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The Eastern Rail-road Company, 1855–1884
Published online by Cambridge University Press: 24 July 2012
Abstract
The main lines of the Eastern Rail-road served a rich coastal trade, yet even in an age of great commercial expansion this historic railroad enterprise courted continual disaster. The crisis of 1855 (Spring, 1957, Business History Review) had been compounded out of unprofitable branch connections, poor management, and a major defalcation. Reorganization promised a better future, but history repeated. Management generally chose to cover up, rather than correct, the operational and financial weaknesses that existed. New mistakes were made — and concealed. Ineffective management controls left power concentrated in a few careless hands. The inevitable final crisis in the mid-seventies paved the way for absorption of Eastern by the Boston & Maine — a major step in the building of that system. Through this narrative of repetitious error runs the thread of railroading progress — cut-and-try improvements in management techniques, in competitive strategy, and in operating methodology.
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- Research Article
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- Copyright © The President and Fellows of Harvard College 1957
References
1 Complete list of nearly 3,000 stockholders printed in 1855. ( N.p., n.d., copy in Boston & Maine history file, North Station, Boston.) There were 31 stockholders holding 100 or more shares each, in July, 1855. Testimony of Shattuck, George O., Eastern Railroad Investigation, 1876 (Boston: Wright & Potter, 1876), p. 523.Google Scholar Samuel Hooper was an important Boston merchant and politician, serving in Congress for 14 years where he was especially important on the banking committee. See Redlich, Fritz, Moulding of American Banking: Men and Ideas (New York: Hafner, 1951), Part II, pp. 8 ff.Google Scholar
2 Annual Report of Eastern R. R., 1856, p. 10; 1857, p. 9; 1858, p. 7; 1859, p. 10; 1868, p. 8. The titles of the published annual reports of the directors to the stockholders of the several railroads vary. For convenience all references to these reports will be cited as Annual Reports. Directors' Minutes of Eastern R. R., Oct. 16, 1860; Nov. 20, 1861. By 1868, Eastern had lost $72,399 in its 15 years of operating the South Reading, besides $69,951 for loans and pay ments on account, and $232,573 for capital stock, totaling $374,923 in return for a very small net worth. In addition, practically all of the business could have been handled on the Eastern's other line. The Saugus Branch Railroad Company was merged with the Eastern in 1858. Stockholders' Minutes of Eastern R. R., July 12, 1858.
3 The 57 miles of horse railways in Massachusetts in 1860 had total revenues of $793,617, an amount greater than the receipts of any of the steam railways in Massachusetts except for the Western, the Boston & Worcester, and the Boston & Maine. Abstract opposite p. 5, in Public Document No. 46, Returns of the Railroad Corporations in Massachusetts, 1860. Together with Abstracts of the Same (Boston, 1861). Hereafter these returns will be cited as Mass. R. R. Returns.
4 Annual Report of Eastern R. R., Nov., 1861, pp. 8–9.
5 American Railway Times, Oct. 27, 1860, p. 428; Annual Report of Eastern R. R., 1862, p. 6. Notice that the volume of traffic mentioned was too large to be carried on a unit car. The absence of any reference to a unit car, as well as the comments in the American Railway Times for Oct. 27, 1860, and Feb. 8, 1862, suggest that only full-size trains were used after the experiment of September and October, 1861.
6 Directors' Minutes of Eastern R. R., Oct. 15 and Nov. 19, 1857.
7 Annual Report of Eastern R. R., 1859, p. 12;ibid., May 31, 1861, pp. 4, 7.
8 Ibid., 1858, p. 6.
9 Stockholders' Minutes of Eastern R. R., July 13, 1857.
10 Annual Report of Eastern R. R., 1862, p. 4.
11 The Massachusetts state loan of $500,000, due in 1857, was extended 10 years, to be paid in installments between 1865 and 1871. Mass. Act of May 23, 1857, c. 220. (Copy in Boston & Maine Railroad System, Vol. Ill, Statutes of Massachusetts Relating to Boston & Maine Railroad and Leased Lines [Boston, 1904], p. 22.) Hereafter this volume will be cited as B&M … [Statutes]. Volume II includes legislation in the states of Maine, New Hampshire, and Vermont. The American Railway Times of May 7, 1857, gives a detailed analysis of Eastern's financial situation at that time, a much more candid report than statements released by the management.
