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and the legal advisers of the Railroad Company. Certainly it cannot be affirmed upon an examination the bill itself, that the United States Attorney, in filing it, has not acted upon correct views of his official duties, though it is to be confessed that there is, on the face of it, language which gives some color to the innuendoes of the California press with reference to this move.
The principal ground of the petition is that the order of the California Railroad Commissioners, directing a reduction of freights“ by i the Southern Pacific Company and its leased lines” within the State of California, is intended to produce a reduction of the freights of the Central Pacific Railroad Company within that State, on the properties of which the United States is a second mortgagee to the extent of about forty-five millions of dollars, principal and interest; that, under an act of Congress, this company is under the obligation of paying each year into the Treasury of the United States an amount aggregating twentyfive per cent of its full net earnings; that the properties of this company have been leased to the Southern Pacific Company, of Kentucky, the latter company covenanting to perform, on behalf of the lessor company, this duty toward the United States; and that the reduction of rates attempted by the Railroad Commissioners of California will diminish the net earnings, twenty-five per cent of which are to be thus paid to the United States. This seems, prima facie at least, to give the United States the right to intervene; and the order of the court, according to it that right, seems to be in all respects reasonable, fair, and just. It does no more than give the United States a standing in court in the case and an opportunity to be heard upon the merits.
Outside of this, the petition of intervention charges that the United States have, under the acts of Congress, under which the Central Pacific Railroad was built, the exclusive right to fix the charges which may be demanded by that railroad company for serving the public. This, of course, involves a construction of the acts of Congress in question, and need not be gone into here. Certain it is that this railroad was built almost exclusively by the credit of the United States, with the view to give the United States, for military and other purposes, a continuous railway transit between its eastern and western seaboard ; that, under the acts of Congress under which it was built, it is a military and post road of the United States, and in a very considerable sense, an agency of the United States. Under settled decisions of the Supreme Court of the United States, this fact would seem to preclude any right on the part of the State of California to interfere with the rate of charges which can be made in operating it.
There is, however, one feature which, it is to be regretted, this peti
tion for intervention has not made clear. The action of the California Railroad Commissioners was directed against the Southern Pacific Company, a corporation organized under the laws of Kentucky, and not against the Central Pacific Railroad Company, whose properties are leased for the period of ninety-nine years, as we understand it, to the Southern Pacific Company. The petition for intervention says that this lease “ was made without the authority and consent of the United States, and that the same can in no way affect or prejudice the rights or interests of the intervenors under the acts of Congress aforesaid.” The petition is weak in not stating what the terms of that lease are. It does not state whether the Southern Pacific Company is to pay to the Central Pacific Company a fixed rental, or only a certain proportion of its gross earnings. It merely states that, in that lease, it has entered into a covenant to perform the obligations of the Central Pacific Company toward the United States under the various acts of Congress, and especially under the Sinking Fund Act, and that this reduction of rates by the California Railroad Commissioners will interfere with it in performing those obligations. This lease, it is well known, was made subject to future amendment, and it is said to have been amended last year at the instance of Sir Rivers Wilson, who came to this country in the interests of the English security-holders. This lease is clearly ultra vires as against the United States. It having been settled by the Supreme Court of the United States that the principal franchises of this company were granted by the United States, the well-known rule which prohibits a railroad company from transferring its franchises and unloading its public duties upon another corporation without the consent of the sovereign which has granted those franchises and imposed those duties, plainly applies here and renders this lease speedily voidable whenever the United States moves to avoid it. It is understood that the Central Pacific Railroad Company, the real company which stands under the duties toward the United States already spoken of, was not made a party to any proceeding before the California Railroad Commissioners, and that no order to make a reduced schedule of rates has been in terms directed against that company by those commissioners. If, therefore, this ultra vires lease were dissolved at the suit of the United States, the order of the railroad commissioners, so far as it affects that portion of the Central Pacific Railroad covered by the statutory mortgage of the United States, would be wholly inoperative. From this it would seem that a sincere purpose on the part of the law officers of the United States to right the wrong done to the United States and to pre
i California v. Central Pac. R. Co.,127 U. S. 1, 38.
vent interference by the State of California with the rights of the United States, would lead them to bring the proper action to dissolve this ultra vires lease, and to rehabilitate the directors of the Central Pacific Railroad Company in the possession of their own properties, and in the discharge of their public duties.
THE GREAT RAILROAD COMBINATION OF 1896.- The most powerful railroad combination which has existed in this country is, at the time of this writing, in process of formation, and assume that it came into operation on the first of January. According to The Railroad World, of Philadelphia, the purposes of the combination are —
To aid in fulfilling the purposes of the Interstate-Commerce Act; to cooperate with each other and adjacent transportation associations; to establish and maintain reasonable and just rates, fares, rules, and regulations on State and interstate traffic; to prevent unjust discrimination, and to secure the reduction and concentration of agencies, and the introduction of economies in the conduct of the freight and passenger service.
It is, in brief, a vast pooling arrangement for the regulation of rates and fares and the prevention of competition. It is difficult to see how the press can judiciously do more than pass a very general opinion concerning it without having information as to its exact provisions. The Railroad World expresses the opinion that “there is no reasonable ground for doubting the legality of the new agreement, nor should there be any doubt as to the sincerity of those who have agreed to enforce its provisions.” On the contrary, the New York World declares, in substance, that
is the largest and most dangerous conspiracy against the popular welfare that has ever been formed in this country. “It combines,” says the World enterprises representing three billions of dollars' capital. It places in the hands of nine irresponsible men the absolute control of the railroad business of the continent.
