34 



HARDWOOD RECORD 



years after the contract date, the iustallments to hear interest at the 

 rate of five per cent per annum, payable semi-annually, and the United 

 Security Life Insurance and Trust Company of Pennsylvania, was 

 thereafter designated as trustee for the purpose of holdini; the title to 

 the said lands until full payment of the purchase money due thereon 

 should be paid ; and John K. Marklev thereupon formed a partnership 

 with Isaiah B. Miller, one of the defendants herein, and organized the 

 International Luuibf^r and Development Company, defendant herein, for 

 the purpose of making it purchaser of the said lands for the sum of 

 $600,000, and upon the organization of the said International Lumber 

 and Development Company, the said lands were conveyed to the United 

 Security Life Insurance and Trust Company of Pennsylvania, to be 

 held by it, as trustee, until the payment of the said sum of $600,000 

 to the San Pablo Company. 



Title Still in Trustee 



"Your orators believe that the United Security Life Insurance and 

 Itust Company of Pennsylvania still holds the title to the lands as 

 trustee for the International Lumber and Development Company, but 

 your orators are not informed whether all the purchase money due 

 upon the contract has yet been paid in full, but believe that it has not 

 been so paid to the San Pablo Company. 



"Markley & Miller, by the terms of a certain contract, made with the 

 International Lumber and Development Company, were required to pay, 

 from moneys received by them, from the company, the purchase money 

 due to the San Pablo Company for the land, and Markley & Miller 

 further agreed with the San Pablo Company that pending the payment 

 of the full amount of the purchase money for the land by the said 

 defendant corporation, the profits from the land should be used for the 

 benefit of the San Pablo Company : but by the terms of their contract 

 with the International L^lmber and Development Company, they agreed 

 that the profits arising from the operation of the lands should be paid 

 to the stockholders ot the International Lumber and Development Com- 

 pany, and upon the basis of such profits, guaranteed to the International 

 Lumber and Development Company that they would pay to them eight per 

 cent per annum upon the amount of all money paid to the company 

 upon subscriptions to its capital stock and that the eight per cent 

 upon the capital stock had been paid by Markley & Miller from April 1, 

 1905, up to the present date. Both of the contracts providing for the 

 disposition of the profits to these two different corporations ran con- 

 currently from 1904 to 1909. 



No Votes for Stockholders 



"Your orators further aver that by the contract with the subscribers 

 to the stock of the International Lumber and Development Company, none 

 of the stockholders was entitled to vote as membi^rs of the corpora- 

 tion, even though their stock might have been paid for in full, until 

 the termination of the seven-year contract, expiring January 1, 1912, 

 made with John R. Markley and Isaiah B. Miller, composing the firm 

 of Markley & Miller, except the oflicers and directors of the corporation 

 and Markley & Miller, contractors, to whom were issued, without payment 

 of any money, eighty-five shares of the stock of the corporation, the 

 eighty-five shares representing a par value of ,$25,000, out of a total 

 capitalization of $6,000,000 ; and, as a fact, no stock of the corporation 

 has ever been voted in any of its transactions, excepting the eighty- 

 five shares of stock thus held by the officers and directors and contractors, 

 excepting that the subscribers to the stock had a right to vote once a 

 year for an inspector who might be appointed, in this way, to visit the 

 propert.v in Mexico. 



"The lO.Ol.T shares of the capital stock of the defendant company 

 were all sold at par. under installment contracts, at the price of $5,975,- 

 000, and the contracts contained a provision that in event of the failure 

 of the subscribers to pay the monthly installments of $5 per share, 

 as provided by the contract, the moneys paid up to the date of default 

 should be forfeited by the subscribers and they should thereupon lose 

 all right, of every kind, in connection with their subscriptions ; and a 

 very large amount of money, aggregating $1,000,000 and upward, has 

 thus been forfeited by reason of the failure of the subscribers to pay 

 the Installments aforesaid. 



Officers Got Forfeited Money 



"As a fact, the moneys thus i):iid in. wliieli sliouhi have been for- 

 feited to the defendant corporation, ander the terms of Ihe subscrip- 

 tion contract, were not so forfeited to the corporation, but were ap- 

 propriated to their own use by the officers and directors of the cor- 

 poration, in the following manner : Upon default by any subscriber, his 

 stock was resold by the ofHccrs and directors of the corporation or their 

 agents as stock full paid, and the new purchaser of the stock paid Into 

 the treasury ot the company, the full face value ot the stock and the 

 amount which the previous subscriber had already paid on the stocK, 

 or a large part thereof was appropriated by the cfiicers, directors and 

 agents of the company, as their commission for the resale, and In this 

 way the oflicers, directors and agents appropriated to their own use 

 over $1,000,000. 



