treasury has the
power 10 take possession of the roads. The
bonds are identical with first mortgage.
Did the company which became indebted to
the United States promise to pay the
| money? asked the court. The statute on
| this point is not very explicit, which is to
| be very greatly regretted. said the judge.
A promise is only implied. There was no
| explicit or qualified agreement between the
| corporation and the government 1t is to be
expected that the liens and bonds were not
| TO be delivered to the company until the
road was equipped. Here is found a prom
| ise, but it is not qualified promise to re-
pay the money. The government had no in
tention of making these men individually
responsible, said Judge Ross. That ques-
tion never entered into the contract. The
| covenant did not stipulate that the stock
holders should repay the bonds. The ac-
| ceptance of the bonds was an implied act
OF the stockholders TO pay them. The
| stockholders accepted the assistance of the
| government with the agreement that they
should pay for ii; that was all. In accept
ing them. of course, it would be right to
| repay them.
The question remains. however. whether
the liability rested with the stockholders
| There are no common law liabilities. The
state law fixes the liability of stockholders
in proportion to the amount Of stock they
possess. That law, however. cannot be held
to apply in this case. as 1t was passed sub
sequently to the making of the government
contract with the Central Pacific company.
The real question involved Is whether there
was liability provso. Reverting to the
prohibitions In the laws of the United
States, there can be found no such agree
ment. The statutes do not hold the de-
fendants liable. There is absolutely moth.
| ing to establish this fact, and sustain the
demurrer and give the plaintiff the power to
| amend" concluded Judge Ross