Thomas Howard Callaway, President ET&G Railroad

Thomas Howard Callaway (Joseph Woodson, Thomas, Jr., Thomas, Joseph Callaway) was a native Tennesseean whose parents had migrated from North Carolina to settle in the wilderness of East Tennessee in the early 1800s.

The following article from "Ties", the Southern Railway System magazine, about Thomas Howard Callaway, wealthy landowner, banker and President of the East Tennessee & Georgia Railroad, originally appeared in the 1979 CFA Journal, Vol. IV, pg.37. It is entitled -
Like many of his fellow-Southerners, the post-bellum president of the East Tennessee & Georgia Railroad, Thomas Howard Callaway, found that the collapse of military opposition to the North in April, 1865, did not necessarily mean the end of the four-year conflict between the states.

Almost as bitter as the actual fighting was the wrangling over who owed what to whom after confiscated Southern property was gradually returned to its pre-war owners.

War's end found the East Tennessee & Georgia fairly intact, although an inventory report from the state road commissioner to the Tennessee General Assembly said the road "met with its full share of the calamities of war." The commissioner estimated the ET&G's wartime losses from property destroyed or damaged at more than $375,000.

This gloomy report was partially offset by the road's discovery that the wartime shuffling of rolling stock and motive power between the South's railroads ended in the ET&G's favor. The road wound up with one more locomotive than it had when the war began and with almost as many cars. But, as later events proved, this unexpected bonanza turned out to be costly in other ways.

Added to the primary problem of rebuilding, another worry facing the road's owners was the accumulation of interest due the road's bondholders which had not been paid during the war. This amounted to about $275,000 - more than half of it owned to the State of Tennessee.

To protect their interests, and while the road was still occupied by the Union Army, a group of ET&G stockholders met in July 1865, and appointed a president to manage the company's affairs until a formal election could be held. The selection fell on Thomas Callaway, a native Tennesseean whose parents had migrated from North Carolina to settle in the wilderness of East Tennessee in the late 1700s or early 1800s. Callaway had been a leader in banking, mining, agriculture and educational projects in his native section and was one of the road's leading stockholders.

(Callaway's appointment was his second experience as head of the road. He had served as the ET&G's second president during 1852-53 and had resigned to devote his time to other interests - though he continued to serve as a director in the ensuing years. He was also to serve briefly as president of the connecting road to the north, the East Tennessee & Virginia, and as first president of the combined companies when they merged a few years later as the East Tennessee, Virginia & Georgia.)

Shortly after Callaway assumed office, U.S. Secretary of War Edwin M. Stanton directed the military authorities in Tennessee to return all railroads to their owners. President Callaway took possession of the East Tennessee & Georgia on Auguest 28, 1865, receiving it from Gen. George H. Thomas who commanded the Department of the Cumberland in Tennessee.

This apparent leniency from the War Department had, among others, one significant string attached. Rather than attempt to sort out and return the widely-scattered equipment to its owner roads, the Federal Government exercised the right of a victor to dispose of captured enemy property on its own terms. It offerd to sell to the ET&G whatever equipment the road felt it needed that hadn't originally belonged to it.

Thomas Callaway agreed to buy much of the foreign equipment the road found on its line. But, as later explained, he did so under protest and only because he had no choice if the road was to have enough locomotives and cars.

He felt that the government owed his railroad a sum greater than the purchase price - for the Union Army's use of the road during the war and for damages the northern troops inflicted on the road's property. In support of this claim, he argued that when the road had been turned over to the Northern General Burnside in the fall of 1863, the military commander had agreed to reimburse the road for its use by his army.

Nevertheless, to obtain the equipment Callaway had to sign a bond for $371,000. This amount, which he considered far more than the equipment was worth, was to be paid by the railway in 24 monthly installments along with interest set by the government at 7 3/10 per cent yearly.

By June, 1866, the ET&G had reduced this debt some $40,000 through transportation and mail service furnished to the government. Rebuilding of the damaged track had begun and arrangements were being made to pay off the accumulated interest to the state.

