Henry P. Coon
Resort to Court
Whether or not the election of 1863 was tainted with corruption, as soon as it was concluded, San Francisco became bound, on or about the 25th of May, 1863, to subscribe $600,000 and $400,000 to the stock of the Central Pacific and Western Pacific railroads, respectively. The fight against subscriptions, however, did not stop at this point. In an attempt to prevent action, suit was brought by a man named W. N. French against the Board of Supervisors, in the case known as “French v. Teschemaker.” French was a resident of San Francisco and a taxpayer. Teschemaker was a member of the Board of Supervisors. The suit alleged certain irregularities in the city election, but rested mainly on the contention that the act authorizing the city and county to subscribe was void and of no effect, because it provided that the city and county should not be liable for any of the debts or liabilities of either the Central Pacific or the Western Pacific railroads beyond the amount subscribed, and that this provision as to liability should be a part of all contracts made by the companies for the construction and equipment of their roads. According to counsel, this was an attempt to create an exemption from the proportionate liability imposed on all stockholders by the state constitution, and was not only void in itself, but its lack of force invalidated the whole subscription, since it was not to be supposed that the legislature would have passed the other clauses of the act without the section in question.
On the 23d of May, 1863, Judge Sawyer of the Twelfth Judicial District granted a temporary injunction. On appeal to the Supreme Court, however, this injunction was overruled. The court said:
True, the legislature cannot exempt the city and county from liability, but it can authorize the corporation to refuse to contract with persons who do not waive the proportionate liability established for their protection. How the individual liability of a stockholder of a corporation can be a matter of public concern any more than the liability of a copartner, we are unable to perceive, and we are not aware that it has ever been claimed that the latter liability had its foundation in public policy. It is merely a liability created by law, as it might be by contract, and is intended only for the benefit of those who may deal with corporations. It is but another fund to which the creditor may look when the social fund has been exhausted, and whether he chooses to look to it or not is a matter of no concern to the public.... There being, then, only a question of private right involved, there can be no question but that the party interested in the enforcement of the right may contract to waive it.[56]
Compromise Plan
The opponents of municipal subscription now turned to the legislature, and secured the passage of an act authorizing the Board of Supervisors of San Francisco to compromise and to settle all claims upon the part of the Western Pacific Railroad and the Central Pacific Railroad for cash or other security, in place of bonds claimed by the companies, provided the power to make such compromise should rest in the Board of Supervisors only after and in case said board should be compelled by final judgment of the Supreme Court to execute and deliver the bonds specified in the act.[57]
Pursuant to this act of April 14, 1864, the Board of Supervisors appointed a special committee from among their number to consider and report a plan for a compromise. This action was taken on May 23, and the mandamus requiring the supervisors to subscribe $600,000 to the stock of the Central Pacific, which was essential to the adoption of any compromise, was issued on June 7.[58] The committee met with Stanford, reported back to the board, and on June 20 the board passed order No. 582 providing that the city of San Francisco order, execute, and deliver to the Central Pacific 400 bonds for $1,000 each, in full discharge of all obligations on the part of the city and county to make any subscription to the capital stock of said company.