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PENNSYLVANIA SECTION
of the;
RAILROAD.
HE 277/
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i $O f JTctuilJovk:
PRINTED BY WILLIAM W. ROSE,
STATIONER,
AND FIRST PREMIUM ACCOUNT BOOK MANUFACTURER,
• % '
17 WALL STREET.
1851.
LIST OF OFFICERS,
1851.
DIRECTORS.
JOHN GALBRAITH, Erie, Pa.
WILLIAM A. GALBRAITH, Erie, Pa.
WILLIAM S. LANE, Erie, Pa.
HEMAN B. ELY, Cleveland, O.
FREDERICK HARBACH, Cleveland, 0.
President, Secretary and Treasurer,
JOHN GALBRAITH. WILLIAM S. LANE.
Chief Engineer,
PREDERICK HARBACH.
PENNSYLVANIA SECTION
OF THE
EXHIBIT
OI the condition and prospects of the Railroad
Authorised to he constructed by the
IFIS&SriSMKr ©ASSFAIL] ©©SSI[PASTST®
The Franklin Canal Company was originally incorporated
with a view to complete the Franklin Line of the Pennsylva¬
nia Canal, connecting the Alleghany River with Lake Erie, by
the way of French Creek. It was a work upon which large
appropriations had been expended by the state, under her sys¬
tem of internal improvements, and prosecuted until the general
suspension in 1840. In 1844 the present company was organ¬
ized for the purpose above stated, but in consequence of die
embarrassed state of finances, nothing .was accomplished
In April, 1849, an amendment was obtained, giving the Com¬
pany the privilege of constructing a Railroad, under the provi¬
sions and restrictions of the General Railroad Law, if deemed
most expedient, instead of completing or repairing the canal,
and with authority to locate upon such route as the Company
may deem most expedient and advantageous.
The charter is liberal in its provisions, and perpetual: the
time for commencing the work is limited to three years, but it
may be completed at the pleasure of the Company. Under the
amended Act of April 9th, 1849, the Company have proceeded
to locate and put under contract one division of their road, be¬
tween the Borough of Erie and the west line of the State of
Pennsylvania, called the Erie and Ohio Division, 25\ miles long,
forming one link in the great chain of railroads, conrn cting the
Atlantic with the Ohio and Mississippi Rivers, via the south
shore of Lake Erie. It has been located so as to connect with
and form a part of the Cleveland, Painesville and Ashtabula
HE5-"111
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4
ISS"!
Railroad, or the Ohio section of the Cleveland and Erie Rail¬
road, and by contract with that Company, tho entire road from
Cleveland to Erie about 97 miles, will be controlled and ope¬
rated as one concern and interest. By this arrangement the
management will be greatly simplified, expenses reduced, pro¬
fits increased, and the security to the capitalists making invest¬
ments in either road, much enlarged.
Dividends are to be made, pro rata per mile, in proportion
to the lengths of each road, respectively.
This section of railroad occupies a most important and com¬
manding position. It forms the grand connecting link between
the N. Y. and Erie, Albany and Buffalo, and Buffalo and Erie
Roads on the east, and the Cleveland, Coffimbus and Cincinnati,
Cleveland and Toledo, Sandusky and Cincinnati, and Michigan
Southern Railroads on the west and south-west. There are
now more than 50 millions of capital already invested in these
enterprises, all more or less interested and dependant upon it.
Without it, the entire winter business of the Great West, and
a large proportion of the passenger traffic of the summer, must
unavoidably seek an eastern outlet through the interior of Penn¬
sylvania, via the Pennsylvania Central Railroad, or still further
south, by the way of tha Baltimore and Ohio Railroad.
COST.
The Chief Engineer estimates the cost of the road and equip¬
ment complete, at six hundred and thirty-two thousand dollars,
($032,000,) a little short of $25,000 per mile, which, consider¬
ing the beauty of its alignment, the preservation of a 15 feet
maximum grade per mile, and the natural obstacles to overcome,
at the crossings of Walnut, Crooked and Elk Creeks, is a very
fair and moderate estimate. The right of way for nearly the
whole distance upon this section of road has been secured, and
upon favorable terms.
Means are already provided for the grubbing and clearing a
portion of the grading, timber for superstructure, land damages
and fencings—station buildings, equipment and engineering.
The residue will be paid for by the sale of 400,000 dollars of
bonds, authorised to be issued by the act incorporating them, to
be secured by the first and only lien upon the road and equipment.
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5
SECURITY FOR THE PAYMENT OF THE BONDS.
The mortgage is made to cover 400,000 dollars and is the
first and only lien upon the road and equipment, costing 632,000
dollars.
The mortgage or deed of trust is made to George S. Coe,
Esq., of the city of New York, and empowers him as Trustee,
or his successor, in case of failure to pay the principal or inter¬
est of the bonds, to take possession of the road and receive its
earnings, or sell it, on due notice, and apply the proceeds to
extinguish its debts.
ADDITIONAL SECURITY.
