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 a rental equal to thirty-five per cent of the gross earnings, and if there was a deficit they would pay all the expenses and, nevertheless, give a two per cent dividend. The company was allowed six hundred thousand dollars worth of second mortgage bonds for a guarantee of interest.

Villard, however, had overestimated his ability and underestimated the task before him. He had taken the estimates of the engineering department on the Northern Pacific contracts without a question. The report of the chief engineer revealed that the building estimates of the Oregon and Transcontinental Company had been underestimated fourteen million dollars. Nevertheless, Villard was able to complete the Northern Pacific. Villard had expected that the earnings of the road would soon relieve the stringency, but instead of earnings came deficits and by December, 1883, he came to the realization that he was practically insolvent. The result was, he was deposed from the presidency of the Oregon and Transcontinental Company, the Oregon Railway and Navigation Company and the Northern Pacific.

The failure of the Oregon and Transcontinental Company meant they could not fulfill the contracts with the Oregon and California Company. Hence, upon default of interest in 1884 the contracts were rescinded and the Oregon and California Company again began to operate the road itself June 20, 1884. The Transcontinental Company waived all claims to $400,000 worth of first mortgage bonds and $110,000 second mortgage which was due for construction of the last twenty miles of road. These bonds were used to provide for back interest. The company agreed to pay all money due on construction and to turn over to the Oregon and California Company all the second mortgage bonds which it had received for $446,000. These bonds amounted to $2,200,000.

Still the road was not completed. Villard still remained as president of the company. Little returns could be expected while the road was not completed, so Dec. 22,