The following year, however, the company's finances were being spread so thinly that the road began to fall behind on its payments to the government. This brought a curt reminder from the Department of the Cumberland.

". . .You are expected to pay every cent your Company can appropriate to the liquidation of this debt at once," said a letter to Callaway dated August 15, 1867, "and provide definitely for the payment becoming due in the future. If you are not heard from by the 28th inst., I shall proceed to enforce the terms of your Bond. Immediate action in this matter is requested."

The letter was signed "By command of Maj. Gen. Thomas."

Despite the letter's emphatic tones, Callaway asked for an extension on the payments and pleaded his company's poor finances. He was turned down.

Callaway then began his own offensive. He presented a counterclaim to the U.S. Government for a precise $632,066.38. This, he said, was the amount due the ET&G for war damages and for the Union Army's use of the road during the war.

Furthermore, the rail president added, the State of Tennessee had a prior claim on the company's earnings as a result of the state's ownership of a majority of the road's stock. He explained to the War Department that the "scanty" revenues of the company were being applied to a payment of interest on the state mortgage to prevent foreclosure.

This approach apparently won an extension for payments until the first of the following year (1868). By that April, however, the ET&G was still resisting the efforts of the War Department to collect not only the monthly payments but also an accumulation of interest amounting to some $9,000.

From Washington, the quartermaster general of the U.S., J. J. Dana took a hand in the game. In a letter to Callaway on April 10, 1868, the general said no further extension could be granted. And, in reply to the rail president's counterclaim against the government, he added a grim reminder that the road was considered captured enemy property and the government, therefore, owed nothing for its use during the war. The letter also pointed out that the government didn't recognize any prior claims on the company's earnings, including that of the State of Tennessee.

Meanwhile, a pre-war plan to merge the East Tennessee & Georgia with its northern rail neighbor, the East Tennessee & Virginia, was being revived. A firm step in this direction was taken by the stockholders of the ET&V on the death of their president, John R. Branner, in February, 1869, when they elected Callaway as his successor. Callaway at the same time was president of the ET&G.

As the two railroads together had contracted a total of $625,000 in debts to the government for equipment purchased after the war, the War Department was able to direct its demand for payment to a single source - Thomas H. Callaway. But it was no more successful at collecting the joint debt than it was when dealing with the two roads individually.

Consequently, in August, 1869, the quartermaster general, then M. C. Meigs, informed Callaway that he had appointed a receiver to take over the two companies and cited non-payment of debts as the reason. He ordered that the property of the railroads be turned over to the receiver "without delay."

Callaway received this letter along with one written by the appointed receiver on the 23rd of August and promptly replied to both. Stating that he had no authority to comply with the request, he "respectfully declined" to release control of the two roads and, in turn, challenged the legal right of the U. S. to seize the roads.

This stubborn refusal apparently achieved a stalemate between Callaway and the government. No other reference to the litigation appears in the two companies' records until the second annual report of the East Tennessee, Virginia & Georgia Railroad Company (the consolidation of the two roads took effect November 26, 1869) dated 1871. It mentioned that "Congress . . . at its last session passed a law empowering the Secretary of War to compromise and adjust the litigation between the United States and the sundry railroads . . ."

Final settlement between the railroad and the U. S. on the drawn-out controvery came in May, 1872. Of the total debt claimed by the government, $625,000 minus small sums collected from the two roads, the ETV&G paid $5,000 in cash and signed notes of 10 and 15 years for another total of $190,000.

Callaway's cold war with the Union had ended. But the militant Tennesseean did not live to see even this partial victory. He died on August 29, 1870, at the age of 58, less than a year after he became first president of the East Tennessee, Virginia & Georgia.

How the ETV&G fared in later years - its expansion into one of the great railway systems of the South and its eventual bankruptcy and sale to the Southern Railway Company in 1894 - will be told in later articles.

In a large measure, however, the East Tennessee, Virginia & Georgia owed its existence to Thomas Howard Callaway, who fought the War Department to a standstill and preserved the private ownership of the roads placed in his charge.

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