Watson, President; Gen. A. S. Diven, Vice-President; Horatio N. Otis, Secretary, and William Watts Sherman, Treasurer.

At the election, James McHenry and other foreign parties representing stock of the Company were present, and claimed that $750,000 in all had been expended in the ousting of Jay Gould, and that the entire amount ought to be a charge upon the Company. After the election, at a stockholders' meeting at which $50,000,000 of stock was represented, four-fifths of it English holdings, it was voted unanimously that the Directors of the Erie Railway Company should take an early method of reimbursing all the actual expenditures incurred by the few stockholders who had brought about the change. A resolution was also passed instructing the Board of Directors to audit the account for expenditures and then pay it. The account was referred to the Executive Committee, but it was not felt by that Committee that it would be well just then to act upon it. This matter was also made subject to annoying search for more light upon it later on.

The first and only report to the stockholders made by the Dix management (July 1, 1872) was a history of but seven months of operation (from October 1st to May 1st), the act repealing the Classification Act having ordered a new election for Directors to be held on the second Tuesday of July instead of the second Tuesday of October, as theretofore. It may be proper to remark," said the report, in some preliminary explanation, "that whatever credit or discredit may appear from the statements must attach not to the present managers, but to their predecessors in office." The earnings of the Company for the nine months, the return for June and July being partially estimated, were $10,374,599.50, including $295,092.66 reported earnings of the leased lines. The expenses, including $316,530.57 for the leased lines, were $9,801,980.93, leaving a surplus of $572,618.57. This showed an increase in earnings over the corresponding seven months of the previous fiscal year of $1,335,197, and a decrease in expense of $160,593.35. There had been expended for construction $2,189,276.40. The disbursements for interest, construction, etc., added to

the operating expenses, brought the outlay for the seven months up to $11,991,257.35, showing a deficit of $1,616,657.83.

"The Railroad of the Barclay Coal Company, with its furniture and equipment," the report continued, "is leased for twenty years by the Towanda Coal Company, which is operated by the Erie, this Company paying for the same an annual rental of $30,000, and a royalty of twenty-five cents per ton for the coal. This arrangement is an advantageous one for the Company, securing as it does a supply of coal at cheap rates for the use of the locomotives. The broad-gauge track of the Cincinnati, Hamilton and Dayton Railroad Company was leased perpetually by this Company at a yearly rental of $180,000, but this arrangement, like many others of a similar character made by the late management, entails an unnecessary and improper loss to this Company, and it can probably be terminated, the same not being valid as against this Company.

'The contracts between this Company and the Sleeping Coach Company provides that the latter. shall furnish sleeping and drawing-room coaches. complete, with the furniture and fixtures properly adapted to their use, and necessary attendants, and shall receive for their use four cents for each mile run, and the additional amount paid by passenger occupying the same, over and above the rates of fare charged on the regular passenger coaches of the Railway Company. The Union Car Company furnish 500 box freight cars, suitable for transportation of grain in bulk, at one cent per car per mile run, the Railway Company to keep the same in repair and guarantee a minimum monthly service of 2,500 miles The Jefferson Car Company furnish the Railway Company with 1,500 four-wheeled dump or coal cars, at half a cent a car per mile for carrying coal, the Railway Company to keep the same in repair and guarantee a minimum monthly service of 1,400 miles per car.

per car.

the road could be very well worked without double tracking the rest of the road. Though I regard the double tracking from Hornellsville to Buffalo and from Hornellsville to Salamanca as important, I do not regard it as indispensable.

“To lay third rail from Jersey City to Buffalo—on double track to Hornellsville-and track as now laid from Hornellsville, including completion of double track on Delaware and Susquehanna Divisions, will cost, if of steel, $7,965,865; if of iron, $7,232,865. Add to this, third rail on track as now from Hornellsville to Salamanca will make, if of steel, $8,653,315;

if of iron, $7,852,665. Unless the Atlantic and Great Western narrow their gauge, the third rail to Salamanca is not recommended. The double track to Hornellsville, and the third rail to Buffalo, as soon as practicable, is of unquestionable importance. As it will take about one year to do this work, no time should be lost in its prosecution."

This was the beginning of the great change in the gauge of the railroad, a change that was not finally accomplished until years afterward. The survey and estimates for these proposed improvements were made under the direction of R. N. Brown.

I. DARK CLOUDS WITH SILVER LINING.

THERE had never been a more eminently respectable and reputable Board of Directors than the one that started in to pilot the battered bark of Erie out of troubled waters, and bring it safely into the harbor of peace and prosperity. Yet there was no indication that confidence in Erie was restored by this showing of great names. According to the statement made by the Directors on July 10, 1872, the earnings had for months exceeded the expenses more than half a million of dollars, but the disbursements were more than a million and a half in excess of the receipts. The inheritance of liabilities from the preceding management was a funded debt of more than $30,000,000, and a stock debt of over $86,000,000. It was well known that the treasury was empty. Something besides names representing all that was substantial and potent in the financial world was necessary to improve the condition and repute of Erie. Wall Street had ruled the Company and its affairs long and disastrously. Public confidence awaited the disclosure of what the policy of the Company was to be under its new guidance. The disclosure came in good time, and the policy was unpopular from the start. It was one of dividends -the English policy of dividing among the stockholders, annually or semi-annually, the net earnings of the road, and the pledge that whatever amounts might be required for construction or equipment

should be provided by the stockholders. A few of the Directors expressed grave doubts as to the wisdom of this policy, and apprehension that the result of it would be far from beneficial to the future of the Company; but the stockholders, a majority of whom were foreign, insisted upon it. As the management was duty-bound to coincide with the wishes of the foreign influence, the policy was adopted, and, as subsequent developments made manifest, the necessary figuring to bring to bear such a relation of charges to earnings as would leave a balance to be divided among the stockholders began.

A radical change in the administration of the operating departments of the railroad was made by President Watson's "General Order, No. 1," on September 18, 1872. A Department of Transportation, a Department of Road, and a Department of Rolling Stock were created, over which Vice-President Diven had direct authority, with power to appoint superintendents and make rules and regulations for the operation and maintenance of the road, subject to the approval of the President. Harden D. V. Pratt was appointed Superintendent of Transportation; Robert M. Brown Superintendent of Road, and Myron T. Brown Superintendent of Rolling Stock. Robert Berdell Cable was subsequently appointed General Superintendent of Transportation, and the Superintendents of Divisions were changed as to title, and became Assistant Superintendents of Transportation.