Year: 1873




CHICAGO, Nov. 26.-Judge Upton, Of
the Mclean County Circuit Court, rem
dered decision yesterday in the case
brought against the directors OF the Gilman,
Clinton and Springfield railroad, charging
them with gross 1Iiismanagement OF the
eOmpanys affairs, and praying for the ap-
pOintment of receivers. 1t appears from
the evidence that the actual cost OF con-
structing and equipping the road was about
a million and half, while the Morgan I'm
provement Company received for rendering
this service about fourmillions. The Nor
gan Improvement Company was incorpo-
rated in Pennsylvania, May 6, 1870, and
SO far as the evidence in this
case discloses it, was organized for the
sole purpose of constructing this road. 1t
had capital of half million, divided into
ten shares of fifty thousand each. Four
teen days after its incorporation it entered
iuto contract with the Gilman, Clinton
and Springfield railroad. The diret.9rs
and president of the road, who had beeA
principally concerned in letting the cot
tract to the Improvement Company, ;re
shown to have been let into its enormous
profits for merely nominal considerations.
1t is also charged against the railroad Off
cials that they made ruinous contract for
the road with the Barclay Coal Company,
of which they owned a three-quarters' in
terest; that they made an unlawful lease OF
the road to the Pennsylvania Com
pany, and that in other respects
they were guilty of breach of trust. The
Court then recapitulates the grievances
complained of, and discusses at length the
English and American law concerning the
circumstances under which trust property
will be taken out of the hands of trustees
who are mismanaging and fraudulently
APPLYING the trust funds. The modern
doctrine and the theory of Illinois law is
that railroads are public highways, created
by the sovereign power OF the State, and
that the corporation is authorized, through
its Board of Directors, to construct, equip
and operate the same as long as such direc-
tory shall remain true to the trust conferred
upon them by law; that they are so far a
public corporation; that at the time of con-
struction of this road, and at the adoption
of the present Constitution of Illinois, my
property could, by vote Of the county, town
or city, not only be converted into the capi-
tai stock of the railroad company against
my will, but, by like
vote, could be compelled
to donate my property to the capital stock
of a railroad company, and that the proper
ty of the corporation is trust fund in the
hands of the Board of Directors. Townships
that have become parties-to this proceeding
did not donate their bonds voted to the
Company, but on the contrary they sub
scribed tothe capital stock, for which they
issued their bonds, dollar for dollar, and no
reason is shown by this proof why the cap
ital stock of this Railroad Company is not
worth parvalue, if the cost of constructing
and equipping the road did not cost to eX-
ceed one and One-half millions, and the
road has paid running expenses and inter
est on eight millions since its completion,
with bonds voted along the line and loan
Of one million upon the road, which ought
to and would have constructed and equipped
the road. the stock should be worth
par to-day. | assume this fact upon the ev-
idence in this record that the Pennsylvania
Company could operate the road, pay in
terest on two million first mortgage bonds
and the current expenses Of the road, and
leave surplus to apply i'll the one million
income bonds intended to be issued i'll lieu
of the one million second mortgage bonds
now in the hands of ThOs. a. Scott. If it
is true that the stock of this railroad COM
pany ought to be worth dollar for dollar.
we are led to Oinquire whether it is proper
to so manage such trust property that the
stock should become substantially worth
less and incumbered with three millions OF
debt. The cOmpany's books do not show
the cost of construction and equip
ment, nor do the defendants
deny the proof Of complainantS
as to the last. Another thing whichis ap-
parent from the proof is, that the Board OF
Directors are controlled by the Morgan
improvement Company. The court then
proceeded to discuss other points Oflaw in
the case, and to cite authority, which lead
to the conclusion that relief prayed for in
this case should be granted, concluding as
follows: The court is of opinion that under
the circumstances of this case, it is proper
to appoint a receiver to take charge of and
manage said railroad until it can be ascer-
tained who its legitimate stockholders are,
to whom the custody or management OF
said railroad should be committed.