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Gauge cases to be reached, reversed Judge Jackson's decree
in which he put ahead of the first mortgage the claim for a
mechanic's lien for constructing a dock at the terminals of
the Narrow Gauge system in Toledo. Justice Brewer de-
livered the opinion of the Supreme Court.

According to the precedents, there was less reason for
Judge Jackson allowing this claim than there was for
Judge Gresham allowing the claim of the Grant Locomo-
tive Works, in Kneeland vs. Grant Locomotive Works (136
U. S. 79), decided May 19, 1890, for the use of engines dur-
ing the four months of a receivership under a judgment
creditors' bill immediately preceding the receivership insti-
tuted by the bondholders.

Indeed, every precedent and every expression of the
Supreme Court prior to this time justified the decree Judge
Gresham entered, and yet Judge Jackson was reversed in
becoming judicial language, while Judge Gresham was
reversed with a rebuke. If it was necessary to reverse



THE WABASH CASE AGAIN 623

the practice that had long obtained, the rebuke should
have been administered at the first opportunity.

This was the Narrow Gauge case. July i, 1883, Judge
Drummond, at the instance of a judgment creditor or on
a bill filed by a judgment creditor, appointed George D.
Branham receiver of the Narrow Gauge system of railroads.
The bondliolders did not object. They stood by until
November i, 1883, when they asked that they be given
the receivership and their mortgage foreclosed. That day
they were given the receivership. In due time their mort-
gage was foreclosed, under a decree which practically gave
them possession of the road without a sale, conditioned only
that they pay such claims as the court might decree to
be in equity prior to the lien of their mortgage.

When Branham took possession, he found in the pos-
session of the railroad company certain locomotives belong-
ing to the Grant Locomotive Works. These locomotives
were held under leases between the Grant Locomotive
Works and the Toledo, Cincinnati & St. Louis Railroad
Company, or the "Narrow Gauge Company," with the
right to the railroad company to purchase them at any time
at a certain price, and with a further provision that when
the monthly payment of the rent aggregated the agreed
purchase price, the title should pass to the railroad com-
pany. From the start the receivers held on to these loco-
motives, as without them the road could not have been
operated. The rolling stock people demanded the rental
as stipulated, even prior to the receivership, under the
judgment creditor's bill, then during that receivership and
the receivership at the instance of the bondholders. The
bondholders said there should not only be no allowance for
the period prior to the receivership under the judgment
creditor, but that no rental should be paid during the
receivership of the judgment creditor.

Judge Gresham rejected all claims for rent prior to
the receivership instituted on July i, 1883. For the four
40



624 LIFE OF WALTER QUINTIN GRESHAM

months during the receivership under the judgment credi-
tors' bill, that is, before the bondholders actively inter-
vened. Judge Gresham rejected the claim for rent under
the leases, but allowed the rolling stock people compen-
sation for the use of their engines on the basis of about
one- third of what was provided for in the lease; that is, on
a quantum meruit basis.

Now for the rebuke. In order to justify the reversal.
Judge Brewer had to go back to Judge Drummond's dis-
carded language in the Chicago & Alton case of 1864.^
We quote him:

One holding a mortgage debt upon a railroad has the same right
to demand and expect of the court respect for his vested and con-
tracted priority as the holder of a mortgage on a farm or lot.

Indeed, we are advised that some courts have made the
appointment of a receiver conditioned upon the payment of all
unsecured indebtedness in preference to the mortgage liens sought
to be enforced. Can anything be conceived which more thor-
oughly destroys the sacredness of contract obligations?

That other than legal and equitable considerations en-
tered into this judgment of the Supreme Court is mani-
fest when we consider that five years later, in an exactly
similar case — Louisville Loan & Trust Company vs. Louis-
ville, New Albany & Chicago Railway Company (174 U. S.
674) — the Supreme Court reversed itself, the Court of
Appeals for the Seventh Circuit, and Judge Woods, who
had literally followed Kneeland vs. Loan & Trust Company
(136 U. S. 97). Again Justice Brewer was the mouthpiece
of the court. To justify his conclusion and that of the
court, the major premise — that of Judge Drummond in
Turner vs. IndianapoHs, Bloomington & Western Railway
(Bissell) — of 1879, was adopted, namely, ''Then a mortgage
on a railroad is not like an ordinary mortgage on land."^

The rebuke at once attracted wide attention, and much
resentment. From Maine to Cahfornia came letters from
members of the bar. The explanation vouched privately

ISee page 372. 2 See pages 376-7-



THE WABASH CASE AGAIN 625

by members of the Supreme Court was that the rebuke was
intended for Judge Caldwell of the Eighth Circuit, Judge
Brewer's successor.