In addition to the above security on the road, equipments and
franchises, &c., the Cleveland, Painesville and Ashtabula Rail¬
road Company, a corporation duly incorporated by the State of
Ohio, now engaged in constructing the Ohio portion of the
Cleveland and Erie Railroad, obtained a special act, authorising
them to aid any company constructing, or authorised to con¬
struct a connecting line of railroad in the State of Pennsyl¬
vania; and under this act have guarantied the payment of the
principal and interest of these 400,000 dol'ars of bonds, thereby
giving the bond holder a double security for his investment.
The bonds are in sums of one thousand dollars each, with
coupons attached, and payable at the office of Ohio Life and
Trust Company, on the first day of February, 1861, with inter¬
est, at seven per cent, per annum, payable semi-annually, on
the first days of August and February, at same place.
The bonds are convertible into the stock of the Company at'
par, at p^asure, any time before maturity.
Any information required may be had on application to the
undersigned, or to George S. Coe, Esq., at the office of the Ohio
Life and Trust Company, New York, where copies of the sev¬
eral laws, reports and maps, relating to the road, can be had,
and also copies of the bonds and mortgage.
JOHN GALBRAITH, Erie, Pa. \
H. B. ELY, Cleveland, Ohio. > Comm. of Directors.
FREDERICK HARBACH, do, )
Niw York, Jan. 27, 1851.
6
DEED OF TRUST.
This Indenture, made this twenty-second day of January, in
the year one thousand eight hundred and fifty-one, between
the Franklin Canal Company, a corporation duly constituted as
such by the laws of the Commonwealth of Pennsylvania, of the
first part, and George S. Coe, of the City of New York, of the
second part; Witnessedi,
Whereas, the parties ot the first part, pursuant to the terms
of the Statute of the said state incorporating them, and other
statutes of the said state affecting them, are engaged in con¬
structing one division of their railroad, called the Erie and Ohio
Division, from the Borough of Erie to the west line of the said
state, and for that purpose need and have resolved to raise
money by loan, to an amount not exceeding four hundred thou¬
sand dollars; and to secure the payment therefor, or re pay¬
ment thereof, to execute, in the manner and within the time here¬
inafter specified, certain bonds, not exceeding four hundred in
number, for the sum of one thousand dollars each, payable to
the party of the second part, or the holder thereof, on the first
day of February, in the year one thousand eight hundred and
sixty-one, and bearing interest, at the rate of seven per centum
per annum, payable semi-annually, on the first day of each
August and of each February ensuing the date thereof, until
the principal shall be paid, to be on an equality, so far as re¬
gards security for the le-payment thereof, by these presents,
notwithstanding the same may be issued at different times, each
of said bonds being authenticated by a certificate, signed by said
party of the second part, and containing a clause, permitting
the holders to exchange the same, at par, for shares of stock in
said Railroad Company, at par.
Now, therefore, this Indenture witnesseth, that the said par¬
ties of the first part, in order to secure the payment of said
bonds, and interest, and in consideration of the sum of one dol¬
lar. to them, at the sealing and delivery hereof, in hand paid, by
the said party of the second part, the receipt whereof is hereby
acknowledged, have granted, bargained, so'd, transferred and
conveyed, and by these presents do grant, bargain, sell, transfer
and convey to the said party of the second part, his successors,.
7
in the trust hereby created and assigned, all the following pre¬
sent, and in future to be acquired property, of the said parties
of the first part, that is to say, the Erie and Ohio Division of
their road, made or to be made, including the right of way, and
land occupied thereby, together with the superstructure and
tracks thereon, and all rails and other materials used therein,
or procured therefor, inclusive of the iron rails purchased, or to
be purchased or paid for with the above described bonds, or the
money obtained therefor; bridges, viaducts, culverts, fences, de¬
pot grounds and buildings thereon, engines, cars, tenders, tools,
machinery, materials, contracts, and all other personal property,
right thereto or interest therein; together with the tolls, rent or
income, to be had or levied therefrom ; and all franchises, rights
and privileges of the said parties of the first part, of, in, to or
concerning the same; but nothing herein contained shall be
construed to prevent the parties of the first part from selling,
hypothecating or otherwise disposing of any city or county
bonds, or other securities received in payment of stock, or other¬
wise, or of any lands or other property of the Company, not
necessary to be retained for their railway, depot grounds, sta¬
tions, nor required for the construction or convenient use of
their road; nor from collecting moneys due to the Company
on stock, subscriptions or otherwise, provided they shall dili¬
gently proceed to collect and Faithfully apply all such means to
the construction and equipment of their said road ; and provi¬
ded, also, that no default shall have been, made in the payment
of the interest or principal of any of the above described bonds.
