Selections From The Splinters - Volume 7
The information contained in this sketch was obtained from the Minute Books of the Gulf, Colorado and Santa Fe Railway Company.
Gulf, Colorado and Santa Fe Railway Company was incorporated by an Act of the Legislature of The State of Texas, passed May 28, 1873, and which became a law without the signature of the Governor. Section 19 of the Act provided that it should take effect from and after its passage.
The first meeting for organization purposes was held in the office of the Mayor of the City of Galveston on June 13, 1873. As a majority of the Commissioners named in the act of incorporation were not present, no action was taken. At an adjourned meeting, held on June 19, 1873, A. Sommerville was elected chairman, and a committee was named to obtain subscriptions to the capital stock.
The minutes record little except endeavors to obtain subscriptions to the capital stock until April 26, 1875, when the first bids (72 in all) were opened at an adjourned meeting of the Board of Directors--covering the actual construction of the road and the furnishing of material therefor. The first construction contract was awarded to Burnett & Kilpatrick at an adjourned meeting held on April 27, 1875. The President and Secretary signed the contract on April 30, 1875, in the presence of the Board of Directors; and it was voted that the work of construction be begun the next day, May 1, 1875, in the presence of the President and the Board of Directors.
There were continuous financial difficulties, in spite of the fact that as a result of an election held on Wednesday, May 20, 1874, the County of Galveston subscribed for capital stock to the amount of $500,000.00, and paid for it in bonds. The interest on the bonds was at one time guaranteed by the Railway Company. (See minutes of the called meeting of the Board of Directors held on Friday, August 20, 1875.) These bonds were to finance the Construction of the first fifty miles of road, and they were delivered to the Railway Company in blocks of $50,000.00. The Railway Company had planned to sell the bonds in New York; but on the delivery of the first $50,000.00 in bonds, on the completion of the first five miles of the road, a citizen made application for an injunction in the District Court, to restrain the sheriff from collecting the special tax levied for the bonds, and to restrain the County from issuing any further bonds and the Railway Company from using those already issued. The injunction was denied. An appeal was taken to the Supreme Court of the State, but the case was decided on every point in favor of the County and the Railway Company, on March 17, 1876. The account of this suit is taken from a newspaper clipping pasted into the minute book just after the minutes of the meeting of the Board of Directors held on Friday, December 7, 1877. This clipping contains the statement of the Board of Directors holding office at the time of a serious crisis which resulted from the County's ownership of stock on account of these bonds. The County claimed the right to name thirteen directors. There was an election, but the directors elected immediately resigned.
At a called meeting of the Board of Directors held on Saturday, Sept. 23, 1876, authority was given to borrow $30,000.00 It was also voted to suspend construction beyond the terminal point of thirty miles, because of the unfortunate financial condition of the Company.
At a called meeting of the Board of Directors held on Wednesday, October 18, 1876, it was decided to resume construction. And the President was authorized to go to New York to arrange to sell the County's bonds----and also to arrange the Railway's mortgage bonds, to be issued thereafter for construction purposes. There is a continuous record of borrowing various sums, with the County's bonds pledged as security. In the newspaper clipping referred to above, it is stated that the bonds were finally all sold in Galveston at par, to the amount of $450,000.00.
(Incidentally, at the meeting of the Board of Directors held on Saturday, October 3, 1874, the report of the Treasurer disclosed that the Company had then a balance on hand of $12.15.)
Another means of raising money was resorted to when, at the adjourned monthly meeting held on Monday, Feb. 19, 1877, a committee was appointed to consider what action should be taken to have the Texas & Pacific Railroad Bill, then before Congress, amended to have the Gulf, Colorado and Santa Fe Railway Company named as one of the branches of the Texas & Pacfic, so that it might receive the same aid given to the other branches.
