South Bend news-times. (South Bend, Ind.) 1913-1938, 1914-11-10
Judge H. B. TuthiII in Porter
Circuit Court Decides Gary &
Interurban Corporation Was
Legally Organized.
ABSOLVES DIRE ?T0RS OF
SUSP CI1N OF FRACD
Declares InterIOCking Director
ateS Complained of Permitted
Under Indiana Laws and Min
Ority Did Not Suffer.

The merger Of interurban railways
in northern Indiana into the $1,000
GOO corporation known as the Gary
and Interurban Co. engineered by
Frank y. Gavit OF Whiting, was leaL
Minority stockholders. among whom
the greater number are South Benders
have suffered no wrong through the
consolidation.
That in brief was the substance OF
the decision handed down by Judge
Harry =. Tuthill in the Porter circuit
court at Valparaiso Tuesday. The
decision was made in the suit of Fer
dinand c. Raft Of South Bend. against
LeIauel Darrow, Frank y. Gavit and
the other officers OF the Gary and In
terurban Co.
The court refuses the petition Of the
South Benders that the merger be
dissolved into its constituent parts
specifically acquits the engineers OF
the merger Of any suspicion OF fraud,
points out that the merger was evi-
IDENTIFY for the best interest Of the
companies involved. and says In con-
clusion. this egg. If Unscrambled al
all, must be unscrambled by the
stockholders and not by the court"
Suit Filed i'm 1913.
The suit was filed by Ran July %.
1913, and after a lengthy trial in the
adVisement by Judge Tuthill for 70
days. In his opinion Judge Tuthin
pays tribute to the cooperation of the
attorneys in assisting in arriving at
decision. Hubbard and Hubbard OF
South Bend represented Ran, the
chief complainant.
other South Benders interested as
minority stockholders Of the Gary and
Interurban Co. are Samuel Leeper.
Joseph ID. oliver, Charles Z. Russ.
Harriet Elbel, Jacob WoOlvertOn, John
G. Ellsworth, /. A. Sibley estate, ii. Al.
Miller, George Wyman estate. The
cOmplainants charged that the merger
''froze them OUT OF participating in
the control OF the company and asked
the dissolution Of the corporation into
its constituent companies.
The consolidating directors owned
S425,931 in stock, while the total OF
the dissenting stockholders was $685.
525.
The court in its opinion goes into
minute detail as To the merger and its
legal status.
The corporate defendants are the
Gary < Interurban Railway Co, which
is the company into which the other
companies were consolidated. The
constituent companies are the Gary &
Interurban, the Goshen, South Bend
* Chicago railroad, the Valparaiso *
Northern railway, and Gary, Connect
ing railways. The Chicago New York
Electric Air Line Railroad Co. IS also
a defendant TO the suit.
Consultations Lawful.
The court says; There is 10 be
found, it may be broadly stated. no
enactment in Indiana which requires
in any event more than majority
vote by the stockholders 10 affect "a
lawful consolidation" The court
t1rlrr VAT al
legal rules: Consultations may be-
lawfully effected: the power Of the
stakeholder majority over the stock
holder minority is absolute.
It is pointed out in the decision that
back of all decisions and into them
must always be read the question OF
fraud-W neither or not the consolida-
tion was fair or fraudulent. 70 is held
Furthermore that from the authorities
cited il would appear in the absence
Of fraud that no action ike the pres
ent one is well brought unless 90 ts
supported and sustained by "a majority
in holding of the stockholders OF AZ
least one of these constituent COM
panies.
In answer 10 the complaint that
subsequent TO consolidation stock had
been assessed 20 pay debts the court
points out that this action was wen
within legislative enactment Further
more in answer 10 the contention thai
il was illegal for the stock OF the con-
sOlidated company 20 exceed IN
amount the combined stock Of all the
constituent companies. the court says
that in the creation of the new cor
poration the constituent companies
ceased 10 exist.
No Fraud Apparent
Following this opinion the court pro-
ceeds 10 shoT that there was no
fraud. fn the consolidation. Il is ad-
mitted that evidence went 20 show
that the individual directors who aided
in the consolidation had long planned
on such q move juS as charged hy
the complainant The court points
out that not only was this the case
but that in addition the coUplainants
were using such lawful means as pos
sible 10 gain power and that II was
that very motive OF the cOmplainants
which the defendants claim 10 have
feared when they formed voters
trust wherobv their control was more
firmly fixed. This was accom- plsAed
by borrowing large sums on the credit
Of one constituent Germany with un-
encumhered assets. which obtaining
they loaned. making the original bor-
rowing company a creditor OF other
constituent companies the latter or
which while in dire need OF money
for extensions and other purposes had
no mortEaged bonds.
The court proceeds: The court de
rectlv and specifically absolves the
complainant and his associates from
any imputation OF fraud. The court
CONTINUED OK PAGE SEvEN)