USA > Ohio > Franklin County > Columbus > History of the city of Columbus, capital of Ohio, Volume II > Part 37
Note: The text from this book was generated using artificial intelligence so there may be some errors. The full pages can be found on Archive.org (link on the Part 1 page).
Part 1 | Part 2 | Part 3 | Part 4 | Part 5 | Part 6 | Part 7 | Part 8 | Part 9 | Part 10 | Part 11 | Part 12 | Part 13 | Part 14 | Part 15 | Part 16 | Part 17 | Part 18 | Part 19 | Part 20 | Part 21 | Part 22 | Part 23 | Part 24 | Part 25 | Part 26 | Part 27 | Part 28 | Part 29 | Part 30 | Part 31 | Part 32 | Part 33 | Part 34 | Part 35 | Part 36 | Part 37 | Part 38 | Part 39 | Part 40 | Part 41 | Part 42 | Part 43 | Part 44 | Part 45 | Part 46 | Part 47 | Part 48 | Part 49 | Part 50 | Part 51 | Part 52 | Part 53 | Part 54 | Part 55 | Part 56 | Part 57 | Part 58 | Part 59 | Part 60 | Part 61 | Part 62 | Part 63 | Part 64 | Part 65 | Part 66 | Part 67 | Part 68 | Part 69 | Part 70 | Part 71 | Part 72 | Part 73 | Part 74 | Part 75 | Part 76 | Part 77 | Part 78 | Part 79 | Part 80 | Part 81 | Part 82 | Part 83 | Part 84 | Part 85 | Part 86 | Part 87 | Part 88 | Part 89 | Part 90 | Part 91 | Part 92 | Part 93 | Part 94 | Part 95 | Part 96 | Part 97 | Part 98 | Part 99 | Part 100 | Part 101 | Part 102 | Part 103 | Part 104 | Part 105 | Part 106 | Part 107 | Part 108 | Part 109 | Part 110 | Part 111 | Part 112 | Part 113 | Part 114 | Part 115 | Part 116 | Part 117 | Part 118 | Part 119 | Part 120
278
HISTORY OF THE CITY OF COLUMBUS.
new route to Baltimore and Washington vio the Marietta & Cincinnati Railway and the Parkersburgh Branch of the Baltimore & Ohio. The Straitsville Branch was opened for general business on January 2, 1871. Large deposits of iron ore had been found on the line of this branch at Gore, and three coal companies were in opera- tion at New Straitsville, two more were nearly ready for work, and it was believed that by the following spring the capacity of these mines would reach one hundred cars per day. On the main line five mines were in operation, with a capacity of 250 cars per day.
On December 31, 1871, the superintendent reported that notwithstanding the greatest flood known in the Hocking River for many years, and a twomonths strike of miners, the net income of the road during the year then ended was suf- ficient to pay the interest on all the bonds and ten per cent. on the stock of the company. At the election of January 24, 1871, W. B. Brooks, C. P. L. Butler, Theodore Comstock, William Dennison, William G. Deshler, Isaac Eberly, John L. Gill, M. M. Greene, John Greenleaf and B. E. Smith, of Columbus ; John D. Martin, of Lancaster, C. H. Rippey, of Logan, and S. W. Pickering, of Athens, were chosen directors. B. E. Smith was elected president in lieu of P. Hayden. The report of the company for 1870 stated that the labor strikes of the two years preceding had caused it a loss of not less than fifty thousand dollars. Eightysix subscribers to the company's stock, most of whose engagements were for small amounts, failed to pay the instalments as they became due. Some had paid five or ten per cent. As the law provides that in such cases the delinquent stock may be sold at public auction, fiftyeight sbares were thus disposed of at from seventy- one to seventyfour and a half dollars per share, in other words at a premium of from fortytwo to fortynine per cent., so that to those who had paid only five or ten per cent. on their subscriptions there was something due after charging them with all the due instalments and interest. In 1872 a new roundhouse and new shops were constructed and a new freight yard arranged for the company at Col- umbus. In order to test the value of steel rails as compared with those of iron, fifty tons thereof were purchased and laid in sidings at the south yards where the heaviest wear took place.
