USA > Vermont > Grand Isle County > History of Franklin and Grand Isle counties, Vermont : With illustrations and biographical sketches of some of the prominent men and pioneers. > Part 26
USA > Vermont > Franklin County > History of Franklin and Grand Isle counties, Vermont : With illustrations and biographical sketches of some of the prominent men and pioneers. > Part 26
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HISTORY OF FRANKLIN AND GRAND ISLE COUNTIES.
Hunnewell, G. Howland Shaw, and W. H. Gregerson, covering the same property, and with substantially the same provisions as contained in the first mortgage deed, and subject thereto, and to the rights of the Vermont and Canada company by virtue of their lease.
On the 12th day of May, 1854, the Vermont Central company, hav- ing become embarrassed by the constantly accumulating indebtedness of the road, and being unable to longer meet its obligations, executed a deed of surrender to the trustees of the first mortgage bondholders ; and, likewise, on the 2Ist day of June thereafter, executed a similar deed to the trustees of the second mortgage bondholders, thus passing the control of the Vermont Central and the Vermont and Canada roads into the hands of the trustees. At the time of executing the first deed of surrender the trustees of the first mortgage creditors were John Smith, of St. Albans, and William R. Lee and John S. Eldridge, of Boston ; and when the second deed of surrender to the trustees repre- senting the second mortgage creditors was executed the latter com- prised William H. Gregerson, John C. Pratt, and Peter Harvey, all of the city of Boston.
Having thus been put into the possession and control of the joint lines by virtue of the deed of surrender the trustees of the first mort- gage bondholders, Smith, Lee and Eldridge, at once assumed the man- agement of the roads and entered upon the performance of the duties connected therewith ; but they had not been long possessed before they were brought into court at the suit of the Vermont and Canada com- pany, who filed a bill in chancery against the Vermont Central, the trust- ees, and others, with the result of an order dispossessing them' and passing the management of the roads over to the orators by virtue of the prior and paramount rights of their company under the lease with the Vermont Central. This order was made on the 17th of May, 1855, by Chancellor Luke P. Poland; but was upon condition that the Ver- mont and Canada company execute to the trustees a bond in the penal sum of $250,000, to save harmless the said trustees from all debts and liabilities incurred by them in their management of the roads ; also a further bond in the sum of $50,000 that the bounden party should pru- dently manage the road.
Under the order of the Court of Chancery the Vermont and Canada
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company, for the first time during its existence, had the management of its own road, as well as that of the Vermont Central, but even this possession was not long continued, for, on the 6th of May, 1856, Chan- cellor Poland made an order directing the Vermont and Canada com- pany to surrender back the possession and management of the joint roads to the trustees of the first mortgage creditors of the Vermont Central company, which trustees were now John Smith, John S. Eldridge and Lawrence Brainerd, the latter the successor of Trustee Lee. And these trustees, by this order of restoration, were directed to hold, man- age and operate the roads under the direction and subject to the order of the court.
The character of the office of these trustees was that of receivers and managers of an insolvent corporation ; in fact the petition of the orators asked for the appointment of a receiver, and the question was passed upon and determined to that end. Under all ordinary conditions the only purpose of a receivership would be the settlement, liquidation and final winding up and closing the affairs of the insolvent concern, but in this particular instance it became the duty of the court to constitute not only a receivership, but more than that, a board of management, not for the purpose of terminating the operations of the company, but having for its object the continuance of the business formerly and then con- ducted for the public good and benefit; and in connection with the duties of the management it became necessary for the court to order and direct that the trustees and managers should make considerable invest- ments of money in providing equipments for the road, increasing its facilities, extending its business, improving its property, and enlarging its capacity in various material directions. And for this purpose it became incumbent upon the Court of Chancery to authorize the receivers and managers to borrow moneys on divers occasions, and therefore to execute obligations in their fiduciary capacity, they being at the time neither more nor less than officers of the court. For all these operations it so happened that the law furnished no precedent. It was an independent and compulsory action, founded upon the exigencies of an occasion, the like and fellow of which were previously unknown; and founded upon exactly the same principles and laws of necessity as were the very insti- tutions of the state itself. In the establishing of such a law, and such an
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HISTORY OF FRANKLIN AND GRAND ISLE COUNTIES.
extended power in a constituted trust and receivership, the Court of Chancery of Vermont acted only in the capacity of pioneer, for the action here became an established, safe precedent, upon which was based similar subsequent action in many other states, and which was upheld and sustained by the highest courts.
