USA > Alabama > History of Alabama and dictionary of Alabama biography, Volume II > Part 84
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On December 31, 1841, a law was passed "to secure more speedily the collection of debts against Incorporations." It provided machinery for collecting debts against railroad companies, on which judgments had been ob- tained, when they attempted to evade or frustrate collection by setting up a claim of having insufficient property to satisfy the judgment, by legalizing the process of gar- nishment against the company, and against any stockholders therein, to the extent of his stock subscriptions, paid and unpaid. However, the act extended to stockholders so proceeded against all the rights accorded by the laws to co-sureties to compel other stock- holders to pay their pro rata shares. The provisions of this law did not apply, by spe- cial exemption contained therein, to the State Bank or its branches.
On February 4, 1846, an act was passed
which required all corporations to give secur- ity for the costs of suits commenced by them.
In 1850 a general act was passed to govern the organization of companies to construct macadamized, graded, turnpike, wooden, rail, or plank roads. Under this act, persons de- siring to form such companies might file articles of incorporation, after complying with certain requirements as to advertisement of such intention, and with respect to subscrip- tions to capital stock, in which declaration in detail should be made of the objects and intentions of the organization, with the sec- retary of state, by whom the charter would be issued.
Notwithstanding the existence of this gen- eral law on the subject, the legislature con- tinued to issue charters to railroad companies in which special provisions were made to fit particular cases.
In 1852 an act was passed to define the liability of common carriers and warehouse proprietors for damage to merchandise. The bill required the issuance of receipts or bills lading when freight was accepted for ship- ment or storage, on which must be indicated the condition of the packages when received, and made the railroad or warehouse company liable for damage to or the total destruction of loss of such articles, a receipt or bill lading not specifically marked "bad order" being considered presumptive evidence of perfect condition when received.
The same legislature enacted a law making railroad companies liable for live stock in- jured or killed by their locomotives or cars.
A law passed on February 6, 1858, extended the active control of the state over corpora- tions chartered under its laws to the regula- tion of the details of the operation of trains by railroad companies. This law prescribed with particularity the rules to be observed and the precautions to be taken by locomotive engineers when approaching road crossings, stations, deep cuts where vision was ob- structed, abrupt curves, etc., and made fail- ure to comply with the terms of the law a misdemeanor for which an engineer proven guilty should be fined "not less than fifty, nor more than one thousand dollars, and impris- oned in the county jail for not more than twelve months, one or both, at the discretion of the jury trying the case." The law also made the railroad company in whose service the negligent employee was engaged, liable for all damages to persons, stock or other prop- erty caused by any accident resulting from such carelessness or neglect.
Two years later an act was passed to em- power railroad companies chartered by this state to execute mortgages, deeds of trust and other securities, and providing for the succession of title to their property. when sold under foreclosure proceedings. This act was an assertion of the state's authority to regulate the financial affairs of corporations as well as the details of their operation.
In 1873 a law was put in force which regu- lated down to the smallest detail the leasing of railroad property by its owners, and pre- scribed the conditions under which leases
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could be made, with respect both to lessor aud lessee.
A further exercise of the state's right to regulate and control was the law of April 19, 1873, "regulating the charges for transporta- ton of freight upon railroads within this State," under whose terms it was unlawful for any railroad company to discriminate in charges on freights or passengers between persons or localities, or with respect to the direction of the shipment, such discrimina- tion being penalized in double the amount of the overcharge, but in no case should the penalty be less than twenty dollars. The passenger rate was fixed at five cents per mile, with the privilege of assessing an additional half-cent per mile from passengers who neg- lected to purchase tickets at stations where they were kept for sale for the space of one hour immediately preceding the departure of each passenger train. The maximum per- missible charge for local shipments of freight was fixed at fifty per cent. more than the rate charged for the transportation of the same description of freight over the whole line of the road.
In the same year the "equal accommoda- tion" clauses were first inserted in railroad charters and amendments thereto. These clauses usually read about as follows: "That the said. . . . railroad company, be and are hereby required to give the same accommo- dations to all persons paying the same fare without regard to race, color or previous con- dition of servitude, and that said . . . . rail- road company shall not refuse to sell first- class tickets to any person or persons apply- ing for the same on account of race or color."
These laws were the forerunners of later elaborate systems of railroad regulation which eventuated in the creation of the Alabama Railroad Commission since enlarged and broadened in jurisdiction as the Alabama Pub- lic Service Commission (q. v.).
