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Show SOUTHERN PACIFIC FILESANSWER Specific Reply to Government Demand for Divorce of Central Cen-tral and Southern Lines. LAW NOT VIOLATED Historical Review of Roads, Their Management and Ownership Is Given. Salt Lake City. Utah, May 1 The Southern Pacific company filed yesterday yes-terday in the United States district court its answer in the government 'uit to divorce the Central Pacific from the Southern Pacific The answer, an-swer, after specifically denying all allegations that the Sherman antitrust anti-trust law has been violated, points out not only that the two lines were originally built, operated and developed devel-oped as one road, but that, as far back as 1898. the United States government, gov-ernment, itself, practically recognized the combinations as wholesome. It asserts, that In the joint opera tion, of these lines, through trains have been run by the most direct or convenient route without reference to their ownership, and that any separa tion of the Central Pacific lines from those of the Southern Pacific cannot now be had without detriment to both properties, and without impairing and inconveniencing the public service and the communities through which the lines pass. Resume of Company. In a brief historical resume, the answer an-swer declares: First That the lines or the Southern South-ern Pacific Railroad company were built as extensions and connections of the lines of the Central Pacific Railroad compauj, and by the same stockholders. Second That, as the lines of the Southern Pacific Railroad companj were completed, the were directly leased to the Central Pacific to be operated within its lines Third Thar, on April 1, 1885, the Southern Pacific railroad company, to simplify the organization, took over, under lease for 99 years, all the lines of both Central Pacific and Southern Pacific, and has since managed and I developed them as one property considering con-sidering only efficiency of service to the public, without regard to corporate corpo-rate properties, such as terminals and branches, Fourth That relying on the terms under which the Central Pacific's debt to the government of $58,000,000 was settled in 1898, the Southern Pacific Pa-cific company undertook heavy finan clal obligations, not only guarantee lng payment of this debt, but also guaranteeing the $100,000,000. 4 per cent mortgage bond issue of the ('en tral Pacific. In this connection, it Is j contended that the government could not consistently and with Justice have accepted this settlement, of which it did hae full knowledge as party thereto, if the arrangements InvoUeJ a relation between the roads contrary to public policy. Fifth That, even as late as 1912. in the recent socalled Harriman un-merger un-merger suit, when the United States supreme court ordered the dissolution dissolu-tion of the Union Pacific and the Southern Pacific, the court the high est tribunal in the land, found no rea j son to disturb the relations between the Central Pacific and the Southern Pacitic. The supreme court ordered the dissolution of the Union from the Southern Pacific but as to the Cen tral Southern Pacific relations, said: "We find no reason to disturb the action ac-tion of the court below." The court below had declined to disturb the Central-Southern Pacific relations, al though the facts concerning it were at the time brought out Ownership of Terminals. Commenting on the fact that the Unea were in one ownership and management man-agement and developed as one property, prop-erty, the early part of the answer points out that, because of this fact, little heed was given as to which corporation should hold the title to : terminal properties and branch linei A. cyrdinls branch lines i roin point-on point-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 I the Southern Pacific Railroad company com-pany except through Central Pacific-lines Pacific-lines At important points the entire en-tire title to valuable terminal prop erties was taken and held In the name of the Central Pacific Railroad company. At other points the titles to terminals property was held by the Southern Pacific Railroad com puny. Any separation of the Central Pa clfic lines from the Southern Pacitic lines, it is asserted, cannot now he had except with great detriment and injury Granting of Subsidy. The answer further sets forth the granting by the government of subsidy sub-sidy of the treasury and the interior and the attorney general constitute a commission with full power to settle this indebtedness bv agreement In-tween In-tween them and the railroads Involved In-volved and with the written approval of the presldeut of the United Slates The answer alleges: "It was well understood by the con-greaa con-greaa at the time of the passage of this law that the said indebtedness of the Central Pacific Railroad company to thje United States government amounted to at least $58.000.00 and according therefore, to the terms of said law, the Central Pacific Railroad company was required to pay during each of the ten years allowed for the payment of said debt the sum of $5,800,000 per anuum. "This sum exceeded many times over any possible net earnings of the Central Pacific Railroad company that could be applied to the payment" pay-ment" of this debt, and it cannot be questioned that the congress intended and understood that this debt could only be paid by the employment of the credit and resources of the South ern Pacific company, and that compliance com-pliance with the prescribed terms of the settlement necessarily involved participation therein by the Southern Pacific company, and the only motive or consideration which could induce the said Southern Pacific company to participate io the payment of the Central Cen-tral Pacific Railroad company's debt to the government was the existence of the aforesaid relations between it I and that company and its desire to I continue such relations and to make j permanent its control of that part of its system. "The defendants, therefore, allege that the congress at the time it enacted en-acted the said law of July 7, 1898, contemplated and expected such par ticipatlon by the Southern Pacific company in the settlement provided for and had full power to arrange for such security for the payment of said l indebtedness as to said commission might seem expedient." The commission created by con gress under the authority of this act made an agreement with the Central Pacific Railroad company for the payment pay-ment of this debt in twenty semi-annual Installments. Widest Publicity Given. Copies of the agreement and memoranda mem-oranda were given the widest publicity, public-ity, so that not only the private parties par-ties interested, but the president of the United States and all government officials, Including members of congress, con-gress, kuew hat by the terms of the readjustment, the Southern Pacific company was to acquire the ownership owner-ship of the entire capital stock of the Central Pacific Railway company, and knew also of the lease and operation of the Central Pacific lines as a part of the Southern Pacific system, the things now complained of as beim; in violation of the Sherman anti-trust law. It is recited that they knew also at the time that the Central Pacific could not. without the aid of the Southern Pacific, comply with the terms of the agreement, and they based bas-ed on the participation of the latter their assurance that the agreement would be carried out financially. Guaranteeing of Bonds. In consequence, it is recited, the Southern Pacific company incurred the obligation of guaranteeing the $100,u00,000 of the first refunding 1 per cent mortgage bonds of the Central Cen-tral Pacific Railway company, which are now outstanding and of acquiring the $12,000,000 preferred stock and the $67,i.'75,5i0 common stock of the Central Pacific Railway company For this stock, the Southern Pacific company com-pany gave either cash or its equivalent equiva-lent in its own capital stock. Furthermore, Further-more, the United States government received $58,81-, 715. 48 in payment of the Central Pacific deft, which it would not otherwise have been paid In like manner, relying on the expectation ex-pectation and belief created anil induced in-duced by the government as above, the Southern Pacific company has since incurred heavy financial obligations, obliga-tions, details of this being given in the answer The answer further relies upon the decree of the United States supreme court in the stjlt which resulted In the separation of the Union Pacific Railway company from the Southern Pacific company as a bar to the present pres-ent suit. The answer was filed by all the defendants other than the Union Trust company of New York, through William P. Herrin, solicitor for the defendant, and .1 I' Blair. P F Dunne Dun-ne and Garrett W, McEnerney of counsel. |