Indiana Vs. Terre Haute and Indianapolis Railroad

In 1899, the state of Indiana brought forth a lawsuit against the Terre Haute & Indianapolis Railroad for tax money due for the school fund. It started with a charter. In the early days of Indiana, to create a railroad company (and basically any company, as far as that goes), a charter for the company and its goals would have to be written and taken before the Indiana General Assembly for approval. I would love to say that these things were basically rubber stamped…but I truly have no way of knowing without extensive research.

The Terre Haute & Indianapolis Railroad was issued it original charter by the Indiana General Assembly in 1831. The name on the charter was the Terre Haute & Indianapolis. The TH&I was then issued a special charter as the Terre Haute & Richmond Rail Road on 24 January 1847. The company was to build a railroad between the two title cities, through Indianapolis. The official name of the company had changed twice between the special charter of 1847 and the court case of 1899. First, in 1850, the space was taken out between rail and road, making it the Terre Haute & Richmond Railroad legally. Then, in 1865, the name was changed to suit the actual extent of the railroad company. It became the Terre Haute & Indianapolis Railroad Company.

Newspapers of the time often refer to the legal action against the Terre Haute & Indianapolis as the Vandalia Case. By the time of the legal action, the TH&I was already leasing the St. Louis, Vandalia & Terre Haute, the only line (for a while) connecting Indianapolis to St. Louis. The St. Louis, Vandalia & Terre Haute was known most of the time as the Vandalia. The Vandalia was in financial trouble while under construction. Money was floated from five railroad companies to complete the route in 1870: Terre Haute & Indianapolis, Pennsylvania, Panhandle, Steubenville and the Indiana Central. The last three being consolidated later into the Pittsburgh, Cincinnati, Chicago & St. Louis Railway, also nicknamed the Panhandle. The Pennsylvania would gain control of the Panhandle and the Vandalia…although the Terre Haute & Indianapolis would fight it the entire way.

The whole case stemmed from how the charter for the TH&I was read, and who was doing the reading. The State of Indiana was of the opinion that the TH&I owed the School Fund somewhere between $1.2 and $2 million dollars. Obviously, the TH&I was of the opposite opinion. The entire case stemmed from a special charter that had been issued for the company in 1847, give or take a year. The new charter, keeping a provision from the old one, would allow the railroad to set its own passenger and freight rates, and allow for a 15% profit to be split among its shareholders after all of the construction bills have been paid.

The state, in its case, claimed that the TH&I was setting its rates to a point where it was earning 18% to 35% profits. Since the limit was 15%, the rest, the state continued, would be required to be paid to the state school fund. Vandalia saw things differently.

The South Bend Tribune of 4 October 1899 describes the beginning of the case as such: “Noble C. Butler, as master in chancery, began taking testimony, Monday afternoon (2 October 1899), in the case of the state against the Vandalia railroad for money due the school fund on account of the special charter under which the road operated 20 years ago.”

“Experts have been examining the company’s books to ascertain the exact earnings and the proportionate amount due the state, and their testimony is expected to be interesting. About $2,000,000 is claimed to be due the school fund from the railroad.” (Source: South Bend Tribune, 4 October 1899, pp 1 via newspapers.com.)

When the time came to defend itself, the Vandalia brought out John G. Williams, a man, according to the Indianapolis News of 17 January 1900, “who is said to know more about the affairs of the road than any other man.” Attorney Williams started talking about the charter of the Terre Haute & Richmond, the charters of other railroads, and the fact that when the original charters were written for the early railroads, the company had a choice between building a railroad and building a toll road. The state saw no real difference between the two.

He also mentioned that, according to the News, “one of the first roads built in the State was the Baltimore & Ohio. In the beginning, its cars were moved by horses and, when the wind was favorable, sails were hoisted on the cars to help propel them.” I would be that the News meant in the United States, as the Baltimore & Ohio wouldn’t have been in Indiana in 1831.

Reference is also made by the attorney for the railroad that in the beginning, the B&O charged 4 cents a ton a mile for moving of freight. “Modern railroads” (1900) are lucky to get one half cent per ton/mile. And passengers were actually weighed and charged essentially a pro-rated charge of 4 cents per ton/mile. If I am reading this right, since I weigh 200 pounds, it would cost me eight cents to travel by train from Indianapolis to Greenfield in those days. If I lived then…and the train actually was built to connect the two.

Mr. Williams went on to argue that the ability to regulate tolls by the state was left out of the charters of seven of the eight railroads that were incorporated in 1832. All eight of these charters allowed for the company to build a railroad or turnpike. Also in 1832, a company applied for a charter to build a bridge across the Ohio River at the Falls, the location of New Albany and/or Jeffersonville, and Louisville on the Kentucky side.

In 1832, five more railroads were incorporated, including the Evansville & Lafayette. It, like the Terre Haute & Indianapolis (1831 charter), had a clause stating that the State of Indiana could purchase the road after a certain period. Very few railroad company charters included the state regulation of the amount of dividends to its shareholders.

Ultimately, the Vandalia won the original case. Special Master Butler determined that the state was owed nothing by the Vandalia. The State appealed to the Superior Court, in which it was determined that the Vandalia owed the state of Indiana $913,000.

According to the Indianapolis Journal of 18 June 1902, as the case was being brought before the Indiana Supreme Court, “the charter provided that the company should pay the State its surplus earnings over the operating expenses and 10 per cent to the stockholders. The company surrendered its special charter in 1873 and has since operated under the general railroad law.” The company claimed that the surplus money was spent to improve the road, and there was no money left to pay the state.

The case before the Indiana Supreme Court lasted three days, ending on 19 June 1902. When the ruling went against the Vandalia, the Pennsylvania Railroad announced that they would appeal the decision to the United States Supreme Court. That decision was made on 28 November 1902.

