The San Francisco call. [volume] (San Francisco [Calif.]) 1895-1913, 1895-09-19
Attorney CAREERS Strong Plea
in Behalf of the Stanford
Estate.
GOVERNMENT SUBSIDY BONDS
No Liability for Them Alleged to
Attach to the Central Pacific
People.

l.. Stanford, respondent in the appeal case
OF the United States against the estate of
Leland Stanford, in which the Government
seeks to recover SIS, 237 900 as the proper
ton alleged to be due from the Stanford
estate for matured bonds OF the United
States loaned to the Central Pacific Rail-
road Company to aid in the construction
of the road under the various Pacific rail-
road acts of Congress.
Attorney CARRIER prefaced his argument
proper by stating that he would take up
the points at issue in a somewhat different
order from that adopted by the counsel for
the Government.
The first point he wished to discuss, he
said. was the quest ion OF personal or COR
porate liability. He desired to show the
court whether or not there was any per-
sonal liability impo rted III the contract be-
tween the United States and the Central
Pacific Railroad Company; whether there
was covenant to pay the amount Of the
bonds by the corporation, or whether fair
Interpretation of the contract did not show
the bonds to be only a lien and charge
upon the property for the construction of
which they were used. He then continued: :
Authorities have been quoted to show the
rule that while, as between individuals, the
court is TO put fair and reasonable conStruc-
ton on the terms and wording of the contract
when it is constituting the terms of contract
between an individual or corporation and the
United States, the latter being so much bigger
and more powerful than any individual or cor
porstiOn, the principle in law is to lean in favor
OF the individual or corporation and against
the Government.
This was not case where party of adven-
tuTers were seeking to obtain concessions from
the Government. 1t n contract in the
1aiTest sense OF the word between these men
and the Government. In making the contract
with the Central Pac1nc people the Govern
merit was seeking TO advance its own interests.
Its desire to have the great overland highway
constructed at the earliest day induced it to
aid the various companies which undertook
the work. In view OF these circumstances the
contract must be construed according to the
language and according TO contemporaneOus
history. The intention OF the contracting par
ties must be obtained by lair and reaso liable
construction OF the language of the contract.
ask your attention while l endeavor to
show by the language OF that contract that it
was not the intention OF the Government to ex-
act from any of the individuals the payment OF
the bonds loaned in aid of the road.
II make you grant of any kind, and say
that this grant is made upon condition that
you do so and so, this merely means that you
must perform the condition set forth or forfeit
the grant, but it does not make you personally
liable for carrying out the conditions of the
agreement. How from that can you insert
promise or covenant that the individual is re-
sponsible for his failure TO fulfill the condition
OF grant?
The question is What did the Government
intend when 1t made that contract? You can
not take that contract and from any language
therein draw the inference of q covenant
whereby any OF these individuals agreed 10
pay these bonds.
The Supreme Court of the United States has
held that the United States had no power to
change a contract after it had entered into it
without the consent of the other party. The
contract reservation that the contract could be
amended does not hold except such amend
ment be made with the consent OF the COM
pany.
There is nothing in the contract, implied or
otherwise, that would make the companies
the individual stockholders in them respon-
sibie for the payment of these bonds.
\ condition is not q covenant Forfeiture of
the property which was partly constructed
with the proceeds of these bonds is the only
remedy. This does not imply personal per-
Torrance of the condition and does not involve
personal liability.
Under the contract the proceeds of the bonds
could not be wasted. There were stringent
provisions under which the bonds were trans
ferred only after the work for which they paid
was done, and thus no bonds we're paid by the
Government until the security tor them had
been first created.
To create individual liability there must be
something in the contract to show that the
men would be required to repay the bonds but
there appears nothing OF this kind, and 1t
could not, therefore, have been the intention
OF Congress that they should do so. The bonds
were simply mortgage or first lien on the
road. If the bonds were IoJ paid by the COM
pany at maturity the Government could take
possession of the road, and there the liability
OF the contractors ended.
1t was then claimed that it was stipu-
lated that no other than he aided road be
forfeited in case of fal! IRE, and this was
urged as a reason why here could be no
personal liability.
Attention was then 6*awn to the fact
that the Government hap signiied its will
ingness to accept the l9)nds of the COM
pany instead of money n payment of the
United States bonds as Fhey matured, and
this also it was claimef, proved that the
Government did not corsi der the company
or its stockholders PERSONALLY liable for the
subsidy bonds.
Another circumstance to show the Gov
eminent did not look upon the Central
Pacific stockholders as being liable person
ally for the payment of the subsidy bonds
was the fact that the Government insisted
that 3 per cent of the net earnings be set
aside to meet the semi-Annual interest on
these bonds.
The next contention was that the Gen.
trail Pacific Railroad Company received its
franchise to build the Central Pacific Rail-
road from the United States, the same as
did the Union Pacific, Notwithstanding
the fact that the Central Pacific Railroad
Company had already been incorporated
under the laws of the State of California.
1t was held that the larger powers given
by the Federal franchise virtually wiped
out the State IrancnlSe, ana taat therefore
the stockholders liability clause of the
California constitution did not operate in
this case.
Attorney CARRIER then took up another
point He made numerous citations to show
that the liability clause of the State consti-
tuition is not self-executing. This is tie pro-
vision making all stockholders liable for
debts of the corporation In proportion to
the amount of stock owned by them at the
time the Indebtedness was incurred. His
next step will be to show that there was
no legislation enacted making it operative
until after the contract between the Central
Pacific Railroad Company and the United
States, and that for this additional reason
the stockholders liability provision did
not operate.
Mr.. CARRIER will resume his argument at
II O'Clock this morning.