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ment and undergone important changes since the previous publication of the work-that of business combinations and "trusts." The question is treated very clearly, though briefly, finding a place in the work from its relation to partnership law rather than for the purpose of discussing its depths, interesting and important though they undoubtedly are. This chapter first describes a few of the present more important “trusts," and shows the objects of their custom and their nature legally considered. The question of illegality is then taken up, and, as regards the cases to which corporations are parties, a distinction drawn between the violation of, or departure from, charter rights, and the more interesting and less well-defined ground of "public policy." A list of the various State “anti-trust" acts is added in a note and a brief mention of the extent to which they have gone.

The editor remarks in his preface that "much of the discussion in the first and fifth chapters" (of the previous edition) “was rendered unnecessary by Cox v. Hickman." The mercantile conception has, he says, become the legal conception as well. On page 41, chap. 5, the partnership character is discussed.

Mr. Beale has not hesitated to make liberal use of his office as regards the treatment of the notes. We find, however, that the changes are improvements, and such is surely the province of the editor.

A useful appendix of forms for partnership agreements (and disagreements) is added. The book has throughout been divided into sections, following the present almost universal custom. Text books are usually consulted, not read continuously, and some sort of heading to the various subjects are necessary. W. S. E.

The Editors announce that the following erratum has been brought to their attention: Page 69, ad column, 4th line of the January number, 1894 (Vol. I, N. S., No. 1), after the words "upon the discretion of a last trustee," insert “or being given in perpetuity."

THE

AMERICAN LAW REGISTER

AND

REVIEW.

JUNE, 1894.

THE COMMERCIAL BASIS FOR RAILWAY
RECEIVERSHIPS.

By THOMAS L. GREENE.

During the year 1893 there were placed in the hands of receivers 76 railway companies, small and large, owning 29,380 miles of line and representing stocks and bonds to the amount of $1,754,806,000, being one-sixth of the railway mileage and one-sixth of the railway capital of the country. These figures of capitalization do not include car trust notes, floating debts or other liabilities, which would add considerably to the total. At present about one-fourth of the entire railway mileage of the country is being operated by these officers of the courts.

These large figures suggest at once the importance which the question of railway receiverships has assumed of late through the inability of railway companies to meet their obligations. The practice of operating insolvent railways through court officers appointed for the purpose is not yet definitely settled either as to the methods of working or as to the legal doctrines involved, the whole matter being yet in a state of evolution. It is the boast of our law that it changes to meet the changing demands of commerce, as business becomes more complex and the rules governing it necessarily more

involved; so as regards railway receiverships our present situation is the result of a compromise between the terms of railway mortgages and the commercial conditions under which railway operations are carried on.

The original idea of appointing a receiver to take charge of the property of a firm or individual was that the business might be wound up with as little delay as possible and the assets sold and distributed to the creditors in some equitable proportion. As corporations became more common, taking the place of firms and individuals, the same idea was applied to them when insolvent. They were placed in the hands of receivers in order that their affairs might be closed up with the least possible delay by dividing the assets among the creditors in the proportion to which it was shown they were entitled. It was inevitable that the question of the proper method of treating insolvency among railway companies should arise. From small beginnings the number of miles of railway in the United States increased rapidly until now, judged by the magnitude of the property invested and the amount of business done, the railways form perhaps our largest industry, certainly one of the most complex. Through one cause or another it was inevitable that bankruptcy should increase among these rail carriers as their mileage increased; and in such cases also it was natural, as in the cases of firms or small corporations, that receivers should be appointed pending a settlement of the insolvent debtor's affairs. But here a new question arose. A trading firm or corporation unable to pay its debts could be wound up and its assets distributed to its creditors without loss to the community. Other traders could take their places and business would go on as before; but it was otherwise with the railways. It was quickly seen that great states and sections of states dependent upon the continued operation of these railways for the transaction of their every day business, for supplies of clothing and manufactured goods and even for meat and bread. Whatever the outcome the trains must be kept running. Since, in the course of time, local railways had grown into systems, it was found that the interests involved in these systems were so enormous that their combined assets

could not easily be sold as one parcel to any one person or company, or sold separately without breaking up the systems. Hence, until the serious questions of reorganization or sale were settled, the receivers of these systems must continue to run the trains in the interest of the public. As these necessary adjustments were often found very complicated, requiring a long time for negotiations and final agreement, the receivers appointed by the courts were placed for the time being in the position of railway managers. They were confronted with technical problems of much practical importance. They were required to become familiar with disputed questions concerning reasonable rates and their ramifications. The conflicting claims of cities and towns ́ as to charges which should be relatively fair to cach were pressed upon their attention. In short, it was required that receivers should be able to formulate for the operation of the properties in their charge a policy which should be equitable to the capitalists whose money was invested in the road, to all the sections served by the railway and to the general traveling and shipping public. Needless to say the success of such a task required men of administrative ability with the further result that the courts through their appointed officers were obliged to decide upon the details of administration.

It was the practice at first for receivers to be asked for solely by the creditors of the company in order that their property might be held together and protected against the seizure of certain parts of the system, particularly against creditors who might destroy the value of the property as a whole. Usually the corporation appeared before the court in opposition to the motion so that, if receivers were appointed at all, the court acted upon information brought to its knowledge after a severe legal struggle. The idea that the corporation itself could ask for an appointment of a receiver for its own property originated with the late Jay Gould, whose contention in the Wabash cases in this respect was afterwards affirmed by the Supreme Court of the United States, which held that a company could itself ask for the protection of the court if such was for the best interest of all concerned. Under this

doctrine few of our large railway systems are now placed in any but "friendly" hands. In such cases the matter is all planned out beforehand and the men chosen. Any creditor of the company, friendly to the administration, may allege that the corporation owes him money that it cannot pay, and as every going concern has plenty of creditors in the ordinary course of business, such a convenient creditor is usually not hard to find. To this complaint, usually prepared in secret, some one of the company's officers arranges a reply confessing the truth of the charge. All parties concerned, each with the respective documents, and without notice to the other creditors or to the public, apply to the judge, perhaps at night, who forthwith grants the application and appoints the receivers already arranged for. That this procedure opens the door to the possibility of great abuse of corporate interests needs no argument. That on the whole the plan has worked fairly well is owing to the high character of our judiciary and also of the officers in charge of our great corporations. Yet it is not reassuring to holders of stocks, bonds or floating debt to know that a conspiracy between any small creditor and any one of the principal officers of a corporation may throw the control of the whole property of the company into the hands of the court. Unquestionably, the appointment of former officers of the company as receivers leads to the charge at times that those who had wrecked the company are still left in power. Moreover, the door is open to abuses such as the difficulty casily thrown in the way of a thorough investigation into the company's condition, which it may be the wish of the old managers to thwart, but which may be necessary before an equitable plan of reorganization can be envolved. Yet the affairs of our large corporations have become so complicated that only those long familiar with them are capable of administering them without losses both to owners of the road and to shippers. This business fact has so far controlled the action of the courts in the appointing of old officers of the insolvent corporation as receivers, though usually other men not previously connected with the company, but representing important interests as well as the sections through which the

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