The Indiana Supreme Court judgement ruled that the Vandalia must pay $913,905, and a six percent interest from the date of the Superior Court judgement. This brought to total to $1,028,143. Of course, the state was to only receive $771,107 of that, with the rest going to attorney’s fees. The Vandalia would fall into receivership after the ruling, and arguments between Illinois and Indiana receivers would follow.

31 May 1904, and the United States Supreme Court ruled, after much deliberation, that the Vandalia Railroad owed a grand total of nothing to the state of Indiana School Fund. This would go on to allow the Vandalia to consolidate the following railroads into one corporate entity: Terre Haute & Indianapolis, Indianapolis & Vincennes, Logansport & Toledo, Terre Haute & Logansport, and the St. Louis, Vandalia & Terre Haute. A consolidation which created the Vandalia Railroad Company on 1 January 1905.

National Road at Reelsville

1952 USGS topographic map of the Reelsville area.

When the National Road came to Indiana, part of the requirements for the building of the road was that it be in as straight a line a possible connecting Indianapolis to Vandalia, Illinois (then the capital of that state). Southwest of Indianapolis, the terrain got a little rough to be able to maintain a straight line. Especially in Putnam County. But the surveyors did a very good job in keeping it as straight a line as possible.

1864 map of southwestern Putnam County courtesy of the Library Of Congress. The National Road runs through the southern part of Section 19, the center of Sections 20 through 23. The Big Walnut Creek bridge that washed out in 1875 is in the eastern central portion of Section 20.

And so, the National Road chugged along for around four decades. In 1875, a bridge over Big Walnut Creek, southwest of Reelsville was washed out…and not replaced at the time. Since the National Road, at the time, belonged to a private company, they decided to reroute the road through the town of Reelsville. This would solve the connection problem, road wise, between Terre Haute and Indianapolis, but would create a few more while it was at it.

The Terre Haute & Richmond (TH&R) Railroad was chartered on 24 January 1847 to connect the two title cities through Indianapolis. By 1852, the TH&R had built a railroad connecting Terre Haute to Indianapolis. This railroad, near Reelsville, was to the north of Big Walnut Creek from where the National Road was, and connected to the town of Reelsville proper. There was even a station at Reelsville. On 6 March 1865, the Terre Haute & Richmond became the Terre Haute & Indianapolis.

The National Road replacement route took travelers up a long hill into Reelsville. At the town, the new road, which had been in place long before being used as a bypass, followed and crossed the TH&I several times before reconnecting to the original National Road. These railroad crossings were considered some of the worst in the state, especially due to the angle of the crossing.

1912 United States Postal Service map of southwestern Putnam county showing the roads around Reelsville. Notice that the National Road, marked as Mail Road RE 2 east of Reelsville, does continue after turning north to enter Reelsville proper. The old road did still contain houses, even though through traffic had been gone from the route for 37 years.

The Terre Haute & Indianapolis Railroad ceased to exist as a separate entity on 1 January 1905. That was the day that the TH&I, the St. Louis, Vandalia & Terre Haute, the Terre Haute & Logansport, the Logansport & Toledo and the Indianapolis & Vincennes merged to become the Vandalia Railroad Company. Among the items that were taken up by the new Vandalia was the crossings near Reelsville. Money was set aside in 1907 to correct the problem. By the end of 1912 (October to be exact), the Brazil Daily Times was reporting that no such work had been completed to date.

Part of the plan in 1912 was to return the original National Road route to use. According to the same article in the Brazil Daily Times, this would cut 1/2 mile off of the route then in use through Reelsville. And, the railroad crossing situation, with its inherent dangers, would be addressed…and partially eliminated. But, as with other well laid out plans, this did not go to schedule. At all.

The National Old Trails Road, an Auto Trail that, through Indiana, mostly followed the original National Road used the Reelsville cut off when it was created. The old route was still out of commission at Big Walnut Creek. This situation would not be resolved until after the (second) creation of the Indiana State Highway Commission in 1919. ISHC surveyors were out in the field looking at ways to improve the situation at Reelsville, with the decision made that a bridge would be built in the same location that had been used over 80 years prior when the National Road, now called State Road 3, was built. The new bridge would be a concrete arch facility.

Even then, the new bridge for the National Road would take some time to get started. Over two years, as a matter of fact. Construction started on the replacement of the National Road in January 1922. The winter that year was relatively mild, allowing for construction to start very early in the year. But it was decided that the new route of State Road 3 would skirt the Pennsylvania Lines (the then operators, later owners, of what was the Vandalia Railroad) to the south, bringing the new National Road closer to the Big Walnut Creek.

Even then, the replacement route would only be in place for less than two decades. The Highway Commission made plans to make a true four lane highway across Indiana along what was then the US 40 corridor (which was original State Road 3 until the Great Renumbering of 1 October 1926). The new new road would take a straight course through the area south of Reelsville, the railroad and the old new path of SR 3/US 40. This realignment would occur in 1941.

Editor’s Note: This post took a long time to convince me to write. There are several subjects that I have been avoiding because they are MUCH better covered by others. In this case, my Co-Admin of the Facebook ITH Group, Jim Grey, covered it much better than I ever will. And, generally, he has done a great job covering the entire National Road. His post, “Puzzle solved: The National Road at Pleasant Gardens and Reelsville in Indiana,” served as the spring board for this post. The irony is that some articles that I posted in the ITH Facebook group led to the puzzles being solved for Jim. Such is the way of the world in this field. I recommend checking out Jim’s stuff when you get the chance. He is more of a road trip person, going out to see what’s on the ground. I tend to look more into the documented history of the same scenes.