Judge Caldwell in the Eighth Circuit, as a condition
precedent to appointing a receiver, had required the bond-
holders to pay claims for personal injuries and other like
claims which in no wise were betterments to the property.
As he put it to one attorney, "If you want me to open the
door, you must come to my terms," — a summing up in a
sentence of a score of the decisions of the Supreme Court
"The appointment of a receiver was not a matter of right."
It was Judge Caldwell's view that, in extending the protect-
ing arm of the court, with all the power of the nation
behind it, because of the public interests involved, the court
making the appointment could impose terms largely within
the discretion of the judge to whom the application was
made. He had gone farther than Judge Gresham ever fol-
lowed Judge Drummond, who inaugurated the system; and
ultimately Judge Caldwell seems to have had the sanction
of the Supreme Court, as appears from the opinions of
Justices Brewer and Harlan we have last cited. In other
words, that eminent tribunal, as Mr. Lincoln once said in
refusing to accept its rulings as final, especially in matters
that affect the entire public, has often reversed itself.

Judge Caldwell did not accept the privately expressed
views of the Supreme judges that the rebuke in the Knee-
land case was aimed at him. On the contrary, apparently
with design, he spread the report in the Eighth Circuit
that the rebuke was intended for Gresham. In the con-
fidence of his chambers. Judge Caldwell was deft in poison-
ing the minds of many an attorney against the members
of the Supreme Court. "They will never stand for that
Wabash case," was one of Judge Caldwell's expressions.
And yet, as we have shown, Judge Gresham's judgment in
the Wabash case had been confirmed by several acts of
Congress.



626 LIFE OF WALTER QUINTIN GRESHAM

If it was not aimed at Gresham, the opinion should
have been so framed as to exclude that impression, and
should have been written by some other member of the
court than Justice Brewer, especially as Justice Brewer
was a nephew of Cyrus W. Field, one of the financiers
whose conduct had been under review in the Wabash case.
Even though it be as General Swayne said in a letter to
Judge Gresham, "Mr. Field 'got from under' before the
trouble came," the fact is, the impression went broadcast,
especially throughout the Eighth Circuit, embracing the
States of Kansas, Missouri, Iowa, Minnesota, Nebraska,
the Dakotas, Wyoming, and Colorado, that the Supreme
Court was "dressing Gresham down." And there were
men — lawyers — high and low who resented it. And when
it comes to digging into the web and woof of things, one
lawyer is the superior of dozens of politicians.

In 1889 the information came that the Harrison admin-
istration, through its Department of Justice, was searching
the records to get something on Judge Gresham. "Afraid
of nothing but sin," as Henry Watterson put it. Judge
Gresham never ceased "Wabashing" railroad property, when
it came his way. But notwithstanding the feeling and the
sentiments that Walter Q. Gresham knew the members of
the Harrison administration, including President Harrison
himself, entertained and manifested toward him, the record
is conclusive that in Judge Gresham's court it fared better
than at the hands of any other Federal judge, even judges
that it created.

Meantime, on September 21, 1889, the People's party
was formally born. That day, at Winfield, Kansas, four
rural leaders, Mike Markham, Bill Grow, Sam Strong, and
Dick Chase, walked out of the Cowley County Republican
Convention. They consulted Judge A. J. Miller, and in-
side of a week they and their followers in the RepubHcan
party, under the name of the People's party, were joined
by the Democrats and the Cowley County Union Labor



THE WABASH CASE AGAIN 627

party, then less than a year old. The American Non-
Conformist, a newspaper that had made much of the Wabash
decision, became an advocate of the platform of the new-
party. The Non-Conformist was ably and fearlessly edited
by Mr. James Vincent and his son Henry. James was an
English Abolitionist. After helping in the clean-up of the
British Empire, he moved to America in 1848 and settled
in Iowa, thence to Kansas to continue his war against the-
"divine institution." At Tabor, Iowa, John Brown had
a station in James Vincent's house. Meantime, the Vin-
cents became correspondents of Walter Q. Gresham, who
made no secret of his views of "men and measures."

