"MONDAY EVENING, _February 14, 1870_.
"MY DEAR SIR,--On my return late Saturday night I received yours of the
11th, and I take the earliest time at my disposal to reply.
"The retainer to which you allude grew out of and related to matters
wholly distinct and disconnected from the A. and G. W.,[52] and was
arranged without any agency of mine, and the subsequent payment of it
was purely voluntary on your part.
"No intimation was ever made to me that it had any reference to or was
to affect my relations to Mr. Flagg[53] as trustee under the several
mortgages of the A. and G. W.
"I cannot doubt that it was known to you that I had acted as his
counsel for more than a year previous. Nor did I ever suspect that you
did not perfectly understand that I was still at liberty to do so.
"Afterwards, when Mr. McHenry[54] sought to retain me in reference to
his scheme for reorganizing the A. and G. W., and asked me to name the
amount--having looked into all the relations of parties, and having
considered his plan--I declined to have anything to do with it in any
manner or for any purpose, and refused his retainer, repeatedly pressed
upon me.
"In one of these interviews I informed him that the suits which had
been commenced to foreclose the mortgages, if, as I understood them to
be, for I had not seen the papers, were objectionable, that, if a sale
were to be had, they must be reformed or abandoned, and new suit in
proper form, and with proper parties, instituted; that Mr. Flagg--at
the instance of any bondholders, and possibly in an extreme case
without their instance--ought to intervene for that purpose. To this
view he yielded.
"When the lease proposed to be made by the receiver was brought to
my attention some weeks ago, the counsel of the Erie called on me to
ask my consideration of it as counsel for Mr. Flagg and of the first
mortgage bondholders. He called on me to exercise my function in that
capacity; and had prolonged negotiations with me, not as an associate,
but as a representative of a different party.
"I heard no complaint until it happened that, while acting as counsel
for the trustees and bondholders, I did not do precisely what their
adversaries preferred to have done.
"Now, I answer your question: You 'are not justified in being surprised
that I am acting for the trustee and his bondholders "without notice"'
to you. You had notice all the time that I was at liberty so to act,
and much of the time that I was so acting. If you _are_ surprised,
you are under some misapprehension as to the situation. I would have
omitted no courtesy towards you. I had no suspicion that you did not
understand my position exactly as I understand it.
"When the question as to the proposed lease came before me, suddenly
and unexpectedly, it was with the declaration of Mr. Meyer that he was
'opposed to it, unless I could show him reasons to the contrary, which
he did not think I could.' I looked at it to see if I could devise
modifications which would make it safe for the bondholders.
"The difficulty of the case is the _short_ and _uncertain_ duration
of the lease. I was not able to see in it, _as drawn_, sufficient
guards to satisfy the bondholders. I spent a morning with Mr. Lane
and Mr. Meyer discussing amendments; and we left for Ohio, with the
understanding between him and us that we should have a conference there
upon the subject of amendment. It was only when the motion was on
and the argument was about beginning that we learned to our surprise
that Mr. Backus had decided that no negotiation for any modification
would be entertained. So the question had to be argued as it stood.
Just before I left Cleveland, Mr. Backus said to me that if we would
recognize the advance ($1,390,000) as to be ultimately paid, he would
do everything to give us security in the operation of the lease; and,
if, when I got to New York, it was thought advisable to negotiate,
he would come here on your request. After my return I _did think_ it
advisable to consider the question, and so said to Mr. Lane; but he
declined. Shortly after, the motion in Philadelphia, of which Mr.
Cuyler had given notice, in pursuance of a reservation he had caused to
be made in the original order, came on.
"I allude to these circumstances to show that I have treated you fairly
and considerately while in an adversary position on this question of
temporary lease.
"One word as to Mr. Flagg. The payment of the $1000 for his services
was due him, and should have been provided for. I first called the
attention of Col. Stebbins to it, and then yours. The purchase of the
bonds of Mr. Flagg--to a trifling amount--was no greater favor than had
been accorded on a large scale to parties who had stood in the way of
the arrangement for the close of the receivership and the making of the
lease. That he had taken no selfish care for himself did not seem any
reason why he should be treated with less consideration. I submitted
the matter to you as the proper party. You treated it with equity and
courtesy. You are entitled to the same spirit from Mr. Flagg. But you
could not have supposed that he would be unfaithful in any respect to
his trust.
"In conclusion, what the first mortgage bondholders want is:
"1. That the suit for foreclosure should be prosecuted, in proper form
and with proper parties, to give a good title at the sale, and that
they be represented in these suits by their own agent and not by agents
of any adversary party.
"2. That, if a sale and purchase of the property be made which
operates to discharge their lien, with or without an agreement for
reorganization, the title be taken by satisfactory agents for their
security.
"That in the mean time the property be protected and further debts in
priority to their rights be avoided.
"With these conditions observed, the first mortgage bondholders have
every desire to preserve the best relations with the Erie, which is
the natural and preferred connection. That is my advice. That is their
disposition.
"If you wish any conference on the points on which differences have
arisen as to the proposed lease, or as to the general relations of the
two roads, I shall be happy to obtain an appointment for that purpose.
"In my judgment the faculties of the parties would be better employed
in devising a complete and permanent harmony of interests than in
litigation. I think, also, that to attempt to discard from the
negotiations the divisional bonds which represent most of the value in
the property is a practical mistake.
"Very respectfully, Yours, &c.,
"S. J. TILDEN."
"_To Jay Gould, Esq._"