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An honest law^^er is very rare,
In some the meanest culprit there
Sits upon the bench.

This Angle case, although there was no formal break,
destroyed some of the cordiality that I have described as
existing between the Circuit Justice and the Circuit Judge.
Here I am simply recording facts. Some people say judges
should have no feelings, and yet the chancery reports are
full of expressions and imprecations to which the outraged
consciences of the chancellors or equity judges have given
voice and acted accordingly.



CHAPTER XXXV
THE WABASH CASE



its effect on interstate commerce law — jay
Gould's wrecking schemes — removal of receivers
of the wabash railroad — wabash decision makes
a great stir — rebates, preferences, and discrimina-
tions put under ban" of statute law.

'T^HE opinion in the Wabash case, read December 6,
-*- 1886, was far-reaching in its effect.^ It helped pass
the Interstate Commerce Law of 1887, putting under the
ban pools, rebates, and discriminations against localities. It
was ratified in the Act of March 2, 1887, limiting the juris-
diction of the United States courts in that it provided that
a receiver appointed by a Federal court ' ' should manage and
Operate such property according to the requirements of the
valid laws of the State in which such property should be
situated." And also that such a receiver may be siied in
the State courts.

Prepared without any thought of attracting attention,
and with less care than any opinion Walter Q. Gresham
ever wrote, the Wabash opinion was more of an executive
than a judicial act and the direct result of what had pre-
ceded — mature judicial reflection and action. Cutting to
the bone and ringing with conviction, only a few of the
reasons are given that made the act necessary, namely:
the removal of the receivers, John Humphreys and Thomas
E. Tutt, appointed by Circuit Judge David J. Brewer of
the Eighth Circuit, because they had been paying rebates;
the appointment in their stead of ex-Judge Thomas Cooley
to operate that part of the railroad in Illinois, Indiana, and
Ohio, and the protection of the minority of certain of the

1 129 Fed. Rep. i6i.



THE WABASH CASE 551

underlying bondholders against the attempt of Jay Gould
and his associates to force them into a reorganization they
did not wish to enter because it primarily involved a re-
duction of the rates of their interest. There was no reason
for the non-payment of the interest on the underlying bonds
other than to subserve the purposes of Jay Gould as a rail-
road wrecker.

Even before Walter Q. Gresham encountered Jay Gould's
reorganization or wrecking schemes, he had, in the most
carefully prepared opinions he ever wrote, aided by thorough
and exhaustive arguments, by men among the most emi-
nent of the American bar, reached the conclusion that even
a single bondholder should be protected in a court of equit}^
and that, too, against all the other bondholders and the rail-
road corporation that issued the bonds. This was on April
6, 1886. The case was that of the Farmers Loan & Trust Com-
pany vs. The Chicago & Atlantic Railroad Company (27 Fed.
Rep. 146). The counsel on one side were Benjamin H. Bris-
tow, H. B. Turner, and Joseph E. MacDonald; on the other,
Ashabel Green, Joseph H. Choate,^ J. J. McCook, Charles I.
Atterbury, Charles W. Fairbanks, and Edward Daniels.

June 20, 1886, the Indiana, Bloomington & Western
Railroad Company, owning and operating a line of railroad
from Peoria to Springfield, Ohio, with leased lines from
Springfield to Columbus, and Springfield to Sandusky, Ohio,
became insolvent because of the construction the Supreme
Court of Ohio put on the lease under which the Columbus
and Sandusky line was operated. On behalf of the In-
diana, Bloomington & Western Railroad Company, Charles
W. Fairbanks, in a bill in which it was the plaintiff, copied
after the bill General Wagner Swayne had filed in the
Wabash case, applied for a receiver. At Indianapolis on
June 6, 1886, the Circuit Judge said: "No, we cannot ap-
point a receiver for an insolvent corporation at its instance
and against its creditors." So a bill was filed by a creditor
and the receiver was appointed.

iSee page 812.