12 Before 1862 taxes were insignificant but within a few years the annual taxes became the equivalent of 2 per cent dividends to the stockholders of both the Eastern and the Eastern in New Hampshire.
13 Directors' Minutes of Eastern R. R., April 21, 1864; Annual Report of Eastern R. R., 1864, p. 8.
14 The jointly operated Boston & Lowell and Nashua & Lowell followed in 1865 and the Fitchburg Railroad in 1866.
15 Cf. commissioners' decision of Feb. 6, 1860, filed as document 110 in the Eastern Railroad contract file located in the B&M general offices, Boston.
16 Charles J. Kennedy, “The Eastern Rail-road Company to 1855,” The Busi ness History Review (Spring, 1957).
17 May 15, 1858, No. 128 in Eastern contract file; April 1, 1859, No. 118 in Eastern contract file; Directors' Minutes of Boston & Maine R. R., Oct. 17, 1860; Eastern-B&M contract of April 1, 1859, and related papers, No. 118 in Eastern contract file; The Boston and Maine Railroad: Statement Showing the Result of Its Management for the Last Ten Years. April, 1866 (Boston: Wright & Potter, 1866), p. 16.
18 Incorporated by Act of New Hampshire, June 30, 1865, c. 4, 150. ( Copy in B&M … [Statutes], II, 326.) Cf. Annual Report of Eastern R. R., 1866, p. 4.
19 Directors' Minutes of Eastern R. R., June 15, 1865; Directors' Minutes of Boston & Maine R. R., June 19, 1865; Feb. 20, April 1, 1867; Directors' Minutes of Eastern R. R., March 2, 1867; April 11, 1867; Annual Report of Eastern R. R., 1868, p. 4; Directors' Minutes of Boston & Maine R. R., April 17, May 30, 1867; Contract No. 113 in Eastern contract file.
20 The Eastern president was to specify the rates between Boston and the stations of Salem, Danvers, and Newburyport whereas the B&M president was to specify the rates between Boston and the stations of Lawrence, Great Falls (Somersworth) and Salmon Falls.
21 Annual Report of Eastern R. R., 1875, p. 8.
23 Ibid., 1868, pp. 7–9.
24 Directors' Minutes of Eastern R. R., March 16, 1869.
25 Copy of referee's decision of Dec. 14, 1869, in Annual Report of Eastern R. R., 1869, pp. 14–15.
26 Letter of George M. Browne to Gen. George Stark, Dec. 8, 1869, copy in Directors' Minutes of Boston & Lowell R. R., Dec. 28, 1869. Nothing materialized on this project, however.
27 According to President Samuel C. Lawrence in the Annual Report of Eastern R. R., 1875, pp. 44–45. His total figure is $8,245,380 (erroneously printed as $8,245,980) which we have divided by computations made from in formation in the Annual Reports and from Eastern R. R. Investigation, 1876, p. 6.
28 With a net railway operating revenue of $635,150, the corporation was obligated to pay $1,135,296 as follows: $42,018 for taxes, $200,916 for rents, and $892,362 for interest.
29 Haven, in Eastern R. R. Investigation, 1876, p. 151.
30 Parker, in ibid., p. 16.
31 A corporation, chartered June 30, 1865, to combine the Great Falls & Conway and the Great Falls & South Berwick railroads.
32 Eastern R. R. Investigation, 1876, p. 6 of the committee report; Annual Report of Eastern R. R., 1875, pp. 25–28.
33 Ibid., 1873, p. 6.
34 For Eastern's relation with the Portland & Ogdensburg, see the Directors' Minutes of the Eastern, Nov. 26, 1873, Sept. 23, 1874; Annual Report of Portland & Ogdensburg R. R., 1874, p. 7; contract between Eastern and the P&O, in the Directors' Minutes of the Maine Central R. R., pp. 78–86, following entry of June 5, 1874.
35 Annual Report of Eastern R. R., 1875, pp. 25–28.
36 Stockholders' Minutes of Eastern R. R., Feb. 7, 1870; Directors' Minutes of Eastern R. R., Feb. 29, 1872; Annual Report of Eastern R. R., 1875, p. 29.
