The herald., 1896-02-12
STOCKHOLDERS NOT LIABLE
Judge Horizons Decision in the Pacific
Railway Case
Tile Bill and Intervening Petitions Dismi ssed
for Want of EquitY-The Complain.
ants VIII. Take an Appeal

Yesterday in tho superior court, Chicago,
Judge Horton decided the celebrated Pa
cific railroad case, awarding a victory to
the stockholders. The Pacific railway was
the Los Angeles street car line in which G.
B. Holmes. former general superintendent
of the Chicago City Railway company, was
largely interested. The matter was recently
revived in suit brought by creditors of the
defunct company to force the stock liabil-
ity OF the stockholders, including sixty
prominent Chicago business men. 1t is on
this bill that Judge Horton passed, holding
that the stock liability cannot properly be
enforced.
As to the question of liability of defend
ants as stockholders. the court said it was
the understanding between the defendants
and Pacific company that the conveyance
of all property of the California company,
which they had bought, was to be accepted
as payment in full Of the stock
of the Pacific company. The Pacific
company could not, therefore, recover
| from the defendants on any stock
| liability. The creditors could not recover
! on the ground of contract of liability, when
the corporation itself could not, and the
| principal upon which the creditors must re-
| cover, if at all, that there has been misrep-
| TesentatiOn of facts and fraud committed.
The burden of proof Of fraud, the court
said, is upon complainant. Upon full con-
| sideraton OF all the testimony in the case,
! it does not appear to be established there
| by that there was such fraud, either actual
| or presumed, by or on behalf Of defendant
stockholders as to make them individually
| liable for the debts of the Pacific company.
| 1t follows that the bill and intervening Pc
rNlSgy ,tet 6IGtpN cnE
for want of equity against the stock
holders for stock liability. The court held
| the claims OF compiainants are good as
against the company. The complainants
| will take an appeal.
! The suit grew out of the purchase in
| 1890, by about sixty business men and
capitalists of Chicago, of the stock of the
Los Angeles Gable Railway company. At
| ter the purchase was made the Chicago in
| vestors formed n new corporation under
| the laws of Illinois to own and operate the
road. This company was the Pacific Rail
| way company and its capital stock was
| $2,500,000. The investment was not a
paying one, and in January, 1895, a re-
ceiver was appointed by the circuit court
of Cook county, ILL.,, for the Pacific Rail
way company. and a receiver was also ap-
pointed at Los Angeles, who took pos
avs of California. Tho road was sold
under foreclosure proceedings to satisfy a
trust deed which had been placed on the
property. This foreclosure sale practically
wiped out the assets of the company, but a
bill was filed by several Chicago banks and
capitalists who had claims ranging from
$25, 900 to 100000, asking that the stock
holders be held liable on their stock sub
ccriptions, under the laws of this state, for
the debts of the company.
Judge Horton said the creditors could moi
contend that the sale of the property of tbs
! Los Angeles company to the Illinois cor
poration was void, because they were par
ties to the transactions and therefore no
in a position to complain.