At a called meeting of the Stockholders held on Monday, April 23, 1877, authority was voted for the Board of Directors to borrow money at the rate of $30,000.00 per mile of the road, to issue bonds therefor, and to execute a deed of trust to cover. At a called meeting of the Board of Directors held on Thursday, Dec. 20, 1877, it was voted to limit the issuance of bonds to $15,000.00 per mile.
At the meeting of the board of Directors held on Monday, March 11, 1878, the president, Mr. Kopperl, was authorized to go to New York to arrange to sell the Company's bonds. The first contract made by Mr. Kopperl was not acceptable. However, later on, the Board of Directors, at their meeting held on Wednesday, August 14, 1878, and the Stockholders, at their meeting held on September 16, 1878, approved the issuance of $2,700,000.00 in bonds and the execution of a mortgage on the entire property of the Company to secure bonds. It was also voted that the capital stock be incresased to $3,700,000.00 The resolutions recite that the money to be obtained from the sale of bonds was to be used by the Company "to construct, complete, and equip its railroad from its present northwest terminus to Belton in the County of Bell". (At an adjouned meeting of the Board of Directors, held on Tuesday, July 30, 1878, the Executive Committee was authorized to enter into a contract with James H. Brooks for the consruction of the road from the 80th mile station to the Town of Belton, and for the completion of construction from the 50th mile station to the 80th mile station.)
The bonds to be issued were dated Sept. 16, 1878, payable August 1, 1908, for $1,000.00 each. At any time before January 1, 1889, the bonds might be surrendered in exchange for capital stock of the Railway Company. The bonds were payable either in gold coin of the United States or in sterling money of Great Britain.
The mortgage was dated September 16, 1878, and named George Mosle and Charles Meriwether Fry, both of the City of New York, as trustees. It covered the entire property of the Company from Galveston to Belton. It provided that the proceeds of the sale of bonds, after the payment of trustees' commissions, etc., should be applied to the completion of the road to the Town of Richmond. The sum of $100,000.00 was to be paid the Railway Company for this alone. Additional sums were to be paid on the completion of each ten miles of road; and Messrs. E. Pavenstedt & Co. were to be paid the amounts expended by them, "including freight, insurance and their commissions for rails, spikes, chairs, superstructure and equipment for construction and operation of the road". It was also stipulated in the mortgage that no resident of the State of Texas should be appointed a Trustee thereunder.
The same meetings that approved the execution of the mortgage also authorized the giving of a power of attorney to David Plenderleath Sellar, of the firm of Dennistoun, Cross & Co., Merchants of the City of London, to sell and dispose of the First Mortgage Bonds.
The same meeting also authorized the execution of a constract with Dennistoun, Cross & Co. of London, for the sale of the bonds. The Railway Company was permitted to sell its bonds to the amount of $200,000.00 in Galveston. All other bonds were to be deposited with Dennistoun, Cross & Co., Bartholomew Lane, London, as security for a loan of $100,000.00, which they agreed to make to the Railway Company on its note at 7%, payable in three months. Out of this loan, payment was to be made to E. Pavenstedt & Co. for rails, etc., used in the completion of the road to Richmond. And the first $100,000.00 which was to be advanced by the trustees under the mortgage, was to be used in liquidation of this loan.
As a consequence of these arrangements, the Railway Company immediately entered into contracts for the purchase of locomotives, passenger and baggage cars, flat cars, and stock cars, and for large quantities of rail and other material.
At a special called meeting of the Board of Directors, held on Thursday, September 26, 1878, a telegram was read from E. Pavenstedt & Co. of New York, advising that Messrs. Fry and Mosle, the trustees named in the mortgage, had declined to accept the trust. A long telegram was sent to E. Pavenstedt & Co., asking them to endeavor to persuade the trustees to accept, as the Company was in imperative need of the money to proceed with construction----and in danger of losing its charter if it could not proceed.
At a called meeting of the Board of Directors held on Wednesday, October 9, 1878, the Finance Committee reported on the Company's indebtedness; and promissory notes were authorized to take care of the most pressing obligations, as the Company had no cash available, and the notes could be negotiated. At later meetings, other promissory notes were authorized.
