The news & observer. [volume] (Raleigh, N.C.) 1894-current, 1905-02-02

NyT1I
"In 1879 the State passed an act
| to compromise its outstanding indebt-
| ednesS, offering to the holders 40 per
cent. of the principal Of the bonds
| issued before May 20, 1861, and for
| bonds issued since the close of the
war % per cent of the principal and
| for bonds issued under the Funding
Acts, 16 per cent. Of the principal.
"There was absolutely no pretense
then, or at any future time, that the
amount of this offer was based upon
the benefit which the State received
or the price which the purchasers had
paid for the bonds. There was no sug-
gestion that the old State bonds had
cost the holders less than par, and
yet only 40 per cent. was paid.
THE bonds issued for funding the
/ coupons had the same moral and
legal validity as the bonds issued for
the principal, and get only Is per
cent was offered. The same is true
of the bonds for which % per cent
was offered.
"Schafer Brothers were the holders
of quite q number of other bonds
which came under the % per cent
class but for which there was no
| pledge of collateral security For
these bonds they accepted twenty-five
cents on the dollar.
AT the same session that the act
to compromise and commute the pub
lie debt was passed on act was passed
with reference to the North Carolina
construction bonds, and commissioners
were appointed to negotiate with the
holders Of such construction bonds
for a settlement. BY the terms of
the compromise the Treasurer was
directed TO issue State bonds, dated
April /, 1879, payable forty years
after date, bearing interest at per
cent, secured by lien, or a renewal
of the old lien, on the stock of the
North Carolina Railroad. The holders
of the second mortgage, or ten share
bonds, were not parties to this adj
juStment and were not bound by it.
and they have always commended that
the extension or renewal of the con-
struction bonds for forty years was
illegal and void as to them, in that
it extended the lien of a first mort
gage without the consent of the hold
ers OF the second mortgage. The hold
ers of the second mortgage bonds We're
at that time entitled to have the stock
of the North Carolina Railroad sold
and applied to the payment OF the
first mortgage bonds and the surplus
paid 10 the holders of the second
mortgage bonds.
MANY of the holders of the ten
share bonds who had not sufficient
faith in the recuperative power of
the State and the future value of the
North Carolina Railroad stock, sur
rendered their bonds and received the
new bonds of the State. There re-
main outstanding, so far as can be
ascertained by diligent inquiry only
the two hundred and fortw-tWo bonds
represented by Schafer Brothers, and
the ten bonds upon which the State
of South Dakota has obtained judg-
ment. From 1879 to 1901 the holders
Of these ten share, bonds received
nothing.
I'm the meantime North Carolina
Railroad stock had advanced until it
is now worth Shipper share.
There are outstanding of the
per cent. bonds issued under the act
Of 1879 about $2.T60,000 and the stock
held for it's security is worth largely
more than the bonded debt, towit:
$3.50, 900.
The remaining stock, 2,340 shares
(even if the State should reserve ten
shares of stock worth $1,750 for the
security Of each $1,000 of the first
mortgage bond) would be worth
$4,000
I'm 1901 Schafer Brothers present
ed respectful petition to the Legis-
lature of North Carolina pointing out
these facts, and their counsel urged
shown to the holders of these ten
share bonds, whose rights had been
utterly ignored by the state for more
than thirty years To this respectful
petition not the slightest attention was
paid; not even a commission was APP
pointed TO treat with the bondholderS,
but the door was promptly shut in
their faces. Believing that their claim
was just in law, reasonable in equity
and that it had a moral force which
ought to appeal TO the State, the
bonGholderS desired to get the opin-
ion of the highest court in the world
upon the validity of their bonds. They
therefore, donated to the state OF
South Dakota ten bonds, upon which
suit was brought, and judgment
finally entered in the Supreme Court
of the United States that the State Of
North Carolina was indebted to the
state of South Dakota i'll the sum of
$27400 and directing that one hum
dred shares of the stock OF the North
Carolina Railroad Company now held
by the State, should be sold to de-
fray this Judgment, as far as the Secur-
ity would go.
AT the request of the State of North
Carolina the execution of this judg-
ment has been held up in order 70
allow the Legislature to make some
provision in regard to it.
The bondholders again desire to
lay their claim before the General AS
sembly and ask that some reasonable
adjustment should be made in order
that they may receive at least part
OF their claim which has been with
held for some thirty years.
The amount due upon the 242
bonds is S663 $50. The reasonable
value OF tile stock pledged as security
for these bonds is $42S,500. This stock
is valued upon the basis of recent
sales. Making the statement upon the
basis of a single bond the State has
already received from dividends OH
each ten shares of stock pledged for
the payment of each bond since 1879,
when the stock was turned over to
the State by the receiver appointed
in the Swasey suit, about S1,615, every
dollar Of which in equity and honor
belonged to the holders of these bonds,
for the security of which the stock
was pledged.
The amount paid by Schafer
Brothers for each bond averaged 1868,
and with simple interest for thirty
seven years, each bond has cost them
$2,125. Under these facts the bond
holders believed that settlement upon
a basis of 81 per cent. of the amount