In November, 1889, the newly founded People's party
carried Cowley County by a good majority. The fast-
growing "Farmers' Alliance" joined the new movement,
and in 1890 the State that had hitherto been overwhelm-
ingly Republican voted the People's party ticket by 80,000.
Out of one hundred and twenty-six members of the State
legislature the "Populists" elected ninety-four. Thomas
Benton Carr of Medicine Lodge, Kansas, but bred to the
law in southern Indiana while Walter Q. Gresham was at
the bar, was unsurpassed as an agitator. He was the
brains of "Sockless Jerry Simpson of Medicine Lodge,"
who in 1890 was elected to Congress by an overwhelming
majority over his Republican opponent.

Another story Judge Caldwell told was that even Justice
Harlan was influenced by Justice Brewer. But we have
shown that the want of cordiality between Justice Harlan
and Judge Gresham grew out of the Angle case. At first
Justice Harlan approved the Wabash ruling, although it
was opposed to his idea of central control.

In the Northern Pacific receivership, when Judge Han-
ford, the district judge in the State of Wavshington, with
the Wabash ruling as a precedent, raised some questions as
to the propriety of certain orders which Judge Jenkins, who
had appointed the receivers at Milwaukee, was entering.



628 LIFE OF WALTER QUINTIN GRESHAM

Judge Caldwell said to the attorneys, eminent in their line,
who were conducting the case, "If you can get Judge
Harlan to intervene . you can get a modification of that
Wabash case." At first Justice Harlan, so the attorneys
said, refused to have anything to do with the matter.
Finally he did so at Washington. Armed with a letter
from Justice Harlan, the attorneys went to Seattle, and with
that letter and good dinners, Judge Hanford was prevailed
on to abandon his efforts to run the Pacific end of the
Northern Pacific receiverships; and the good dinners and
goodfellowship, one of the counsel engaged said he believed
were more potent than Justice Harlan's letter. Subse-
quently Judge Hanford resigned in the face of impeach-
ment proceedings.

Further complications arising in the Northern Pacific
receivership because of the Wabash precedent, a case was
made up for four of the Supreme Court justices — Field,
Harlan, Brewer, and Brown — to pass on the circuit. The
hearing was had, but there was not that modification of the
Wabash ruling that was hoped for and desired.^

There are many things that even unanimous consent
of counsel and parties is insufficient to authorize a judge
to do. May i8, 1889, Walter Q. Gresham, on his own mo-
tion, appointed Volney T. Malott receiver of the Chicago
& Atlantic Railroad Company. Another — a railroad man
— had previously been decided on by counsel and parties,
including J. Pierpont Morgan & Co., for this receivership.

This Chicago & Atlantic case we have adverted to before
because it dovetailed into the Wabash case.- The Chicago
& Atlantic Company had built, in the interests of the Erie
Company, the railroad from Marion, Ohio, to Chicago,
270 miles, as the western extension of the Erie. But the
money to build it had been furnished by citizens of Holland
on the guaranty of the Erie Company that the Chicago &

1 Farmers' Loan & Trust Company vs. The Northern Pacific Railroad Company,
72 Fed. Rep. 26.
2See page 551.



THE WABASH CASE AGAIN 629

Atlantic Company would promptly pay the interest on this
loan. For the first eighteen months after the road was
opened for traffic in 1883, failing to earn operating expenses
and interest, the Erie Company advanced the interest;
then dissensions arose, and the Erie Company refused long-
er to advance the interest — said its contract of guaranty
was ultra vires. It then caused a bill to be filed for the
appointment of a receiver for the Chicago & Atlantic
Company, and asked for a foreclosure of the mortgage on
account of the interest it had paid.

At first the Holland bondholders, by Alexander & Green,
opposed the appointment of a receiver. They w^ere then
opposing the Erie Company's attempt to get possession of
the railroad. They represented to the court that the Chi-
cago & Atlantic Railroad was in splendid physical condition ;
that they had advanced their money on the faith of the
promise of the Erie Company that it would pay their inter-
est ; and rather than that the Erie Company, having default-
ed in its promise, should get possession of their property,
they were willing to defer their interest. Meanwhile, they
said, let the Chicago & Atlantic Company continue to oper-
ate the road. Ever considerate of the wishes of the real
owners of property, Judge Gresham refused, on this show-
ing, to appoint a receiver when the Erie Company was the
moving party. Three years later, after a decree of fore-
closure in which the validity of the Hollanders' mortgage
had been upheld, pending an appeal to the Supreme Court
in which the validity of the Hollanders' mortgage was still
questioned, and after the Hollanders and the Erie Company
had settled their differences and united in a motion for a re-
ceiver, Mr. Malott was appointed. Mr. Malott was a prac-
tical railroad man of long experience. Judge Howell E.
Jackson of the Sixth Circuit promptly confirmed the Mal-
ott appointment as to that part of the road in Ohio that
was within his jurisdiction. Suspecting that perhaps the
road had not been maintained as it should have been in



630 LIFE OF WALTER QUINTIN GRESHAM

the interim, Judge Gresham instructed Mr. Malott, imme-
diately on his appointment, to look to the physical condition
of the road, and meanwhile take all temporary precautions
against accidents that might result in injury to employees
and the traveling public.