To have and to hold the said premises, and every part there¬
of, with the appurtenances, unto the said party of the second
part, his successors in said trust, and assigns, upon the follow¬
ing trusts, that is to say : in ca*e the said parties of the first part
shall fail to pay the principal or any part thereof, or any of the
interest on any of the said bonds, at any time when the same
may become due and payable, according to the tenor thereof,
when demanded; then, after sixty days from such default, upon-
request of the holder of such bond, the said party of ths second
part, his successors in said trust, or assign*, may enter into, and
take possession of all or any part of said premises, and, as the
♦ 8
attorney in fact, or agent of the said parties of the first part, by
himself or agents, or substitutes, du'y constituted, have, use and
employ the same, making from time to time all needful repairs,
alterations and additions thereto; and ^fter deducting the ex¬
penses of such use, repairs, alterations and additions, apply the
proceeds thereof to the payment of the principal and interest of
all of said bonds remaining unpaid : or, the said party of the
second part, his successors in said trust, and assigns, at his or
their discretion, may, or, on the written request of the holders
of at least one-half of the bnnds then unpaid and unconverted
into stock, shall cause the said premises, or so much thereof as
shall be necessary to pay and discharge the principal and inter¬
est of all such of said bonds as may then be unpaid and uncon¬
verted, as aforesaid, to be sold at public auction, in the Borough
of Erie, in the State of Pennsylvania, or in the City of New-
York, giving at least forty days' notice of the time, place and
term3 of such sale, and of the specific property to be sold, by
publishing the same in two newspapers, of good circulation, in
each of the places aforesaid, and wherever else required by
law, and execute to the purchaser pr purchasers thereof, a good
and sufficient deed of conveyance in fee simple for the same,
which shall be a bar against the parties of the first part, their
successors and assigns, and all persons claiming under them, of
all right, interest or claim, in or to said premises, or any part
thereof; and said trustee shall, after deducting from the pro¬
ceeds of said sale, the cost and expenses thereof, and of man¬
aging such property, apply so much of the proceeds as n ay be
necessary, to the payment of said principal and interest, due or
unpaid on said bonds, and shad restore the residue thereof to
the parties of the first part, it being hereby expressly under¬
stood, that in no case shall any claim or advantage be taken
of any valuation, appraisement or extension laws, by the said
parties of the first part, nor any injunction or stay of proceed¬
ings, or any process be applied for or obtained by them to pre¬
vent such entrv or sale, as aforesaid.
And the said parties of the first part hereby covenant for the
consideration aforesaid, to execute and deliver any further rea¬
sonable and necessary conveyance of the premises, or any part
9
t.
thereof, to the said party of the second part, his successors in
the said trust, and assigns, for more fufy carrying into effect
the objects hereof, particularly for the conveyance of any pro¬
perty, subsequently to the date hereof, acquired by said parties
of the first part, and comprehended in the description contained
in the premises.
And the said parties of the first part hereby covenant, as
aforesaid, that the money borrowed for the purposes aforesaid,
upon the security of the said bonds, shall be faithfully applied
to the construction of said road, and its appurtenances, the ex¬
penses attending such loan, and other necessary purposes of
said road.
And it is hereby mutually agreed, and these presents are upon
this express condition, that on payment of the principal and in¬
terest of the said bonds, or the conversion thereof into stock, in
mariner aforesaid, the estate hereby granted to said party of the
second part, shall be void, and the right to the premises hereby
conveyed shall revert to and revest in the said parties of the
first part, without any acknowledgment of satisfaction, re-con¬
veyance, re-entry, or other act.
And it is also further mutually agreed, that the said party of
the second part, his successors in said trust, and assigns, shall
only be accountable for reasonable diligence in the management
thereof, and shall not be responsible for the acts of any agent
employed by him or them, where such agent is selected with
reasonable discretion ; and that said party of the second part,
his successors in said trust, or assigns, shall be entitled to re¬
ceive proper compensation for every labor or service performed
by him, in the discharge of his trust, in case he shall be com¬
pelled to take possession of said premises, or any part thereof,
or manage the same.
And it is further mutually agreed, that in case of the death,
mental incapacity, or resignation of the said party of the second
part, all his estate, right, interest, power and control in the pre¬
mises, shall be divested, cease and determine, and the same
shall from thenceforth, for the purposes aforesaid, be vested in,
and all and singular the trusts and duties herein before enu¬
merated shall devolve upon William W. Gilbert, of the City
10
of New York, without any other or further assurance or
conveyance of or for the same; and in case of the death, men¬
tal incapacity or resignation of the said William W. Gilbert,
after the trust hereby created shall have devolved upon him,
the said parties of the first part shall, or in their default to take
proceedings therefor, for thirty days, the holders of a majority
of said bonds may apply to the Supreme Court of the State of
Pennsylvania, sitting in any county in said state, to appoint a
new trustee, being a resident of the City of New York, to
supply his place, and thereupon such new trustee shall be¬
come vested, for the purposes aforesaid, with all the rights and
interest hereby conveyed to or vested in the said party of the
second part, without any further assurance or conveyance for
the same; but if the same shall be necessary, both or either of
the parties hereto, shall execute any necessary releases or con¬
veyances for that purpose.
In witness whereof, the parties of the first part have caused
their corporate seal to be hereto affixed, and the same to be sub¬
scribed by their President, and the said party of the second part
has set his hand and seal, the day and year first above written.
In presence of Edwin Ludlow,
Geo. W. McLean.
(L.S.) JOHN GALBRAITH. President of the
Franklin Canal Company.
(L.S.) GEORGE S. COE.
11
Hnitetr States of America,
COMMONWEALTH OF PENNSYLVANIA.
