The sun. [volume] (New York [N.Y.]) 1833-1916, 1898-03-03
LAKE HoREDEALBLoCKED
JTs TERMS CONTRARY To TIE STOCK
CORPORATION LAW.

Attsmpe &c eneak = Fel,ef Bil1 Through the
sEisiature-Passed by the senate. but Lest
IN the hssembiy-Dr Depew Says the law
IL . NED one and should ne ChapEed.
There was considerable comment yesterday
over the defeat in the Assembly at Albany Of
Senator Ellsworth's bill cxempting steam rail-
road corporations from the provisions of the
Stock Corporation law which limits the issue
of bonds. The bill was generally believed to be
in the interest Of the New York Central and the
Lake Shore railroads and to be necessary to
enable the carrying out of the plan for the sale
of the Lake Shore to the Central; and 1t was
said, therefore. that It's defeat will block tho
plan and prevent the sale.
The news of the defeat Of the bill in the As
sembly, which was printed In TIE Sun yester-
day, was the nrst newspaper mention that the
bill has had. Senator Ellsworth succeeded in
getting Il through the Senate without any pub
licity. 1t passed the Senate on Feb. IL. 1t
was slipping along nicely in the Assembly, and
the men who had 1T in charge thought there
were sufficient votes to pass 1t when 1t came up
on Tuesday. They were mistaken. Its defeat
was due to the absence Of q largo number OF
! Assemblymen, and not to the fact that tho
Importance Of tho bill had been discovered.
Very few members knew the Importance Of the
bill. Tho section of the Stock Corporation law
that the bill seeks to amend is as follows:
SEC. "a. Liability Of directors for unauthor.
corporation shall create any debt not secured by
mortgage In excess Of the amount of its paid
consenting TO the creation Of any such debt
shall be personally liable therefor to the credi-
s safio Sa te os G sba sorpopati da oo seesr Cd 0f BY mort mort.
gage, are issued in excess of the amount author.
lied by law, or in violation OF law, the directors
voting for such over-issue, or unlawful Issue,
shall be personally liable to the holders of the
bonds or other, obligations illegally Issued for
| fhn nrnArr bald 40 fhnn, and IN all nRre0nA
sustaining damage by such illegal issues for
any damage caused thereby.
This section Of the law, 1t will be seen, plain.
ly forbids a stock corporation. such as a rail
road company. TO incur debt in excess Of its
capital except when that debt is secured by q
mortgage. The capital stock Of the New York
Central is 300, 600. 900. The capital stock Of
the Lake Shore is $49,466. 500. By the terms of
the sale which is in process Of contamination
the Central is to give 5000 in bonds for each
share of Lake Shore stock Of the par value of
! 500. In other words, the Central Is to pay
500, 933. 600 for the Lake Shore road. IL all the
stockholders turn in their stock and accept
bonds in return.
Hero is the circular issued to the Lake Shore
stockholders by Chauncey NJ. Dopew, Presi-
dent of the Central. by order of tho Board Of
Directors Of that road:
To All Stockholders Of the Lake shore and Michigan
Southern Ruil,cuy Conipunv:
Pursuant to resolutions of the Board of d.
River Railroad Company, adopted this day. no.
sc Lei is :, given ,nl to any yyb and all and ho a1sS;. Of the oapiIai
Railway Company that, in exchange for valid
certificates for such stock. duly Endorsed for
transfer. and delivered to the Guaranty Trust
agent of this company for the purposes hereof.
on or before the l4th day of April. 1898, there
shall entitle the holder. upon surrender thereof,
to receive; In exchange for each FIVE shares Of
Of the New York Central and Hudson River
Railroad Company, bearing interest at the rate
Of 80 per cent, PAYABLE semi.annually, from
Feb. !, 1893, and the principal payable 100
years from said date, namely Feb. !. 1898; all
shares of such capital stock acquired and owned
Railroad Company to be held in trust as collat.
eral security for these. gold bonds.
tions of not less than 81 900 each, scrip %certiti-
Gates will be issued for shares less than five,
cry; but such scrip certificates shall be- OK.
changeable for bonds only when presented in
s sssb e ssns,a dm afoeH Or rs epms sHsn In nE | Sea of sS Cs
shares thereof.
The debt thus incurred by the Central is not
a debt secured by a mortgage. The circular
says: "All shares of such capital stock acquired
and owned by the New York Central and Hud-
son River Railroad Company to be held in
trust rs collateral security for these gold
bonds" So the stock and not a mortgage is
intended 10 Dc the security Ir the DOnQS. III
the Central incurred a debt of S9s, 933. 900 in
purchasing the Lake Shore, as contemplated. it
would be within a little more than a million
dollars of its debt-contracting power exclusive
of its mortgage Indebtedness. The Financial
Rerietr for 1897 says that the Central's mort
gage indebtedness is $40, 600, 900, and its other
bonded Indebtedness $50, 644, 900. Therefore.
with the law as it is. 1t would appear that the
Central can legally incur Indebtedness other
than that secured by mortgage to the amount of
1863, 1856, 900 only or about twenty mine and q half
millions less than the amount 1t has arranged
to incur in the purchase of the Lake Shore.
These figures, however. are said to be not cor
rect. ASUN.reporter called on DIR. Depew at his
home last night and asked him about them and
The total Indebtedness of the New York Cen.
trail R b nCa do0 unsecured by mortgage is less
Then the figures in the Financial Reriew
are wronei" asked the reporter.
for ref1nding the debt Of the road included the
issue Of a first mortgage for 800 o4O, 900. This
800, 900. 900 MORTGAGE covers all the indebted.
a ansS it Il has ar BEEN eDf taken. Every Si railroad Company.
particularly every company whose road Isl
money that are not mortgage indebtodness-a
sort Of floating debt: In the case of the Cen,
""@1hastt has this ellsworth bill got 10 do with
the sale of the Lake Shore to the Centrali'
at has nothing at all to do with 1t. said DR..
Depew. He qualified this a moment later.
when he said, ut could have nothing to do
with 1t unless every share Of stock Of the Lake
Shore was turned in and exchanged for bonds"
viii not all the stock be turned int
81 cannot say
What proportion of the Lake Shore stock 10
1t likely will not be turned INF"
"I cannot say
'If the bill has nothing to do with tho sale
and II IL is not necessary in this case. why does
tho company want III What Is the object Of
the billf' asked the reporter.
''Tbe law has been a bad one from the begin
nine,'' said DIR. Depew. ut has only been q
law since 1890. When 1t was first introduced
1t included all stock corporations, That in
ance companies in this city. Don't you sect
Take the Chemical Bank. for instance. 1t has
a capital stock Of only $500 900. II owes its
Assurance Society has a capital OF only $1OO,-
900. 1t has a Thousand millions Of debt In the
shape OF insurance. Now banking and insur-
ance business and the like were exempted from
the provisions OF the law. The railroad COM