552 LIFE OF WALTER QUINTIN GRESHAM

The Wabash receivership was and is unique in that
Circuit Judge David J. Brewer had appointed the receivers
at the instance of the company itself, and after District
Judge Treat at St. Louis had decHned to act. Instead of
the trustees for the bondholders or the creditors of the
company proceeding against the company, it had pro-
ceeded against its creditors. At this time, May 28, 1884,
Jay Gould was, as he had long been, its dominant force,
often its president. Built from Toledo, Ohio, to Quincy
and Hannibal on the Mississippi, to take up the traffic of
the Wabash and Erie Canal from Toledo, Ohio, to the In-
diana and Illinois line and that originating in the heart of
Illinois, it possessed from the start immense earning power.
Honestly constructed and managed, there was no better
railroad property in the United States. Many times had
it been wrecked and reorganized by Gould, Sage, and
Humphreys, but each time it had emerged from a fore-
closure or a receivership with a greater load of indebted-
ness. In 1869 the line from Decatur to St. Louis had
been acquired, and in 187 1 the Chicago division was built.
In 1880 there was a consolidation with a corporation own-
ing a line from St. Louis to Kansas City and Omaha under
the corporate name of the Wabash, St. Louis & Pacific
Railway Company, with headquarters at St. Louis.

"To the court at St. Louis," said the receivers, and in
this they were sustained by Judge Brewer, ' ' must all parties
repair having business with or claims against the Wabash
property." The other Federal judges through whose juris-
diction the road ran were simply to enter the decrees of
the St. Louis court.

March 11, 1885, District Judge Woods at IndianapoHs
in a letter to Circuit Judge Gresham at Chicago, said:

At the instance of the receiver of the Wabash, after looking
into the records of the court as to what had been done during
the strike of 1877, I instructed the United States marshal to in-
form the strikers at Fort Wayne what action had been taken in



THE WABASH CASE 553

that year, and as I have heard nothing more, I suppose it has
had the desired effect.

Now to the point. The trouble, as I understand, has arisen
from reductions in wages, and I have been thinking what the
duty of the court may be in such cases. Should receivers be
allowed to make reductions without an order of court, or once
made, should the court inquire into the propriety or justness of
the act? I do not think that the losses incurred by railroads
under pool arrangements or suicidal competition should be made
good by cutting wages. Especially ought this not to be done
upon the responsibility of the courts.

April 18, 1886, one of the Illinois patrons of the Wabash
road residing on the Chicago division, not far from Chicago,
came before Judge Gresham at Chicago with a petition
which he asked leave to file, in which he said his stock had
been killed on the Chicago division not far from Chicago
at a point w^here the road was not fenced, as the Illinois
statute required. The prayer of the petition was that the
receiver be ordered to pay him the value of the stock killed.
The attorneys for the receiver promptly objected to the
petition being filed and claimed that the United States
Circuit Court for the Northern District of Illinois could
make no order in the premises, that only the court at St.
Louis could do so. The attorney for the farmer was told
he might hold his petition for a few days if he was not
in a hurry, otherwise he could go on to St. Louis. The
attorney w^aited.

A short time before this Judge Gresham, on a bill filed
by the Illinois Central Railroad Company, had issued an
injunction against its switchmen, who w^ere on a strike,
and had been injuring its property and interfering with
the management of its trains.

May 4, 1886, the attorneys for the receivers rushed into
court with a petition, and were in a great hurry to have
orders issued to the United States marshal at Chicago to
protect the receivers in their possession of the road at Chi-
cago, Springfield and in the vicinity of Danville. Accord-
ing to a newspaper man the following colloquy occurred :



554 LIFE OF WALTER QUINTIN GRESHAM

"In view of your position the other day, I may not have
jurisdiction to enter the orders you ask. Had n't you better go
to the court at St. Louis?" asked the judge.

"But," said the lawyers, "the court at St. Louis cannot ap-
point marshals and issue orders to them in Illinois."

"And Jay Gould cannot run this court, come in here one day
and say we have n't jurisdiction, and the next day demand that
we enter his orders. If it becomes necessary to protect the
property, we will do so, but in the meantime it may become
necessary to remove Tutt and Himiphreys and appoint some
honest citizen of Illinois in their places."

The records of the court disclose the following telegram
addressed May 4, 1886, to Humphreys and Tutt, the re-
ceivers, by Judge Gresham:

The Circuit Court of the United States is asked to appoint
deputy marshals to protect you as receivers in the possession and
management of the Wabash property here and elsewhere in this
district. If the emergency calls for such action, one of you should
be here. The request comes from Colonel Howe, one of yoiu*
subordinates.

To this telegram the receivers replied next day by letter :

We are in receipt of your telegram of yesterday, . . . for which
we are greatly obliged, and to which we have just replied thus:

"We are obliged for your dispatch of yesterday, received last
night. We, the receivers, have never denied your jurisdiction over
the property which we hold in trust for all the bonds and stock-
holders and other parties interested in the Wabash property. Col-
onel Blodgett, our legal representative, will leave here to-night with
a petition to Your Honor asking protection. In the meanwhile,
will you please afford such protection as you may deem advisable.