No. PENNSYLVANIA SECTION $1000.
OF THE
ERIE AND CLEVELAND RAILROAD.
The Frank'in Canal Company acknowledge themselves to
owe George S. Coe, or bearer, one thousand dollars, for money
loaned to aid in the construction of their railroad, extending
from Erie to the west line of the State of Pennsylvania, which
sum said Company promise to pay to the said George S. Coe,
or the holder hereof, at the office of the Ohio Life Insurance and
Trust Company, in the City of New York, on the first day of
February, 1S61, and also interest thereon, at the rate of seven
per cent, per annum, semi-annua'ly, on the first day of each Feb¬
ruary and of each August, ensuing the date hereof, until the said
principal sum shall be paid, on the presentation of the annexed
interest warrants at said office. And the said Company also
agree to transfer to the holder hereof, at any time before said
principal sum shall fall due, when said holder shall elect to
receive the same, on the delivery of this obligation, and of the
unpaid interest warrants, to the trustee named in the annexed
certificate, or to his successor in the trust, in the City of New
York, or to the Treasurer of said Company, in the City of Cleve¬
land, Ohio, forty shares of twenty-five dollars each, of the Capi¬
tal Stock of said Company, in exchange for and satisfaction of
this obligation. And said Company further agree, that this ob¬
ligation, and all rights and benefits arising therefrom, may be
transferred, by a general or special endorsement, or by delivery,
as if the same were a note of hand, payable to bearer, and here¬
by waive all benefits, from valuation or appraisement laws.
In testimony whereof, the said Company have hereunto caused
to be affixed their corporate seal, and these presents to be sub¬
scribed by their President, this first day of February, in the.
year 1851. JOHN GALBRAITH,
3, President,
12
CERTIFICATE.
11, George S. Coe, hereby certify, that the Franklin Canal
Company have conveyed to me, by deed, bearing date the 22d
day of January, 1851, their railroad, extending from Erie
to the west line of the State of Pennsy'vania, with its income
and franchises, and all the property, rights and privileges of the
Company pertaining thereto, in trust, for the use and benefit of
the holders of their obligations, of similar tenor as the forego¬
ing, issued and to be issued, to an amount not exceeding in all
four hundred thousand dollars, with power to take possession
of, use and sell the same, or any part thereof, in case of sixty
days' default in paying the interest or principal of said obliga¬
tion, or any of them, as by reference to said deed of trust, which
I have caused to be recorded in the County of Erie, in which
said railroad is located, will more fully and at large appear.
And I further certify, that the foregoing is one of the obliga¬
tions referred to in, and secured by said deed.
New-York, Feb. 1, 1851.
GEORGE S. COE, Trustee.
GUARANTY.
For value received, and in pursuance of the act of the Legis¬
lature of the State of Ohio, passed December 10, 1S50, author¬
ising the Cleveland, Painesville and Ashtabula Railroad Com¬
pany to guarantee the payment of the bonds of any company
constructing or authorised to construct a railroad in the State of
Pennsylvania, and whose line may form an extension of the line
of road belonging to the Cleveland, Painesville and Ashtabula
Railroad Company, said Cleveland, Painesville and Ashtabula
Railroad Company hereby guarantee the payment of the within
bond, of one thousand dollars, and interest, as therein provided
for.
In testimony whereof, the said Company have hereunto caused
to be affixed their corporate seal, and these presents to be sub¬
scribed by their President, at their office in Cleveland, Ohio,
this first day of February, 1851.
HE MAN B. ELY, President.
13
AN ACT,
To authorise the Cleveland, Painesville and Ashtabula Railroad
Company to negotiate their bonds, and for other purposes.
Sec. 1.—Be it enacted by the General Assembly of the
State of Ohio, That the Cleveland, Painesville and Ashtabula
Railroad Company be, and is hereby authorised and empow¬
ered to sell or negotiate the notes or bonds of the Company,
issued by such Company, at such time and at such p'aces, either
within or without this State, and at such rate and for such prices,
as may bs deemed best fitted to advance the interests of the
Company; and if such bonds or notes are thus sold at a dis¬
count, such sale shall be as valid in every respect, as if they
were sold at their par value.
Sec. 2.—Said Company shall have power to lend its money
or credit, in such amounts as may be deemed expedient, to any
Company constructing or authorised to construct a railroad in
the State of Pennsylvania; and whose line may form an exten¬
sion of the line of road belonging to the Cleveland, Painesville
and Ashtabula Railroad Company ; and for this purpose, said
Cleveland, Painesville and Ashtabula Railroad Company, may
guarantee the payment of any notes or bonds of such Pennsyl¬
vania Company, and such guarantee shall be valid and binding;
and may also hold and own, by subscription or transfer, any
number of shares of the capital stock of such Company.
Sec. 3.—Said Cleveland, Painesville and Ashtabula Kail-
road Company shall have power to alter the gauge of their
*
road, if deemed expedient, so as to conform to the gauge of the
New York and Erie Railroad, or to the gauge of any other
Road with which it may connect, at the west line of the State of
Pennsylvania. JOHN F. MORSE,
Speaker of the House of Representatives
CHARLES C. CONVERS,
December 10, 1850. Speaker of the Senate.