Within thirty days Mr. Malott presented a written re-
port to Judge Gresham in which he set forth that the Chi-
cago & Atlantic Railroad was in a dilapidated condition —
rails, ties, fi.sh-plates, angle-bars, and bridges. A piece of
a rotten bridge timber was brought along as an exhibit.

Chief Justice Fuller was then in Chicago. Judge Jackson
was written to, and asked to come to Chicago and sit with
the Chief Justice and Judge Gresham and consider this
report.

The report was considered in chambers by the three
judges and the receiver without any one else present. Mr.
Malott was asked how much it would take to make the
road safe for the operation of trains. His answer was,
"$350,000." Accordingly, with the approval of his as-
sociates. Judge Gresham, on June 20, drafted an order
that the receiver be authorized to borrow $350,000 and se-
cure its payment by receiver's certificates that should be
a lien on the road superior to the lien of the mortgages, and
unless the bondholders and the Erie Company consented
to the issuance of these receiver's certificates, that on or
before August i, 1889, the operation of trains over the
road should be abandoned. Mr. Malott had stated he
could readily get the money. He at that time was presi-
dent of one of the best National banks in the country.

Accordingly Receiver Malott and Edward Daniels, his
counsel, proceeded to New York and assembled J. Pierpont
Morgan, whose firm was reorganizing the Chicago & At-
lantic Company and was then the fiscal agent of the Erie
Company, Turner, Lee, & McClure, attorneys for the
Far mers' Loan & Trust Company, and the trustees in
the first and second mortgages of the Chicago & Atlantic



THE WABASH CASE AGAIN . 631

Company; Alexander & Green, the counsel of the first
mortgage bondholders or the Hollanders; Charles W. Fair-
banks, representing George J. Bippus, one of the trustees
of the second mortgage; John King, the president, and Ben-
jamin H. Bristow, the counsel of the Erie Company. To
the assembly Mr. Malott exhibited and explained the order
of the court. All were surprised, but none except J. Pier-
pont Morgan showed resentment. Through Justice Field
of the Supreme Court, the few second mortgage bondholders,
who were prosecuting the appeal to the Supreme Court in
which the validity of the first mortgage was questioned,
had been prevailed on to come into Mr. Morgan's plan of
reorganization and to dismiss their appeal. C. W. Fair-
banks, the counsel for these appealing bondholders, was
very indignant at Justice Field for ending his lawsuit. But
Mr. Morgan was the most indignant of all, for the order of
June 20, 1889, upset all his plans for the reorganization of
the Chicago & Atlantic Company. He said, "The money
cannot be raised on receiver's certificates. I will discredit
them everywhere." Mr. Malott said, "Gentlemen, I do
not ask you to raise the money. I will attend to that."
The consent was given.

As there had been no diversion of earnings from operat-
ing expenses, there was a reasonable doubt if the Supreme
Court would have sustained the issuance of the certificates
in this case without the consent of the bondholders. But
to mandate a circuit judge to operate a railroad while un-
safe to the employees and traveling public, was going farther
than it was believed it would then have gone.

Mr. Malott so increased the business of the Chicago &
Atlantic Railroad — for he was a practical railroad man
as well as a banker — that out of the earnings of the road
he was able to make it safe and did not have to sell a single
one of the authorized certificates.



CHAPTER XL
THE SHERMAN ACT AND McKINLEY BILL



THE SHERMAN ANTI-TRUST ACT — THE CASE OF RICH-
ARDSON VS. ALGER — THE SHERMAN SILVER BILL — THE
MCKINLEY BILL — THE WHISKEY TRUST — THE " INFERNAL
machine" plot — WHY THE PROSECUTION OF THE WHISKEY
TRUST FAILED THE SUGAR TRUST CASE — OTHER PROSE-
CUTIONS.

