The weekly tribune and the Cape County herald. (Cape Girardeau, Mo.) 1914-1918, 1916-07-20
Il. HI. Schultz Believes Frisco
Sale Means Rehabilitation
of HOuck Line.
WOULD BOST 100000
TO REVAMP RAILROAD
Court Will Decide What Frisco
Must Pay c. G. & N.
BOndhOlders.

That the Cape Girardeau & North
ern Railroad will be rehabilitated and
made part of the Frisco system as a
direct result of the sale of the latter
roai, was the opinion expressed YES
terday by R. H. Schultz, manager for
the receiver of the C. G. E. N.
The sale of the Frisco does not mean
that the c. G. & N. is automatically
sold, Mr.. Schultz declared, but it aids
In bringing to focus the final dis
position of the Cape County road.
Tie exact disposition of the Houck
line still is unknown and depends al
most entirely on another decision by
Judge SanbOrn of the U. S. District
Court in suit brought by Mr.. Houck
to determine the amount of the
damages due bondholders of the C. G.
& N. on liability which the court held
the Frisco had to make good.
All the testimony in this case now
pending before Sanborn was intro
duced at hearing before special
master during the week of July, 8 to
10, last. The hearing was held in st.
Louis before Tom J. Fauntleroy as
special master.
The history of the liability of the
Frisco for C. G. & N. bonds traces it.
self through the last four or five years
of the roads financial chronicles.
In the latter part of 1912 the Off
cials of the Frisco commissioned the
A. r. Byrd & Sons Investment Com
pany, a New York concern, to acquire
the Houck railroads in Cape and Perry
counties.
]. H. Byrd, president of that invest
ment company, came down to the Cape
and let it be known that he was acting
for the Frisco in acquiring the Houck
lines. He organized the Cape Girar-
deau & Northern out of the former
Houck lines. That deal was consum-
mated February l, 1913.
The stocks of the Houck lines were
taken over and a contract drawn
whereby the C. G. & N. would issue
S1,500,000 in bonds which should be
guaranteed by the Frisco. The value
of the bonds at that time was cirtually
fixed by the Frisco's guarantee.
OF the bond issue, S457, 900 in the
first issue, was to be devoted to max
ing improvements on the road. Of that
issue $15O,OOO was fioated and the
money was used in getting the work
of repairing the road and getting it
into good shape for profitable opera
tion, under way.
Much timber had been purchased,
parts of the track had been prepared
for hallasting and the work was in
full swing when the Frisco was thrown
into receiverShip.
The receivers for the Frisco then re-
pudiated the contract to guarantee the
c. G. & N. bonds and declared they
would not take over the Houck lines,
because the Frisco did not need them
That action destroyed any value in
the e. G. & N. bonds that had been
fioated and made it impossible for the
road to sell any other bonds. The road
was forced into a receivership itself
by this action, because it could not
pay it's obligations.
Mr.. Houck, who owns S5 per cent of
the $1,500,000 issue of bonds, there
upon filed suit in the District Court
against the Frisco Company seeking to
get a decree of the court ordering the
company to maintain its contract and
guarantee the railroads bonds.
The case was referred to Mr.. Fount-
leroy as special master, and at the
close of several hearings, Mr.. Faunt-
leroy made a report in which he rec
commended that the bond contract was
a binding obligation. He also recon-
mended a Judgment for $1,5OO,OOO
against the Frisco company In favor
of the bondholders.
Judge Sanborrl in giving his deci-
sion in that case, then held that the
bond contract of tine Frisco company
was valid and binding obligation, but
be said that the master had erred in