USA > Oregon > History of Oregon, Vol. II, 1848-1888 > Part 69
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Before Barry quitted Washington he succeeded in having a bill introduced in the lower house by Cole of California, the terms of which granted to the California and Oregon Railroad Company of California, and to such company
698
RAILROADS.
organized under the laws of Oregon as the legislature of the state should designate, twenty alternate sections of land per mile, ten on each side of the road, to aid in the construction of a line of railroad and telegraph from some point on the Central Pacific railroad in the Sacramento Valley to Portland, Oregon, through the Rogne River, Umpqua, and Willamette valleys, the Cal- ifornia company to build north to the Oregon boundary, and the Oregon com- pany to build south to a junction with the California road. Cong. Globe, 1863-6, ap. 388-9; Zabriskie's Land Laws, 637; Veatche's Or., 12-21. This bill, which was introduced in December 1864, did not become a law until July 25, 1866, and was of comparatively little value, as the line of the road passed through a country where the best lands were already settled upon. The bill failed in congress in 1865 because Senator Conness of California refused to work with Cole. It passed the house late, and the senate not at all. S. F. Bulletin, March 8, 1865; Eujene Review, in Portland Oregonian, April 1 and 26, 1865. The California and Oregou railroad had already filed articles of incorporation at Sacramento, its capital stock being divided into 150,000 shares at $100 a share. When the subsidy bill became a law the Oregon Central Railroad Company was organized, and the legislature, accord- ing to the act of congress, designatedl this company as the one to receive the Oregon portion of the land grant, at the same time passing an act pledging the state to pay interest at seven per cent on one million dollars of the bonds of the company, to be issued as the work progressed on the first hundred miles of road. This act was repealed as unconstitutional in 1868. Or. Laws, 1SGG, 1SGS, 44-5; Deady's Scrap- Book, 176; S. F. Bidletin, Oct. 25 and Nov. 2, 1SG6. See special message of Gov. Woods, in Sac. Union, Oct, 22, 1866. Articles of incorporation were filed November 21, ISGG. The incorporators were R. R. Thompson, E. D. Shattuck, J. C. Ainsworth, John McCracken, S. G. Reei, W. S. Ladd, H. W. Corbett, C. H. Lewis of Portland, M. M. Melvin, Jesse Applegate, E. R. Geary, S. Ellsworth, F. A. Chenoweth, Joel Palmer, T. H. Cox, I. R. Moores, George L. Woods, J. S. Smith, B. F. Brown, and Joseph Gaston. Gaston's Railroad Development of Or., MS., 15-16.
The incorporators elected Gaston secretary and general agent, authorizing him to open the stock-books of the company, and canvass for subscriptions, which was done with energy and success, the funds to construct the first twenty-five miles beiug promised, when Eliot, before mentioned, suddenly appeared in Oregon with a proposition signed A. J. Cook & Co., whereby the Oregon company was asked to turn over the whole of its road to the people of California to build. The compensation offered for this transfer was the sum of $50,000 to each of the incorporators, to be paid in unassessable pre- ferred stock in the road. To this scheme Gaston, as the company's agent, offered an earnest opposition, which was sustained by the majority of the incorporators; but to the Salem men the bait looked glittering, and a division ensued. A new company was projected by these, in the corporate name of the first, the Oregon Central Railroad Company, with the evident intention of driving from the field the original company, and securing under its name the land grant and state aid. A struggle for control now set in, which was extremely damaging to the enterprise. Seeing that litigation and delay must ensue, the capitalists who had contracted to furnish funds for the first twenty-five miles of road at once cancelled their agreement, refusing to sup- port either party to the contest. Gaston, who determined to carry out the original object of his company, in order to avoid still further trouble with the Salem party, located the line of the Oregon Central on the west side of the Willamette River, and proceeded again with the labor of securiog financial support. The Salem company naturally desiring to build on the east side of the river, and assuming the name of the original corporation, gave rise to the custom, long prevalent, of calling the two companies by the distinctive titles of East-Side and West-Side companies.
While Gaston was going among the people delivering addresses and taking subscriptions to the west-side road, the east-side company, which organized
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RIVAL COMPANIES.
April 22, 1867, proceeded in an entirely different manner to accomplish their end. Sc.en men subscribed each one share of stock, at $100, and electing one of their number president, passed a resolution authorizing that officer to subscribe seven million dollars for the company. This manœuvre was con- trary to the incorporation law of the state, which required one half of the capital stock of a corporation to be subscribed before the election of a board of directors. The board of directors clected hy subscribing $100 cach were J. II. Moores, I. R. Moores, George L. Woods, E. N. Cooke, Samuel A. Clarke. Woods was elected president, and Clark secretary. To these were subsequently added J. H. Douthitt. F. A. Chenoweth, Green B. Smith, S. Ellsworth, J. H. D. Henderson, S. F. Chadwick, John E. Ross, A. L. Love- joy, A. F. Hedges, S. B. Parrish, Jacob Conser, T. McF. Patton, and John 1. Miller. Gaston's Railroad Development in Or., MS., 22-3. Before the meeting of the next legislature, thirteen other directors were added to the board, being prominent citizens of different counties, who it was hoped would have influence with that body, and to each of these was presented a share of the stock subscribed by the president. So far there had not been a bona fide subscription by any of the east side company. In order to hold his own against this specious financiering, Gaston, after raising considerable money among the farmers, subscribed in his own name half the capital stock, amount- ing to $2,500,000. As a matter of fact, he had no money, but as a matter of law, it was necessary to have this amount subscribed before organizing a board of directors for his company. This board was elected May 25, 1867, at a meeting held at Amity. The first board of directors of the Oregon Cen- tral (west-side) were W. C. Whitson, James M. Belcher, W. T. Newby, Thomas R. Cornelius, and Joseph Gaston. Gaston was elected president, and Whitson secretary. Both companies, being now organized, proceeded to carry out their plans as best they couldl. Elliot, as agent of the east-side party, went cast to find purchasers for the bonds of the company, while Gas- ton continued to canvass among the people, and also began a suit in equity in Marion county to restrain the Salem company from using the name of the Oregon Central company, Gaston appearing as attorney for plaintiffs, and J. H. Mitchell for the defendants. On trial, the circuit judge avoided a decision by holding that no actual damage had been sustained. Mitchell then became the leading spirit of the east-side company, and the two parties contended hotly for the ascendency by circulating printed documents, and holding correspondence with bankers and brokers to the injury of each other. A suit was also commenced to annul the east-side company, on the ground of illegal organization. Meanwhile Elliot was in Boston, and was on the point of closing a contract for a large amount of material, when Gaston's circulars reached that city, causing the failure of the transaction, and compelling Elliot to return to Oregon, having secured only two locomotives and some shop material, which he had already purchased with the bonds of his com- rany. A compromise would now have been accepted by the east-side party, but the west-side would not agree to it, and in point of fact could not, because the people on that side of the valley, who were actual subscribers, would not consent to have their road run on the cast side, and the people on that side would not subscribe to a road on the other.
By the first of April, 1868, both parties had their surveyors in the field locating their lines of road. Portland Oregonian, March 11, 1868. The west- side company had secured $25,000 in cash subscriptions in Portland, and as much more in cash and lands in the counties of Washington and Yamhill. The city of Portland had also pledged interest for twenty years on $250,000 of the company's bonds. Washington county had likewise pledged the inter- est on $50,000, and Yamhill on $75,000. Thus $375,000 was made available to begin the construction of the Oregon Central. The east-side company had also raised some money, and advertised that they would formally break ground near East Portland on the 16th of April, 1868, for which purpose bands of music and the presence of the militia were engaged to give eclat to the occasion. An address by W. W. Upton was announced.
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RAILROADS.
