The San Francisco call. [volume] (San Francisco [Calif.]) 1895-1913, 1896-01-29
Government Attorneys Set Forth
the Liability of Railroad
Stockholders.
OBLIGATIONS OF AIDED LINES
Mr.. Choate Says That the Senator's
Widow Is Not Responsible for
Any Indebtedness.

WASHINGTON, D. c., Jan. 2S.-Argu-
ment was heard to-day by the Supreme
Court of the United States in the famous
suit brought by the United States against
the estate of the late Senator Stanford OF
California, as stockholder ir the Central
Pacific Railroad Company, to establish his
liability for the debts of that corporation
to the Government. Among the auditors
was Mrs. Stanford, to whom the determ-
ination of the litigation means much.
Among other Californians noticed were
Senator Perkins, Colonel John F. Irish,
Hon. TREY l.. Ford and George H Max
well OF San Francisco, Thomas H. Bond of
Lockport and Senator Stewart, besides
Russell Wilson of counsel for Mrs. Stan
ford. Many ladies were present, some of
them being personal friends of Mrs Stan
ford. The argument was opened by Assist
ant Attorney General Dickinson and will
be closed by Solicitor General Conrad.
Mrs. Stanford was represented by Joseph
II. Choate of New York. The suit was
originally begun in the Circuit Court of
the United States for the Southern District
OF California, the demand being for the
sum of $i5, 237 900. Both IN that court and
in the Circuit Court of Appeals the Gov
eminent was defeated and the case comes
TO the Supreme Court of the United States
by appeal from the judgment of the Court
of Appeals against the United States.
The Assistant Attorney General and So
hcitor-General in their argument stated
that the liability sought to be enforced
was created by the law of California, which
it was insisted bound stockholders of cor
porations TO answer personally for their
debts in proportion to their holdings OF
capital stock. Mr.. Stanford was stock
holder in the Central Pacific Railroad
Company and the Western Pacific Rail
road Company, two California corporations
chartered IN 1861 and 1862 respectively. and
consolidated by authority OF California in
1870 under the name of the Central Pacific
Railroad Company.
1t was alleged that these companies be-
came indebted to the United States for
bonds OF the United States which were
loaned to these companies under the
United States statutes OF July l, 1862, to
aid them in building their railroads; that
the companies became obligated TO pay
the United States the amount OF these
bonds at their maturity, together with all
OF the interest upon the same, and that all
OF the same was an existing Indebtedness to
the United States. The bonds loaned to the
Central Pacific Railroad Company Of Cali
fornia amounted TO SIS, S85, 100; those
loaned to the Western Pacific Railroad
Company amounted to $3.50, 800. All
were thirty-year bonds, bearing interest at
6 per cent. The first four installments of
the bonds loaned to the Central Pacific
Railroad Company OF California, amount
ing to 50, 49,, O00 have matured, and have
been paid by the United States, and all OF
the interest which accrued up to the fling
of the bill has likewise been paid by the
United States, and no part of the principal
or interest has been paid by the corpora
ton. It was alleged that the United States
was bound to pay and would pay all of
said remaining bonds and interest at
maturity; that the Indebtedness to the
United States on account OF those bonds
loaned to the Central Pacific Railroad
Company of California would amount to
$60,000,000, and that on account of those
loaned to the Western Pacific Railroad
Company to s. ass, $50; that the said rail
roads were insolvent, were covered by a
paramount mortgage exceeding their
value, and that the United States has NO
remedy except against the stockholders OF
said company.
The contention by the Government was
that the railroad company became indebt-
ed to the United States in the amount of
the bonds issued to them and were per
sonally obligated TO pay the same with
interest; that the constitution of the State
of California imposed upon each stock
holder an enforceable personal obligation
for a proportion of all debts and liabiIi-
ties; that the constitution, supplemented
by section II of the act of 1861, under
which the companies in question were in
corporated, fixed a definite liability; that
by no act of the United States, through
either of its departments of government,
was an intent or purpose manifested to
absolve the Central Pacific Railroad Com
pany from the obligations assumed by the
companies or from liability imposed upon
their stockholders, and that nothing can
be found IN the course of dealing between
the United States and the Central Pacific
Company TO support the inference OF
Justify the conclusion that the United
States IN any manner relinquished OF
waived the security afforded by the per-
sonal liability of the stockholders.
Mr.. Choate, in h is argument in behalf OF
a.
trix of the will Of her deceased husband
referred to the basis and magnitude of the
suit, saying the magnitude of the claim
was wholly unparalleled. The bill de.
manded 100000 against the defendant
and involved the claim of an equal am cunt
against each of the three associates of the
defendants testator, amounting to a total
sum of $50, 100000 against four individuals
solely by reason of their having held stock
in the Central Pacific Railroad Company
and its constituent companies. The de.
Tense to the suit was based upon four prin.
cipal gr ounds, in support of which it was
argued:
First-The successive acts of Con.
gress relating to the Union and Contra
Pacific railroads are to be read to
gether. and SO read they demonstrate
that Congress intended them to cover
control and regulate the entire
relations of the Government to all of the
companies, with respect to the subsidy
bonds, without reference to the laws o.