Secretary of State's Office, Columbus, Dec. 26, 1850.
I hereby certify the foregoing to be a correct copy of the
original roll on file in this office.
HENRY W. KING, Secretary of State.
14
CERTIFICATE
That the Deed of Trust is the first and only lien.
I hereby certify, that I have been a director of the Franklin
Canal Company, from its first organization to the present time,
and am acquainted with all the acts and doings thereof, and that
.the Deed of Trust or Mortgage referred to in the foregoing
exhibit, executed by me, President, to secure the payment of
certain bonds therein described, is the only instrument execu¬
ted, or ordered by said Company to be executed, of the said in¬
come or other property of the Company, and constitutes the first
and only lien thereon.
JOHN GALBRAITH.
Erie, Pa., January 8, 1851.
OPINIONS OF COUNSEL.
Legal opinions of Hon. Thomas Sergeant, for many years one
of the judges of the Supreme Court of the State of Pennsylva¬
nia ; Hon. Charles B. Penrose, late Solicitor of the United States
Treasury, and formerly Speaker of the Senate of Pennsylvania;
Hon. Benjamin F. Butler, of New-York, and late Attorney
General of the United States ; and Hon. George Bliss, a well
known lawyer of Massachusetts, showing authority of the Frank¬
lin Canal Company, to mortgage the property and income of that
portion of their railroad between Erie and the west line of the
State of Pennsylvania, to secure the payment of moneys loan¬
ed, &c.
OPINIONS OF Messrs. PENROSE & SERGEANT.
The subject on which the annexed inquiries arise, as many
others, particularly those in relation to corporations, arising out
of the legislation of Pennsylvania, must be sought for through
several acts of the Legislature. The several statutes and parts
of statutes, having a bearing upon the subject, are correctly
contained in the pamphlet exhibited in relation to the Franklin
Canal Company; and we know of no other statutes which affect
the question in any way.
The statutes are the following:
44 An Act to authorise the Governor to incorporate the Frank-
15
lin Canal Company, passed 27th April, 1844," referring to and
embodying in it various sections of the act, passed the previous
session, incorporating the Erie Canal Company.
"An Act to authorise the Canal Commissioners to sell and
convey certain real estate upon the Franklin Division of the
Pennsylvania Canal, to allow the Franklin Canal Company to
construct a railroad, extending the time for settlement of claims
on the Conneaut Line, and relating to an Election District,"
passed 9th April, 1849—and
"An Act regulating Railroad Companies," passed 19th Feb¬
ruary, 1849.
The act of 27th April, 1S44, embodying the several sections
referred to incorporating the Erie Canal Company, author¬
ises a full and ample organization, with full authority and
power to effect the object, the construction of a canal between
the points mentioned in the 3d section of the act, to wit—the
mouth of French Creek on the south end, and the aqueduct over
French Creek on the north or north-western end, constituting
what was denominated the Franklin Division of the Pennsyl¬
vania Canal. It is represented and shown by the Charter, or
Letters Patent, issued by the Governor, that ths preliminary
provisions of this act had been complied with, and it is also rep¬
resented that an organization had been regularly formed under
that Charter, but had been omitted to be kept up, and nothing
done further than the necessary tax paid to the Commonwealth.
This failure, and all irregularities are cured by the act of 9th
April, 1849. By the 8th section of that act a mode is provided
for the re-organization of the Company, and on complying with
the conditions prescribed, it is again set upon its feet, and re¬
vested with all its original powers. This was fully within the
control of the Legislature, and it is represented and believed
that the condition (of electing officers, &c.,) has been complied
with. The 9th section provides " that the said Company, in¬
stead of constructing a canal, or repairing the work done by the
Commonwealth, have the privilege of constructing a railroad, if
deemed the most expedient, and to use the graded line or tow¬
ing path of the said canal as the bed of the said road." In this
there is no limitation or restriction or condition, but it is left to the
uncontroled will of the Company to determine their acceptance
16
of the privilege, and if they should determine to accept, the
Company are vested with full powers to convert the canal into
a railroad company, and to construct a railroad between the
points designated in the 3d section before referred to, that is to
say—for the extent of the Franklin Division of the Pennsylva-
vania Canal. The next, and for this examination most im¬
portant provision, is contained in the 10th section. It provides,
" that upon the Company's increasing the capital stock thereof
to the amount of five hundred thousand dollars, it shall have the
privilege of extending from the north end thereof to Lake Erie,
and from the south end thereof to Pittsburg, by such route as
the Company shall deem most expedient and advantageous.
The said railroad shall be constructed subject to all the provi¬
sions and restrictions of an act regulating railroads, passed 19th
February, 1S49," subject to one single express condition,
to wit—that of increasing its stock to the amount of $500,000.
The piivilege is clearly and unqualifiedly conferred upon the
Company, of extending its line of improvement and operations
in constructing a railroad from the north end of what had con¬
stituted the Franklin Division of the Pennsylvania Canal, its
terminus, under the oiiginal act, to Lake Erie, by such route
as the Company shall deem most expedient and advantageous.