The west-side company refrained from advertising, but made preparations to break ground on the 14th, and issued posters on the day previous only. At ten o'clock of the day appointed a large concourse of people were gathered in Caruther's addition to celebrate the turning of the first sod on the Oregon Central. Gaston read a report of the condition of the company, and speeches were made by A. C. Gibbs and W. W. Chapman. This ended, Mrs David C. Lewis, wife of the chief engineer of the company, lifted a shovelful of earth and cast it upon the grade-stake, which was the signal for loud, long, and enthusiastic cheering, which so excited the throng that each contributed a few minutes labor to the actual grading of the road-bed. Thus on the 14th of April, ISGS, was begun the first railroad in Oregon other than the portages above mentioned. Ou the 16th the grander celebration of the east-side com- pany was carried out according to programme, at the farm of Gideon Tibbets, south of East Portland, and on this occasion was used the first shovel made of Oregon iron. Portland Oregonian, April IS, 1868; Mcl'ormirk's Portland Dir., 1869, 8-9. The shovel was ordered by Samuel M. Smith, of Oswego iron, and made at the Willamette Iron Works by William Buchanan. It was shaped under the hammer, the handle being of maple, oiled with oil from the Salem mil's. It was formally presented to the officers of the company on the 15th of April. Portland Oregoninn, April 14, 16, and 17, 1808.
Actual railroad building was now begun on both sides of the Willamette River; but the companies soon found themselves in financial straits. The east- side management was compelled in a short time to sell its two locomotives to the C'entral l'acific of California, although they bore the names of George L. Woods and I. R. Moores, the first and second presidents of the organiza- tion. A vigorous effort was made to induce the city council of Portland to pledge the interest for twenty years on $600,000 of the cast-side bonds, in which the company was not successful. It is related that, being in a strait, Eliot proposed to inform the men employed, appealing to them to work another month on the promise of payment in the future. But to this propo- sition his superintendent of construction replied that a better way would be to keep the men in ignorance. He went among them, carelessly suggesting that as they did not need their money to use, it would be a wise plan to draw only their tobacco-money, and leave the remainder in the safe for security against loss or theft. The hint was adopted, the money was left in the safe, and served to make the same show on another pay-day, or until Holladay came to the company's re ief. Gastou's Railroad Development in Or., MIS., 34-5. Nor was the west-side company more at case. Times were hard with the farmers, who could not pay up their subscriptions. The lands of the company could not be sold or pledged to Portland bankers, and affairs often looked desperate.
The financial distresses of both parties deterred neither from aggressive warfare upon the other. The west-side company continually pressed proceed- ings in the courts to have its rival declared no corporation, but no decision was arrived at. Gaston declares that the judges in the third and fourth judi- cial districts evaded a decision, 'their constituents being equally divided in supporting the rival companies.' Id., 38. Failing of coming to the point in this way, a land-owner on the cast side was prompted to refuse the right of way, and when the case came into court, the answer was set up that the com- pany was not a lawful corporation, and therefore not authorized to condemn lands for its purposes. The attorneys for the company withdrew from court rather than meet the question, and made a re-location of the road, thus foiling again the design of the west-side company.
Portland being upon the west side of the river, and the emporium of capi- tal in Oregon, it was apparently only a question of time when the west-side road should drive the usurper from the field, and so it must have done had there been no foreign interference. But the east-side company had been seek- ing aid in California, and not without success. In August 1868, Ben Holla- day, of the overland stage company and the steamship line to San Francisco, arrived in Oregon. He represented himself, and was believed to be, the pos-
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HOLLADAY TO THE RESCUE.
sessor of millions. A transfer of all the stock, bonds, contracts, and all property, real and personal, of the east-side company was made to him. The struggle, which had before been nearly equal, now became one between a corporation without money and a corporation with millions, and with the support of those who wished to enjoy the benefits to be conferred by this wealth, both in building railroads and in furnishing salaried situations to its friends. The first thing to be done was to get rid of the legislative enact- ments of 1866, designating the original Oregon Central company as the proper recipient of the land grant and state aid.