37 Ibid., 1875, p. 34.
38 Bradlee, Francis B. C., The Eastern Railroad (Salem: Essex Institute, 1917), p. 77.Google Scholar
39 Annual Report of Eastern R. R., 1871, p. 10.
40 Described in an Eastern time book, quoted by Bradlee … Eastern R. R., pp. 65–66.
41 Annual Report of Eastern R. R., 1875, pp. 36–37.
42 Directors' Minutes of Eastern R. R., Sept. 2–3, 1847; Petition dated April 28, 1859, in Eastern's historical file, B&M Contract Bureau, North Station, Boston.
43 Testimony of Haven, Alley, Silver, and Parker in Eastern R. R. Investigation, 1876, pp. 66, 155, 404, 409–16, 465; Directors' Minutes of Eastern R. R., Oct. 26, 1870; June 22, Oct. 11, 1871.
44 Testimony of Parker, Haven and Wooldredge in Eastern R. R. Investigation, 1876, pp. 67, 83, 155, 500; Directors' Minutes of Eastern R. R., Feb. 29 and June 27, 1872.
45 Bradlee, F. B. C., “The Boston, Revere Beach and Lynn Narrow Gauge Railroad,” Historical Collections of the Essex Institute, LVII (Oct., 1921), 273–80.Google Scholar
46 Kennedy, , “The Eastern Rail-road Company to 1855,” The Business History Review (Spring, 1957).Google Scholar
47 Required by the contract of 1847. A complete copy is in the Annual Report of the Portland, Saco & Portsmouth Railroad, 1867, pp. 15–32.
48 American Railway Times, June 25, 1864, p. 208.
49 Stockholders' Minutes of the Portland, Saco & Portsmouth Railroad, June 1, 1863 ff.; Directors' Minutes of Boston & Maine R. R., Dec. 17, 1864; Stockholders' Minutes of PS&P R. R., June 6, 1865; Stockholders' Minutes of Boston & Maine R. R., Oct. 4, 1865.
50 Directors' Minutes of PS&P R. R., July 3, 13, 1869; Stockholders' Minutes of PS&P R. R., Aug. 4, 1869.
51 Annual Report of Eastern R. R., 1875, p. 15. We have found no evidence to support or deny Lawrence's assertions. Director George L. Ward of the Maine Central maintained that the PS&P made a mistake in breaking the 1847 lease. See testimony of Ward in Eastern Railroad Investigation, 1876, pp. 300–2.
52 Directors' Minutes of PS&P R. R., Nov. 23, 1870.
53 Directors' Minutes of Boston & Maine R. R., Dec. 10, 1870; Directors' Minutes of PS&P R. R., Dec. 14, 1870.
54 Ibid., Dec. 14, 17, 1870; Jan. 7, 11, 1871.
55 Stockholders' Minutes of PS&P R. R., March 18, 1871.
56 Ibid., March 18, 1871; Directors' Minutes of Boston & Mame R. R., Jan. 11, 1871; Directors' Minutes of Eastern R. R., Jan. 13, 1871; Directors' Minutes of PS&PR. R., Jan. 13, 1871.
57 Ibid., Jan. 13, 1871; Directors' Minutes of Eastern R. R., Jan. 13, 1871; Stockholders' Minutes of PS&P R. R., March 18, 1871. Besides an undetermined amount spent for betterments, the PS&P was obligated to pay $100,000 to the Eastern and $100,000 to the Boston & Maine as a penalty for breaking the 1847 lease.
58 Directors' Minutes of Boston & Maine R. R., May 17, June 24, 1871; Directors' Minutes of Eastern R. R., May 11, 12, June 2, July 20, 1871.
59 Directors' Minutes of Boston & Maine R. R., May 17, June 24, Aug. 16, 1871.
60 Copy of contract in Eastern contract file, No. 1210 in B&M Contract Bureau; Directors' Minutes of Eastern R. R., July 20, 1871; Directors' Minutes of Maine Central R. R., Dec. 6, 1871; Annual Report of Eastern R. R., 1875, p. 17. The contract did not exclude the B&M or any other road and conse quently was acceptable to the Maine Central.
