OCR Text |
Show MSm PILED IN DIVORCE SUIT AGAINST RAILROADS Avers That Central Pacific and Southern Pacific Assumed Interlocking Obligations With Knowledge of Public and Officials. THE Southern Pacific company yesterday yes-terday tiled In tho United States dlatiici court Its answer in the government's .ult to divorce the Central Pacific from tho .c.ou thorn th-orn Pacific. The aiiKwcr, after spcfitl-cnlly spcfitl-cnlly denying nil allegations! that the Sherman anti-trust law had been violated, vio-lated, points out not. only that the two llncfi were originally built, operated ami developed as one road, but that, as far back as 1SD8, the United States government govern-ment Itself practically recognized the combination. It asserts that In the joint operation of these Hues through trains have been run by the most direct or convenient routes without reference to their ownership, owner-ship, nnd thai any separation of lho Central Paottlc linos from those f the Southern Pa rifle cannot now be had without with-out detriment to both properties and without Impairing and Inconveniencing the public FcrvU'e and tho communities through which the Ilnc3 pass. In a brief historical resume the answer an-swer declares: First TliuL the Hnea of the Southern South-ern PaclhV. Railroad company were built as extensions and connections of the lines of the Central Pacific Hnilroad eompany and by the same stockholder? Second That a. the lines of the Southern Pacific Piallroad company Were completed thev were directly lea-scd to the Central Pacific, to be operated within Its lines. Statements Are Significant. Third That on April 1, ISSo, the ,9outhern Pacific Railroad company, to simplify tho organization, took over, under lease for ninety-nine , years, ail t lie lines of both the Central Cen-tral Pacific: and Southern Pacific, and has since managed and developed them as ono property, considering only efficiency of service to the public, without regard to corporate properties, proper-ties, such n.s terminals and branches. Fourth That, relying on the terms under which tho Central Pacific's debt to tho government of ?nS,000.000 war, settled In J SOS, tho Southern Pacific Pa-cific company undertook heavy Unan-cial Unan-cial obligations, not only guaranteeing guarantee-ing payment of this debt, but also guaranteeing the 5100,000.000 I per rent mortgage bond Issue of the Central Pacific. In this connection, It is conlended that the government could not consistently and with justice jus-tice havo accepted this settlement, of which It did have full knowledge as a, party (hereto, If tho arrangement arrange-ment Involved a relation between the roads contrary to public policy. Fifth That even as late as 1912, In the recent so-called Ilarrlman lin-merger lin-merger suit, when the United States supreme court ordered the dissolution dissolu-tion of tho Union Pacific and the Southern Pacific, the court, the highest high-est tribunal in the land, found no reason to disturb the relations between be-tween the Central Pacific and the Southern Pacific. The supreme court ordered the dissolution of tho Union from the Southern Pacific, but as to the Central-Southern Pacific relations said, "Wo find no reason to disturb the action of tho court below." Tho court below had declined to disturb the Central-Southern Pacific relations, although tho facts concerning lt were at the time brought out. All Interdependent. Commenting on the fact that the lines wore in one ownership and management and developed as ono property, the early part of the answer points out that, because be-cause of this fact, little heed was given as to which corporation should hold tho title to terminal properties and branch lines. Accordingly, branch lines from points on the Central Pacific were built and owned by the Southern Pacific Railroad Rail-road company, these branches having no connection with the main line of the Southern Pacific Railroad company except ex-cept through Central Pacific lines. At important points the entire title to valuable val-uable terminal properties was taken and held in the name of the Central Pacific Railroad company. At other points the titles to terminal properties was held by the Southern Pacific Railroad company. Any separation of the Central Pacific lines from tho Southern Pacific lines, It Is assorted, cannot be had except with great detriment and injury. The answer further sots forth the granting by the government of subsidy: that the treasury and the interior and the attorney general constitute a -m-mlspion with full power to settle this Indebtedness, In-debtedness, by agreement between tlictn and the railroads involved, and with the written approval of lho president of tho United Stales. Situation 'Was Understood. Tiie answer alleges: It was well understood by the congress con-gress at the time of passngo of this law thai, the said indebtedness of the Central Pacific Railroad company to the United States government amounted to at lenst 55S.000.ftOO, and according, therefore, to tho terms of said law", tho Central Pacific Railroad companv was required to pay during each of th'-' ten years allowed for the pavment of said debt the sum of $o,Sft0,000 per an num. This sum exceeded many times over i any possible net earnings of tho Central Cen-tral Pnclflc Railroad company thai I could be applied lo the payment of this debt, and It cannot be questioned that the congress intended and understood un-derstood that this debt could only be paid bv the employment of the credit nnd resources of t he .Southern Pacific company, and that compliance with the prescribed terms of the settlement settle-ment ncccssaiilv Involved participation participa-tion therein by the Southern Pacific company, and the only motive or consideration con-sideration which could Induce the said Southern Pacific company to participate partici-pate In the payment of the Central Pacific Railroad company's debt to the government was the existence of the aforc.ald relations between it and That company and Its desire to continue con-tinue such relations and to make permanent per-manent Its control of that part of Its system. The defendants, tnorcforc, allege that the congress, at the lime it enacted en-acted the said law of July 7, 180S, contemplated and expected such participation par-ticipation by the Southern Pacific company In lho settlement provided for, and had full power to nrrungo for such security for the payment of said indebtedness as to said commission commis-sion might seem expedient. Known and Acknowledged. The commission created by congress under the authority of this act made an agreement with the Central Pacific Railroad Rail-road company for the payment of this debt In twenty semiannual installments. Copies of the agreoinent and memoranda memo-randa wero given the widest publicity, so that not only the private parties Interested, In-terested, but the president of the United States and all government officials, including in-cluding members of congress, know that bv the torma of the readjustment the Southern Pacific company was to acquire the ownership of the entire ca-pltal stock of the Central Pacific Railway company, and knew also of tho lease- and operation opera-tion of the Central Pacific lines as a part of the Southern Pacific system, the things now complained of as being In. violation of the Sherman antitrust law. It Is recited that they knew also at tho time that the Central Pacific could not, without tha aid of the Southern Pacific, comply with the terms of tho agreement, and they based on the participation of the latter their assurance that tno agreement agree-ment would be carried out financially. Assumed Debt in Faith. In consequence, It is recited, the Southern South-ern Pacific company incurred the obligation obliga-tion of guaranteeing the 510O.00ft.00O of tho first refunding 4 Tier cent mortgage bonds of tho Central Pacific Railway company, which are now outstanding, and of acquiring ac-quiring the $12,00ft,000 preferred stock and the $67,275,500 common stock of the Central Cen-tral Pacific Railway company. For this stock the Southern Pacific Railway company com-pany gave cither cash or Its equivalent In its own capital stock Furthermore, the United States government received $58,-(512,715. $58,-(512,715. -IS in payment of the Central Pacific Pa-cific debt, which lt would not otherwise have boon paid. In like manner, relying on the expectation expecta-tion and belief created and induced by the government as above, the Southern Pacific company lias since Incurred heavy financial obligations, details of this being given in the answer. The answer further relies upon the decree de-cree of the United States supreme court In the suit which resulted In the separation separa-tion of the Union Pacific Railway company com-pany from the Southern Pacific company as a bar to tho present suit. The answer was filed by all the defendants defend-ants other than the Union Trust company of Now York, through William F. Herrln, solicitor for the defendant, and J. P. Rlalr. P. F. Dunne and Garrett W. Mc-Enerney, Mc-Enerney, of counsel |