USA > Maryland > Washington County > Hagerstown > A history of Washington County, Maryland from the earliest settlements to the present time, including a history of Hagerstown > Part 37
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After this sum had been spent an application was made to the legislature in 1835 for more money, and this time the eight million loan was
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HISTORY AND BIOGRAPHICAL RECORD
issued, three millions of which was to go to the canal and the remainder to be divided up among the other public works of internal improvement to which the State had subscribed. The law under which this loan was made required that the bonds should not be sold for less than twenty per cent. premium. This it was speedily found was impos- sible, and so the loan was changed to a five per cent. sterling loan and the three millions of bonds handed over to the canal. After much negotiation and difficulty these bonds were sold in London at a great sacrifice, some as low as seventy-six cents on the dollar. The money secured in this man- ner, together with the issue of a large amount of script, completed the canal to Dam No. 6, fifty miles from C'umberland and thirty-one miles of the remainder in unconnected portions, completed. This latter work cost $2,892,000, and it looked for some time as if this would have to be abandoned for lack of funds to complete it.
At a meeting of the stockholders held in Frederick, August 17, 1843, General Wm. Gibbs McNeill, the President of the company, was re- moved for a contract he liad made with Letson and Rutter in contravention, it was said, of the orders of the Board of Directors, and the contract de- clared null and void. All this was done by the vote of the State of Maryland, the other stockhold- ers voting "no." On the same day Col. James M. Coale was elected to. fill the vacancy. Mr. Coale immediately opened negotiations with the Balti- more and Ohio Railroad, which had then been completed to Cumberland, to act as the connecting link between the terminus of the canal and Cum- berland. An arrangement was mode with the road to land coal at Dam No. 6, charging two cents per ton per mile, "so long as it shall not interfere with their general trade nor require a material augmen- tation of their machinery." The theory was at once started that it was unnecessary to complete the canal to Cumberland, as the railroad could be used to advantage to provide traffic. It was to combat this theory as well as to show how the canal could be completed, that Mr. Coale made his exhaustive report to the stockholders November 16, 1843. He showed the great quantity and fine quality of the Cumberland coal, and argued that the demand for it would increase to the full ex- tent of the capacity of the canal, and that in this traffic the railroad would not be a competitor, for railroads were designed for passengers and light freight when speed was an especial requirement.
That a car could contain but five tons of coal, and although the company was then contemplat- ing an increase in the capacity of the cars to six tons, even at that rate, in order to deliver to the canal a sufficient quantity to insure a revenue which would pay the State any interest on the investment, would require 289 cars to be run daily, and as the distance was forty-five miles but one trip per day could be made and hence it would re- quire 578 cars, and supposing 13 cars to be drawn by a locomotive, there would have to be twenty-two trains running daily. Clearly the railroad could not support the coal trade to this extent.
At this time the whole State was groaning under the burden which had already been assumed to advance internal improvements, and the neces- sity of imposing a State tax of twenty cents on the hundred dollars drove many persons to advocate repudiation of the entire debt. It was useless, therefore, to ask for any further aid out of the State treasury, and so Mr. Coale's plan was to get the State to waive its lien on the receipts of the canal in favor of an issue of bonds by the canal company sufficient to complete the work to Cuni- berland. After considerable time the Legislature was convinced that the State's lien upon the net revenue, as matters then stood, was worthless, for - there would never be any net revenue as long as the canal stopped short of Cumberland. The lien was consequently waived by an Act of Assembly passed in 1845-the Legislature of Virginia hav- ing passed an act the previous year conferring the same authority and extending the time for the completion of the canal, which had expired in 1840, to 1855.
The Maryland Act of Assembly, entitled "An Act to provide for the completion of the Chesa- peake and Ohio Canal to Cumberland and for other purposes," passed March 10, 1845, authoriz- ed the canal company to issue bonds to raise suffic- jent money to complete the canal to Cumberland not to exceed $1,700,000. which bonds should be payable in not sooner than thirty-five years and should be a preferred lien on the revenues of the company, and the rights and liens of the State upon the revenues of the company should be post- poned in favor of the bonds so issued. It was also enacted that the company should exccute to the State a further mortgage. subject to the priority already mentioned in the act, as an additional security for the payment of the loan made by Chapter 241 of the Acts of 1834. These acts
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were accepted by the company at a stockholders' meeting April 29, 1845.