At a called meeting of the Board of Directors, held on Wednesday, October 30, 1878, it was disclosed that the Company's indebtedness was about $162,000.00, and that the Company had no funds and no immediate prospect of obtaining any. The Finance Committee was empowered to confer with the citizens of Galveston in an endeavor to borrow the sum of $200,000.00. At the same meeting, a communication was received from Hugh Burns that he could not continue work under his contract for grading thirty miles of road, without being paid for it; and a committee was appointed to notify James H. Brooks, Contractor, that the Company was unable to pay him for construction work beyond Richmond; and to arrange terms with him for terminating his contract on his reaching Richmond.
At a called meeting of the Board of Directors held on November 1, 1878, it was decided to ask for a loan of $250,000.00, instead of $200,000.00. At this meeting, also, negotiations with Dennistoun, Cross & Co. of London were definitely ended; and the Company's promissory note and proxies given that firm were recalled. The note and proxies were returned through E. Pavenstedt & Co. of New York, and the note was ordered canceled at the Directors' meeting of December 9, 1878.
At the regular monthly meeting of the Board of Directors held on November 11, 1878, a resolution was adopted setting forth the Company's serious financial condition----"in danger of sale under execution at an early day"----and authorizing the solicitation of a loan for $250,000.00 by publication in the Galveston News. The proposition for the loan was also published in the Boston Post and in the Journal of Commerce of New York.
A called meeting of the Board of Directors was held on Friday, December 13, 1878, to consider a proposition for $250,000.00, made by Mr. George Sealy under date of December 12, 1878, in a letter addressed to the President, Directors, and Stockholders of the Santa Fe. Mr. Sealy stated that he represented the following residents of Galveston:
Ball, Hutchings & Co. M. Kopperl Somerville & Davis H. Rosenberg Wallis, Landes & Co. Chas. E. Richards Isidore Dyer LeGierse & Co. Leon & H. Blum J. J. Hendley R. S. Willis Moody & Jemison S. Heidenheimer Julius Runge John D. Rogers
The offer was for a loan of $250,000.00 in cash, for a period of ninety days, with interest at twelve per cent, to be secured by a deed of trust on the property of the Company. Robert Mills was named as trustee in the deed of trust, a form of which had already been prepared by the attorneys for the Company when the advertisement soliciting the loan was published. Mr. Sealy's letter contained the following paragraph:
"I will add that this loan is only offered by the parties under the belief that the Company cannot in any other manner obtain the amount of money its necessities absolutely require----and under the strong hope that with the road completed to Richmond and without debt, other than this loan, the Company will have a basis of credit to enable it to negotiate its bonds and at once extend the road to Belton. "A part of the agreement between the parties uniting in this loan to which I call the attention of all the Stockholders of the Company is as follows: "'It is further agreed that any Stockholder in said Company willing to contribute towards the making of this loan on the acceptance thereof by the Company may, on the day of such acceptance, subscribe thereto and pay the amount of his subscription to George Sealy, and he shall thereupon become jointly and in all respects interested with us in said loan in that proportion. The amount of such further subscriptions and payments by said Stockholders to be deducted pro rata from the respective subscriptions of the parties hereto now agreeing to make the said loan of two hundred and fifty thousand dollars'".
The offer was accepted by the Board of Directors, subject to the action of the Stockholders. Full authority for obtaining the loan and executing the deed of trust was given by the Stockholders at their meeting on December 14, 1878. The deed of trust, dated December 16, 1878, naming Robert Mills of Galveston, as trustee, is embodied in the minutes of the Directors' meeting of December 14, 1878. It covered the entire property of the Railway Company. It provided that in case of default in payment of the loan at maturity, that the trustee should sell the entire property of the Railway Company at public auction in front of the door of the court house of Galveston County.
Volume 7 Splinters pages 119-125 transcribed in altered form for the web by Johnnie Welborn, Jr.
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