The San Francisco call., 1896-01-24
SIDNEY SMITH
GIVES ANSWER
San Francisco and North
Pacific Affairs Are
EluCidated.
VOTING POWER OF STOCK
If President Foster Is Defeated
a Consolidation May
Follow
WITH NORTH PACIFIC COAST
Defendant Says He Never Entered
Into a Compact With Foster
and Markham.
WITH NORTH PACIFIC COAST.

Sidney V. Smith, who is defendant in
suit brought by A. w. Foster, president
of the San Francisco and North Pacific
Railway, and others, growing out of the
attempted consolidation of that railway
with the North Pacific Coast road, filed
his answer yesterday in the Superior Court
of Marin County.
In his answer Mr.. Smith is Joined by
other defendants, all having the same
cause. He denies the various allegations
OF the plaintiffs, and in presenting his side
gives an interesting view of private affairs
of both railroad companies. The docu-
ment begins abruptly with the statement
that the narrow-gauge line does not row
earn or has ever earned its fixed charges
that earnings OF that line south of San
Anselmo are confined chiefly to forest
products; that the greater portion of its
revenue had been derived from stumpage
or from freight on forest products from
land owned by the company; that the
freight revenue hereafter to be derived
from the line north of San AnseImo will
not be sufficient to pay expenses of opera
ton, and IN many other particulars he
claims that the narroW-gauge road is not
the improbable property that Mr.. Foster
and his friends would have il appear.
or before February, 1898, or ever, was de-
slrous OF organizing a syndicate to pur-
chase 42, 600 shares of the stock of the
DOnahue road, or that he had requested
the plaintiffs and the late Mr.. Hitchcock
10 Join with him in this purchase from the
executors of the late James NJ. Donahue's
estate; and, furthermore, that the defend
ant had endeavored TO have these ~ .OOC
shares voted as a unit durirg five years
after date of making the agreement
whereby Smith and his friends would con-
troll the Donahue line. Smith also denies
that he and Foster on behalf of themselves
and other members of the alleged syndi-
cate had ever made bid in writing to buy
the $1,000 shares for $800,000 in the Supe-
rior Court of Marin County. He repudi-
ates the claim that the plaintiffs confided
TO HIM as an attorney-at-law the prepara.
ton OF this agreement or the adoption oi
such or any legal measures as would fulfill
the preliminary or any agreements or
promises stated IN the complaint relative
TO the voting of these shares, or that as an
attorney he ever assumed the duty of pre-
pairing such agreement or adopting the
legal measures stated in complaint.
Mr.. Smith ADDS that the plaintiffs, Mark
ham, Overton and Hitchcock, did seek the
advice OF protection of other counsel. He
denies that they, after forming a syndicate
OF their own, have lived up to the terms of
their agreement; that the management
OF the directors of the Donahue road has
been very successful or prosperous in its
business, and that the earnings of the
road have been largely increased by them.
On the contrary, he shows that the earn
ings OF the broad-gauge line have fallen
Ott, and that the net earnings for the year
ending June 80, 1896, will be $50, 900,
whereas for the year ending June 30, 1898,
they were sol, ,745 II.
Mr.. Smith admits that he is under pc
rT7r Ta1-r f,hf %
banker, and a stockhOlder of the narrow
gauge road, but denies the insinuation of
plaintiffs, that his relations to Borel have
IN any way induced him to do any of the
acts charged against him, and he denies
that hls intention 10 vote his stock with
Borel and his associates, owners of the
North Pacific Coast Railway, at the next
annual meeting of the other line, is so that
the Donahue road shall be operated in the
interests OF the narrOw-gauge road or in
view Of a consolidation intended by him
(Sml;h) or the stockholders of the narrow
gauge line.
The statements of a scheme whereby the
broad-gauge property would be injured
through connivance with the rival road
are denied in detail and at great length.
Continuing, Mr.. Smith AYERS that he never
sought to form a combination before the
sale of the Donahue stock and that the
sale was not made to a syndicate other
Foster asked the defendant (Smith) to
draw pooling agreement for this stock,
and was told that it was not possible to
make such a compact legal and binding
but on Foster insisting Smith did draft
the pooling agreement and signed it March
y, 1893. This document Smith claims was
merely a mutual promise.
1t is set forth that the rival roads can be
made to pay handsomely By combination
OF the management, because in that way
great savings could be effected. As mat
tiers have stood for some time distrust has
been engendered among the stockholders
1t being averred that Foster has been sus.
picious of Markham, and Markham OF
Foster each that the other might sell out
his STOCK TO parties owning 1900
shares. And therefore Smith, himself
had valid reasons for becoming alarmed
and under these conditions he was and is
justified in morals, as we'll as in law, in re-
firing from the pooling agreement, since
that compact has lost whatever cohesive
quality it ever had based on mutual con-
sideration. He goes on to say that be un-
derstands that Markham and Foster in
tend to vote his stock, claiming the right
10 do so through the agreement being in
effect a power of attorney and proxy to
vote the stock, and that unless restrained
by the court they will vote his stock, with
the result that board inimical to Smith S
interests will be elected. In conclusion he
asks:
Wherefore this defendant prays the judg-
ment Of this court that the agreement of March
y, 1893, is and always was void and invalid;
that the plaintiffs, Foster and Markham, be
decreed to give up the same TO be Cancelled
that the restraining order heretofore made
herein preventing this defendant from voting
his stock be vacated and set aside; that the
prayer OF said complaint for an injunction
against this defendant and the defendant cor
poraton be denied, that the writ OF in junction
OF this court issue herein restraining the
plaintiffs, Foster and Markham, from voting or
attempting 10 vote this defendants stock.