New-York tribune., 1904-10-12
TOBACCO MERGER WINS.
Vics-ChanceNor to Dismiss Com
plant after Proof on One Point.

After listening for several hours to argument on
a rule granted BY hirn ten days ago directing the
nfnoers and directors OF the Consolidated Iooaoco
Company TO show cause why an inJunclAOh eiiOu4~
not issue restraining the merger OF the @le-i
Tobacco Company, the Continental Tobacco CON-
pRny and the Consolidated Tobacco Company INTO
a new corporation named the American Tobacco
Company Vice-ChanceIlor Pitney. in Newark, an
nounced yesterday afternoon that If the proof OF
ownership OF the bonds OF the company deposited
with the Morton Trust Company satisfactory
20 the court ne would dismiss the bin OF complaint
There was as yet 10 proof Of such ownership be-
fore the court. and would not be until Halsey s.
Barrett whom the court had deputized TO make an
examination. should have reported The court
would receive the report next Tuesday, and would
then announce his decision. The vice-chancellor
added that as the case would be appealed TO the
Court Of Errors and Appeals he would continue the
stay until an adjudication by that court.
The complainants were Julius p. Ickelheiner and
others owners OF Consolidated Tobacco gold bonds.
Issued in 1901 Alan Il. Strong appeared as counsel
for the complainants. Tie defendant corporations
represented by r. Y. LINDA bury, general coun-
sell ". ". Fuller and Junius Parker. Of New
York: Attorney General Robert H. McCarter and
Charles 4 Corbin. Joseph Cout- IN behalf OF
Jacob Samek. OF New-York moved TO be allowed
% Join with the other com plainants. There was
no objection. Mr.. Strong opened the argument He
Eaid that Notwithstanding the covenant contained
an the trust indenture that the property of the
Consolidated Tobacco Company should never be
mortgaged. the proposed merger plan contem-
plated placing S560000O0 per cent bonds which it
is proposed TO issue in substitution Of Sc 100000 pre-
GeFEed stock Of the American and Continental To-
haoco companies. a first lien upon earnings and
assets OF the proposed new company. Counsel held
that complainants would be injured by the reason
Of the substitution since the excess Of 100000 Of
bonds would create a greater charge upon the
earnings Of the new company.
Mr. Lndabury explained that the S46.OoOooo stock
which II is proposed 70 retire consists Of per cent
preferred stock OF the American Tobacco Company
and per cent preferred stock Of the Continental
Tobacco Company, and that by substituting FOR
such preferred stock S6O00O0O per cent bonds the
excess OF so 10000 in the bond issue would make
the income from the bonds equal the income from
the preferred stocks Counsel put in g denial OF
the statement that the Consolidated Tobacco Com
pany owes slOO00000. On the contrary, he declared
Il owes only g. CO., and there is not dollar OF
Indebtedness which il cannot pay demand; IL
has not embarked in dangerous schemes. its
plus last December OF SO.9o0000 has since been in
creased to between A6009 90 and S7o000o0 and the
SOOO00oo OF Consolidated stock issued was paid
for in cash Mr. Lindaoury said that the defence
old not admit the ownership Of the bonds claimed
by the complainants.
The vice-ChanoeIlor said that an important point
had been raised. hut he would interrupt the
hearing pending the production Of ownership of
such collateral He said he would deputize Halsey
II. Barrett to 60 10 New-York to examine the
bonds Of the parties 70 the suit MI Corbin re-
marked that he represented P. A 3. Widener and
Thomas +. Ryan. who each owned several million
dollars worth OF the bonds. and that the bonds
would be produced for inspection AIr. Lindabury
RRio that his clients owned bonds worth $l0 900 OO
SSnd that proof Of ownership would be furnished
NJ McCarter told the court thar the merger plan
ooaA not be MADE 70 appear 10 the disadvantage
legal proceedings in the light OF asking Tor stone
and receiving bread Mr.. Corbin said that the
thai il was neither right nor f2r for the COM
plaiaants, who own a small minority Of the stocks
q m r ra NJ 2
llndab bury, resuuling his argument, called atten-
Won TO Article Of TIE trust indenture. which
From tine to time the holders Of majority IN
time being outstanding, by their vote at a meeting
OF the bondhooers, held as provided Ia Section 2
y this article or Py an instrument or instruments
power 70 Sssenl 70 snG aulhorlze ne reieaSs oI
the trustee under this indenture: to assent 70 and
authorize any modification or compromise of the
against the Consolidated company or against any
rights shah arise under these presents or other
wise; and to assent 70 and authorize any modihca-
and recommended BY the tr1stee'
As 70 the alesations in the bin charging that the
Consolidated company was veTging financial
disaster. 3Ir. Lindsbu-y declared with great en-
rant Of the facts. Here ne have the unusual fact
raj Of s4o0oO0O received SsoOO50oO in solid cash;
bonoT 1a r E 81 ne b5a ~ 9ha n iIsetos IL y9
counsel Tor the complainants replied that when
edge % the existence Of the provision contained IN
Article Y, that he had been guided by the circular
Issued over the signature Of Mr.. Fuller, In which
there was no mention az the article in question,
and upon which the defence, he said. seemed 10
rely Tor ther authority for setting aside the IN
oenture and putting into effect the merger.
does rot mean abrogation ana the intent Of the
defendant companies was completely abroga te
the mortgage indentuTe. 10 cancel the mortgage
altogether
Mr.. Corbin. in referring 10 the different reasons
minority stockholders might have for opposing the
voice Of the majority said that II may be zig
norance, suspicion disability"
Hold on; let examine this question OF mod
fhcauon,'" Interrupted the vce-chancellor. What
IS the security you have nov?' he continued,
addressing the complainsnts' lawyer. 1T is the
security Of the stockholders Of the two companies
and the obligations OF the holding companies The
mortgage is mere shell We viii look Al the sub
stance OF things The substance Is you have the
TWO companies and wha1 may come 70 them. You
offered IN its place the security. Of the debt
Of the companies themselves. You rise from the
position % mere creditor OF stockholders to one
OF creditors OF the companies themselves