THE DANGERS OF RECEIVERSHIPS. 239 



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, w^hen we have the ridiculous con- 

 dition 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 mat- 

 ter, 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 : 



