The Salt Lake herald. [volume] (Salt Lake City [Utah]) 1870-1909, 1896-03-03
HARMON'S OPINION.
of Railway officials For
Unlawful Issues of Stock

Unlawful Issues of stock.
WASHINGTON, March 2.-Attorney-
General Harmon today sent the fol-
lowing letter to Chairman Powers, of
the house committee on railroads:
Department of Justice, Washington,
Feb. 2S, 1896. To Hon. Henry Powers,
chairman of the committee on Pacific
railroads, house of representatives.
Sir:-I have the honor to acknowledge
the receipt of your letter of the 18th
inst, lnclosing resolutions adopted by
your committee requesting my views
upon the questions therein put, and to
submit my answer thereto, as fol-
lows:
First Question-Whether the officers
and directors of the bond aided Pacific
railroads incurred any liability to the
United States by the unlawful issue of
the stock of said companies
Answer-If the officers and directors
OF any company knowingly made or
permitted any unlawful issue of the
stock thereof, they become liable to the
company or its lawful stockholders,
but not to the United States. which
was merely a creditor The rights of
creditors could be affected by the i'm
proper issue of stock, which merely
represents the property of the com
pany, but does not dispose of or en-
cumber it.
Second Observation-Disclosures said Off
GERS and directors incurred any liza
bilfty to their respective companies, or
to the United States for the profits on
contracts made with themselves or per-
sons representing them from the con-
struction of said railroads.
Answer-If officers and directors
make contracts with themselves OIL. per-
sons representing them ito their own
profit or the detriment of the com
pany, they become liable to it, unless
such contracts were knowingly author
lied or ratified by majority of the
directors having no interest therein.
or by the stockholders; but they did
not become liable to the United States
Third Observation-Disclosures the United
States as creditor or said corpora
lions can maintain actions in their
name against said parties for the en-
forcement of said liability, if it exists,
until all remedies to enforce payment
Of the debts owing by said companies
to the United States have been eX-
hausted.
Answer-It was held in the case of
the United States VS.. the Union Pa
cific Railroad company, Familiarity
known as the Credit MoIbilier' case,
(9S U. s., p 569), that such liability
was to the respective companies only.
The United States could not maintain
any action thereon against the guilty
parties, but could assert the rights of
the company by a proper suit in equity
as a creditor and would not be bound
first to exhaust other remedies if a
showing were made of probable loss
by delay.
Fourth Observation-Disclosures. if such
liability exists, the United States will
be barred in any action which might
be brought for the enforcement there
of by the statute of limitations which
would bar the companies if the ac-
tions were brought in their name and
behalf. In other words, whether the
United States would be entitled to
maintain actions as creditors of said
against its creditors and
which the corporations them
selves could not maintain.
Answer-As the United States would
be merely asserting the rights of the
assets to be applied to the
payment of their creditors, any statute
of limitation which would bar the
creditors would also bar the United
States
Fifth Observation-Disclosures the facts
found and stated by the Pacific rail-
road commissioners of 1887 in their re-
port TO the president are supported
by evidence legally admissible in
court of justice.
Answer-If the questions mean to
ask were the evidence before the Pa
cific railroad commissioners, upon
which they found the facts stated in
their report, would be admissible in a
suit for action by parties in a court
answer generally that the statement
made by any witness would be adj
missable against him, but not against
any other person, and that original
documents would be admissible or
copies under the usual rules relating to
secondary evidence. With this excep-
ton, the evidence would not be adj
missable. / do not understand the
question to ask for my opinion
if the commissioners had APP
Piled legal rules of evidence, the testi-
mony should have been admitted.
have fully answered the questions
as 1 understand them and have the
honor to be, very respectfully,
JUDSON HARMON
Attorney-G General.