But all these things were not accomplished at once, nor hastily, nor by the same board of officers. They extended throughout a long period of years, from one generation to another, and from one court to another. The order made by Chancellor Poland on the 6th of May, 1856, that restored the management of the roads to the trustees, and constituted those officers as receivers and managers, by no means terminated the controversy between the litigant parties, for the case was continued in court and reviewed by the highest judicial authority in the state, with final determination and judgment in July, 1861. The final decree of Chancellor Poland was made in pursuance of a mandate and judgment of the Supreme Court, which latter held and determined that the lease made August 24, 1849, between the Vermont and Canada company and the Vermont Central, was a valid and binding instrument ; and that the additional lease executed on July 9th, 1850, in which it was agreed that in case rents should become due to the Vermont and Canada, and remain unpaid for more than four months, the Vermont and Canada company should have the right to enter into posession of both roads and use and operate the same, etc., was valid and binding upon the parties to it, and all subsequent incumbrances so far as to entitle the Vermont and Canada company to have the tolls and income of the roads directed to and applied in liquidation of the rental indebtedness. In accordance with the findings and judgment of the Supreme Court the Chancery Court was directed to find, which was accordingly done.
During the pendency of this action, and before its final determination, the burden of the work of operating and managing the roads, and as well the onus defending the litigations that were in constant progress, fell upon the trustees, John Smith, Lawrence Brainerd and John S. Eldridge. At that time John Smith was an attorney of the courts of the state, resident at St. Albans, and otherwise largely interested in the institutions of the village and county, as well as being one of the trustees and managers under the appointment of the Court of Chancery. He
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does not appear as having been the attorney of record in any of the series of litigations, for the reason that his position constituted him an officer of the court; and while he was the chief manager and director of the affiairs of the trust his efforts were ably seconded by the wise counsel and rich business qualities possessed by Lawrence Brainerd. In 1856 Mr. Eldridge resigned his position, and G. M. Dexter was ap- pointed and duly qualified in his stead. Again on November 20, 1858, John Smith, who had ever been the master spirit in founding and carry- ing forward this vast enterprise, was stricken and died. In his stead, on the 6th of December, the surviving trustees, Messrs. Brainerd and Dexter, appointed John Gregory Smith, who was entirely familiar with the affairs of the road, and who had been for some time the attorney and counsel for the trustees and receivers. Still further, on the 18th of January, 1859, George M. Dexter resigned, and the vacancy in the board of managers thus created was filled by the appointment of Joseph Clark of Milton ; all of which appointments were confirmed by the Court of Chancery. Other than has been stated there was no change in the receivership and management of the roads until the 16th of August, 1867, when, upon the petition of Lawrence Brainerd, Joseph Clark and John Gregory Smith, setting forth that since their appoint- ment the business and affairs of the roads had very largely increased, requiring for their proper administration a very much larger amount of time and labor than at the date of the decree (1861); that the business requirements of the roads and the accommodation of the public had made needful the obtaining of a loan of large sums of money, on the credit of the roads and their business and property, whereby an import- ant class of persons and capitalists have become interested in the roads, in connection with the funded bond creditors of the Vermont Central and the stockholders of the Vermont and Canada roads; that, in the judgment and belief of the petitioners, the business interests of the roads will be advanced by such a modification of existing orders as will admit to the management a representation of the bondholders and creditors, and requesting that Lawrence Brainerd and Joseph Clark might have permission to resign and be discharged from their offices of receivers and managers, and in their stead there be appointed a board of mana- gers, who should have power and authority, under the supervision and
36
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HISTORY OF FRANKLIN AND GRAND ÍSLE COUNTIES.