In other words, the Company is authorised, having decided upon
a railroad, to extend or change its northern terminus from
the aqueduct, as fixed in the third section, to Lake Erie, at
such point as the route deemed most expedient and advan¬
tageous, would necessarily reach the Lake, without limit or
restriction as to any particular location upon the Lake with¬
in the State. Thus, drawing within the range of control and
operations of the Company, the whole line from the mouth
of French Creek, by the line of the Franklin Division of Canal,
to any point on Lake Erie within the State. The powers con¬
ferred upon the Company by this section, are much more clear
and explicit, as regards the right to determine the route, than
those of the Boston and Worcester Railroad Company, which
received a judicial construction by the Supreme Court of Mas¬
sachusetts, (of high authority in the courts of this State,) favora¬
ble to the powers claimed—as reported in 23d Pickering, page
17
360—and there is no special grant interfered with by the Frank¬
lin Company, as in the case referred to.
It has never been questioned in Pennsylvania, that a Com¬
pany, authorised to construct a railroad, canal or other improve¬
ment, from one point to another, may not commence and finish
at either end, or on any other part of their line between the
designated termini, unless there be some express restriction to
the exercise of such right, or condition of completing some
portion first. The Franklin Canal Company is not made sub¬
ject to any restriction or condition of this sort; and may, there¬
fore, subject to one condition, prescribed by the 19th section of
the General Railroad Law, commence work on any portion of
its line, and give a valid and legal mortgage upon that portion
to secure its loan creditors. The 19th section of the General
Railroad Act referred to, provides that any railroad incorporated
under it, "shall commence the construction of their railroad
withiu three years, and complete and open the same fur use
within the time prescribed by the special act authorising the
same." The condition of this section, we understand, has been
complied with, by the commencement of operations within the
term mentioned; and the special act authorising the Franklin Ca¬
nal Company prescribes no limitation or condition as to the time
of completion of the whole or any part of its work. It is fully au¬
thorised, therefore, to commence any portion or section of its
route within three years, from 9th April, 1849, deciding for
itself what portion or section, and is not required, within any
limited period, to complete the whole or any part of its line.
There is nothing in any of the laws of Pennsylvania, that we
know of, and we are well satisfied there is nothing, that does in
any way modify or conflict with those contained in the Pam¬
phlet, in relation to the Franklin Canal Company.
The power to execute a mortgage for money, borrowed by
the Franklin Canal Company, is contained in the 9th section of
the act incorporaitng the Erie Canal Company, adopted and em¬
bodied in the 2d section of the act of 27th April, 1844. It pro¬
vides, " that the directors shall have power to borrow money,
from time to time, on the security of the corporate property, by
mortgage of the same, or any part thereof, or by pledge of capi¬
tal stock, at a rate of interest not exceeding seven per cent., but
18
the total amount of such loans shall at no time exceed the sum
of four hundred thousand dollars." The power to execute such
a mortgage, to an amount not exceeding $400,000, at a rate of
interest not exceeding seven per cent, is clear and express.
The mortgage or deed of trust to Mr. Coe, as exhibited, is
precisely in accordance wbh the power expressly conferred, and
would therefore constitute a valid and effectual lien on the road
and property of the Company, for the protection of the holders
of the bonds, for the security of which the mortgage or deed
of trust is made.
If, then, the Franklin Canal Company has been re-organised
under the act of 9th April, 1849, and has kept up that organisa¬
tion since, as represented and believed—if said Company, thus
organised, resolved to adopt the privilege of constructing a
railroad instead of a canal, and has increased its capital stock to
the amount of $500,000, and determined to extend its line to
Lake Erie, as is also represented and believed, and if that line
adopted by said Company as most expedient and advantageous
touches, or so nearly touches the western line of the State short
of the Lake itself as that a railroad company of Ohio may conve¬
niently connect with it—and if the Company has located and
commenced work upon that section or portion of its route, we
are of opinion, from a careful examination of the acts of the
Legislature of Pennsylvania, and its practice and policy under
them, that the Franklin Canal Company has indisputable right
and ample power to construct that section of railroad first, without
completing or even commencing any other portion of the route,
and to use and receive tolls on so much as may be constructed.
It has never formed any supposed ground of revocation or repeal
of a charter in Pennsylvania, that a company has completed one
portion cf its work, and left for an indefinite period the prosecu¬
tion of the remainder, for any reasonable cause, such as want of
sufficient stock subscribed, or means to proceed, &c., where no
time was fixed by law for the completion of the entire work:,
and it has become a settled principle of legislation in this State,
not to interfere with vested rights under a charter. The right of
the Company to mortgage the section of road constructed, with
its property and income, to secure the payment of any sum not
exceeding four hundred thousand dollars,, at seven per cent., in-^
/
19
terest, cannot be doubted, and such mortgage would constitute
a valid and legal lien upon tbe property of the Company in said
flection of road.
The fact that the Company have deemed it advantageous to
connect with a road in another state, or that they have designated
this section by the name of the Erie and Ohio Division of their
road, cannot in any way interfere with the right of the Company
to construct it, and to mortgage such portion of the work, the
mortgage being executed by the Company under its legal cor¬
porate name.
