Omaha daily bee., 1896-03-03
VERDICT FOR MRS. STANFORD
Supreme Court Hands Down Decision in
the Central Pacific Case,
RULING OF itHA LOWER COURT AFFIRMED
IndividuaI, ,s,pckhoiders Not Liable
for thS Debts of the Central
P"citic ~ Other Opinions
Handed Down.

WASHINGTON. March 2--The supreme
court today decided the Stanford case in favor
Of Mrs. Stanford
The title Of this case is the United States
against Jare l.. Stanford, executrx of Le-
land Stanford deceased II involved the
individual liability of stockholders in the
Central Pacific Railway company for the
debt due to the United States on the bonds
issued in aid of the Central Pacific under
the California constitution. Mr.. Stanford
held 1887 shares OF the Genital Pacific
stock, and 1t was claimed by the government
in instituting its suit that the government was
entitled to collect SIS, 237 900 from the estate.
This contention was resisted by Mrs Stan
ford on the ground that the California con-
stitution was not self-ruling, and also on
the plea that 1t was the intention of congress
in granting aid to the Central Pacific com
| pany to put IL on footing different from
| the footing on which other government aided
| roads were placed.
| The case was brought originally in the
| circuit court of the California district where
| the decision was favorable to Mrs Stanford.
| and was then appealed to the circuit court
| of appeals for the Ninth district, where the
| decision was also against the government
| The government appealed to the supreme
| court, and as soon as the case was docketed
moved to have 1t advanced for hearing. This
! motion being granted the argument was made
| during January, eminent counsel appearing
| on both sides The suit has attracted great
| attention from its initiation because of the
| effect the decision will have on other Central
Pacific stockholders and also because the
| fortunes Of the Stanford university will be
| determined largely by the decision.
Justice Harlan delivered the opinion in the
case He held that individual stockholders
| were not liable for the government debt of
| the Central Pacific company. He said the
| congressional acts of 1S63-64-65 regarding
| the Pacific railroads must all be regarded as
| ole .aw. as the object was the construction
| Of one continuous Ime congress employing
| the different railroad companies only as in
| struments. Security was given In the govern
| ment mortgage OH the property of the rail-
road companies 1t was, he said not too
much to say that If in the building of the
| Northern Pacific, for instance, the stockho!d-
ers had been made liable the purpose of con
gress to secure national highways would
have been materially retarded, and it was
plain that no obligation was meant to be put
| on one company that was not put on the
| other. Any other construction would be in
consistent. The decision of the court below
| was therefore affirmed
INTENDED AS ONE LINE.
The opinion proceeded entirely upon the
| theory that the Pacific railroads were in
tended to constitute a continuous line and
| liidJ tHe BO1PTDLUent was protected Dy Its
| mortgage upon these roads. 1t is admitted
| in the opinion that the security was i'm
| paired by the act of 1864, subordinating the
| government lien to the first mortgage but"
Justice Harlan says, ''if the act of 1862
! fairly interpreted excludes the idea that
| stockholders of the companies receiving sub
| sidy bonds Weregto be personally liable to
| the United States for the principal and in
| tereet accruing on their bonds, the legtsla-
| ton of 1884, however unwisa, did not have
| the effect of imposing such liability"
The fact that none of the Pacific acts
| contain clause imposing personal liability
| is commented nRon. as important. 1t was
| competent faTfcongress to provide for such
| liability, "but as it did mot do so, it can
| not be claimed nor is it claimed that the
stockholders of that corporation incurred by
| their subscriptions of stocks any liability
| to the United States, or to any other cred
! itor of the Union Pacific or kindred corpora
| tion. They were bound, of course to make
| good the amount of their subscriptions. But
that being done. their personal responsible
| ity to creditors Of the corporate body
| ceased. Congress-, by its legislation en-
couraged and invited the investment of pri-
| vate capital in the construction of a high
| way, which, at that time, was deemed of
| vital Importance to the whole country"
| Uusing the Union Pacific an ilustra-
| ton, the opinion continues: GAS the stock
| holder of a corporation is mot liable, be-
| yond the amount of his unpaid subscriptions.
| lOT us ueDLS, uilll ShCH lldDlllly is imposed
| by statute, and as the acts of congress in
! question are silent on that subject, every
| subscriber to the stock Of the Union Pacific
| must be deemed to have become such upon
| the condition prescribed by law, that he
would not be personally liable for the debts
of the corporation. 1t is not too much to
say that IL the acts of 1882 and 1864 had
| made the stockholders of the corporations
| therein named personally liable, in proper
ton to their stock. for the repayment Of
the principal and interest of the bonds is
sued and delivered to such corporation, the
| accomplishing of the objects which congress
had in view would have been seriously re-
tarded If not wholly defeated"
CONTENTION OF THE GOVERNMENT.
'It 10 said. however, that these principles
have no application to stockholders of Cali
fornla corporations that came into exist
ence under statutory provisions, making
st0ckholder of railroad corporation liable
in proportion to his stock. ftT its debts and
obligations This position cannot be
tanned except upon the theory that congress-
intends to take larger security in respect
of that part of the Pacific road which the
California company undertook to construct
and maintain than 1t took in respect of the
Union Pacific railroad. But 1t cannot be
inferred from the legislation Of congress
that it intended, for the protection of the
interests of the United States, to impose a
heavier liability upon the stockholders of
the California company than was imposed
upon the stockholders of the Union Pacific
Railroad company. Why should 1t have so
intended? Why should 1t be supposed that
congress would purposely make 1t more
difficult to construct cne part of the proposed
national highway than another? The SUI
preme end sought, to be attained was. by
means of private capital and governmental
aid, to secure the construction of the whole
line for the benefit. primarily, Of the United
States and lfHr the use of all the people.
IT, instead of making use of the Central
Pacific railroad OF California congress had
itself createp "a corporation with authority
to construct a road from San Francisco,
through the territories of the United States
to meet the Hpion Pacific Railway company,
no one would suggest that the stockholders
Of such corporation would have been liable
foa its debts Unless congress expressly
imposed liability upon them"
The opinion goes on to say that to i'm
pose an obligation upon the California cor
poration. not imposed upon the Union Pa
ciic, would be inconsistent. Justice Harlan
was particular to state that the question
of whether the stockholders can be made
liable for its debts to the United States,
arising In some other way than under the
Pacific railroadsi-acts or by the acceptance
OF the United. States bonds in aid OF the
of iS N