order of the court, to manage and conduct the affairs of the roads. The court took due cognizance of the matter, approved the same, and ordered that the resignation of Lawrence Brainerd and Joseph Clark, as receivers and managers, be accepted, and that Benjamin P. Cheney of Boston, and Robert F. Taylor of Philadelphia, be appointed receivers and man- agers with said John Gregory Smith; and the said Lawrence Brainerd, Joseph Clark and J. Gregory Smith, trustees under the first mortgage of the Vermont Central company, with said J. Gregory Smith, Benja- min P. Cheney and Robert F. Taylor, receivers and managers, constitute a board of management of the roads, with power and authority to make all needful rules, orders and regulations for the management and opera- tion thereof, subject to the orders and decrees of the court.
But this was not the first conciliatory agreement between the factions contending for the control and operation of the roads, for there had been previous amicable negotiations during the year 1863, in the nature of an agreement entered into between a committee of the board of managers of the Vermont and Canada company and a like committee representing and in behalf of the first mortgage bondholders of the Vermont Central company, which resulted in what was called a com- promise decree, made by Chancellor Poland, January 19th, 1864. By the stipulations and provisions of this agreement and decree, and agree- able to an act of the legislature, the Vermont and Canada company was authorized to increase its capital stock to $2,000,000, and on that sum to draw eight per cent. rental as provided in the lease heretofore mentioned, and the rental to be a first lien on the income of the roads. This increase of stock was made for the purpose of converting the arrears of rent into principal, upon which, being so converted, the receivers and managers agreed to pay rent according to the terms of the original lease of August 24, 1849. Moreover, it was agreed and adjudged that the trustees, receivers and managers should construct an extension or addition of the Vermont and Canada road from Swanton to Highgate, and pay for the same out of the revenues of the roads, and should also pay the Vermont and Canada company the sum of $97,000 within three years from June Ist, 1864, with accrued interest. And it was further provided, by this decree, that the income of the roads, after paying for the construction of the Highgate extension, should be applied toward
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the payment of the first and second mortgage bonds, in succession, and the remainder, if any, to the Vermont and Canada. Also it was provided that O. W. Davis, Joseph Andrew and Otis Drury, committee of the first mortgage bondholders of the Vermont Central company, constitute an advisory board in respect to the management of the roads and property.
A preceding paragraph has mentioned the fact that the petition of the receivers and managers asked the Chancery Court to change somewhat the character of the management of the roads, a request made necessary on account of increased business, and of extensions in the operating line of the roads, which of themselves called for an increased outlay of means and the borrowing of large sums of money from various capitalists, who, in the judgment of the petitioners, should be entitled to a representation in the management of the roads. The decree above referred to was that made by Chancellor William C. Wilson, on the 16th of August, 1867. Now, in view of this observation, it becomes necessary to relate briefly the occasions and necessities that produced these results, and brought about this change, together with such other facts as may properly be stated in that connection. But in the same connection it may be stated that prior to the appointment of J. Gregory Smith to the receivership, as the successor of John Smith, who died suddenly on November 20th, 1858, the seat of operations of the roads was at Northfield, in this state ; and even after that time, and until the board of receivers and managers comprised the said J. Gregory Smith, Lawrence Brainerd and Joseph Clark, the base of operations had been maintained at the place named. But with the accession of the just named persons to the management, through their influence and efforts, and to the great benefit and advan- tage of the people of this region, the seat of operations was changed from Northfield to St. Albans. For the purposes of the management and operation of the roads these officers caused to be built at St. Albans such structures as were required, both for the public accommodation and the necessities of the roads in the way of shops, depots and other buildings. This removal was made during the early sixties, and the structures were built as required and paid for out of the revenues of the roads by the receivers and managers, and with the sanction and approval of the Chancery Court.
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HISTORY OF FRANKLIN AND GRAND ISLE COUNTIES.