"We are greatly surprised to see in the papers of Thursday
that you refused protection to the property in our charge as
receivers for all the parties interested in the Wabash Railroad,
upon the supposition that we had denied your jurisdiction here-
tofore, and we are pleased to have the opportunity of saying to
Your Honor that no such action was ever taken by the receivers
or any one representing them.



THE WABASH CASE 555

' ' We have always appreciated the protection afforded us by
the United States Court, and but for the protection and a firm
determination by the judges to uphold and sustain the majesty
of law and order, the great trust that we represent would have
been partially destroj^ed, to say the least, by lawless men long ago.

"The Central Trust Company of New York did, we under-
stand, offer the objection that Your Honor had no jurisdiction
over the Wabash property, but of this we knew nothing until
the past week."

Before this letter was received, on the morning of the
6th, Colonel Blodgett, accompanied by Thomas E. Tutt,
walked into the chambers of the Judge of the Circuit Court
at Chicago. And the evening of that day, before Mr. Tutt
started back to St. Louis, he sent to the Circuit Judge the
following letter:

I have this day visited the yards and freight business of the
Wabash Railway in Chicago, and find that considerable freight
is being received and delivered. I am also informed by Mr.
Wade, our superintendent of transportation, and Mr. Tahnadge,
our general manager, that the condition of affairs has been steadily
improving since yesterday morning, and it is their opinion that
with deputy sheriff's and police now on duty in the vicinity of the
property they will, for the present at least, be able to continue
business, and in view of these facts, I think it unnecessary for
the court to take any immediate action upon our petition filed
in your court yesterday, requesting the appointment of deputy
marshals.

Meanwhile, soon after Tutt and Humphreys were ap-
pointed receivers, Jay Gould caused foreclosure proceed-
ings to be begun against it at St. Louis under the general
or blanket mortgage covering the main line from Toledo
to Omaha via St. Louis with all its branches. This mort-
gage secured an issue of $50,000,000. It was typical of
Gould's system of financing. It was never claimed that
much of the proceeds of that issue of bonds went into
the improvement and betterment of the Wabash Railroad.
This mortgage had gone to a decree of foreclosure before



556 LIFE OF WALTER QUINTIN GRESHAM

Judge Brewer at St. Louis. At a sale under it, April 26,
1886, the Jay Gould, Sidney Dillon, Russell Sage, and
Solon Humphreys syndicate purchased the entire railroad
of the Wabash Company, with all its branches both east
and west of the river, and proceeded to whip into their
reorganization — which involved a reduction of interest
from 7 to 5 per cent — certain of the bondholders on the
Chicago division, 250 miles long, under the mortgage of
February i, 1867, covering the main line in Ohio, Indiana,
and Illinois from Toledo to Quincy, and a mortgage dated
May 17, 1879. Between these last two and the mortgage
($50,000,000) that Gould was foreclosing in Judge Brewer's
court were ten other separate mortgages each securing a
separate series of bonds.

These thirteen mortgages secured an aggregate of $27,-
000,000 of bonds. Above them, or subordinate to them
as liens, was Gould's $50,000,000 mortgage. All of this
$27,000,000 had been whipped into the fold but about
$4,000,000 which was held by one Bears and his associates,
$1,800,000 on the Chicago Division, and the rest, $2,200,000,
on the main line, held by one Atkins and his associates.
Bears and Atkins were threatened with all kinds of litiga-
tion, and orders were entered at St. Louis by Judge Brewer
September 6 and 7, 1886, that left it to the discretion .of
the receivers, Tutt and Humphreys, as to what underlying
bondholders should receive interest on their bonds, pend-
ing the reorganization. Under these orders the Bears and
Atkins bondholders were denied interest. Orders had also
been entered by Judge Brewer's court that put claims for
labor and supplies incurred by the Missouri Pacific Com-
pany while it operated the Wabash Road for thirteen
months immediately preceding the receiverships, a charge
upon the Wabash Railroad, as a lien superior to the liens
of the Wabash mortgages.

Bears and Atkins, by able counsel, Henry Crawford and
D. H. Chamberlin of South Carolina fame, had watched



THE WABASH CASE 557

the proceedings in the Chicago & Atlantic and the Indiana,
Bloomington & Western, and the proceedings in the Wabash
case. These precedents made them bold to act.