Railroads During Reconstruction Period .- The influx of Northern capitalists and alien adventurers into the state after the war, who had their own reasons for wishing to see the ante-bellum policy of state aid to internal improvements resumed, and extended if pos- sible, augmented the demand for legislation in that direction. Then began the prostitu- tion of the former policy of encouraging and aiding worthy enterprises for internal im- provement, intended to benefit the whole people, by judicious financial assistance from the public treasury, to purposes of graft and corruption by unscrupulous and designing men without interest in the welfare of the state or its people, who did not hesitate to stoop to bribery and fraud in order to accom- plish their own enrichment. The audacity of their high-handed undertakings in the way of wholesale manipulation of legislators and executive officers was equalled only by the completeness of the success attained and the magnitude of the pecuniary rewards received.
Men who came to the state with all their worldly possessions contained in a carpet- bag, within two years after the passage of the state-aid laws were rolling in wealth,
so to speak, hobnobbing with Wall Street financiers, and building luxurious hotels and opera houses in cities outside the state. Thus, what was intended to develop the wealth and prosperity of the people of Alabama became the means of robbing them of most of the few possessions the war had left them. Appar- ently the philanthropic visitors from the North, during their sojourn in the benighted South, while they were in control of political and financial affairs, believed in and squared their practice with a paraphrase of the fa- miliar scriptural paradox: "To him that hath not, shall be given; and then he shall forth- with proceed to take from him that gave, even the little that he hath left."
The second provisional legislature, on February 19, 1867, passed the famous "act to establish a system of internal improve- ments in the State of Alabama," which was the foundation upon which was builded the infamous system of unblushing plunder of the people by alien adventurers and financial buccaneers through the instrumentality of venal and corrupted legislators during the period from 1866 to 1873. This law provided that the governor should endorse on behalf of the state the first mortgage bonds of any railroad company incorporated by the general assembly of Alabama which should complete and equip twenty continuous miles of track at either or both ends of the road, at the rate of twelve thousand dollars per mile, and upon the completion and equipment of a second section of twenty miles, should endorse addi- tional bonds of the company to the same amount, and so on for each section of twenty miles completed and equipped.
The act required that the proceeds of the .endorsed bonds should be used only for the construction and equipment of the road within the state; that the bonds and the interest thereon should constitute a lien on the road- bed, right-of-way, grading, bridging and masonry, upon all the stock subscribed for in the company, upon the iron rail, chairs, spikes, and equipments, when purchased and delivered, upon the whole superstructure and and equipments, depots and depot stations, and all the property owned by the company as incident to or necessary for its business, on the whole road, whether within or with- out the boundaries of the state; that the presi- dent and a majority of the board of directors should be citizens of the State, and have the headquarters of the company in Alabama, except the Southwestern Railroad Company, of Georgia. (See Atlantic Coast Line Rail- road Company), and the Nashville and De- catur Railroad (see Louisville and Nashville Railroad Company ); that no state-endorsed bonds should be sold for less than ninety cents on the dollar. The act went farther in providing emoluments for enterprising rail- road builders: it provided that, in addition to the twelve thousand dollars per mile of track, for every linear foot of first-class wooden bridge, "supported upon piers or abutments of iron or solid masonry, across any stream," the company should be entitled to endorsement of its bonds at the rate of
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sixty dollars, or one hundred dollars if en- tirely of iron, "estimating the distance be- tween the abutments as the length of the bridge."
The bonds endorsed by the state were re- quired to bear interest at a rate not exceeding eight per cent. per annum, payable semi-a'n- ually, with coupons attached, and mature in not less than fifteen nor more than thirty years. They were to be issued in denomina- tions determinable by the company, but not to be less than one hundred dollars, should recite the fact that they were first mortgage bonds issued in accordance with and upon the conditions of the act, and should have prior- ity in favor of the state over all other liens or claims existing or to exist against the company. Section 5 of the act read:
"That the bonds before specified shall not be used by said company for any other por- pose than the construction and equipment of said road; and the Governor shall not endorse the same unless on affidavit of the president of said company, and a resolution of a ma- jority of its directory for the time being, that said honds shall not be used for any other purpose than the construction and equipment of said road, or sold or disposed of for a less sum than ninety cents on the dollar; nor shall said bonds be endorsed until the president and chief engineer of said company shall, upon oath, show that the conditions of this act have been complied with in all respects."
It was further required that the company should deposit with the state comptroller, "at least fifteen days before the interest be- comes due, from time to time, upon said bonds, . . . . an amount sufficient to pay such interest, including exchange and necessary commissions, or satisfactory evidence that said interest has been paid or provided for." It was made the duty of the comptroller to report promptly to the governor any failure to deposit the interest or furnish the evidence of its payment, whereupon the governor might appoint a receiver, under bond, to take pos- session and control of the road and apply its revenues and earnings toward the liquidation of the unpaid interest. Upon the refusal of the company to surrender its road to the state's receiver, the sheriffs of the counties through which it ran should seize its road and property within their counties and put him in possession of them, which possession should continue until a sufficient sum was realized, including costs and expenses of the receivership, to pay off the interest due on the bonds. The comptroller was authorized to draw, upon his warrant, from the state treas- ury "any sum of money necessary to meet the interest on such honds as may not be pro- vided for by the company," and was required to report thereof to the general assembly from time to time.
