The Hawaiian star. [volume] (Honolulu [Oahu]) 1893-1912, 1902-04-19
THE BONDS ARE
DISAPPROVED
JUDGE HUMPHREYS DECISION AS
TO McBRYDE, WAIALUA
AND OAHU RAILWAY.
TRUSTEE CARRIERS INVEST
MENTS ARE CRITICISED.

The Corporation Bonds Are Too Tn
certain in Value for Trust Funds,
Says the Court
Judge Humphreys today filed his de-
cision i'm the matter of the estate
OF Annie r. X. Parker. con-
frming the oral decision rendered
some time ago, by which the
guardian A. w. Carter, is ordered to
surCharge himself with $4,000 invested
by him in McBryde, oahu Railway
and Waialua Agricultural company
bonds. The written decision is very
lengthy one. There is quite a long
quotation from an argument by A. s.
Hartwell in a former Hawaiian case,
and much discussion Of the conditions
and prospects of the plantations. The
judge says that it is a Settled rule of
equity, in the absence of express di-
Tecuous in the instrument creating the
trust or of statutory provision, that
trustees cannot invest property upon
any mere personal security, nor upon
stocks, bonds or other securities of
private corporations
The court says that the investments
in Waialua and McBryde cannot be
defended" the latter especially being
unauthorized, eXtravagant, imprOvt-
dent reckless and a breach of trust, in
view of the guardians admission that
at the time of the investment he had
neither examined an abstract of the
title of the property, nor read the
trust deed by which the bonds are al
legged to be secured, and in view of the
further and significant fact that he
purchased by far the greater part of
them from a corporation in which he
was a director and of which he was
treasurer, to wit: the American Sugar
Company. AS a faithful, prudent, dill
gent cautious, watchful and cOnserva-
tive fiduciary it was his duty to have
examined the title to the property al
legged to be pledged as security for the
bonds in question and to have careful
ly and critically examined the terms
o. the deed of trust
Judge Humphreys quotes the clause
ian the mortgage which provides that in
case of failure to pay interest on bonds,
foreclosure proceedings may only be
instituted by a majority of the bond
holders This. the court says. makes
the individual bOndholdeU helpless in
many cases: He may be forced, if he
is so unfortunate as to be a minority
bOndholder and unable to secure the
cooperation of the majority bond
holders to bring successive actions for
the collection Of his interest. If the
majority bOndhOlders are the owners
of the plantation, and others having
interest in it entirely separate and dis
tinct from and greater than theiI in
terest as bondholders, should acquire
the majority of the bonds, they would,
if we can take into account the mo-
tives which usually influence men
when dollars are at stake, hardly SaCrt-
flee their interests for the benefit of
the minority In other words they
wOulu not, nor could they in reason
be expected to, consent to a foreclos-
ure for nou-payment of the interest If
ii We're clearly to contrary to their
protection as stockholders, or as in
terested parties otherwise to do So
I'VE cannot blind ourselves to the
maelstrOm of speculation into which
this trusting community was sucked
and it's veins opened by land sharks.
spectators and promoters during the
/ three years following the annexation
OF these islands. The memory of that
high carnival of chance, when, allured
by the prospect of great riches and
listening to the seductive and plausible
promises made by avariCiOus and
INSCRIPTIONS promoters whose pro-
| fessed knowledge of the secrets
which lay hidden i'm the womb
of the future entitle them 20 be
/ ciassed as prescientsts-who spake
| three thousand proverbs and whose
songs were a thousand and five: who
| could speak of trees, from the cedar
| tree that is in Lebanon, even unto the
| hysop that spTingeth out of the wall:
also, of beasts and of fowls and Of
| creeping things and of fishes men,
women, and even children, invested
their savings in wild cat enterprises
will suspended in gall, linger long.
Many of these enterprises are now
only bitter memories-mere specula-
tive tomb-stones"
Referring to a former case in which
the issue was raised the decision says:
| Mr. A. S. Hartwell whose high pro-
fessiOnal attainments and superior
| business ability has been recognized at
all times, was ZealOusly seconded in
/ denouncing the investment of trust
/ funds in the class of securities i'm the
| Banning case by Mr.. w. A. Kinney.
! The argument of Mr.. Hartwell so for
! chilly expressed the danger and the
| purely speculative nature of such in
| vestment that l feel warranted in
| quoting from it at length"
The Judge refers to the American
| Sugar Company, of which stock once
sold at 5000, or 100 per cent above par
| though only ten cents on the dollar
was ultimately realized, as evidence Of
! recklessness i'm Investments, Mauna-
| lei is also referred To I'm the same way,
and the judge remarks that many pru-
dent and careful men can be found
who invested i'm both these PROPOSE
tons Trustees, however, have not the
right to make doubtful investments,
such as a man may make with his
own money.
The Judge discusses the annexation
OF cuba, which he considers inevitable,
and refers to the probability that pro-
! ducticn of cane sugar there and in the
Philippines, and of beet sugar else
where, win reduce the values of plan
tations i'm Hawaii All these are risks
,..hl.h lhn nnllrl aaNe n IrlIaInn hns no