CHARES B. PENROSE,
THOMAS SERGEANT.
Philadelphia, Jan. 25, 1851.
MR. BUTLER'S OPINION.
I have carefully examined the several acts and parts of acts of
the Legislature of Pennsylvania, concerning the Franklin Canal
Company, contained in the printed pamphlet and submitted to me
by Mess. Galbraith and Ely, for the purpose of answering the two
following questions:
Question 1st.—The Franklin Canal Company having accepted
the privilege granted by the Legislature, by the act of April 9th, 1849,
to construct a railroad instead of a canal; and having determined to
extend their line to Lake Erie, and increased their capital stock to
five hundred thousand dollars, and located their route to Lake Erie,
as deemed by them most expedient and advantageous, which route
touches the west line of the State of Pennsylvania adjoining the State
of Ohio, and is continued to Erie—have the Company, as part of
the route of their road, the right to commence work, and complete
that portion of the Road between the west line of the State of Penn¬
sylvania and Erie, before completing any other part of it?
Question 2d.—Have the Company the right to borrow money
to the extent of four hundred thousand dollars, and at a rate of in¬
terest not to exceed seven per cent., and to secure the payment
thereof, the right to mortgage the portion of their Road between the
west linq of the State of Pennsylvania and Erie; and would a bona
Jide mortgagee have a valid lien upon the Road so mortgaged ?
20
With the same view, I have also looked into several of the prior
acts, concerning the Pennsylvania Canal, and the general system of
internal improvements, of which the different branches and divisions
of that Canal formed a part; and I now proceed to state the result
of my reflections on the points embraced in the questions.
I. The first question assumes that the Company was duly organ¬
ised, by the election of officers, before the 1st of August, 1849, as
authorised by the 8th section of the 9th of April, 1849, and affirms,
that it has accepted the privilege granted to it by the 9th section of
the same act, of substituting, instead of the Canal originally known
as the Franklin Division of the Pennsylvania Canal, a Railroad be¬
tween the same points, and over the same route; and also, that it
has increased its stock to the amount of $500,000. If this be so,
there can be no doubt that the Company is entitled to avail itself of
the privilege of extending its substituted Railroad from the north end
thereof to Lake Erie, and from the south end thereof to Pittsburg,
conditionally proffered to it by the 10th section.
The question in its s'ating part further affirms that the Company
has determined to extend its line to Lake Erie, and has located its
route to Lake Erie, as deemed most expedient and advantageous;
and that the route, as so located, touches the division line of Penn¬
sylvania and Ohio, and is continued from thence to the harbor of
Erie; and it is only in reference to the construction and comple¬
tion of this part of the Road that my opinion is asked. 1 am thus
particular in noticing the form of the question, because, to prevent
any misapprehension, I think it proper to state that, in my opinion,
the privilege described in the 10th section is one and indivisible;
and that the Company, in accepting it, will be bound to proceed in
good faith to extend its substituted Railroad in both directions—that
is to say—northwardly to Lake Erie, and southwardly to Pittsburg,
so as to open, when the whole work shall be completed, a continuous
communication by Railroad between Lake Erie and Pittsburg. The
several laws in the pamphlet before me, and in the statute books of
Pennsylvania, which I have consulted, make it perfectly plain and
clear, t-o my mind at least, that this construction is demanded by
their manifest scope and object; and it is only when the whole
Road, as thus defined, shall have been completed, that this Com¬
pany can claim the full benefit of all the franchises conferred on
21
railroad companies by the 18th section of the act of the ISth of
February, 1849, "concerning Railroad Companies."
Supposing the Franklin Canal Company to have determined to
extend its substituted Railroad in both directions, as above stated, and
to have located, in good faith, and because deemed by it most ex¬
pedient and advantageous, as a part of the Railroad from Lake Erie
to Pittsburg, the route described in the question, then 1 have no
doubt it may commence and prosecute any part of the Road in ad¬
vance of any other part of it, as in the judgment of the Directors
may be deemed most convenient and beneficial. In other words,
supposing the route of the whole Road from Lake Erie to Pittsburg
to have been duly and lawfully located, and that it is the intention of
the Company to proceed in good faith to construct the whole Road,
it is not obliged to put the whole in a course of construction at once,
nor to make any one portion before it can enter on any other; but,
in the exercise of a sound discretion, it may select, in the first in¬
stance, any particular section, and proceed to complete it, before it
enters on the construction of any other section: but in this, as well
as in every other part of its operations, it must act in good faith, and
in view of the end for which it was created; and that end, as I have
already said, is, in my opinion, to open a communication by Rail¬
road from Lake Erie to Pittsburgh.
The Company cannot lawfully make any part of its Road with an
exclusive view to any other object; nor with the intention, after it
shall have completed the part first made, of abandoning the residue..
Either of these things would be a misuse or abuse of its charter;
and under the 20th section of the act of February 19th, 1849, its
rights and privileges may be revoked by the Legislature.
With these several qualifications, 1 reply to the first question in
the affirmative.