Recourse against a company failing or refusing to pay any of the endorsed bonds upon their maturity was given the state by means of suits in chancery to compel the appointment of a receiver, the sale of the road, its property and assets, or such other
procedure as the court deemed best for the interests of the state. In the event of the sale of a road under the provisions of the act, it was stipulated that the state should have a representative present to protect its interests, buying in the road if thought advis- ahle; and in that event, the governor should appoint a receiver to manage the road for the benefit of the state.
Section 11 of the act provided for the creation by the railroad company of a sink- ing fund, beginning five years after the state's endorsement of its bonds and consisting of two per cent. per annum upon the value of such bonds, which fund should be used for the purchase of state honds, or of the state- endorsed railroad bonds, which, after being assigned to the governor, should be deposited in the state treasury for credit upon the amount due the state upon the endorsement, or for cancellation, as the case might be. Semi-annual reports, under oath, to the gov- ernor, showing the condition of the road and the company, were required of the presi- dent until the completion of the road; and after its completion, annual reports, "show- ing the financial condition of the company, · the trade and travel upon the road, the receipts and expenditures, net earnings, and dividends, and what per cent. is paid on the stock to the stockholders."
Section 13 read: "That it shall not be law- ful for any officer, director or servant of the said company, to engage in any speculation or dealing, either directly or indirectly, in any real estate on or along the line, at any of the depots or depot station, or at either terminus of the road until after the road is completed, without first offering to the com- pany, through the directory, the refusal of the same at cost; and every officer of the com- pany, before entering upon the duties of his office, shall take an oath in writing, before any judge or justice of the peace in this state, that he will not knowingly violate the provi- sions of this act, and that he will faithfully perform the duties of his office, and if any such officer of the company, or other person taking an oath as herein provided, knowingly swears falsely, he shall be deemed guilty of perjury, and subject to all the pains and pen- alties therefore. Every affidavit required under this act may be sworn to before any judge or justice of the peace in this state, to be filed in the office of the comptroller of public accounts."
The gauge of the tracks of roads receiving the state's endorsement was required to be five feet, and the weight of the rails not less than fifty pounds to the yard. The state re- served the right to enact any other laws neces- sary to protect its interests, and to secure it against loss in consequence of its endorse- ment of the bonds. Section 17 provided: "That any of the railroad companies afore- said, whose roads are now in progress, but not yet completed, which have, or may have twenty miles or more of road constructed and equipped, and no liens or mortgages thereon, at the time of the application, shall be en-
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titled to all the benefits of this act, for not exceeding twenty miles of road thus con- structed and equipped. . . . "
The intersection of one road by another was regulated by a section of the act, and the interchange of traffic between connecting roads. Endorsed roads were required to com- plete at least one section of twenty miles within three years from the date of passage of the act, and complete and equip the en- tire road "within seven years after the time of said endorsement of first bonds;" should have at least two directors appointed by the governor on their boards; should give prefer- ence to "iron rails, spikes, chairs, frogs, etc., of Alabama manufacture," and should trans- port all freight belonging to the state free of charge.
The requirements of this act were too strin- gent for the railroad promoters, and it was, therefore, amended August 7, 1868, so as to give them the benefit of the state's endorse- ment of their bonds in blocks of five miles, after the first twenty, at the rate of twelve thousand dollars per mile.
In less than two months from the date of the foregoing amendment, another amenda- tory act was passed which raised the rate per mile of the state's endorsement from twelve to sixteen thousand dollars, and modi- fied the requirements of the original act in such a way as to enable companies chartered in Alabama to get the benefit of the sixteen thousand dollars per mile endorsement upon their road outside as well as inside the state. A proviso specified, "That the provisions of this section, relating to the extension of rail- roads beyond the limits of the state, shall not apply in favor of any other railroad com- pany, except the Will's valley railroad com- pany;" and Section 2 stipulated, "That a notification to the Governor of the State, by any corporation engaged in the construction of a road within the provisions of this act, that such company will construct the road with a view to the obtainment of the endorse- ment of honds under this act, and the actual bona fide completion of twenty continuous miles of the same, shall amount to a contract upon the part of the corporation that it will, within a reasonable time, finish, equip and complete the same, and upon the part of the State that it will endorse the bonds of such corporation upon the conditions, and in the manner prescribed in this act."
The provisions of the former law relating to endorsement for bridges were repealed.