61 Eastern R. R. Investigation, 1876, pp. 262–65; cf. Stockholders' Minutes of Maine Central R. R., Feb. 6, 1873; Ward, in Eastern R. R. Investigation, 1876, pp. 265, 279–80, 300–1.
62 Ward, op. cit., pp. 262–68, 301.
63 Parker, Eastern's treasurer, loaned money to himself, as trustee, with which he purchased the stock through Ward, as instructed by Lothrop. (Parker, in Eastern R. R. Investigation, 1876, pp. 7, 8.) The stock was used as collateral to Hooper, Wooldredge and others who endorsed Eastern's notes. (Parker, op. cit., p. 12.) If this had been voted by the Eastern board, it would not have been illegal or uncommon. (Shattuck, in Eastern R. R. Investigation, 1876, p. 174, quoting Brice's Ultra Vires.)
64 Annual Report of Eastern R. R., 1875, p. 18. This report says 7,619 shares were contracted for in February, costing $533,330. Parker, Eastern R. R. Investigation, 1876, pp. 8 ff.; Ward, op. cit., pp. 19–20. Wooldredge, a director and next president of the Eastern, was “astonished” when he learned Rice received such a high price. Wooldredge, op. cit., p. 177.
65 Directors' Minutes of Maine Central R. R., April 30, 1873.
66 Ward, op. cit., p. 268. Copy of contract in Annual Report of Eastern R.R., 1873, pp. 11–14.
67 Directors' Minutes of Eastern R. R., June 5, 1873; Directors' Minutes of Mame Central R. R., June 13, 1873.
68 Annual Report of Eastern R. R., 1875, p. 17.
69 Wooldredge, op. cit., pp. 175, 179.
70 Jones, Eastern R. R. Investigation, 1876, pp. 391–92; Annual Report of Eastern R. R., 1875, pp. 20–21, 45.
71 Wooldredge, op. cit., pp. 175, 179.
72 Ibid., pp. 176–78. By Feb., 1874, all members of the Eastern board knew about Eastern's ownership of Maine Central stock but they never acted as a board upon the subject. Haven, op. cit., p. 128; Parker, op. cit., pp. 8 ff. Maine Central had $3,615,800 of stock, par value. Lawrence, in Annual Report of Eastern R. R., 1875, p. 18, states that after the initial purchases of stock in Feb., 1873, which gave Eastern, together with its friends, control of Maine Central, 4,655 shares were secured in 1873 and 1874, at steadily advancing prices, except for Judge Rice's stock bought at par. That made a total of 12,274 shares costing about $925,000. Cf. p. 19 and p. 18 in ibid.
73 Ibid., 1875, pp. 44–45.
74 See the statement by F. B. Rowell, dated Feb. 8, 1928, in the B&M history file, located in the B&M Contract Bureau at Boston. If the Eastern had not leased the P&D, it would have been to the advantage of the B&M to lease it and divert business from the Eastern. Cf. Annual Report of Eastern R. R., 1875, p. 30.
75 Six per cent of the capital stock and one-half of the remaining surplus. There was never a surplus, however. Directors' Minutes of Eastern R. R., March 30, June 27, 1872; copy of lease dated June 1, 1872, printed in 1876, in B&M Contract Bureau at Boston. The towns of Dover and Portsmouth furnished $225,000 and $300,000 respectively, a total of 69 per cent of the cost of construction. Annual Report of Eastern R. R., 1875, p. 30.
76 Ibid., pp. 30–31; Directors' Minutes of Eastern B. R., April 24, 1873.
77 Annual Report of Eastern R. R., 1875, pp. 11, 45. This is Lawrence's version. The minutes of Essex Branch have not been located and the B&M minutes do not mention the episode. Directors' Minutes of Eastern R. R., March 19, July 25, 1872; “Corporate History of the Boston & Maine System,” p. 27.
78 Ibid., p. 18; Annual Beport of Eastern R. R., 1875, pp. 8–9, 45.
79 Act of Mass., May 12, 1864, c. 233. (Copy in B&M … [Statutes] III, p. 323); minutes of Newburyport Common Council, Dec. 30, 1864, copy on back of lease in history file of Newburyport City R. R., in B&M Contract Bureau, Boston.