But the act contained a proviso that none of the bonds should issue until mining companies of Allegany should enter into a contract with the canal, to be approved by the State, guaranteeing a transportation over the entire length of the canal of not less than 195,000 tons of coal per year for five years. The difficulty of obtaining this guar- antee occasioned another vexatious delay which was all the more annoying that just 'at this time the Baltimore & Olio railroad began to act, as the canal claimed, in bad faith about their con- tract. It was felt and the mining companies so said, that if they refused to give the guaranties the Legislature would repeal the requirement. But the persistent energy to Mr. Coale overcame, all obstacles'and by December the guaranties were gotten from a great number of parties including a guaranty of 20,000 tons per year from 122 citi- zens of Washington County. Under the require- ments of the act the bonds could not be sold for less than par, and this was found impossible, there- fore, the company made a contract with Messrs. Guynn, Thompson, Hunter and Cunningham to complete the work and to receive in payment $1,- 625,000 of the bonds, bearing six per cent. inter- est but the contractors were, in addition to doing the work for these bonds to pay the company $100,- 000 in cash and oblige themselves to pay interest on the bonds until the entire canal should be opened, amounting to $90,000, leaving $1,435,000 as the actual amount they received and that pay- able in bonds. It was not until October 1817, that the contractors were able to place any of tlie bonds and in the meantime work had languished and had been actually suspended for a few days, and two of the contractors, Messrs. Guynn and Thompson withdrew, and Mr. Thomas G. Harris, of Washington County became associated with the remaining two, Wm. B. Thompson, of George- town and James Hunter, of Virginia. These con- tractors became bankrupt and the contract was taken in July 1850, by Michael Byrne, of Freder- ick County, and by him completed-the entire cost of the work from Washington to Cumberland being $11,071.176 or $39,618 per mile.
At 5 o'clock p. m., June 11, 1850, the gates at Cumberland were opened by Charles B. Fish, the chief engineer of the company, and water ad- mitted into the western level of the canal and a new boat named the "Cumberland" floated in. A
great concourse of people was present to witness the ceremonies. On the 10th of the following October the completion of the canal was celebrated at Cumberland with claborate ceremonies. The president at that time was James M. Coale; Jolin Pickell, Wm. C. Johnson, Wm. A. Bradley, George Schley and S. P. Smith were directors. The State Government was represented by its agents, Gov. Sprigg, J. Van Lear and Gen. Teneh Tilgh- man, Senator Wmn. D. Merrick, the Mayor of Georgetown and other prominent gentlemen were present. A long procession marched through the streets to the canal locks where there was a great gathering. "Five canal boats, laden with the rich product of the mines of Allegany and des- tined for the eastern markets, were passed through the locks amidst the salvos of artillery from the Eckhart Company, accompanied by the brilliant performances of the bands."*
Mr. William Price mounted the deck of one of the boats and in behalf of the mayor and council of Cumberland welcomed the visitors to the city. In the course of his remarks he said that "The opening of yonder gates to let through the first boat carrying freight from Cumberland to tide water, signalizes a happy epoch in the financial condition of the State. It is the turn- ing point in the history of the canal, and marks the precious moment of time when this great work ceases forever to be a burden upon the tax payers of Maryland and begins to reimburse those who have so long and so patiently borne the charge of its construction."
This hopeful view of the situation, whilst less ambitious than the predictions of President Adams made when ground was broken two and twenty years before, have been unhappily, almost equally far from realization. President Coale responded to this address in a carefully prepared spcech in which he reviewed the past efforts and struggle of his work and set forth what might be hoped for in the future which even included the original design of reaching the Ohio river. The party then embarked and went down the canal ten miles to a large spring and there enjoyed a collation which had been prepared by the company. In the eve- ning a dinner was given by the citizens of Cum- berland and the day's festivities closed with a ball.