"Your orators are turtbcr Informed and believe that forty-four shares 

 of the capital stock of the International Lumber and Development Com- 

 pany, being a majority In number of the elghty-flve shares of voting 

 stock Issued by the corporation, as hereinbefore stated, were Issued to 

 John R. Markley or Isaiah B. Miller, or either or both of them or 



their a.gents or representatives, and that by means of the holding of 

 the said forty-four shares Markley & Miller, or either or both of them, 

 have maintained an absolute control over the management of the de- 

 fendant corporation since its organization up to the present time, 



"That by means of their control ot the defendant corporation, through 

 Iheir holding of stock as aforesaid, Markley & Miller made a contract 

 between the defendant corporation and themselves by which the cor- 

 poration was to pay to them the sum of $250 for each acre of the 

 2,SS,000 acres which might be cleared, planted and developed, with the 

 proviso that Markley & Miller, within the period covered by their con- 

 tract, should clear, plant and develop not less than 20,000 acres and 

 in return therefor should receive the sum of $5,000,000, and Markley 

 & Miller further contracted that during the period of the contract, to- 

 wlt. from January 1, 1905, to January 1, 1912, they would furnish tlie 

 necessary labor, machinery, warehouses, mills, railroads, transportation, 

 wharves, factories and everythini; necessary for the full equipment 

 and operation of the lands and the products to be derived from the 

 same. 



Failed to Live Up To Contract 



"That Markley & Miller have utterly failed to live up to the require- 

 ments of the aforesaid contract, and, in fact, have not cleared, planted 

 or developed 20,000 acres of the land, as agreed, nor have they furnished 

 the necessar.v labor, machinery, warehouses, mills, railroads, transporta- 

 tion, wharves, factories or other things necessary for the development 

 of the land, but, in fact, have used a large proportion of the money so 

 paid to them for their own personal use. That the only railroad upon 

 the property is a small narrow-gauge road which was already upon the 

 property at the time the same was sold for $180,000, as hereinbefore 

 recited, and that the small locomotive that was used in connection there- 

 with was later abandoned, and the motive power of mules installed in- 

 stead. 



Hard Luck of Contractors 



"Tliat Markley & Miller have failed io furnish the necessary mills and 

 machinery for the purpose of preparing the products to be produced 

 on the land, for the market. Markley & Miller did furnish for the use 

 of the defendant company a small s.teamer of 490 tons net burden by 

 the name of the Vueltabajo, which your orators believe was owned b.v 

 them and registered in their name in Lloyd's, and they did further 

 furnish a sawmill at Mobile, Ala., which mill was assessed in the name 

 of Markley & Miller, as the owner.=, in the sum of $28,510. as late as 

 January, 1912, and has been so assessed since the year 1907. That the 

 steamer was, on or about Jan. 29, 1912, wrecked and became a total 

 loss; that the sawmill was destroyed by fire on Oct. 23, 1911, with ii 

 total insurance thereon of $2,000, which covered the hardwood lumber 

 in the mill. The steamer is reported as being insured for the sum of 

 !t27.000. 



"By bulletin No. 21 of the defendant company, issued January. 1912. 

 the assets of the defendant company are stated as follows : 



" 'Conservative estimate of value of property owued hy the Interna- 

 tional Lumber and Development Company, paid for in full and held in 

 trust, free and clear of all incumbrances. 



1. 288.000 acres of land at $10 per acre $2,880,000 



2. 320.000,000 feet marketable timber at $26.25 per 1,000 



feet 8,400,000 



3. Personal property, boats, railroad, sawmills, buildings, live 



stock, etc 625,000 



4. 750.000 e\iltivated rubber trees, 4 vears old, $2 each 1.500.000 



5. .500.000 wild rubber trees at $5 each 2.5iiO,00() 



6. 13,000.000 heneqnen (hem|i) plants at 75 cents each 9,750,000 



7. 100.000 tons of dye woods, log wood and fustic at $9.20 



(average) per ton 920.000 



8. 250,000 chicle or zapote trees at $2.50 each 625,000 



Total (over four times par value entire capital stock) .. .$27,200,000 

 No Change Since Prior Sale 



"Your orators aver that nf tlu- above ileius, numbered from 1 to 8 

 upon the report, items 1, 2, 5, 7 and 8, aggregating $15,325,000, are 

 exactly the same items of the property which existed and were found 

 upon the land at the time the satne was sold, as hereinbefore recited, for 

 the sum of .$180,000 by John R. Markley. 



"Of the personal property under Item No. 3 of ihe statements, there 

 has been little or no change since sale aforesaid, excepting as to the 

 Doat and the sawmill, hcrelnbtfore mentioned, both ot which were carried 

 In the name ot Markley & Miller, and both of which have now been 

 destroyed. 



"That ot item No. 4, the report of the company to its stockholders, up 

 to June 20, 1911, were stated as lieing 200.000. 



"As to item No. 6 of the said statement, your orators aver that the 

 number ot plants Is largely fictitious and the value far In excess of any 

 real worth of the same. 



"Your orators aver that the plantation has produced no profit whAt- 

 soever from any source, and that tlie cost ot running the business In 

 connection therewith has been lar In excess of any money realized from 

 the same. 



Dividends Paid from Subscriptions 

 "The defendant eoriioratlon liMs advertised publicly since the organi- 

 zation of the company and has nutllled Its stockholders from time to 

 time, up to till- present date, that the dividends of 8 per cent, which 

 hail Ix'cn |)ald annually upon the amount ot capital stock paid In, were 



