St. Paul daily globe., 1896-04-19

lutL to a point between Lake of the Woods
and the Red River of the North. In 1889 the
company gave to the Guaranty Trust and Safe
Deposit company trust deed to secure the
payment of bonds to the amount of 81, ,00O,-
900 that were to be issued for the construc-
tion, equipment, ETC.. Of the road The cap
ital stock of the company was $4,000, 900. part
of which was preferred stock bearing 5 per
cent interest, and the balance common stock.
In 1888 an arrangement was made whereby
the Duluth & Winnipeg syndicate was to be
paid 900 per mile in preferred stock, $15,
00D per mile in common stock and 900 per
mile in bonds for constructing and equipping
the road, making the cost $4,000 per mile.
The syndicate built seventy miles, and the
North Star Construction company, its sue
cessor, built thirty miles, that by 1892
100 miles had been built and equipped at the
rate named, whereas, in fact, the actual cost,
it is alleged, did not exceed SIS, 600 per mile.
1t is charged that the syndicate was in real
ity the owner of the road, and that the legal
distinction between itself and the railroad
company was simply a subterfuge; that the
officers of the railroad company were selected
and dominated by the syndicate; that it or
CARRIED the North Star Construction company
as it's own successor, and that the construc-
ton company did in fact succeed to all the
rights and privileges of the syndicate. The
road was constructed only so fast as the
stocks and bonds could be disposed of to pay
the cost and Is per cent profit, and when the
road was built it was operated by the con-
struction company without any consideration
other than the payment of the interest on the
bonds.
The officers of the road, it is alleged, know
ing that the road did not cost more than
81 500 0OO wrongfully, unlawfully and without
authority, turned over the s4 500,0 900, pre-
tended stock and bonds agreed upon, the
object of the arrangement being to make the
cost appear much greater than it actually
was, so that the excessive rates might be
charged for traffic over the road to pay in
terest on this fictitious capital. 1t is claimed
that as a matter of fact none of the bonds
was ever sold outside of the syndicate itself.
Continuing, the complaint says that under
competent and honest management the road
be made to earn more than 81 900 per
mile net each year, but that Van Horn got
control of the construction company in 1892,
when it had a paid up capital Of $1063, 600,
and in very prosperous condition, and
so discouraged and prevented the traffic Of
the road that its earnings decreased from
$50, 900 in 1893 to less than $4,000 in 1894,
and that by such methods and manipulation
he sought to wreck the road and have the
is claimed that the s., 900, 900 in bonds that
were issued in 1892 were issued without any
consideration whatever having been paid
for them.
In October 1894 an action was commenced
by the Guaranty Trust and Safe Deposit COM
pany for the foreclosure of the trust deed
originally given to secure the bond. and in the
complaint filed it was alleged that the road
was insolvent and unable to pay the interest
on its bonds. The court asked to direct
that the property be sold and the proceeds
applied toward the 81 900 bonds and in
terest. The railroad company. answering the
petition, admitted the facts alleged in the
complaint and consented to the appointment
of receiver and the sale of the road. The
receiver was accordingly appointed and the
sale was to have taken place on March %
last but was postponed until April %. on a
motion for leave to file the complaint filed
yesterday.
The attorney. general urges that the suit
for the appointment of the receiver was
baseless. collusive and fraudulent and that
at the time the road was not and has not at
any time subsequently, been insolvent;
that the bonds. issued without con-
sideration. were issued In violation of the
laws OF the state. and in furtherance of the
plans of Van Horn TO buy In and reorganize
the road and capitalize it at an amount great
lv in excess Of its actual cost: that he in
tends to issue dollar for dollar Of. the senrri-
ties previously issued by the Duluth e. Win
nipeg Railroad eompany. and that if this sale
is permitted 1t will operate as fraud on the
people of the state.
The ATTORNEY general calls attention to the
state law prohibiting the sale disposal or
pledge of stock until fully paid for. or the
use Of stock or bonds in any manner except
in exchange for cash. labor property
actually received and applied to the purpose
for which the corporation was created or thr
sale of any stock or bonds at less than their
rar value. The penalty for the violation ot
This law. the part Of apv corporation. Is
the forfeiture Of its franchise and dissolution
Nv tho court. and the officers are punishable
for misdemeanor.
In conclusion the court is asked to grant