The Lebanon Springs Railroad, begun in 1852, encountered financial problems and was not completed until 1869. The line ran from the village of Chatham, New York, through Lebanon Springs to Bennington, Vermont. In January of 1870, the Lebanon Springs Railroad Company consolidated with the Bennington and Rutland Railroad Company to form the Harlem Extension Railroad Company.
The new road experienced numerous financial setbacks and eventually fell into receivership. The courts eventually names James H. Jones receiver of the road, and authorized him to issue receiver's certificates, dated April 2, 1881, with interest at six percent, the same to be signed by said John W. Van Valkenburgh, as receiver of said Lebanon Springs Railroad Company, and a certificate on each thereof duly to be signed by an officer of the Farmers' Loan and Trust Company of New York City. It was further ordered that the said receiver should negotiate said certificates, and with the money arising there from pay and discharge the certificates theretofore authorized by the order of October 25, 1880, and to purchase all necessary materials for the repairs of said road, and pay and discharge all necessary expenses incident to said repairs. It was further ordered that said receiver's certificates of indebtedness should be declared to be a debt of the receiver incurred for the benefit and protection of said Lebanon Springs Railroad and its owners and the bondholders thereof, and said certificates were declared and decreed to be a first lien on the railroad and every kind of property owned by the company, to be recognized as such in any reorganization of the company, or in its consolidation with any other company; and, in case of any sale of the said railroad, the property in the hands of the receiver, and the franchises, under any decree of the supreme court, the said certificates are to be first paid from the first moneys realized thereupon by the receiver, unless sooner paid and cancelled by him from the earnings of the railroad; but, in case said railroad and property in the hands of the receiver, and franchises, on any sale thereof, does not bring sufficient to pay the full amount and interest then due on the outstanding negotiated certificates, then such unpaid amount shall remain as a first lien on the road, property, and franchises in the hands of the purchaser.