In April, 1872, by previous consent of the stockholders, the company issued a second mortgage of $1,000,000, from which the sum of $300,000 was to be used in redeeming a like amount of the Straitsville Branch bonds. Four hundred and twenty tons of steel rails were laid during the year 1872, and twentyeight and a half acres of ground were purchased for a roundhouse, shops and sidetracks at the station in the southern part of Columbus. For the greater part of this ground the sum of $1,000 per acre was paid. The Monday Creek Branch was located in 1873 but its construction was delayed on account of the financial stress of that year. On August 17, 1874, Henry C. Noble was chosen director vice William Dennison, resigned. Owing to the suspension of manufacturing during that year the ton- nage of the road declined from 890,396 to 526,022 tons. On March 17, 1874, an agreement was made by which the use of the tracks of the Pittsburgh, Cincinnati & St. Louis company was obtained by the Hocking Valley from the intersection of the two roads at or near Dennison Avenue at a rental of $2,700 per year in
279
RAILWAYS.
monthly instalments, the Hocking Valley company agreeing not to discriminate in favor of any road of the Panhandle organization and making further engage- ments as to division of receipts.
At the annual meeting of the stockholders held in April, 1874, a report was made showing a decrease of earnings for the preceding year. John G. Deshler, a stockholder, presented a memorial sharply criticising the management, but this criticism did not affect the result of the election. On September 1, 1874, John W. Doherty resigned the office of superintendent and was succeeded by George R. Carr. At the same time B. S. Brown, P. W. Huntington and H. W Jæger were elected directors vice Theodore Comstock, John Greenleaf and B. E. Smith.
On May 20, 1876, a few of the company's employés organized the Hocking Valley Mutual Life Insurance Company, each member of which was required to pay a small membership fee and an assessment of one dollar for each death. The first assessment, made March 26, 1878, amounted to 8230. The report of the secre- tary at the last annual meeting showed that the total assessments had amounted to $39,540, and that the largest single assessment had been $771. The membership now includes employés of the Columbus, Hoeking Valley & Toledo Company.
Joint operation of the Columbus & Hocking Valley and the Columbus & Toledo railways under the name of Columbus, Hocking Valley & Toledo, was agreed upon in 1876, Orland Smith being appointed general superintendent of the united lines. A continuous track of steel from Columbus to Nelsonville and Straitsville was reported at the annual meeting in 1877, and in July of that year construction of the Monday Creek and Snow Fork branches was begun. The first accident to a passenger occurred in 1877. Owing to damage to the track done by high water near Millville an engine was thrown into the river and some cars were derailed. Colonel James Kilbourn, of Columbus, had a leg broken and four other persons were slightly injured. At the annual meeting in 1878, the presi- dent reported that the entire road from Columbus to Athens and the Straitsville Branch from Logan to New Straitsville had been laid with steel rails. An increase of 150,000 tons in freight had produced an increase of only 835,575.05 in receipts, the average rate of freight per ton per mile being only one and nineteen hundredths cents. In 1879, William Dennison was again elected director, taking the place of W. B. Brooks. Eight iron furnaces were reported in blast on the line of the road in that year. The earnings of the road for the year 1879, showed an in- ercase of $161,019.47 over those of the year before. During this year a contract was made for completion of the Ohio & West Virginia road from Logan to Pomeroy via McArthur, eightyfive miles. On January 2, 1879, the Columbus City Council authorized the company to construct, maintain and operate two tracks from its premises on the north side of Maple Street to and across Maple and Spring streets, to which arrangement the owners of abutting property had given their consent.
The Monday Creek Branch from Greendale to New Straitsville, five miles, and the Sand River Branch, two and a half miles, were completed this year, at the end of which the paid up stock amounted to 82,400,000 and $300,000 of the Straitsville Branch bonds, with a like amount of second mortgage bonds, had been
Run
280
HISTORY OF THE CITY OF COLUMBUS.
redeemed. The president earnestly recommended that a double traek should be laid from Columbus to Logan to accommodate the rapidly increasing business.
On August 20, 1881, an agreement was made for consolidation of the Hocking Valley, Columbus & Toledo and Ohio & West Virginia lines as the Columbus, Hocking Valley & Toledo Railway, embracing the main line from Toledo to Pom- eroy, the Athens Branch from Logan to Atbens, the Straitsville Branch from Logan to New Straitsville, the Monday Creek Branch from New Straitsville to to Nelsonville, the Snowfork Branch from Monday Creek Junction to Orbiston, making with other branches and sidings a total trackage of 402 miles.