80 Directors' Minutes of Boston & Maine R. R., April 1, 1871; Directors' Minutes of Eastern R. R., July 25, 1872.
81 “Corporate History of Boston & Maine System,” p. 68.
82 Annual Report of Eastern R. R., 1875, p. 12.
83 Ezra H. Dodge, in Eastern R. R. Investigation, 1876, pp. 358–63, 409.
84 Annual Report of Eastern R. R., 1875, pp. 41–42.
86 Lawrence, in ibid., p. 426.
87 Shattuck, in ibid., p. 517, and Wooldredge, in ibid., p. 183. Among the largest creditors was Baring Brothers & Company who took ¿100,000 in bonds in 1873 at 5 per cent interest and 1¼ per cent commission. (Contract dated April 18, 1873, in Eastern contract file, No. 108, B&M Contract Bureau, Bos ton.)
88 Wooldredge, in Eastern R. R. Investigation, 1876, p. 183.
89 Ibid.; Parker, op. cit., pp. 85–86; Directors' Minutes of Eastern R. R., Oct. 28, 1874. The Eastern Rail-road paid $10,000 and the PS&P R. R. and the PGF&C R. R. each paid $5,000.
90 Annual Report of Boston & Maine R. R., 1874, p. 6; Directors' Minutes of Eastern R. R., April 17, 1874; original contract in Eastern contract file, No. 132, in B&M Contract Bureau, Boston.
91 Annual Report of Eastern R. R., 1873, p. 5; 1874, pp. 4–5; 1875, pp. 37–38.
92 The “cost of road and equipment” and “other property” accounts were written down 49 per cent in 1876. Ibid., 1875, p. 56; ibid., 1876, pp. 12, 13. See the itemized list of losses in Annual Report of Eastern R. R., 1875, pp. 44–45. Nearly $5,000,000 of that list of “losses” were declared by the new management to be an excess above the current value of certain assets.
93 Contract of April 8, 1874, in Eastern contract file, No. 107, in B&M Contract Bureau, Boston. Cf. fn. 87. Directors' Minutes of Eastern R. R., March 30, Nov. 8, 1872; March 31, April 24, 1873; Feb. 20, 1874; Stockholders' Minutes of Eastern R. R., Feb. 3, 1873; Feb. 1, 1875; Act of Mass., March 23, 1874, c. 80. (Copy in B&M … [Statutes] III, 266.)
94 Wooldredge, op. cit., p. 186.
95 Cummings, in Eastern R. R. Investigation, 1876, p. 221.
96 Ibid., 230.
97 Ibid., pp. 221, 226.
98 Ibid., pp. 224, 486, 487; Lawrence in Eastern R. R. Investigation, 1876, pp. 442–43; Directors' Minutes of Eastern R. R., May 10, 26, 1875; Directors' Minutes of Boston & Maine R. R., Jan. 20, May 6, Sept. 23, 1875. A copy of the memorandum of the 1875 contract is contained in Directors' Minutes of Boston & Maine R. R., May 6, 1875.
99 Directors' Minutes of Eastern R. R., July 28, 1875; Wooldredge, in Eastern R. R. Investigation, 1876, pp. 188, 191.
100 Annual Report of Eastern R. R., 1875, p. 47.
101 Cummings, in Eastern R. R. Investigation, 1876, pp. 227, 489; Williams, in ibid., p. 356. Russell, in ibid., pp. 354–55; Directors' Minutes of Eastern R. R., Sept. 10, 30, Oct. 4, 1875. On Dec. 16, 1875, the Eastern board voted to limit passes to employees only. The Boston & Lowell, Nashua & Lowell, and Fitchburg railroads took the same action about that time.
102 Cummings and Lawrence, in Eastern R. R. Investigation, 1876, pp. 249, 444.
103 Parker, in ibid., p. 91.
104 Haven charged that the minutes of the directors were inaccurately recorded. The minutes state that on May 10, 1875, the board approved the previous action of the finance committee in purchasing the Maine Central stock. In a heated meeting during the following October, Haven declared that that vote had never been taken. He wrote a letter to the board denying that such a vote was ever taken on May 10, and repeated the same statement under oath the next spring. The State Railway Commission in its annual report said that the finance committee, including Haven, had purchased the stock. Haven wrote two letters to the Commission denying that the committee had ever purchased, or authorized the purchase, of Maine Central stock. (Haven, in Eastern R. R. Investigation, 1876, pp. 135–37, 447–49, 463, 464.)
