October 81,1891





Record  and   Guide.





541







1.





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Vol. XLVIII





OCTOBER 31,  1891.





No. 1,233





Have you read the second number of The Architectural Record
vet f Nobody interested in good building should be without it.
Articles appear in this issue from the pens of such well-known
writers on architecture as Prof. A. D. F. Hamlin, Barr Ferree and
Montgomery Schuyler; the first of whom points out the '• Difficul¬
ties of Modem Architecture;" the second discusses " What is
Architecture f " and the third continues his critical account of the
" Romanesque Revival in America." A paper by William J. Fryer,
Jr., on "Skeleton Construction," others by Harry W. Desmond and
Herbert D. Croly; a second part of Prof. Atchison's lecture on
" Byzantine Architecture," and the regular departments complete a
very interesting number. The magazine is, as -usual, profu.sely
illustrated, und in matter and appearance is fully equal to the first
number. The publisher takes pleasure in announcing that the issue
immediately following this one will be of unusual interest to archi¬
tects and of great value to the general reader. Among the con¬
tributors will be Prof. E. A. Freeman, the English historian, O.
Lindenthal, L. De Coppet Berg, Prof. Kerr and other authorities
equally high.

THB current numoer of the North American Review contains an
article on the business prospects and business conditions of
the United States] that deserves the careful attention of everyone
interested in their development. Mr. Charles S. Smith is a gentle¬
man holding such intimate relations with several of our most
important manufacturing industries, and his position keeps him so
closely in touch with the business pulse that his opinions have a
peculiar value. It is consequently more than usually interesting
to note that he considers the trade of the country at the present
time to be upon a sound conservative basis, without a trace of
sptculation. Some of the illustrations which he gives
of the progress of our manufacturing industries are
striking enough to take many of our readers by
surprise. It seems that there is a larger aggregation of capital
engaged in the production of textile fabrics than in any other man¬
ufacturing industry in the United States. The fifteen millions and
a-balf of cotton spindles represent a capital of $232,500,000, while
the invested capital of the woolen, silk, and other mixed textile
industries amount to $225,O00,0ijO in addition. Of caipets we are
the largest producers in the world, and in design, colors i^nd
quality our goods are quite equal to anything made in Europe of
competing grades. In the manufacture of silk we are ahead both
of England and Germany, and are second only to France. Lately
we have been extending our foreign markets in many
directions. For instance, American standard sheetings and drills
have the preference in the Chinese market, being sold
in competition with English and German-made goods, and
always at better prices, because of their superior quality. Still
more interesting is the fact that even in Great Britain's own
dependencies American goods are finding favor, a prominent mill
having 10,000 packages of standard sheetings and drills engaged
for the African market. Furthermore it has been proved that
America can successfully compete with Europe in the Oriental
markets in the manufacture and sale of plain cotton goods,
when the cost of labor of a piece of goods does not exceed 25
per cent of the total cost. The otber facts mentioned by Mr. Smith
respecting progress in the iron trade aud allied industries have been
more widely circulated, and it is unnecessary to repeat them here.
The point, then, of Mr. Smith's illustration of the growing stability
and diversity of our industries is that a country which is increasing
its product and markets in the way that Amerit^ is, and is doing
80 without ranning into feverish and inflated speculation will
rapidly be possessed of so many and such varied resources that its
commerce will stand on the amplest and surest basis possible. This
fact of growth will tell on Wall Street in time, and while bonds
and stocks ^^Qay be dull for some months to come, the market will





eventually be broadened and strengthened. With the business of
the country prosperous, investment securities cannot long sell
for cheap prices. The only possible source of trouble
which Mr. Smith thinks that the future may bring forth is
a depreciation of the standard of value due to the continued crea¬
tion of silver nfoney under the present law. On this complicated
matter, however, Mr. Smith's opinion is no better than that of any
other intelligent man. The law of last year provides for an
increase of currency, just about sufficient to take the place
of the national bank notes, which are being retired, and to meet
the needs of our constantly increasing volume of business. While
this is so the fear of any depreciation in the standard is an idle
dream.                                               ..