About June 20, 1881, a rumor gained cireulation that President M. M. Greene had made arrangement for the sale of the stock of the company. This rumor caused great excitement among the stockholders, but it soon became apparent that some of the largest holders of the stock had assented to the sale and that the prob- abilities therefore were that the control of the corporation would pass away from those who then held it. At that time the stock and bonds were both commanding a liberal premium in the market. A very large proportion of thiem was owned by citizens of Columbus and used as a permanent investment by individuals, executors, administrators and other trustees. The first official notice of the proposed sale that came to the directors was received at a meeting of the executive committee on July 5, 1881. A stock dividend had been declared but not yet issued ; the issue was suspended "owing to pending negotiations," and on July 15, after the sale and transfer had been completed, the record of the directors contained the first reference to it. Such influences were brought to bear on the stockholders that they all, with one exception, agreed to and did assign their stock in accord- ance with the agreement made by the President. The board of directors was as mueh surprised at this agreement as any of the other stockholders. All the stock of the three companies, except seven shares of the Columbus & Hocking Valley, was sold and transferred. Few persons knew at the time to whom the sale was made. The money was paid to the stockholders by the Deshler Bank on the floor below the office of the railway companies, and all the certificates of stock taken up during the day were consolidated into one in the name of M. M. Greene, trus- tee, and forwarded at once to Winslow, Lanier & Co., New York. The purchasers were only known at the time as a Cleveland party, but subsequent developments showed them to be Stevenson Burke, Charles Hickox, William J. McKinnie, Chauncey Andrews, W. C. Andrews, Charles G. Hickox, N. P. Payne and Payne, Newton & Co. These parties were not known to the accounting officers of the companies nor to the stockholders, with very few exceptions. For the Columbus & Hocking Valley stock, the par value of which was fifty dollars per share, the price paid was seventyfive dollars per share; for the Columbus & Toledo $62.50, and for the Ohio & West Virginia forty dollars per share. According to the presi- dent's testimony this was at least twentyfive per cent. higher than the stock had been know to be sold for, and this was certainly true so far as the Ohio & West Virginia was concerned, that stock never before having been sold, according to testimony, for more than five dollars per share.10
281
RAILWAYS.
What was the inducement which caused this party to pay what was deemed so much above the market price for the stock of these roads ? First, the capital stock of the three roads outstanding in 1880 was of the par valne of 83,975,000. At the time of the purchase the stock was increased to $20,000,000, of which $10,305,000 was issued, making a net increase of $6,330,000. An issue of $14,500,000 of bonds was agreed to and made, being an increase of $9,677,374 over the amount at the time of the purchase, making an increase in stock and bonds of $16,007,374. The further statement should be made that the parties who offered to purchase the stock of the roads constituted the Hocking, Coal & Railroad Company, which they had incorporated June 8, and which was the ostensible owner of ten thousand acres of coal land in the Straitsville coal field. This land the railway company was to purchase for 88,000,000 of its own stock. That is, after the purchase, the owners of the railway and the owners of the coal land would be identical, and the railway company was to purchase of itself ten thousand acres of coal land for 88,000,000 of its own bonds, which put a value of eight hundred dollars per acre on lands deemed by experts to be worth in the market not more than eighty dol- lars per acre.11
The evidence does not show the precise sum realized by Burke and-associates, but it can be approximated. They received par valne for the $8,000,000 of bonds and sold their stock at say fortytwo and onehalf per cent., which would produce $4,970,927, the stock issued at the time of the sale being $11,696,300. These two items amount to $12,970,927. Add to this sum the value of threefourths of the stock of the Toledo & Ohio Central Railway Company (83,525,000), received in exchange of stock of the two companies, as hereafter explained, which according to the last quotation was rated at fortyfour per cent., and we have $14,521,927. To this add $2,000,000 of bonds issued which were worth about ninety per cent., and we have $16,321,921. From this deduct the amount paid for the stock of the three companies, which was about 87,500,000, and we have a residue of 88,821,921, as the probable cash return on the operation. As there seem to have been ten persons or firms interested in the purchase, the net profit to each one would appear to have been about three quarters of a million dollars without having invested a dol- lar of his own.
From a contract brought forward in a suit now pending in the courts of New York it appears that Mr. Greene was to receive $100,000 of the bonds to be issued, 82,000,000 of the new stock, and $15,000 per year as president of the new company for five years. His stock was sold at about thirty per cent. and his bonds were worth about par at that time.
Commenting on the sale the Ohio State Journal of June 20 said :
Nothing has created such a stir in this city for many years as the gobbling up of the Columbus & Hocking Valley, Columbus & Toledo and the Ohio & West Virginia railroads by a Cleveland syndicate. . . . The stock of the Hocking Valley road in particular has been the pet stock for Columbus investors and so reliable has it been in its dividends that it became a favorite wedding present, or for those of small means who looked rather to revenue than an investment for speculative purposes.
282
HISTORY OF THE CITY OF COLUMBUS.
The same paper of June 21 thus resumed the subject :
It has been many a day since anything has created more agitation in this city than the transfer [above mentioned]. The matter was the subject of comment everywhere yesterday and the city had much of the appearance of a money centre. Deshler Block, High and Broad streets, seemed to be a regular stock exchange with all the highflying and speculating of New York or Chicago.