On the 14th of April, 1866, Chancellor Pierpoint, upon the petition of the receivers and managers, and the representatives of the first and sec- ond mortgage bondholders of the Vermont Central company, and others, looking to a consolidation and refunding of the outstanding bonded in- debtedness of the Vermont Central, made a decree by which it was ordered and adjudged that the principal of the first mortgage bonds be called and fixed as the sum of $3,000,000, on the Ist of June, 1866, and that the same be refunded by the issue of new bonds running twenty years and bearing seven per cent. interest; and that the principal sum of the accumulated indebtedness of the Vermont Central under the sec- ond mortgage bonds be fixed and called $1,500,000; and that therefor there be issued new bonds running twenty-five years, bearing interest at seven per cent., but subject to the prior lien of the first bonded re-issue, and both subject to the priority of lien of the Vermont and Canada com- pany by virtue of their lease. This adjudication and re-issue of bonds was ordered by the court, with the consent of all interests; and was another step in the direction of consolidation and harmonizing conflicting in- terests that had ever embarrassed and obstructed the good order and proper management of the roads; and the result accomplished was brought about largely through the efforts of those who were then en- gaged in the direction and operation of the roads under the supervision of the court.
The decree authorizing the first equipment loan, so called, was made by Luke P. Poland, chancellor, on the 7th of September, 1865. In the petition made and presented to the court by the receivers and managers, Lawrence Brainerd, Joseph Clark and J. Gregory Smith, it was stated that the gross income of the roads and business for the year ending June Ist, 1864, amounted to $1,227,807.35, that the gross expenses were $940,843.59, leaving a balance of $286,963.76; that for the year end- ing June 1, 1865, the gross income was $1,434,631.15; the expenses (estimated, the year not being completed), $1,265,803.33, leaving a bal- ance of $168,829.82. The petitioners reasonably account for the in- creased expenditures of the last year in that they were due to the increase in cost of labor, materials and supplies needful in operating the line, owing to trade and finance disturbances caused by the Rebellion. And they further relate that from the earnings of the business they had ex-
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pended in the construction of the Swanton branch the sum of $320,000 ; that in supplying the constant demand for increased fixtures and equip- ments they had been compelled to purchase thirteen locomotives, 253 freight cars, and twelve passenger cars, at a cost of $350,000, which equipments had been mainly acquired since 1861; that when the re- ceivers began their offices as such, under the decree of 1861, they oper- ated only about 166 miles of road, but with subsequent extensions they at present operated over 270 miles ; that to provide for and accomodate the increasing business of the road there should be provided sufficient structures, fixtures, equipments and appliances to carry all passengers and freight usually applying for transit, with promptness, safety, and dispatch. Upon the foregoing and other representations of fact the managers related to the court that a considerable amount of money would be required, among other things, for the following purposes : The construction of a new car shop at St. Albans, (in place of that de- stroyed by fire on July 4th, 1865,) costing from $50,000 to $60,000 ; a round- house, for storing and cleaning engines, from $25,000 to $30,000 ; for the re-construction and enlargement of the station-house at St. Al- bans, from $30,000 to $40,000; for a station-house at Burlington, from $25,000 to $30,000; for increased facilities for storing freight on the wharf at Burlington, $25,000; for ten new locomotives, $180,000; for 350 new freight cars, $280,000; for eight new passenger cars, $40,000. These facts being presented to the court, Chancellor Poland ordered that the receivers and managers be authorized and empowered to borrow such sums, not exceeding $750,000, as in their judgment should be necessary for the uses and purposes mentioned in the petition. And to secure this sum the receivers and managers were authorized to issue their notes or obligations, themselves being exempt from personal liabil- ity, running ten years, and at interest not exceeding eight per cent. per annum. They were further authorized to pledge certain equipments of the road as security for the payment of the notes so issued, and to create a sinking fund from the general assets of the receivers, to meet the obligations when due. And it was further ordered that in case the notes were not paid when due the holders might apply to the court for relief, and for leave to pursue their securiety ; and that in case of failure to negotiate the loans the receivers were authorized to make a tem- porary loan on the credit of the trust.