'T^HE Republican members of the Congress that assembled
-'- in December, 1889, selected Thomas B. Reed Speak-
er over William McKinley. Speaker Reed appointed Mr,
McKinley Chairman of the Ways and Means Committee,
and hence the tariff act that passed that Congress received
the name "McKinley Bill."

But long before the McKinley Bill had even passed the
House, Senator Sherman had put his Anti-Trust Act of
July 2, 1890, through both Houses. When he signed it,
President Harrison remarked: "John Sherman has fixed
General Alger." The allusion was to Frank Hatton's
complaint that General Alger had purchased certain dele-
gates in the Chicago convention of the year before.

Walter Q. Gresham never believed that John Sherman,
in his public conduct, was influenced by his passions or
his resentments. But whatever the motive, Senator Sher-
man^ was prompt to act. In the Congress that assembled in
December, 1888, he introduced his bill, as he said, to carry
out the anti-trust plank of the Republican platform of that
year.

A lawsuit at Detroit, David M. Richardson vs. Russell
A. Alger and Christian A. Buhl, disclosed whence came the
lavish expenditures that General Alger had made as a Presi-
dential candidate. In justifying the increase of the capital

1 See page 620. 632



SHERMAN ACT AND MCKINLEY BILL 633

account of the Diamond Match Trust, General Alger tes-
tified that during the years 1881 and 1882, to keep men out
of the match business, large sums were expended in buying
machinery and patents and match factories which were dis-
mantled. The money thus expended enabled the trust to
keep up prices and pay large dividends. The decision of
the lower court, the Circuit Court of Wayne County, Michi-
gan, on the chancery side was satisfactory to neither party,
and both wanted the controversy decided by the Supreme
Court of Michigan. But that court (77 Mich. 271), invoking
the rule that "a court of conscience would not countenance
an immoral contract" — "a contract in furtherance of a
scheme to restrain trade" — of its own motion "turned both
parties out of court" without deciding the controversy.
And then as a warning to the legislative and executive
branches of the government, State and National, it said if
such combinations as the Diamond Match Trust were al-
lowed to exist, it would not be long until they overwhelmed
all popular government.

Michigan lawyers. Grand Army men, among whom Gen-
eral Alger was prominent, were frequent visitors while we
lived at the Palmer House, and at our Prairie Avenue home,
in Chicago. Some were friends of General Alger, some not.
Some repeated in private what Joseph Medill had said in his
paper about General Alger. It was from one of these that
Senator Sherman got his specific information about the case
of Richardson vs. Alger. It was November 15, 1889, that
the Michigan Supreme Court handed down its decision, or
more properly, its philippic. Senator Sherman followed it
up by reintroducing his Anti-Trust act when Congress met
December 6, 1889. The attorneys for the trust were there
to draw, as they did, the match schedule in the McKinley
Act, and later also in the Dingley Bill.^

Having had trouble in New York, the Diamond Match

lAt the time of the Dingley Bill, Edwin Walker had become the attorney of the Diamond
Match Company, and he it was who wrote the match schedule of the Act.



634 LIFE OF WALTER QUINTIN GRESHAM

Trust organized February 13, 1889, as a corporation under
the laws of Illinois. One of our neighbors was making
enormous amounts of money out of the Diamond Match
Company of Illinois. It was a small organization com-
pared to the Standard Oil and the Sugar Trusts, but it was
a lusty infant. Our friend urged me to buy some of the
Diamond Match stock. "It is now a corporation and has
a recognized legal status." The absurdity of the proposi-
tion that a State could grant a charter to a corporation to
do what the State itself could not do, namely, regulate trade
and commerce between the States or nullify or defeat an act
of Congress, was pointed out by my husband so clearly and
vehemently that even a woman, educated as I had been,
"in the field," who had seen "the war legislate," and had
heard lawyers and judges talk for years, could see the point.
And yet eminent lawyers and the most of the American bar
said that when the Standard Oil Trust organized as a cor-
poration under the laws of the State of New Jersey, it was
immune from attack by the National government.

The Diamond Match Company possessed patents that
made it a monopoly without the aid of any tariff.

What little money my Irish uncle had left me I kept in real
estate. Once I did lose a few hundred dollars on the Board
of Trade, and the broker said I was a good loser. He and I
alone knew of the transaction, which was buying wheat on
margin. Women speculate, but it is on the long side. A
woman never sells "short," — that is, she doesn't figure prices
are going down. For a public man in Washington to say
he did not know and would not know how to operate or
speculate on the stock or grain market removes the last



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