Same paper, July 15:
It is mentioned as a matter of peculiar interest that at the meeting of the Hocking Valley & Toledo directors this week, for the first time in the history of the roads, being over ten years, the question of dividends was not considered, or even mentioned. It is said to have passed out of sight.
Same, July 21 :
There is now considerable comment on the change, since the consolidation of the three roads under the name of the Columbus, Hocking Valley & Toledo Railway Company, and the increase of the capital stock to $20.000,000. This large capital stock, of course, is only authorized. . . . The stock has been watered to a fourfold increase. . . . The only dividends paid were the regular semiannual dividends of four per cent. on the two million five hun- dred thousand of Hocking Valley stock, or just half the total amount, so that the stock is now watered eightfold on that heretofore. paying a dividend. As a matter of fact the syndi- cate running the consolidated roads has not paid out a cent of money from their own pocket for their great purchase. They . . . arranged with their financial agents. Messrs. Winslow, Lanier & Co., for $15,000,000 of bonds on the road. . . . It was from the proceeds of this sale that all the stock of the three roads was paid for. . . . Of course there is much random spec- nlating as to what this stock will be worth. It is not likely that it will be grabbed up very lively. . . . The amount the syndicate will make out of the transaction is estimated all the way from five to fifteen millions of dollars.
The following is an abridged history of the transaction gleaned from the records of the company, the correspondence and the evidence in a suit brought by the later owners of the railway : On February 14. 1881, Stevenson Burke, of Cleveland, wrote to M. M. Greene, president of the three railway companies, calling his atten. tion to " various schemes proposed for getting to the Perry and Hocking coalfields," and stating that " there has been for some little time a disposition among some of the parties holding land in that quarter to unite in the building of another road to Columbus, and at this time, when railroads can be built by the issuing of bonds, it is difficult to estimate in advance what may or may not be done by energetic men when they set about it." Mr. Burke continued : " I want to suggest to you whether it is not better for your company to possess itself of eight or ten or twelve thousand acres of that land most available to you while it is at a comparatively low price. . . . I do not care to have you speak of this matter except to those inter- ested in four property, but if you are willing to look at the proposition in a busi- ness light, I am sure that so far as the owners of your property are concerned they would prefer to deal with you."
The first interview between the parties of which we have any record took place on June 9. On June 11, Burke wrote to Greene as follows :
Referring to our talk on Thursday [June 9] and the plan of our party purchasing all the stock of your three roads at about the price we named, I have submitted it to three or four
283
RAILWAYS.
of our parties, to wit : Messrs. Payne, Wade, C. H. Andrews and W. H. McKinnie, and they all seem to think well of [it] and express their willingness to help carry it ont. . . . Ilickox and myself, however, control twothirds of the nine thousand acres of coal land we all hold now, and it is possible [possible ! ! ] we might be willing to exchange for stock on a fair basis, say, 125 of each stock, $250 in all, of C., H. V. & T. and C. & T. stock for each acre of land - $1,125,000 each road - each road to own onehalf of the land.
On June 13 Burke wrote again from Cleveland :
I can meet you here Wednesday, fifteenth, if agreeable. If it would excite less attention I can meet you at Columbus Thursday, sixteenth, and devote all day if necessary to it, and if you desire, Mr. Deshler could meet with us [Mr. Deshler was not consulted]. Since I saw you I have been considering the mode of raising the money to refund the cash put into the purchase of the stock of your three companies. It may or may not be best to sell five per cent. bonds; probably it would be hest to do so if such bonds, being first mortgage on the land and secured on the road, could be floated at par ; otherwise it might be best to issue no more mortgages, but to make it all stock, roads and land, and then sell enough of the new stock to refund the money. There is no doubt, if the properties are all consolidated or held in one interest, being worth from five to ten millions more than now, and we may as well have some of that benefit as give it all to others.
