Gulf, Colorado and Santa Fe Railway Company

Early Issues of Capital Stock (continued)

Elinore McDonough

Galveston, Texas

May 25, 1927

The minutes of the Directors' meeting of Dec. 8, 1875, contain the following:

This stock was probably issued to Galveston County on account of the threatened suit against the validity of the County's bonds. The original arrangement with the County was that one certificate should be issued, when the entire subscription was paid. (See Page 5 of this sketch----Page 6 of this copy----and Page 27 of Minute Book No. 1.)

The minutes of the Directors' meeting of Jan. 17, 1876, are particularly interesting on account of various troubles about stock subscriptions. A bill for $235.00 for printing the County's bonds, was received from Strickland & Clark, who had, as a firm, subscribed for ten shares of stock. Apparently, the firm had been dissolved, as Mr. Strickland asked that the Company look for half the subscription to "his late partner, Mr. Clark", and that the bill for printing be allowed as a credit on his subscription for the other five shares. The President was given power to act on the request.

Mr. J. Astall had addressed a communication to the Finance Committee, "stating, that, at the time he made his subscription, he understood that the Co. would give him work - they have not done so and therefore asks that he be relieved from the payment of the balance due by him". This, also, was referred to the President, with power to act.

As a matter of fact, Mr. Astall, who had a foundry in Galveston, afterwards had contracts with the Railway Company.

The firms of J. C. Smith & Co., and Gary & Oliphint asked to be relieved of their subscriptions, which was refused in the case of the latter firm, and laid on the table in the case of the former.

The meeting then adopted the following resolution:

"Resolved that the Finance Committee be and they are hereby authorized to employ attorneys to institute suits in the District and Justice Courts to enforce the payment of subscriptions to the Capital Stock of this Company due and remaining unpaid".

When the first block of County bonds had been delivered to the Railway Company, and the first stock certificate issued to the County, Edward T. Austin, a citizen of Galveston, applied for an injunction in the District Court, "on behalf of himself and others,to restrain the sheriff from collecting the special tax levied by the Court, to restrain the County Court from issuing any more bonds to the Company, and to restrain the Company from using or disposing of the fifty thousand dollars already received." The injunction was denied, and on appeal to the Supreme Court of the State, it was decided on every point in favor of the County and the Railway Company. The judgment was rendered on March 17, 1876. An effort had been made at first to sell the Galveston County bonds in New York, but they were withdrawn from the market when the injunction suit was filed. They were afterwards sold in Galveston, mostly to members of the Santa Fe Board of Directors. The bill for Twenty Thousand Dollars, rendered by the law fir! ms of Ballinger, Jack & Mott and Flournoy, Sherwood & Scott, for defending this suit, was paid in County bonds.

Mills & Tevis, who had acted at one time as attorneys for the Railway Company during the absence of Col. Geo. Flournoy, the Company's attorney, were paid for their services with five shares of capital stock.

The firm of Flournoy, Sherwood & Scott was paid for two years' legal services with twenty shares of capital stock, authorized at the Directors' meeting of August 23, 1876.

At the same meeting, the bill of Mr. S. W. Sydnor, for his comission for collecting the first installment of subscriptions to the capital stock, was paid by crediting the amount against his own subscription to capital stock. Mr. Sydnor at first declined such payment, saying that he had not subscribed to the capital stock. However, later, on the recommendation of Mr. M. Kopperl, he was prevailed upon to accept three shares of stock in full payment for his bill for $295.00.

At a called meeting of the Stockholders, held on March 23, 1877, with Mr. N. B. Yard, as Chairman, to consider a proposition to raise money for the extension of the road to Belton, by the issuance of bonds and the execution of a deed of trust, the vote, unanimously in the affirmative, was as follows:

These gentlemen represented practically all the active stockholders. It will be noted what a heavy majority was held by the County with its five thousand shares of stock. This afterwards caused a great deal of trouble in the election of directors, particularly at the election on Oct. 2, 1877, when the County Judge, voting the County's stock, insisted that the County had the right to name all thirteen directors, on account of holding the majority of the stock. Judge Wm. H. Williams, County Judge, who was chairman of the Stockholders' meeting, over-ruled all protests. Prior to this time, the County had named three gentlemen to represent it on the Board of Directors, that being "the number of directors to which the ratio of its stock is entitled". The private stockholders had then named the remaining directors. In the formal protest against this election----which protest was signed by H. Rosenberg, Somerville & Davis, P. J. Willis & Bros., and A. P. Lufkin----aside from the protest against the County's assumption of the right to name the entire directorate, attention was called to the fact that some of the gentlemen elected directors to represent the County were not even stockholders in the Company, although the charter provides that "no person shall be a director who is not the subscriber of ten or more shares of the capital stock of the company".

Much confusion followed this election. The "old board" remained in office; and finally a friendly suit was agreed upon to test the legality of the election. Instead, however, the attorneys for the "new board" filed a suit for libel against the "old board". Before it came to trial, the "new board" resigned. A committee from the "old board", meeting with the county commissioners, finally effected a compromise, by which all legal proceedings were dismissed, and directors were agreed upon, eight to represent the County, and five to represent the private stockholders. These directors were, accordingly, elected at a special meeting of the stockholders held on Dec. 15, 1877. At the Director's meeting following, M. Kopperl was elected president, succeeding Henry Rosenberg, who was formally thanked by the directors for his work for the company during his three years as president.