Here the handiwork of the "Stanton gang" becomes apparent. The franchise of the Will's Valley Railroad Company had been appropriated by the Stantons, to be utilized, in their impatience to participate in the state's benefactions, in getting the governor's endorsement on bonds for twenty miles of road without having to go to the trouble and take the time to build them. (For details of the transaction, see Alabama and Chatta- nooga Railroad Company, under "Alabama Great Southern Railroad Company.") Charges of bribery and corruption of mem-
bers of the legislatures in connection with the passage of railroad bills were openly and persistently made, both orally and in the newspapers, and were not disproven nor even denied. Subsequent reports of investigations' made by legislative committees, and, indeed, the reports and records of the railroad com- panies themselves, revealed the fact that after having secured almost unlimited con- cessions and indulgences from the legislatures, the promoters abused their privileges, took advantage of the weakness or the venality of the governor, and obtained endorsements of bonds to which they were not entitled even under the most liberal construction that could have been put upon the terms of the laws. Furthermore, they made no pretense of conforming to the requirements and re- strictions of the laws as to the disposition to he made of the bonds, and the security to be furnished the state for its endorsement. They first deceived, then robbed, and finally flouted the state, their benefactor.
Governor Smith in his message of Novem- ber 15, 1869, stated his views upon the policy of state endorsement of railroad bonds, as follows: "In my judgment there is a defect in the law which requires the Governor to indorse the bonds of Railroad Companies. I am in favor of extending the credit of the State, with proper restrictions, to necessary and important works of internal improvements; yet I do not think it sound policy to have a general law upon the sta- tute book, requiring the State to indorse for any and every road that may build and equip twenty miles. It is natural that every community and locality should desire the advantages of railway communication. The convenience of such communication is incalculahle to every one who wishes to travel, or who has anything to transport. So great is the desire for railroad facilities that counties and towns will readily vote subscriptions to aid them. The induce- ments to do this are strengthened when it is only necessary to construct twenty miles of road to place it within reach of the State's indorsement. This being accom- plished, the indorsed bonds would be ap- plied to a continuation of the road; and as additional indorsements are obtained for every section of five miles after the first twenty, county and town subscriptions may easily be obtained to an extent sufficient to insure the completion of the road.
Thus it will be seen that an entire road might be built upon public credit, and with- out the contribution of any individual cap- ital; and it might be done through parts of the State, and between points where there is not sufficient business to justify the ex- penditure of so much money, raised upon credit alone. It is possible, indeed, to con- struct a road in this way that would not pay running expenses after it was put in operation. This is not in accordance with the true theory of extending public aid to works of internal improvements. The cor- rect principle upon which to proceed is to
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lend the State's credit to the efforts of priv- ate capitalists, whose practical business sagacity foresees remunerative enterprises. Inasmuch, therefore, as the present law · will probably so operate as to embarrass the State's credit, I deem it a duty to invite such legislation as will protect the State against a misfortune of that character. The best mode of accomplishing this, in my opin- ion, is to repeal the law which requires the indorsement of railroad bonds. This would by no means preclude the State from extend- ing assistance to meritorious works of in- ternal improvements. On the contrary, the General Assembly, which meets annually, could, from time to time, by special acts, lend its credit to such enterprises as might be found of sufficient importance and neces- sity to justify it."
The state auditor, in his report to the gov- ernor, dated October 1, 1869, called atten- tion to the risks involved in the policy then pursued by the state in lending its credit to railroad companies. He said: "While I fully concur in all legislation favoring the development of the resources of the state by giving its credit in aid of internal improve- ments, so far as it can be done with safety, yet I am constrained to call your attention to the following facts. The total value of railroads in the state, as per assessment re- turns made to this office, including right of way, main and side track, rolling stock, etc., is less than thirteen thousand dollars per mile, more fully shown in Exhibit No. 5, to which reference has been made. When it is remembered that these items include all of value that can be embraced in 'First Mort- gage Bonds' upon any railroad, and when it is further known that the returns are made under the affidavits of the President and Sec- retary of the several roads, that such was a 'full, fair and just valuation of the same,' it will be readily seen that the state cannot be safe in the endorsement of railroad bonds to the amount of sixteen thousand dollars per mile nor would she be free from loss should default be made by the railroads in payment of interest or principal of said bonds.
"I would therefore recommend the repeal of the law giving endorsement to railroads to the amount of sixteen thousand dollars per mile, or amendments to the same require- ing the endorsement not to exceed ten thou- sand dollars per mile.
"It is scarcely necessary for me to say any- thing further upon this subject, as the Con- stitution of the state forbids the General Assembly giving any endorsement except 'on undoubted security.'-(Sec. 33, Art. 4). Un- less this recommendation receives the atten- tion of the Legislature, and the amount for which the state becomes liable, is reduced to the standard of 'undoubted security,' as re- quired in the Constitution, the state will, at no distant day, be compelled to assume and pay a large portion of these bonds, which would not only embarrass her finances, but very materially effect her credit, which is to- day among the best in the Union.
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