Of the $8,359,400 of the capital stock of the canal, $133,209.61 was not paid in. The State of Maryland owned $5,000,000 of the stock, which was a large majority of the whole, and gave the
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HISTORY AND BIOGRAPHICAL RECORD
State entire control of the company. This stock was voted by the Board of Public Works, which ap- pointed the President and Directors. The State was, therefore alone responsible for the man- agement and mismanagement of the work from the beginning down to 1890. In 1842 the Legisla- ture passed an act authorizing the sale of the State's interest for five millions of dollars, but a purchaser could not be found. At the close of the fiscal year, Sept. 30, 1888, in addition to the five millions of stock, the State held canal bonds for the two millions loaned and there was due the State an accumulation of interest amounting to $19,177,- 460.77. By the Constitution of 1867, the Legisla- ture was prohibited from selling the State's interest in the canal unless the bill to that effcet is approv- ed by the succeeding Legislature.
A complete list of the presidents of the com- pany is as follows :
Charles F. Mercer, from 1828 to 1832 ; John H. Eaton for 1833; George C. Washington, from 1834 to 1838; Francis Thomas, for 1839 and 1840; Michael C. Sprigg, for 1841; W. Gibbs McNeill, for 1842; James M. Cole, from 1843 to 1851; William Grason, for 1852 and 1853; Samuel Hambleton, for 1854 and 1855; William P. Maulsby, for 1856 and 1857 ; Lawrence J. Brengle, for 1858 and 1859; James Fitzpatrick, for 1860; Alfred Spates, from 1861 to 1864; Jacob Snively, for 1865 and 1866; Alfred Spates, for 1867 and 1868; Josiah H. Gordon, for 1869; James C. Clarke, for 1870 and 1871; Arthur P. Gorman, from 1872 to 1882; Lewis C. Smith, for 1883 and 1884; L. Victor Baughman, for 1885 and 1886; Stephen Gambrill, from 1886 to 1890.
During the war the canal under the Presi- dency of Col. Alfred Spates performed efficient service for the Government in the transportation of supplies. In April 1862, Adjutant General Thomas issued a general order that all officers of the army should respect Mr. Spates as President of the canal, and prohibiting them from interfer- ing with him in the management of the work, but should aid and assist him in keeping it in repair and removing obstructions and removing all ob- structions and intericrence with boats passing through the lines. Several attempts by the Con- federates to destroy aqueducts were foiled by the magnificent character of the masonry. During the presidency of James (. ('lark, and the first few years of that of A. P. Gorman, his successor, the canal was very prosperous, the revenues reach-
ing almost a million of dollars a year. In 1869 the sum of $160,000 had accumulated in the treasury of the company. This was the first time within the history of the company that receipts had exceeded expenditures and the question arose, how the money should be distributed among the contending claimants who held the securities of the work. The Commonwealth of Virginia brought suit to establish her claim to certain priorities and the Legislature of Maryland passed an act sub- mitting her rights to the decision of the court with the rest. In the case The Commonwealth of Virginia rs. the Chesapeake and Ohio Canal Company et. al. 32 Md., the whole financial his- tory of the canal is reviewed and the rights of each class of claimants settled.
By the act of 1834, ch. 24, the State of Mary- land loaned the canal two millions of dollars and took as security, for the principal and six per cent. interest, a mortgage of all its lands, tenements, works, property, rights, nct tolls and revenues. This was the first lien upon the canal.
By the act of 1835, ch. 395, the State sub- scribed three millions additional to the capital stock of the company, and by chap. 396 of the laws of 1838, $1,375,000. As a condition to these subscriptions a guaranty, after the expiration of three years, was exacted from the company, of a dividend of six per cent. semi-annually out of the profits of the company. This guaranty was duly executed, and in payment of this subscription of the capital stock amounting to $4.375,000, the State issued her bonds to the company. As a fur- ther condition the company was to pay the inter- est on these bonds for the three years ending July 1, 1842. It failed to meet this engagement, and was compelled. by the act of 1838, chapters 386 and 396, to execute mortgages to the State upon its property and revenues to the amount of $663,- 611.94, the interest upon the sterling loan which the State had to pay by reason of the default of the canal.
This constituted the second lien upon the canal.
In 1841 the canal had been constructed to Dam No. 6, fifty miles from Cumberland. Its re- sources were exhausted and its credit gone, and it remained in this crippled and almost useless condition until 1845.
On the 10th of March, 1845, the act of 1844, chap. 281, became a law. Previously to this the canal had no express authority to borrow money.
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OF WASHINGTON COUNTY, MARYLAND.