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HISTORY OF FRANKLIN AND GRAND ISLE COUNTIES.
Under the authority vested in them by this decree of chancery the managers of the road were enabled without serious difficulty to realize on the notes and obligations issued by them, and with the avails thereof not only provided increased facilities for the traffic and business of the road, but as well caused to be erected at St. Albans the large and per- manent structures that are now in use: the main office building, the addition to the depot proper, the car and repair shops, and the large engine-house. These improvements, for such they proved to be, were erected on the line of the Vermont and Canada road, and were of ma- terial benefit to the property of that company, although no part of the expense of them was chargeable against that company at the time, and not until consent was obtained therefor, and then by the issue of their stock and not by an investment of money. But notwithstanding the strenuous efforts of the receivers and managers to equip and operate the roads, and maintain them without again calling upon the court, they found themselves unable to do so; and they found, moreover, that the interest of the roads, and those connected with them as creditors and otherwise, demanded that the line should be increased by acquiring the Stanstead, Shefford and Chambly road, which was accordingly done by the purchase of its stock and bonds secured by mortgage, at an ex- pense of about $364,000; and the managers also found themselves re- quired to extend the Vermont and Canada road from Essex to the city of Burlington, which they did at a cost of about $450,000 more. With these extraordinary expenses falling upon them, the outlay for which was not only advisable, but absolutely necessary for the good of the roads and the faithful fulfillment of their obligations as trustees, the receivers and managers, on account of obligations soon coming due, and other expenses, were a second time compelled to petition the Chancery Court for an equipment loan, with the result of an order and decree, granted by Chancellor Pierpoint the Ist of May, 1867, by which the ac- tion of the receivers and managers was sanctioned and approved, and by which the Vermont and Canada company were directed to increase the issue of their stock by the amount of $250,000, and deliver the same to the receivers ; and the latter to pay the Vermont and Canada com- pany out of said stock or its avails the sum of $97,000, and the balance to be applied in reduction of the trust liabilities. And further, the man-
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agement was authorized to issue their obligations, without personal lia- bility, to the gross amount of $300,000, bearing interest at seven per cent., payable in twenty years from July 1, 1867, and secured by a pledge of the entire capital stock of the S., S. & C. Company, to create a fund to be applied in payment of the obligations soon to become due, and for other necessary purposes in connection with the management of the roads and the reduction of their indebtedness. It was the issuing and sale of these obligations that induced the receivers and managers, Brainerd, Clark, and Smith, to petition the court for an order permit- ing the first two named to resign their offices, and in their stead there should be appointed men who had made large advances of money to the management on the notes and securities authorized under the first and second equipment loans. This petition, being considered, was duly acted upon with the result of the establishment of a board of manage- ment, comprised and constituted as stated on a preceding page.
On the 22d of May, 1868, Chancellor William C. Wilson, upon the petition of the board of management, made an order by which was mod- ified and relieved of doubt and ambiguity the decrees relating to the first and second equipment loans; but there was nothing in the order of May 22d that has any material interest for this narrative, except the fact that it was the result of a harmonious conference (as far as harmony is possible where conflicting railroad interests are at hazard) between the various interested parties representing each branch of encumbrance against the joint and several lines of road. The decree was the result of an agreement entered into between these parties: Lawrence Brainerd, Joseph Clark, J. Gregory Smith, B. P. Cheney, Robert F. Taylor, trust- ees and managers; John Porter, Edward Blake, Samuel Atherton, com- mittee of directors of Vermont and Canada Railroad Company ; J. M. Pinkerton, Otis Drury, committee of first mortgage bondholders ; W. P. Hacker, M. Hall Stanton, Robert F. Taylor, committee of second mort- gage bondholders; and B. P. Cheney, J. M. Pinkerton, Edward Blake, Otis Drury, R. F. Taylor, Lansing Millis, Lawrence Brainerd, Joseph Clark, holders of the equipment loan.
But notwithstanding the increase in the facilities for transportation and traffic afforded under the former equipment loans, the business in the hands of the receivers and managers had soon assumed such pro-
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