Fenner to Hall, June 7, 1885

Dr. D. P. Fenner, general agent of Shea, Cornick & Co., contractors of the Northern Railroad of Guatemala, to Mr. Hall.

Sir: We wish to call your attention to certain facts and occurrences which lately have taken place, seriously affecting the interests of Shea, Cornick & Co., contractors for 62 miles of Northern Railway of Guatemala.

In 1883 the Government of Guatemala issued a decree for a certain contribution to be paid by nearly every citizen of Guatemala, at the same time inviting subscriptions from foreigners as well as natives. Each person so contributing or subscribing received corresponding shares in the enterprise incorporated by the Government and known as the “Guatemala Northern Railroad.” A president and board of directors were appointed and duly authorized to receive and receipt for money paid in by the shareholders as trustees, that the money should not be used other than for the lawful purpose for which it was collected, i. e., to build the railroad.

The first collections demonstrated that the amount of money which could be safely expected to be paid into the treasury would amount to about $700,000 per annum.

The directors were further authorized to contract for building of part or whole of the designed road, subject to the approval of the minister of fomento.

In May last, 1884, Messrs, Shea, Cornick & Co., contracted with the directors to build 62 miles from Puerto Barrios to Los Amates, at a round sum of $30,000 per mile, equipped, and to be paid for, as shown in specifications of contract, to be finished in two years and — months, it being calculated that the receipts of the directors at that time would be almost sufficient to pay for the work, leaving, however, a deficit in the amount which might occur on the part of the directors before the work was concluded; in view of this probable deficit, Shea, Cornick & Co., allowed to be introduced into the contract a clause No. — by which in case the funds of the contribution, or of the stockholders would not be sufficient at any time to pay the contractors for work actually done, and to be paid for as expressed in the terms of the contract, that the directors should not thereby suffer immediately, but that the road should be ipso facto, become mortgaged to the contractors, who would continue work for three months, charging 10 per cent, interest on such moneys as were due.

(It will be noted by you that the contribution was collected quarterly, thus enabling the directors to have three months more time to pay than Shea, Cornick & Co. had to build.)

Matters went on well enough for some time, and the contractors had made their preparations to put on a much larger force than they actually had at work, being specially encouraged to this by the favorable season, and by the fact that the directors had on deposit in the bank about $600,000 in coin, as well as also having effected favorable arrangements in England and the United States to purchase rails, locomotives, bridges, &c, as per article No.— of contract.

The war preparations early in March necessarily made the contractors circumspect in pushing the work by a much enlarged force, but no men were discharged, and work was and has been ever since steadily progressing.

Early in April the Government suppressed the contribution, the very basis upon which the contract was founded, giving no notice to the contractors nor making any provision to pay the contractors for work done or to be done, and the Government appropriated to other uses the money in the bank, and now the directors are abolished and absorbed into the ministries of fomento and hacienda, no notice being given to us, thus depriving us of having to do with the only legally recognized party of the other part to our contract.

Up to this time we have graded, received, and been paid for 12 miles. We have now another mile graded. The inspector was duly informed of this, but deliberately passed by the work on his way to Puerto Barrios without inspecting, thereby subjecting us to a long delay in receiving our money, it being the clear duty of the directors to have an engineer on the work to inspect as fast as our engineers give notice of completion.

But we especially wish to call your attention to the fact that the money which was in the bank has been seized and applied to purposes alien to that for which it was collected, and that the source of revenue has been abolished. We therefore declare that unless the Government make satisfactory arrangements for payment for work to be done, that we consider the Government has broken faith and the contract, and we think that arbitration should be appointed to arrange for our damages and losses.

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