The Seattle post-intelligencer. [volume] (Seattle, Wash. Terr. [Wash.]) 1888-1914, 1900-01-23
R01TENNESS Of 4 TRUST.
IT - EXPOSED ny A CAsn IN THE
SUPREME COURT.
Promoters OF the Coiumbia straw
Paper Co. Pockctea Millions ana
Paid the Companies for Their
Plants win Nethine bat stock.

WASHINGTON, Jan. GA decision was
rendered In the United States supreme
court today In the case Of Henry w. Dick
erman w. the Northern Trust Company.
This was bill IN equity filed In the circuit
court for the Northern district OF Illinois
by the Trust Company against the Column
bia Straw Paper Company to foreclose .
trust deed Of thirty-nine paper mill prop
critics located In nine different states The
court Of appeals for the Seventh circuit
issued decree allowing the foreclosure
and sale and this decree was affirmed by
today's opinion. which was handed down
by Justice Brown.
In passing upon the case, Justice Brown
took cognixance OF the organisation OF the
paper trust and the objection that the
scircuit. court should have allowed the an :,
swer to be amended for the purpose Of
company was part Of q scheme to form
trust Justice Brown held, however. that
the purpose for which the corporation
was originally organised could not become
80 long" ne continued, ''as the corpor-
alton existed It had the power to create a
came due the trustee had a right to fore
close,
!, Another point raised was that the circuit
court erred in holding that the eyidence
is liability against bondholders who also
hold stock that II not paid for TO the paper
sGsm, conn., s smoSuntins n to Nnso@ a a,i
against the indebtedness on each bond.
This proposition involved the real merits
of the case and was discussed at length,
should V Be held usp for the differenss between
the amount paid for the thirty nine mills
and the amount they subsequently turned
over. The opinion reviewed the ,., effort IT
comprise seventy mills Into this trust
only thirty-nine mills entered, but the
capital was not reduced In this connec-
That the mill owners were to be. paid
principally In stock; that Emanuel Stein,
who conducted the transaction. had no
to sell, that the corporation was organised
by the parties who had but twelve shares
out OF 10000 shares; that Untermeyer. who
poration. was the only responsible stock
mill owners knew nothing OF the PROPOSE
th 0n The stock K w ns red az pSn
the idea that seventy mills would join in
the combination. whereas only thirty-nine
The PROPERTIES 0a and hat sos 81 stock
was distributed among the persons who
got up the corporation. without any dis
t tInSt consideration being received; that the
worth but one-half the value of that
which they supposed they would receive,
and that they were defrauded in that
But Notwithstanding the assumption of
fraud. the court held that this fact could
not affect the validity of the bonds as a
whole. or the right of the trustees to FORE
close, or give recourse against the innocent
bondholders.
Continuing, Justice Brown said that as
this was a suit Of stockholders, the dec
laration that the shares are fully paid up
and unassessable IL valid one. II an
action by the corporation would not lie to
recover the unpaid part of the subscrip-
ton, then such unpaid part cannot be de-
Quoted from the bonds.
=. With reference to the charge Of fraud
company, Justice Brown said
I'VE are not disposed to condone the Of
lenses of those who, through Beard and
Ramsdell, of Buffalo, and their assignee.
Stein, as their agent. purchased these
plants for 81, 7SS, 00O and Immediately there
chasing from their own agents Tin fact,
themselvesl, the same properties at 5000
600. bound as these promoters were to
deal fairly and honestly with the stock
holders In the new corporation, they were
guilty of apparently inexcusable conduct
In excluding the millowners from all par
ticipation, putting in their own clerks as
stock which was really little more than
half of the value they must have expected
to receive. If they were able to secure
options on only thirty-nine of the sever.v
mills, they should have known the fact,
or at least given those millowners the
benefit of the surplus stock"
IT. was difficult to see how justice could
be done by reversal, and the decree so was
affirmed
Justices Shiras and Peckham concurred
in the result, but held that the question
of fraud was irrevelant to the issue.