Railroad Giant Abandons Its Contracted Obligations
The Northern Pacific Railroad has declared its agreement with the Seattle, Lake Shore & Eastern Railway illegal, threatening to force a bankruptcy and total foreclosure.
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The Northern Pacific Railroad has taken a new and startling step in the controversy regarding the Lake Shore road. One of the conditions of the contract under which majority stockholders of the Lake Shore sold their stock to the Northern Pacific was that the latter should guarantee the interest on the bonds and the periodic payments into the sinking fund. The next half-yearly payment, amounting to $170,230, is due August 1. A.P. Burleigh, attorney for the Northern Pacific, filed a petition in federal court stating that because a recent judicial opinion held the contract between the two railroads illegal, the Northern Pacific will not fulfill its financial requirements. Mr. Brown, the receiver, noted that they anticipated this move, suggesting that the Northern Pacific intends to force a foreclosure sale to acquire the road completely and wipe out minority stockholders.
“It therefore seems to be the purpose of the Northern Pacific to force the road to a foreclosure sale.”
The aggressive corporate tactics used by the Northern Pacific to squeeze out minority stakeholders and force a foreclosure echo contemporary struggles over corporate acquisition and the fragility of public infrastructure when controlled by private interests. The collapse of the Seattle, Lake Shore & Eastern Railway was a precursor to the volatile boom-and-bust cycles that defined early Seattle’s economic development.
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