On the convening of the legislature, Holladay established himself at Salem, where he kept open house to the members, whom he entertained royally as to expenditure, and vulgarly as to all things else. The display and the hospitality were not without effect. The result was that the legislature of 1868 revoked the rights granted to the Oregon Central of 1866, and vested these rights in the later organization under the same name. The cause assigned was that 'at the time of the adoption of the said joint resolution as aforesaid no such company as the Oregon Central Railroad Company was organized or in exist- ence, and the said joint resolution was adopted under a misapprehension of facts as to the organization and existence of such a company.' Or. Laus, ISGS, 109-10. It was alleged that the original company, in their haste to seeure the land grant by the designation of the legislature, which meets only once in two years, had neglected to file their incorporation papers with the secretary of state previous to their application for the favor of the legislature, the actual date of incorporation being November 21st, whereas the resolution of the legislature designating them to receive the land grant was passed on the 20th of October, a month and a day before the company had a legal exist- ence. In his Railroad Development in Or., MS., 15, Gaston says that the Oregon Central filed its incorporation papers according to law before the legis- lative action, but withdrew them temporarily to procure other incorporations, and it was this aet that the other company turned to account. By the terms of the act of congress making the grant of land, the company taking the fran- chise must file its assent to the grant within one year from the passage of the act, and complete the first twenty miles of road within two years. The west- side company had filed its assent within the prescribed time, which the other had not, an illegality which balanced that alleged against the west-side, even had both been in all other respects legal.
And now happened one of those fortuitous circumstances which defeat, occasionally, the shrewdest men. The west-side management had sent, in May, half a million of its bonds to London to be sold by Edwin Russell, manager of the Portland branch of the bank of British Columbia. Just at the moment when money was mnost needed, a cablegram From Russell to Gaston informed him that the bonds could be disposed of so as to furnish the funds and iron necessary to construct the first twenty miles of road, by selling them at a low price. Gaston had the power to accept the offer, but instead of doing so promptly, and placing himself on an equality with Holladay pecuniarily, he referred the matter to Ainsworth, to whom he felt under obligations for past favors, and whom he regarded as a more experienced financier than him- self, and the latter, after deliberating two days on the subject, called a re- fusal of the proposition.
Ainsworth had not intended, however, to reject all opportunities, but a contract was taken by S. G. Reed & Co., of which firm Ainsworth was a member, to complete the twenty miles called for by the act of congress, of which five of the most expensive portion had been built, and Reed became in- volved with Gaston in the contest for supremacy between the two companies, while at the same time pushing ahead the construction of the road from Portland to Hillsboro, by which would be earned the Portland subsidy of a quarter of a million.
To prevent this, Holladay's attorneys caused suits to be brought deelaring the west-side company's acts void, and to prevent the issuance to it of the bonds of the city of Portland and Washington county, in which suits they
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RAILROADS.
were successful, thus cutting off the aid expected in this quarter. At the same time the quarrel was being prosecuted in the national capital, the newly elected senator, Corbett, befriending the original company, and George H. Williams, whose term was about to expire, giving his aid to Holladay. See correspondence in Seu. Rept, 3, 1860, 41st cong. Ist sess.
An appeal was made to the secretary of the Interior, whose decision was, that according to the evidence before him neither company had a legal right to the land grant in Oregon, which had lapsed through the failure of any properly organized and authorized company to file acceptance, and could only be revived by further legislation. This decision was in consonance with Williams' views, who had a bill already prepared extending the time for filing assent so as to allow any railroad company heretofore designated by the legislature of Oregon to file its assent in the department of the interior within one year from the date of the passage of the act; provided, that the rights already acquired under the original act were not to be impaired by the amendment, nor more than one company be entitled to a grant of land. C'ong. Globe, ISG9, app. 51, 41st cong. Ist sess. This legislation placed the companies upon an equal footing, and left the question of legality to be de- cided in the Oregon courts, while it prevented the state of Oregon from losing the franchise should either company complete twenty miles of road which should be accepted by commissioners appointed by the president of the United States. The act of April 10, 1SGO, does not mention any exten- sion of time for the completion of the first twenty miles, but by implication it might be extended beyond the year allowed for filing assent.