Id confers upon these men the right and the power to determine absolutely at what rate freight and passengers shall be transported from one point to another, without any check from competition or any relief from reason.
These nine men are empowered to say arbitrarily what the cotton, wheat, and corn crops of the country shall be taxed as the condition of reaching & market. They are empowered to decide what tribute shall be levied upon the dry-goods, the clothing, the hats, shoes, clocks, groceries, agricultural implements, and everything else used by the people in their passage from maker to consumer.
There could be nothing more dangerous than this in the way of a trust. There could be nothing more flagrantly violative of law. The statutes against
it are specific, and without reference to the statutes our highest courts have held such combinations to be criminal at common law.
The excuse just now urged is that the agreement is necessary to protect the small shipper against unjust discriminations in favor of the large shipper. But the small shipper is protected already. The law makes discrimination against him a penal offense.
If the railroad magnates are really anxious to protect him they have only to obey the law. Their contention is in substance that they are such incorrigible lawbreakers that they must resort to the greater crime of conspiracy in order to prevent themselves from committing the smaller one of unjust discrimination.
The Louisville Courier Journal speaks of it in terms of approval, and does not regard it as a dangerous conspiracy, because it is subject to the Interstate Commerce Commission. The Boston Advertiser refers to it as a useful plan, but admits that it is forbidden by law. Other papers refer to it as proceeding in a contemptuous disregard of the Interstate Commerce Law, and the Sherman Anti-Trust Law. Chairman Morrison, of the Interstate Commission, in response to a resolution introduced by Senator Peffer, has sent a report to the Senate in reference to this combination, in which he says that “inasmuch as the agreement is not yet completed, the Commission cannot determine whether the contract which may be finally perfected, will be in contravention of the provisions of the Interstate Commerce Law.” In respect to the power of the Commission to investigate it on its own motion, Chairman Morrison says it is competent, under the recent decision of the courts, to proceed by injunction in the case of any obstruction to interstate commerce caused by such a combination as is contemplated in this case. As to the feasibility of enforcing the penal provisions of the Interstate Commerce law, Mr. Morrison called attention to the fact that it is necessary to proceed through the courts to do this, and he adds that it has so far, in such cases, been found exceedingly difficult to secure the necessary testimony. Under the present ruling of the court, any inquiry may be answered by the refusal of witnesses to testify on the plea of self-incrimination. He refers to the case of T. F. Brown of Pittsburg, now pending in the United States Supreme Court, in which the question involved is that of the power of the courts to compel railroad officials to answer questions concerning rates and rebates on their roads when they make this plea, and says that the decision of this case will determine whether it is practicable to secure a conviction under a prosecution for unlawful contracts and combinations. He says that the Commission has satisfied itself, by careful investigation, that no increase of charges or lessening of facilities has occurred as a result of the joint traffic contract, and adds: “In view of the fact that any action, by injunction or otherwise,
which might be used to prevent the completion of a contract or combination made can be had to prevent its being carried into effect in the event of its being finally entered into, and in addition thereto the persons representing the corporations becoming liable for a misdemeanor, the Commission has believed and still believes that it must perform its duty by postponing any request to the United States District Attorney to institute and prosecute proceedings in court as contemplated, until said railroad companies should actually form a joint traffic association and enter into an agreement which shall be unlawful.” At the same time one of the Interstate Commerce Commission, Mr. Knapp, is reported as expressing the opinion that the proposed agreement is perfectly legitimate, and even commendable, since it is directed against rate cutting and discrimination against certain classes of shippers. On the other hand, Senator Chandler, of New Hampshire, whose opinions on all subjects are energetically expressed, has written to the President of the United States a letter on this subject, from which the following is extracted:
“ The proposed crime against the anti-trust and anti-pooling laws is a public fact, as distinct and evident as the Cuban rebellion, which your Attorney-General eagerly labors to suppress.
" I. All the competing railroads, with their $3,000,000,000 capitalization, are to agree that no one road shall reduce its rates to the public without the consent of the nine governors of all the roads. This is a conspiracy in restraint of trade and commerce, and a crime, according to the act of July 2, 1890.
"II. Each company agrees to deposit in the beginning, and from time to time, portions of its earnings with the nine governors. These earnings are to go back to the company if it continues to commit crime, but if it obeys the law it is to lose the earnings and they go to the other roads which continue steadfast in crime. This is a division of earnings forbidden by section 5 of the Interstate Commerce Law. « III. Of course,
like all great wrongs, these have their subterfuge and false pretense.
“But, Mr. President, these stupendous crimes can by virtue of express statutes of the United States be suppressed in advance by national officials subject to your orders. Indeed, a single word from you to Mr. J. Pierpont Morgan will cause these confederates to desist. Will you act, or will you take the responsibility of consenting, as you will by inaction, to a conspiracy against law which is within a few weeks, as soon as the elections are over, to raise the price of food and fuel to all your beloved people? • He shall take care that the laws be faithfully executed.' Thou art the man!"
Unquestionably the formation of this combination has been encouraged by the ill-success of the Interstate Commerce Commission in effectuating the purposes of its creation, the regulation of railway charges, and the prevention of discrimination against particular ship