None had been conferred upon it by its charter. But this act authorized the company to borrow upon its bonds such sums, not exceeding $1,700,- 000, as might be required to complete the canal to Cumberland. These bonds were to be payable in not less than thirty-five years and to bear six per cent. interest payable in January and July, and to be preferred liens on the revenues and tolls of the company from the entire length of the ca- nal, which tolls and revenues were pledged and appropriated for their payment, principal and in- terest.
The State waived and postponed her prior rights and liens upon the revenues of the company in favor of these bonds "so as to make them and the interest to accrue upon them preferred and absolute liens on said revenues, until the bonds and interest should be fully paid." The second section of the act gave authority to use a sufficient portion of the revenues to pay expenses and repairs and provide an adequate quantity of water.
In 1848 the company issued these "Preferred bonds" to the amount of $1,699,500 and executed a mortgage upon the tolls and revenues to Phineas Janney, W. W. Corcoran, Horatio Allen, David Henshaw and George Moray, trustees, to secure the bonds.
The canal company, on the 8th of January, 1846, as required by the act of 1844, executed a new mortgage to the State, securing the two mil- lion loan of 1834.
In 1847 the State of Virginia guaranteed the payment of $300,000 of the preferred bonds. The interest was paid on this amount by Virginia for about ten years and she claimed to be reimbursed, but the court decided that this could not be done until all the overdue unpaid coupons were paid, and then the principal of the bonds, after which the coupons paid by Virginia could be repaid to her.
But Virginia was guarantor of another sct of bonds After the completion of the canal front Dam No. 6 to Cumberland the Georgetown end absolutely needed repairs; there was not enoughı revenuc to pay expenses and the preferred bonds was dedicated to the construction of the Western end. In this emergency application was made to the Legislature of Virginia for a loan of $200,000. In response that State agreed to endorse the bonds of the company to that amount provided her Board of Public Works should certify that the State would run no risk, or that the bonds were "suffic-
iently secured." The question whether the com- pany had the power to issue such bonds and to make them superior to the "Preferred Bonds," having arisen, Gov. Thomas called for the opinion of Attorney General George R. Richardson, who submitted his written opinion that such a power existed. Upon this Virginia endorsed the bonds and they were sold at a premium. These bonds were known as the "Repair Bonds."
These repair bonds, according to the decision of the Court of Appeals, take precedence over the Preferred Bonds. The court, referring to them, used this language: "In answer to this (the ar- gument that nothing should or could take prece- dence over the Preferred Bonds) it may well be retorted, of what value would these Preferred Bonds now be, or will they be hereafter, if the power to raise money by loan on the pledges of its revenues for the purpose of repair does not exist in this company?" It was decided the company had the power to issue these bonds under its amended charter, chapter 124, of the act of 1843, and in the last proviso to the second section of the act of 1844, ch. 281.
The company, being in default on the cou- pons of the preferred bonds falling due July 1, 1851 and January 1, 1852, made an arrangement with Selden, Withers & Co., bankers, of Wash- ington, who took up these coupons amounting to $143,000. The company afterwards issued to the firm interest bearing certificates of debt to the amount of $140,000. These certificates were transferred to the State of Virginia along with the coupons represented by them. It was con- tended that these certificates in some sort of way, under the agreement with the company, enjoyed a precedence over other liens, but the Court of Ap- peals decided that the agreement was simply to borrow money from Selden, Withers & Co., and with that money so borrowed the coupons had been paid and extinguished.
Another class of claims against the canal were the creditors of the old Potomac Company, which assigned its charter to the canal company August 15, 1828, in consideration of the payment of their debts by the latter company, amounting, as was supposed, to $175,800. In 1836, certain of the Potomac Company stockholders, who refused to invest in the canal, surrendered their claims against the former, receiving in lieu thereof, canal certificates of debt for one-half of the amount of their claims. The interest on these certificates
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HISTORY AND BIOGRAPHICAL RECORD
has not been paid since January 1, 1841. Under the act of 1844 these creditors have a lien upon the tolls and revenues of the canal to the extent of $5,000 a year, in preference to the claims of the State, but subsequent to the preferred and repair bonds.