On June 16 Mr. Burke made a written proposition to Mr. Greene, and on July 1 the two met in New York and a written agreement was entered into with Wins- low, Lanier & Co., for a loan of six millions of dollars, not to the railroad compan- ies, but to Burke and associates to enable them to purchase the stock of the three companies. This agreement provided in substance: 1. That Drexel, Morgan & Co. should loan to Burke and associates six million dollars for four months from July 1, 1881, on their joint and several notes. 2. That the money thus borrowed should be used solely for the purchase of the stock of the three companies at prices agreed upon. 3. That the stock of the companies when purchased should be transferred to M. M. Greene as trustee, indorsed by him in blank and transmitted daily to Winslow, Lanier & Co., and by them handed over to Drexel, Morgan & Co., as part security for the loan. 4. That as soon as practicable the three compan- ies should be consolidated into one and the stock of the three purchased under the agreement should be exchanged and merged into the stock of the new company, and this stock to the amount of ten million dollars, or the total thereof, should be held by Drexel, Morgan & Co. as security for the loan. 5. As soon as practic- able after its formation the new company should issue 14,500 bonds of 81,000 each, secured by mortgage on its property and upon ten thousand acres of coal land, which was at the time the land of Burke and associates; $6,500,000 of which bonds should be used to pay off the outstanding bonds of the three com panies, and the remaining eight millions of the bonds should, as soon after the formation of the new company as possible, be issued and delivered to Drexel, Morgan & Co., as additional security for the loan. 6. If the new com- pany could not lawfully own and mortgage the coal lands (which it plainly could not do), then Burke and associates should organize a coal company, cause the lands to be deeded to it, and cause that company to legally secure the bonds by the coal lands.
284
HISTORY OF THE CITY OF COLUMBUS.
As part of this agreement, Burke and associates assigned to Drexel, Morgan & Co. the $8,000,000 of bonds, and gave them full power to sell and apply the pro- ceeds to the payment of their loan; and they further gave Winslow, Lanier & Co. an option tor ninety days to purchase 86,000,000 of these bonds at par and accrued interest, with the condition that if they exercised that option they should apply the proceeds of the bonds so purchased to the payment of the notes in the hands of Drexel, Morgan & Co. And all this was done before Burke and associates had any interest whatever in any of the bonds or stock they were thus dealing in or with, and before the company was incorporated by which they were to be issued, for this was not completed until September 10.
At a meeting of the executive committee held July 5, 1881, Mr. Greene made known the existence of the negotiations. He reported that on or about June 8, 1881, certain gentlemen of Cleveland, interested in certain coal lands in the Hocking Valley near the line of this road and its branches, had filed a certificate of incorporation to construct the new railway from Columbus to their coal lands and other points. As soon as this was made public the president, after consulting with some of the directors, communicated with the incorporators of the new road and it was ascertained that these parties intended to build such a road unless they could buy the whole or a controlling amount of the stock of the Columbus & Hocking Valley, or unless that company would purchase their coal lands ; where- fore the president submitted a form of option to Burke and associates containing the following, to be signed by the stockholders :
WHEREAS, it is the opinion of our president, M. M. Greene, and others largely interested, that said corporation will become a formidable competitor to our railroad if constructed ; and
WHEREAS, to obviate such competition negotiations are now pending between M. M. Greene, president, and said Cleveland parties to sell the stock of the said C. & H. V. Railroad Company to said Cleveland parties, now to promote said negotiations on our part, we, the stockholders . . . hereby agree to such sale,
A few discrepancies between this recital and the history of the transaction as shown in the correspondence will readily suggest themselves to the mind of the reader. The transfer of the stock was begun July 8, just one week after the con- tract was signed in New York and two days after the proposition was made known to the executive committee. The proposition was not brought before the board of directors until July 15, and that was after the stock had been nearly all transferred.
The next move was the consolidation of the three companies, which was effected on September 10, by the election of Burke and associates, with M. M. Greene as president, at a salary of 815,000, and John W. Ellis, of the firm of Winslow, Lanier & Co., of New York, as a director, the choice of Ellis being made at the suggestion of Mr. Burke.12 At the first meeting of the board a resolution was adopted authorizing Burke and Hickox to unite " in the purchase of the stock of the Snowfork & Cleveland Coal Company to the amount of 8267,500, and to issue the notes of the company therefor, said Hickox and Burke agreeing to pay for said stock and allowing the company to hold the amount in bonds due them until they paid for the stock." Why the bonds were " due them " does not appear, but
285
RAILWAYS.
they seem to have perceived that the law did not allow the company to deal in coal lands, for on the sixteenth, just six days after the consolidation, the Hocking Coal & Railroad Company was organized at Cleveland with a capitil stock of 83,000,000. This was in accordance with the agreement in New York, that if it should be found that the railroad company could not own the coal lands a com- pany would be formed for that purpose. On September 19 the corporators of this company met and opened books for subscription, limiting the amount to $1,500,000, which was promptly taken by the following parties: The Continental Coal Company by W. J. McKinnie, president ; W. J. McKinnie, Charles J. Hickox, William B. Sanders and others. No amounts were subscribed by the parties, the whole being taken in bulk. Nothing was paid then or at any time afterwards.
Need help finding more records? Try our genealogical records directory which has more than 1 million sources to help you more easily locate the available records.