Bears, on behalf of himself and his associate bondholders,
filed in the Northern District of Illinois a bill to foreclose
the mortgage on the Chicago Division, while Atkins, by
another bill in the Southern District of Illinois, took sim-
ilar action under the two mortgages mentioned on the main
line. In addition to asking for the foreclosure of the mort-
gages, they moved the court to remove Humphreys and
Tutt on the ground that they were not fit persons to act as
receivers, and to appoint some capable, trustworthy person
in their stead.

Much testimony was taken in support of the motion to
remove Tutt and Humphreys. They were put on the wit-
ness stand and made to admit they were without the quali-
fications necessary to manage a railroad. General Swayne
also became a witness to explain how some of the orders at
St. Louis were procured. Those who heard it, said, at the
final hearing on the motion to remove the receivers, that
Henry Crawford's argument was one of the best ever heard
in a courtroom.

The decision said it was unusual and novel, at the in-
stance of an insolvent railroad corporation, without notice
to appoint as a receiver against its creditors, one of its
stockholders who had been unsuccessful in its management.
It denied that the court at St. Louis had paramount juris-
diction over the property in Illinois, asserted that it was the
duty of a court of equity to protect the rights of minority
bondholders, and in commenting on the assertion of the
attorneys that it was right for the reorganization committee
to discriminate against the non-assenting bondholders in
paying interest, the following language was used :

The boldness of this scheme to aid the purchasers by denying
equal rights to all bondholders secured by the same mortgage,
is equaled only by its injustice. The right is asserted by the



558 LIFE OF WALTER QUINTIN GRESHAM

purchasers of the property, in a court of equity, to take the earn-
ings of a road covered by a mortgage and pay part of the coupons
secured by that mortgage, to the exclusion of coupons secured
by the same mortgages and falHng due at the same time. Doubt-
less the counsel who obtained the orders of September 21 was
not as frank in avowing to the court at St. Louis the purposes
of the purchasers as he was here, and still is in defending his
interpretation of them.

Criticism was made of the orders of the court at St.
Louis in directing that the earnings of the Wabash Company
be applied to the payment of the indebtedness incurred by
the Missouri Pacific Company while operating the Wabash
Railroad, and in issuing receivers' certificates to pay that
indebtedness.

Gould, Sage, Dillon, and Humphreys were indorsers of
$2,000,000 of the promissory notes of the Wabash Company
at the time the receivers were appointed. Two days later
the court at St. Louis authorized the issuing of receivers'
certificates to pay that indebtedness. That was one of the
objects in view when Gould, Humphreys, Dillon, and Sage,
as a majority of the meeting of the Executive Committee
of the Wabash Company, decided on the 21st of May,
1884, that they would put the Wabash Railroad Company
into the hands of a receiver. Receivers were authorized to
pay rebates which the Missouri Pacific Company had agreed
to pay prior co the appointment of the receiver. They paid
such rebate claims to the extent of $360,000 and $3,200,000
on account of labor and supply claims incurred by the
Missouri Pacific Company while in the possession of the
Wabash property. It also was shown that Gould, Hum-
phreys, Dillon, Sage, Hopkins, and Charles Ridgeley were
all directors of the Ellsworth Coal Company, owning a mine
near the Wabash Railroad in Sangamon County, Illinois;
that they paid rebates on coal shipped prior to the receiver-
ship, and that on coal shipped since the appointment of the
receiver and up to September i, 1886, they had paid rebates



THE WABASH CASE 55g

amounting to $63,305.85, equal to the entire capital of the
coal company, and besides, the receivers were hauling coal
for this company to Chicago at less than current rates ; that
receiver Humphreys himself had said in a statement filed
with the court that the rates were so low that they had
caused the receivership. The opinion proceeds:

Men with a proper appreciation of their rights and the
rights of others — trustworthy men — are not apt to be found in
such inconsistent relation. Gould, Humphreys, Dillon, Sage,
Hopkins, and Ridgeley are men of stern integrity if their interests
in the coal company would not improperly influence their action
as directors of the Wabash Company. It is going very far —
farther than this court is willing to go — to enforce a secret con-
tract for the rebate of freight paid to a railroad company, and to
the extent of his interest in the coal company, Humphreys allowed
a rebate to himself.

So Humphreys and Tutt were removed and Thomas
Cooley was appointed receiver of the Wabash lines in Hlinois.
He managed the property so successfully that Mr. Cleve-
land made him chairman of the Interstate Commerce Com-
mission when it was organized.

