Montgomery County sentinel. [volume] (Rockville, Md.) 1855-1974, 1896-05-01
The Chesa peake and Ohio Canal Case

The Chesapeake and Ohio Canal case,
argued in the Court of Appeals last week,
is one OF vast importance to the State. The
case is an appeal from an order passed by
Judge Stake, in the Circuit Court of Wash
ington county, extending the time for the
operation of the canal by the trustees for the
bondholders of 1874 until May, 1901, six
years longer than the time granted by Judge
| Alvey in his decree of October 2, 1890. That
decree ordered the sale of the canal TO satisfy
its debts, but suspended the operation of the
decree for four years, or until May, 1895. Dur.
ing this time the canal was to go into the
hands of the trustees of the bondholders of
1874 to be repaired and operated by them.
This was done upon the theory that accord
| ing to the terms of the mortgage which was
given by the canal company to secure those
bonds, 1t was lien upon the revenues and
tolls of the canal and not upon the corpus
of the work. Judge Alvey did not decide
priority, but stated in the opinion which &C.
companied his decree that in case of the sale
of the canal the lien of the State would be
superior to that of the bondhoders OF 1874,
and in order to give them an opportunity to
save themselves the canal was given to them
To repair and to operate for four years. II
they could not show at the end OF that time
that the canal could earn enough to pay
operating expenses, costs Of repair, &c, then
the decree for sale would be enforced
Apparently these conditions were not full
filled. The cost of repairing the damage by
the great lreshet was greater and the time
required to complete them longer than was
anticipated. Then there was a strike in the
coal mines and long interruption of traffic
by drought. The trustees further declared
that the time allowed by Judge Alvey was
not sufficient to justify people in investing
capital in boats or otherwise in the canal
In consideration of all these things Judge
Stake extended the time and gave the trus-
tees authority to make a contract with
company TO engage in the transportation
business. 1t was said at the time that it was
the purpose OF this company TO apply cleo
trcty To the movement of boats. 1t was
from this order OF Judge Stake that the State
took appeal and asked that the decree for
the sale OF the canal be executed and that
the court would embody in decree the
opinion OF Judge Alvey, in which he de
cided that the lien of the State under its
mortgages is prior to the preferred bonds
under the act OF 1874, and to be paid next
after the half milton repair bonds of 1873
The appeal was argued on December 10,
1895. AT the present term a re argument
was ordered, and this re-argument was un.
derstOOd TO be limited to the single question
as to the order in which the creditors of the
canal company are entitled to receive pay
ment out OF the net proceeds OF the sale OF
the canal This would seem TO have some
significance of the decision OF the court upon
the main question.
Ii the canal should be sold it should bring
several million dollars. The interest of the
State in the work is as follows:
Common stock. .................$ TIA "A
Preferred stock. ...... ......". 4375,000 w
Unpaid guaranteed dividends
for 56 years.. ..............". l4,6o3,UOO w
Mortgage under the act of 1884 100000 90
Unpaid interest for go years.. 100000 90
IULal HSo UOS, fSt N
Other claims are the bonds of 1874, about
81 700 900 and Interest; the mortgage OF
1878, lur 100000, with accrued interest,
and the labor claims and Lowndes judg.
ments, amounting 10 about $3.50 more.
The State at the last session Of the Legsla-
ture waived its prior lien in favor of this
latter amount, as il had previously done in
favor uf the bonds oil 1878 The lien of the
State upon tolls and revenues was waived
in favor of the bonds of 1874. The State
now claims that in case the canal is sold the
security of these bonds il gone and the
States mortgage will take precedence next
after the bonds of 1878. This is a vital ques-
ton In the present case, as decision in favor
of the State may be worth large sum TO the
Stat. in cast ol favorable sale Of the prop
erty The expenses OF the receivers and OF
repairing the work by the trustees, it is
claimed by the State, do not constitute
lien on the property, but that the trustees
agreed under the decree to repair the canal
at their own proper cost.-Balto. Sun