Another class of securities appeared in 1878. In 1877 there was a flood, which inflicted very heavy damage upon the canal, far beyond the abil- ity of the company to repair. To meet this the Legislature of 1878 passed a law to "make effec- tual the act of 1844," and authorizing the issuing of $500,000 of bonds "for the purpose of putting and keeping the said Chesapeake and Ohio Canal and its work in good condition and repair, for the payment of the current expenses of the canal," de. To secure these bonds, as provided by the act, the company executed a mortgage to Geo. S. Brown, Jas. Sloan, Jr., and Lloyd Lowndes, Jr., upon "the revenues and other property, land, water rights and franchises." The trustees arc author- ized in case of a default in the payment of three successive semi-annual coupons, upon an applica- tion in writing of the holders of a majority of the bonds, to proceed to foreclose the mortgage or to apply to the courts for the appointment of a receiver.
The bonds of 1878 were by virtue of this act, to take precedence of the State's mort- gages. With the money obtained from the sale of these bonds the canal was restored and business resumed, but in a greatly reduced volume.
In 1889 the great flood occurred, which cre- ated havoc throughout many States. At Johns- town, Pa., there was appalling loss of life and property. In this flood the Chesapeake and Ohio Canal was almost demolished. Being hopelessly insolvent, the company was without means to make repairs, or even to arrest the decay of disuse. Under these conditions, in December 1889, a bill was filed in the equity side of the Circuit Court for Washington County by the trustees of the bondholders of 1844, asking for the appointment of a receiver, to take charge of the property and to repair and operate it. The Canal Company answered, protesting against the appointment of a receiver,and asking for the immediate sale of the property. The At- torney General of Maryland, under authority of joint resolutions passed by the Legislature, also filed an answer resisting the appointment of re- ceivers, and asking for a sale of the property. On
January 15, 1890, the trustees under the mort- gage of 1878 filed a bill for the foreclosure of their mortgage and a sale of tlie canal. The cases were consolidated, and on March 3, 1890, Chicf Justice Alvey appointed three receivers to make an exam- ination of the canal and report its condition, along with the prospects of future business, in case the canal should be repaired. These receivers were Richard D. Johnson of Cumberland, Robert Bridges of Washington County, and Joseph D. Baker, of Frederick. They subsequently reported to the court that the promise of business did Lot in their judgment justify the cost of repairs, and they therefore recommended the sale of the prop- erty. For a number of years before this, after the business of the canal had dwindled down to a small volume, there had been efforts by various railroad companies to get possession of the great work, in order that the tow path might be used for the bed of a railroad. The West Virginia Cen- tral and Pittsburg Company and the Western Maryland had both tried to get it, and a company had been chartercd for the express purpose of building a road along the canal from Georgetown to Cumberland.
After the report of the trustees it was believed at last that the defunct canal would be replaced by a live railroad. But these expectations were doomed to disappointment. In August, 1890, the Attorney General, Mr. John P. Poe, amended his answer in behalf of the State by inserting a par- agraph asking for "the sale of the canal and all the franchises and property of the Canal Company as described in the three mortgages from the Ca- nal Company to the State of Maryland, the first dated April 23, 1835, the second May 15, 1839, and the third January 8, 1846." Thereupon the trustees for the bondholders of 1844, men closely identified with the Baltimore & Ohio Railroad Company, asked for the possession of the canal under the mortgage of 1848, to restore and operate it. This was done upon the theory that the inort- gage of the 1844 bondholders was only on the rev- cnues, and if the canal was sold, their security would be gone. Thereupon Judge Alvey, on Octo- ber 2, 1890, passed a decrec for the sale of the canal but provided that the sale should be sus- pended for four years from May 1, 1891 upon cer- tain conditions. In that time the trustees for the bondholders of 1844 were to have possession of the canal, to repair it at their own cost and then to operate it. This was done, and the eanal was re-
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OF WASHINGTON COUNTY, MARYLAND.
stored to a better condition than ever before. But the traffic on it has been small compared with that of former years. Judge Edward Stake, in the Cireuit Court for Washington County, granted an extension of time for the operation by these trus- tees for six years from May 1, 1895. Again in 1901 the time. was extended, this time to January 1, 1906. On Nov. 29, 1904, Mr. F. S. Landstreet, on behalf of the Western Maryland Railroad Com-
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