While the east-side company was thus successful in carrying out its en- deavor to dislodge the older organization, suit was brought in the United States district court, Deady, justice, to enjoin the usurper from using the name of the original company, Deady deciding that although no actual dam- age followed, as the defence attempted to show, no subsequently organized corporation could lawfully use the name of another corporation. This put an end to the cast-side Oregon Central company, which took steps to transfer its rights, property, and franchises to a new corporation, styled the Oregon and California Railroad Company. The action of congress in practically deciding in favor of the Holladay interest caused S. G. Reed & Co. to abandon the construction contract, from which this firm withdrew in May 1869, leaving the whole hopeless undertaking in the hands of Gaston. Without resources, and in debt, he resolved to persevere. In the treasury of Washington county were several thousand dollars, paid in as interest on the bonds pledged. He applied for this money, which the county officers allowed him to use in grad- ing the road-bed during the summer of 1869 as far as the town of Hillsboro. This done, he resolved to go to Washington, and before leaving Oregon made a tour of the west-side counties, reminding the people of the injustice they had suffered at the hands of the courts and legislature, and urging them to unite iu electing men who would give them redress.
Gaston reached the national capital in December 1869, Holladay having completed in that month twenty miles of the Oregon and California road, and become entitled to the grant of land which Gaston had been the means of se- curing to the builder of the first railroad. His business at the capital was to obtain a new grant for the Oregon Central, and in this he was successful, be- ing warmly supported by Corbett and Williams, the latter, however, refusing to let the road be extended farther than McMinnville, lest it should interfere with the designs of Holladay, but consenting to a branch road to Astoria, with the accompanying land grant. A bill to this effect became a law May 1, 1870. Cong. Globe, 1869-70, app. 644-5. While the bill was pending, Gas- ton negotiated a contract in Philadelphia for the construction of 150 miles of railroad, which would carry the line to the neighborhood of Eugene City, to which point another bill then before congress proposed to give a grant of land. The Oregon legislature passed a joint resolution, instructing their senators in Washington to give their support to the construction of a railroad from Salt Lake to the Columbia River, Portland, and Puget Sound; and to a railroad
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JOSEPH GASTON.
from the big bend of Humboldt River to Klamath Lake, and thence through the Rogue, Umpqua, and Willamette valleys to the Columbia River. Or. Luis, 1868, 124-5; U. S. Sen. Misc. Doc., 14, 41st cong. 3d sess .; Or. Laws, 1870, 179-82, 194.
Anticipating its success, Gaston ventured to believe that he could secure, as it was needed, an extension of his grant, which should enable him to complete the line from Winnemucca on the Humboldt to the Columbia. This also was the agreement between B. J. Pengra, who represented the Winnemucca scheme, Gaston, and the senators. But Holladay, who was in Washington, fearing that Pengra would bring the resources of the Central Pacific into Oregon to overpower him, demanded of Williams that Pengra's bill should be amended so as to compel the Winnemucca company to form a junction with the Oregon and California at some point in southern Oregon. The amendment had the effect to drive the Central Pacific capitalists away from the Winnemucca enterprise, and the Philadelphia capitalists away from the Oregon Central, leaving it, as before, merely a local line from Portland to Mc- Minnville. Thus Holladay became master of the situation, to build up or to destroy the railroad interests of Oregon. He had, through Latham of Cal- ifornia, sold his railroad bonds in Germany, and had for the time being plenty of funds with which to hold this position. In order to embarrass still further the Oregon Central, he bought in the outstanding indebtedness, and threat- ened the concern with the bankruptcy court and consequent annihilation. To avert this disastrous termination of a noble undertaking, Gaston was com- pelled to consent to sell out to his enemy, upon his agreement to assume all the obligations of the road, and complete it as designed by him.
Having now obtained full control, and being more ardent than prudent in his pursuit of business and pleasure alike, Holladay pushed his two roads forward rapidly, the Oregon and California being completed to Albany in 1871, to Eugene in 1872, and to Roseburg in 1873. The Oregon Central was opened to Cornelius in 1871, and to St Joe in 1872. These roads, although still merely local, had a great influence in developing the country, inducing immigration, and promoting the export of wheat from Willamette direct to the markets of Europe.
But the lack of prudence, before referred to, and reckless extravagance in private expenditures, shortened a career which promised to be useful as it was conspicuous; and when the Oregon and California road had reached Roseburg, the German bondholders began to perceive some difficulty about the payment of the interest, which difficulty increased until 1876, when, after an exami- nation of the condition of the road, it was taken out of Holladay's hands, and placed under the management of Henry Villard, whose brief career ended in financial failure.
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