Message of Gov. J. S. Hogg to the twenty-third Legislature of Texas. Page: 6 of 28
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MESSAGE OF THE GOVERNOR.
during the same period their increased stocks and bonds amounted to many
millions of dollars. The contention that the public is not interested in every
kind of public security must be made without mature consideration. The
execution of a fictitious security is a fraudulent act for the purpose of obtain
ing money from some source. Money obtained in fraud has ever been an
offense against good morals, and should be in all respects a crime against the
laws of every civilized country.
It is unnecessary to go any further than this proposition to point out the
interest the public has in checking the growth of fictitious securities of every
class. It, is the duty of the government to make the acquisition of property
through fraudulent practices a crime. She owes this much to good order,
fair dealing and honesty. Aside from this view, considering a feature of
perliaps more general imnportance, the fact must not be lost sight of that,
after all, the bonds of railways must be paid or repudiated. Their payment
is necessarily confinei to the source of revenue collected through traffic
tolls or taxes laid on the commerce carried by the railways. It may be
contended, that as they are void under the constitution, they cannot be collected.
This proposition is certainly sound under reasonable conditions,
which unfortunately do rnot exist under the laws nor in the courts of Texas.
A few men own the stock of the railways. Directors and officers are elected
to carry out their will. A resolution is passed in pursuance of which interest-bearing
bonds are issued and the railway property mortgaged to pay
them. They are floated, sold. or hpyothecated for cash. Neither the property
nor the public receives a dollar of this money; but the stockholders or
the owners of the road appropriate it. If a line continues to be operated by
such stockholders and owners, to meet the interest on such fictitious bonds,
train forces and section gangs must be reduced, wages of employes decreased,
and traffic charges raised to the highest point permitted by law or that
the traffic will bear. Within a few years by this process the property becomes
improverisled and wrecked, the public badly served at high expense;
a default of interest follows, and a foreclosure of the mortgage given to secure
these bonds the result. Under the laws and jurisprudence of this
State it would be quite impossible for the corporation, composed of the directors,
stockholders and officers who perpetrated the fraud, to enter court
and successfully resist judgment on the bonds. If not estopped by
laches, they could not be permitted to take advantage of their own wrong.
So the process of foreclosing the mortgage and establishing the amount of the
fictitious indebtedness upon the road by judgment of the court, proceeds
unobstructed. It is strange enough to say, but it is nevertheless true, that
the State government is now, under present laws, unable to appear in such
case or raise its voice against the fraud. A so-called reorganization generally
follows such judicial proceedings. None of the bonds or stocks are cancelled,
but are generally increased, sometimes to double or quadruple the
former amount, by continued abuse of corporate franchises. Thus the property
of the people is threatened with ultimate confiscation, and their liberties
No question now confronts your honorable bodies, or that may probably
arise in this State within the next fifty years, that can promise more
interesting consequences to the people than this one. If it is judiciously
settled, it will take but a short time for the material interests of this State
to bear their wholesome fruits in great abundance. On the other hand,
if it is avoided or tempnorized with, its baneful effect will in time be visited
upon every wealth-producing citizen of this State. Its momentous importance
certainly cannot be denied now by any intelligent man, since the
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Hogg, J.S. (James S.). Message of Gov. J. S. Hogg to the twenty-third Legislature of Texas., book, January 12, 1893; Austin, Texas. (texashistory.unt.edu/ark:/67531/metapth5861/m1/6/: accessed August 22, 2017), University of North Texas Libraries, The Portal to Texas History, texashistory.unt.edu; .