I was very much disappointed that I did not get to see you while you were in the Western part of the State last. I wanted to go over with you again the matter of the S. A. & Western, formerly the Transcontinental Railway Company, in its relation to the State.

You will recall that at the meeting in July of the Council of State and the Prison Board, I stated, in substance, that if the Construction Companies, with which the Railroad Company had made what they believed to be valid and reliable contracts for the construction and equipment of a road, were not in a better condition to give assurances of their ability to proceed by the 10th of August, I, for one,- and I believe I represented the feelings of a large majority of the Board of Directors of the Railroad Company, would advise the return of the convicts to the State, inasmuch as they could not be profitably used by the Company or the State without the active support of the Construction Company.

Immediately on my return from that meeting I caused a special meeting of the directors and stockholders of the Railroad Company to be called for the 2nd of August; there was not a quorum of the stockholders, and this meeting was adjourned until the 18th of August; but there was a quorum of the directors, and a very long and patient session in which the whole situation was carefully gone over. Mr. Breese came down from New York and made a very intelligent and, I think, reliable report of the situation there, which may be summed up as follows:

The Construction Company with which the Railroad Company had its contracts has practically gone to pieces, and I infer is insolvent; however, some of the leading spirits in that Company, among others, General duPont, of Delaware, propose to organize a new Construction Company with a "paid-up" capital of a million of dollars, and this Company, when organized, will take up the matter of contracting for the construction of the Transcontinental. General duPont, as I understand Mr. Breese, refuses absolutely to have anything to do with the old Construction Company or to assume any obligations which they have entered into, and in all future relations with the State of North Carolina and the Railroad Company, will be dependent upon new contracts which will be made, and the general features of which are thoroughly understood. The orgsnization of that new Company, as I understand, awaits the return from Europe of Mr. Stayton, who is one of the leading factors and the counsel. He is expected in New York on the 11th instant. Mr. Breese seemed to think, and the facts which he stated to our meeting seemed to warrant that conclusion, that this new Construction Company will be organized, and if so, all questions of its solvency and reliability will be settled by the character of its stockholders, and its policy with respect to the work.

But keeping in mind my statement to the Council of State, I insisted that the Board of Directors should pass a resolution expressing the willingness of the Railroad Company to return the convicts after the 10th of August, if the Council of State should so order. Should the Council of State then make the request, the convicts would be returned before the time given for Mr. Stayton's arrival, and the opportunity to re-organize the new Construction Company, and, therefore, upon the suggestion of Mr. Breese, or some one else, there was a clause put into the offer to return the convicts, fixing the time as the 10th of August, or not later than the first of September,-- this last statement being with a view to give those who propose to form a new Construction Company, from the 10th of August to the first of September to perfect the organization, if they are going to do it at all.

I think the meeting directed a copy of these resolutions to be furnished you; whether it did or not, I shall undertake to see that a copy is forwarded to you.

I want you to understand this situation thoroughly, and I should be glad if you will make it known to the Council of State, either individually or in the aggregate, as, above all things, I am solicitous that those who represent the State of North Carolina shall be convinced that those of us who are connected with the Railroad Company will keep faith with the State.

I do not know whether the new Construction Company will be organized or not; Breese seems to be reasonably confident of it, and, upon the whole, he is inclined to the belief that our situation is better than it has been for the past six months. I should have said that in the resolutions with respect to the contract, we, also, adopted resolutions declaring all contracts and obligations and connections with the old Construction Company at an end; our contracts with them containing the provision that we might do so upon their failure to meet their obligations.

My attention was called to a fact, of which I had never heard until the meeting of the Directors aforesaid, viz; That the last General Assembly had passed an Act declaring in effect that those roads which now had convicts under former agreements with the State, or the Prison Authorities, should not be interfered with in that respect until the completion of the work upon which they were employed. Not having access to the laws of the last session, I do not know how that is, but if it should be true, it occurs to me the Council of State would have no power to take away the convicts against the consent of the Railroad Company; but, however that may be, I am decidedly of the opinion, and so stated to the Railroad Company, that unless this new Construction Company was speedily organized and able to show to the Council of State its readiness and ability to energetically prosecute the work of construction, the Railroad Company ought not to avail itself of the provisions of the Act referred to, but should, in good faith to the State, consent to the return of the convicts.

Our mutual friend, Col. Jones, incorporated into the proceedings of the meeting divers and sundry rather long resolutions and documents, which he seemed to have very much at heart, and which we consented, to please him, might go in. I believe the Secretary was directed to furnish you with a copy of the proceedings of the whole meeting.