General John McNulta succeeded Judge Cooley as re-
ceiver of the Wabash. Much rehabilitation work was done,
which Jay Gould himself approved: although when the
language of the court, and other expressions, went broad-
cast over the country at the time the decision was made
public, Gould was bitter in his denunciation of the judge —
said he was a candidate for the Presidency.

Judge John Schofield, of the Ilhnois Supreme Court,
summed up Gresham as follows: "I look upon Gresham
as combining in himself two great qualities — qualities rarely
found together — he possesses executive ability and a judi-
cial mind, and to an unusual degree. Many of our great
men have possessed one or the other of these qualities, but
few have possessed both. In Andrew Jackson we had a
sample of the men who have great executive abiht}' but
36



56o LIFE OF WALTER QUINTIN GRESttAM

small reasoning faculties. Daniel Webster was one of the
other class."

The opinion was given the widest publicity. Of it the
editor of the American Law Review, S. D. Thompson, the au-
thor of that standard work, "Thompson on Corporations,"
wrote January 14, 1887, "We will do what we never have
done before with any decision, print it in full." From his
law office in New York Robert G. Ingersoll wrote, "You
never did a better thing than the action you took in the
Wabash case. . . . Confidence in the judiciary of the
country will go far towards doing away with the spirit of
riot and disorder. If the people really feel that the bench
will stand by the right, there is no danger; when it is known
that no man can be rich enough or popular enough to
pervert judgment the people will be satisfied." Judge Dyer
wrote: "Your decision in the Wabash case is making a
great stir. You are being abused by the pirates and com-
mended by all good people. ... I am glad I belong in
the Seventh Circuit which once had Judge Drummond/'

Although ratified within three months by the passage
of the Interstate Commerce Act, putting rebates, prefer-
ences, and discriminations under the ban of the statute
law, and by the two subsequent acts of Congress, Judge
Gresham's opinion in the Wabash case was the cause of
the rebuke the Supreme Court administered in 1890 in the
appeals that went to the Supreme Court in the Narrow
Gauge case.i

1 See page 510.



CHAPTER XXXVI
EVENTS PRIOR TO 1888 CONVENTION



BLAINE AGAIN CANDIDATE FOR PRESIDENT — REDUCING
THE TREASURY SURPLUS — CLEVELAND'S TARIFF MESSAGE
— EDITOR JOSEPH MEDILL's POSITION ON THE TARIFF —
BLAINE WITHDRAWS AS CANDIDATE — GRESHAM BOOM —
JUDGE GRESHAM REFUSES TO MAKE TERMS WITH PLATT
AND QUAY — PLATT's POWER IN THE CONVENTION.

A FTER James G. Blaine's defeat as the Republican
-^"^ candidate for President in 1884 it was thought that
he would not again ask for the Presidency. Grover Cleve-
land had defeated him by a narrow margin, especially in
New York, where the Democrats had only 1,100 more
votes than the Republicans, with the Greenback, Prohi-
bition, and Labor parties casting an unusually large vote
for their respective candidates. But Oregon unexpectedly
went Republican in 1886, and again Mr. Blaine was put
forward. In Indiana and Connecticut the Republicans
prevailed over the Democrat, Prohibitionist, and Labor
parties by scant pluralities. Conceding that Mr. Blaine
might again lose New York with its large electoral vote, his
many friends, who were ardent in their devotion to him,
said that with Oregon, Indiana, and Connecticut doubtful
States, and with the sure Republican States, he would not
again need New York. At this time Mr. Blaine had been
abroad for over a year. In the West the Chicago Tribune
was the leading Republican paper, and it took the lead in
again pressing Mr. Blaine on his party and the country.

Meanwhile Walter Q. Gresham's prediction of 1884,
that the surplus for the fiscal years 1 885-1 886 and 1886-
1887 would increase, had been verified. Money beyond

561



562 LIFE OF WALTER QUINTIN GRESHAM

the needs of the government was piHng up in the Treasury.
The talk of the hour was, the best way to reduce this sur-
plus. To the Congress that met December 4, 1887, Grover
Cleveland sent his famous message in favor of the reduction
of the tariff.

Departing from the custom in an annual message, Mr.
Cleveland said he would call the attention of Congress to
a single subject, • the dangers of the increasing surplus in
the Treasury and the means of reducing it, namely, by
reducing the duties on imports. Short, the message was



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