Haven testified (ibid., p. 446) that in February, 1875, he suggested the board should have an executive committee but Wooldredge objected.
Lothrop used Eastern's money to buy a hotel and wharf at Bar Harbor, Maine, in the name of the Portland, Saco & Portsmouth R. R. in 1873. He did not have the authorization of the Eastern board of directors for the purchase of the property which was offered at $20,000 by Ezra H. Dodge, but for which he paid another agent, Deering, $33,000. The apparent purpose of the acquisition was to feed boat traffic to the PS&P and Eastern rail line between Portland and Boston. (Ezra H. Dodge, in Eastern R. R. Investigation, 1876, pp. 358–62.)
105 Annual Report of Eastern R. R., 1875, pp. 4, 48.
106 Ibid., p. 48; Lawrence, in Eastern R. R. Investigation, 1876, p. 315.
107 Directors' Minutes of Eastern R. R., Oct. 16, 27, 1875.
108 Ibid., Oct. 27, Dec. 30, 1875.
109 Ibid., Dec. 30, 1875.
110 Annual Report of Eastern R. R., 1875, pp. 61–82; ibid., 1876, p. 4. Stockholders' Minutes of Eastern R. R., Feb. 7, 1876; Directors' Minutes of Eastern R. R., Jan. 19, 1876.
111 Published as The Eastern Railroad Investigation, 1876.
112 Committee report, p. 4, in Eastern R. R. Investigation, 1876.
113 Ibid.
114 Ibid., p. 5.
115 Ibid., 2.
116 Stockholders' Minutes of Eastern R. R., Aug. 22, 1876.
117 Directors' Minutes of Eastern R. R., Aug. 29, 1876; Feb. 19, April 22, 1877; April 22, 1879.
118 Contract dated May 29, effective June 1, 1877, in Eastern contract file No. 132, in B&M Contract Bureau, Boston.
119 Annual Report of Eastern R. R., 1877, pp. 8, 9, 15.
120 Computed from Mass. R. R. Returns, 1875–78.
121 Annual Report of Eastern R. R., 1877, p. 13; Directors' Minutes of Eastern R. R., May 24, 1881.
122 Directors' Minutes of Boston & Maine R. R., June 16, 1880.
123 Directors' Minutes of Eastern R. R., June 28, 1881; Directors' Minutes of Boston & Maine R. R., July 27, 1881.
124 Directors' Minutes of Eastern R. R., March 28, May 23, Dec. 1, 1882; March 13, Nov. 6, 1883; April 22, 1884; Directors' Minutes of Boston & Maine R. R., March 22, April 10, 26, May 24, June 28, Sept. 27, Oct. 11, 25, Dec. 13, 1882; April 23, Oct. 22, 1884.
125 Directors' Minutes of Eastern R. R., June 27, 1882; March 7, 13, 1883; Directors' Minutes of Boston & Mame R. R., Dec. 1, 27, 1882; March 7, 27, 1883; Stockholders' Minutes of Eastern R. R., March 28, 1883; Stockholders' Minutes of Boston & Maine R. R., March 28, 1883.
126 Directors' Minutes of Eastern R. R., Sept. 4, Nov. 19, 1884; Directors' Minutes of Boston & Maine R. R., Sept. 26, Oct. 24, 1883; Nov. 13, 19, 1884; Stockholders' Minutes of Eastern R. R., Dec. 2, 1884; Stockholders' Minutes of Boston & Maine R. R., Dec. 2, 1884.
127 Copy of lease in Annual Report of Eastern R. R., 1884, pp. 44–52.
128 Tables in Bradlee, Eastern Railroad …, p. 102, and Bradlee, Boston and Maine Railroad …, p. 78.
129 $3,150,000 preferred stock was issued in 1886 in exchange for a like amount of certificates of indebtedness. Directors' Minutes of Eastern R. R., Nov. 6, 1886.
130 Copy of consolidation agreement in Forty-Sixth Annual Report of the Railroad Commissioners of the State of New Hampshire (1890), pp. 413–14.