MESSRS. VERMILYE & CO. have allowed themselves to be
interviewed on the subject of the second mortgage bonds
which the Lake Erie & Western Railroad managers are attempting to
issue; and state "that all.the details in regard to the execution of
the mortgage and the issue of the bonds have been examined and .
approved by their counsel, Stephen P.  Nash."    Is the investing
public to understand tbat they and their coimsel approve of the .
clear misuse of a proxy, and that, notwithstanding the indignation
of stockholders, they will proceed with this business and offer the
bonds to their clients at the risk of a litigation f   We do not believe
it.   A reputation for care and conservatism. must always be. th,e.
indispensable   capital   of   a. recognized   house   of   issue,   and
here    is    a   case    in   which   Wall   Street   is   unanimous   in.
condemnation   of   the    directors,    not   only   for   their   secret .
action, but for their artful suppression of it during nearly a jear
and a half.    We append the. opinion of legal counsel, upon which
some of the opposing stockholders are acting, and we do not see
that there can be any other side to the case.   .We give the opinion
in full because we regard it as a lesson as to the legal duty of diretj-
tors and their position before the law.  as well as in morals, when
soliciting proxies from their cestuis qui trust.   Brokers and bank¬
ers who idly sign proxies for shares in their name, owned by clients,
can read this opinion and take it to heart with great profit to them¬
selves.   This opinion will be found in the next two paragraphs.
------—..-------

** rr^HE action at the stockholders' meeting at which a second
-i- mortgage of $5,000 per mile on all the property of the
company was in form authorized was and is voidable; and the
directors in carrying into effect the execution and delivery of said
mortgage and the issuing of bonds secured thereby as provided at
the meeting will commit a breach of legal duty to the stockholders,
whose trustees they are. The facts, as we understand them, are
these: The requisite vote authorizing in form the issuing of the new
mortgage and mortgage bonds was given only by the aid of proxies
held by directors of the company and solicited for the directors
by the secretary of the company upon a notice utating the purpose
of a meeting to be held in Bloomington, III., June 25th, 1890, but
not stating in any mode which could convey to the person whose
proxy was sought the slightest intimation that it was intended to
impose an additional mortgage on the entire property, or that this '
was one of the purposes of the meeting. If such proxies had been
requested by some third person, not a director or officer of
the company, and not holding fiduciary relations to the
persons whose proxies were asked for, then the persons who gave
the proxies would have done so at their own risk as to the use
to which they would be put; but in the present case the
persons who, by an artfully veiled request, obtained the proxies,
intending at the time to use them for the purpose of reorganizing
the financial plan of the corporation, were directors who stood as
the trustees of the very persons from whom they sought the
proxies. Their position was a position of vantage and of fiduciary
relations. They were bound not merely to tell no falsehood as an
inducement to the stockholders to give their proxies, but they were
bound affirmatively to disclose to the stockholders every material
fact within their knowledge which could reasonably be expected,
according to the judgment of ordinary minds, to influence the stock¬
holders in determining whether they should send the proxies or
not.





'* rr^HERE can be no question that the proposition to create an in-
-*- debtedness by way of a specific lien ahead of the interest of
the stockholders amounting to an addition of 50 per cent to the exist¬
ing mortgage debt of the company was a subject quite material to be
considered by every stockholder in determining whether he should
or should not give bis proxy at a meeting where that question was
to come up. Tbe directors took the proxies with the concealed
intention of using them for this very purpose without in any way
informing the stockholders that they were to be used for that pur¬
pose. The notice spoke only of issuing bonds. A bond is a mere
evidence of debt, wholly different from a mortgage. Why did the
notice make no mention of the proposed second mortgage ? Not '
only did the notice and proxy make no reference to any mort¬
gage, but even after tbe action had been taken at the
meeting,    the     management    suppressed    the    fact    that    it