II. The Directors of the Franklin Canal Company, by its origi¬
nal charter, (act of April 27, 1844,) have the like powers, among
others, as were vested in the Directors of the Erie Canal Company
by the 9th section of the act of March 7th, 1843, entitled "An Act
to incorporate the Erie Canal Company." By said 9th section, the
Directors of the Erie Canal Company are authorised "to borrow
money from time to time, on the security of the corporate properly
by mortgage of the same* or any part thereof or by pledge of capi-
22
tal stock, at a rate of interest not exceeding seven per cent., but the
total amount of such loans shall at no time exceed $400,000, with¬
out consent of the Legislature." It was only as a Canal Company,
and with a view to its powers as such, that the Directors of this
Corporation were originally authorised to exercise this power; but
I think there is nothing in the change of the mode of inter-commu¬
nication, from a Canal to a Railroad, to take away or impair the
power; and I am therefore of the opinion, that after the Company
shall have lawfully located its Railroad for its whole route from Lake
Erie to Pittsburg, and have duly acquired a property in the land, or
any part of it, over which the same is to pass, it may borrow money,
to the extent of $400,000, for the legitimate purposes of the Com¬
pany, and may secure the payment of such loan or loans by mort¬
gage on its Road, or any part of it; and that a bona fide mortgagee
will have a valid lien thereon. But this answer must be taken in
connection with what has been said in answer to the first question,
concerning the powers and obligations of the Company, and the
control of the Legislature over it, under the provisions of the seve¬
ral acts of the Legislature to which I have referred. Every person
who deals with the Company is chargeable with notice of these pro¬
visions ; and if f>y any fact within his knowledge, or which by due
diligence might have been known to him, the mortgagee is notified
that the Company is proceeding in violation of its charter, or of any
law obligatory on it, he will not be deemed a bona fide mortgagee*
consequently the lien of a party having such notice will be subject
to the general right of the State to forfeit the charter by judicial
process; and in the cases described in the 20th section of the act
of February 19th, 1849, to the special right of revoking it by act
of the Legislature.
With these qualifications, I answer the 2d question in the affirm
mative.
B. F. BUTLER.
New-York, Jan. 29, 1851.
23
OPINION OF MR. BLISS.
SPRINGFIELD, Dec. 13th, 1850.
Feed. Harbach, Esq.,
Dear Sir:
I have read over and examined, repeatedly, with much care,
the documents you sent me, relating to the Franklin Canal Company.
The original grant of April 27 th, 1844, with the sections of the Erie
Canal Charter, recognised and made parts of that grant, follow¬
ed by the proclamation of the Governor, of May 21, 1846, appear
to prescribe a perfect organisation, as a corporation, with conve¬
nient and ample powers. I assume that all the required proceed¬
ings have been had, in legal form, to organise the Company, and
preserve its corporate powers and existence to the present time.
The limits, the iermini of the original grant, are confined to por¬
tions of the French Creek; but the 9th and 10th sections of the act
of April 9th, 1849, in terms give very ample powers to construct a
railroad as a substitute for the canal, using the graded line or tow-
path therefor; and then follows the principle and important grant,
of the privilege of extending the railroad from the north end thereof
to Lake Erie, and from the south end to Pittsburgh, by such route
as the Company shall deem most expedient and advantageous, (sub¬
ject to the provisions of the General Railroad Law of Feb. 19,1849.)
I assume that the prescribed condition of increasing the stock to
$500,000 has been complied with, as certified by the President.
The Company may then construct their railroad to Lake Erie, "by
such route as they shall deem most expedient and advantageous."
You have deemed it "most expedient and advantageous" to ap¬
proach the lake at the Ohio Line, and to reach the lake at Erie.
This is certainly within your charter.
The 9th section of the Erie Canal Charter, which is, in terms,
made a part of yours, authorises your Company to borrow money,
from time to time, not exceeding $400,000, at not over 7 per cent,
and to mortgage the road as collateral.
I do not sec why these provisions are not ample to protect the
lender, provided sufficient work is previously done upon the line to
give the satisfactory security for the amounts loaned.
24
If capitalists could be made fully acquainted with the advantages
of the portions of the lake shore railroad between Erie and Cleve¬
land, I cannot think it would be necessary to resort to loans at all,
for its construction or equipment; but that subscriptions to the stock
would be made as a very desirable and profitable investment: that
there will be an immense business done upon it, as a necessary
part of the great thoroughfare between the Atlantic and the Missis¬
sippi, no one acquainted with that district of country can doubt.
This portion of the lake shore line will not only have the advantage
of all the business of the Cincinnati and Cleveland road, and the in¬
terior of Ohio, but also of the very large traffic from Chicago, and
the whole country north and west of that city, through the Michi¬
gan, Southern and Northern Indiana Railroads; and I do not see
any possibility of interference with this business of your road by
any competing line which can now or at any time hereafter be es¬
tablished. The portion of the lake shore line between Erie and
Cleveland must have a monopoly of an immense traffic, and in that
view I think the stock will be very productive.
With the hope that the enterprise may be pressed forward to an
early completion,
I am, very respectfully, your obed't serv't,
GEORGE BLISS.