The sun., 1910-01-26
'CHOATE ON TRACTION CLAIM
LINENS THE CASE TO THAT or
A DEBTOR HIDING ASSETS.
whom Court Of EquIty wsuI,I Not Let
90 Untll re Had DIsKOrged-DecI-
sion Reserved In City Railways Suit
Against Met. RecurltIes- Direct Ors.


go Untll He Had DIsgOrged-DecI-
sion Reserved In City railways suit
Against Met. Securities. Direct Ors.
The trial OF the equity action brought
in the United States Circuit Court by Re-
ceIver William W. Ladd OF the New York
City Railway Company TO recover from
the Metropolitan Securities Company and
its directors. among them Paul Cravath,
who was present. q. .707 200 alleged to
have been taken from that company g
treasury illegally, was concluded yester-
day afternoon with the final address by
Joseph II. ChOate for the receiver.
Mr.. Choate touched lightly on the
legal technicalities OF the case. He was
unsparing In his Characterization OF the
series OF transactions that eliminated
IN the bankruptcy Of the New York City
Railway Company.
Oh. Finance. how many crimes are
committed in thy namel- he exclaimed.
III the Court please We fall back ON the
fundamental principles OF equity TO sup
port our case and leave to the other side
TO overwhelm the case with technicalities
which have nothing to do with it and to
oefog the Court with voluminous docu-
ments and hundreds Of pages of record.
I'VE claim that the acts OF which these
defendants stand accused we're primarily
and necessarily a breach OF their duties
as directors OF a holding company. The
real parties in interest here are the credi-
tors OF the Metropolitan Street Railway
Company, who by the terms OF the lease
became the creditors Of the New York
City Railway Company with claims which
amounted to $4,000 OOO a year. These
creditors were widows, orphans and
others who became the victims Of over
capitalization. The trouble is that these
directors Mr.. Craveth's associates, none
OF whom dares or desires 70 appear here
had so inflated the stock that IL was i'm
possible to carry the load"
Ant-impossible enterprise, bold and
reckless transfer. -spoliatiOn. and other
terms OF like tenor were used by Mr.
Choate.
Have the creditors been rightly dealt
wlth?' he asked. Have they been dealt
with according TO the agreement Lord
hardwlcke, one OF the great Chancellors
OF England, has written words of wis
dom on the duties OF court Of equity.
No rules To govern the court have been
written because the craft of men can
frame schemes TO circumvent them some
how. IL a wrong has been done here
then there rs no previous case in equity
which your Honor is bound to follow as a
precedent. This is a case absolutely
unique. IL is just the kind Of an unusual
proceeding which Lord Hardwicke had
In mind when he spoke of the schemes
OF the craft OF men, which no court
OF equity could foresee or frame rules
applicable to-
Mr.. Choate compared the transaction
70 the case OF man who turned over to
his wife or hid in the cellar all his property
after the crash OF an impossible per-
sonal enterprise.
What would a court Of equity do in the
case OF an individual like that?S he asked
why. II i am not mistaken the man would
not leave court until he had disgorged.
diferentH The Securities company un-
dertook an equitable trust and IL these
directors had done nothing else they
should at least have left the City company
in possession Of its own property. so that
IL could meet its obligations
And there ~ no explanation except
that Of MIR. Cravath that there was a
mutual desire OF all the interests for a
tion OF the indebt edness and an
escape from the taxes This is no ex-
planauon-explanati that don't ex-
plain are fatal
MIR. Choate then turned to Mr.. CFavath,
who was sitting next to him, and asked
paTenthetically why 81 .797 200 was taken
from the City Company without anything
being given for IL.
MIR. Cravath has been examined at
length and he has no explanation to make. |
l do not question his good intentions |
but some gloomy roads are paved with
good intentions. Neither the testimony
nor good cha aracter OF Mr. Cravath the |
good character OF Kuhn. Loeb a Co, |
the good character of everybody in the !
case. can make the effect of these trans |
actions any different. Why should notes
which we're issued at 10 be re, 'na-ned |
within thirty days at par and the uire,- /,
tors pocket the profitsf The only excuse |
MIR. Cravath gives is the identity OF in |
terests between the Securities Company !
and the City Company. These were |
the acts in fact. of the Securities Com |
pany sitting in the board and in the guise |
OF the City Company
In opening the argument yesterday |
for the receiver Matthew c. Fleming,
Mr.. Choate's associate, compared the |
alleged looting OF the City Company to |
the shell game OF county fair notoriety !
The defence had said that the Metro |
politan, City and Securities companies |
were practically one company.
1T is hard" said Mr.. Fleming for |
the creditors OF the City Company to
discover under which shell the pea is |
Perhaps Mr.. Cravath is familiar with the |
shell Rame-he comes from Ohio and |
has doubtless been to country fairs"
was the final sally OF Mr.. Fleming, |
accompanied by laughter from all ex-
cept Mr.. Cravath himself.
Alton b. Parker. counsel for Peter
A. b. Widener. made plea for his client. |
saying that Mr.. Widener did not become |
a member Of the board of directors Of |
he City Company until October 3, 1908,
and therefore could not have been a |
member OF any such conspiracy as is
charged.
Judge Ray reserved decision.