receivers, in one instance, paying the interest on all their bonds, and neglecting to pay the over-due principal on their car-trusts, while the other company defaults on all its bonds, and pays both principal and interest of its car-trusts. One of these decisions is probably right, but it does not require a lawyer to decide that both can not be, especially as in both cases the officials testified that the equipment was essential to its operation. Then, again, for some reason or other—probably that their jurisdiction extends over more than one State—most of the applications for receivers are made in the United States courts, perhaps, as in a recent instance, on the application of a man to whom the company owe a few thousands, when we have the ridiculous condition of affairs that those owning millions of the property, and even the trustees of the mortgages, have no legal status before the tribunal that is managing their property, because they, being citizens of the State in which the company has its domicile, have no standing in a Federal court, and, even did they have such standing, it is extremely difficult to get a court to find fault with or dismiss a receiver, firstly, because the receiver, being in possession of the books, it is difficult to get the evidence to show incapacity or misdoing, and, secondly, because for the court to do so would be to admit that it had erred in selecting the receiver, which courts, being human, do not like to do.
There is another danger about receiverships, viz.: if receivers are allowed to pay interest on floating debt, and continue payments to guaranteed and leased lines while defaulting on the securities of their own company, it can readily be seen that no better means could well be devised for unscrupulous men to wreck corporations, as all they have to do is to get themselves elected directors, make a few bad leases, loan the company's money to make gaudy reports until they sell their stock; then apply for a receiver, continue to pay the leased lines, until they freeze everybody out, and then, when they have bought in the securities at their own figures, sell out the property, and thus cancel the bad leases. Unfortunately, just this practice is the one by which some of the largest fortunes of the day have been made, and that it is well understood, the following remark of a prominent Wall Street operator will show, who said to a bondholder of a company that was in the hands of a receiver, "If you don't let us reorganize this property to suit the stockholders, we will keep it in the hands of the court for seven years!" If the court managed it well and fairly to all interests, the threat would have amounted to nothing; but, as some years of experience had shown just the contrary, it was a serious matter, and the bondholders had to yield, feeling that the terms, hard and unjust as they were, were preferable to further management by the court.
It will probably be asked. What is the cure for these troubles? which I confess is not so easy to answer; but I think the adoption of the following would go far to help matters:
