The San Francisco call., 1896-03-12

a petition on the part of ex-Judge Hayne
requesting the admission in evidence of
certain affidavits and extracts from the
testimony given by G. P. Huntington be-
fore the Senate committee, in order to
show that the cost of running steamship
line between New York and New Orleans
was included in the operating expenses Of
the Southern Pacific Company.
Judge McKeEna, after some argument
on both sides, decided to admit the docu-
ments in evidence, but no other portions
of Huntington's testimony.
Mr.. Herrin then commenced the OPEN
ing argument for the company. he de-
voted his attention TO a consideration of
the law governing the powers OF Legisla-
lures and Railway Commissions to reduce
rates of transportation. He cited the
Granger case, decided in 1876 wherein a
principle was enunciated which was long
thought to imply that the bodies named
were endowed with unlimited powers in
the direction mentioned. Judge Brewer,
he said, was the first to attack this view
by holding that these powers were to be
reasonably used.
Mr.. Herrin contended that the Legisla-
ture had the right to order that reasonable
rates of transportation be established, but
had no authority to fix any arbitrary rate
it might choose. 1t was not easy to esti-
mate the value OF railway property, and
hence it was hard to fix upon fair return
for funds invested in the road and its stock.
Aside from the actual value some re-
gard, he claimed, should be had for the
sums of money invested in the road, even
though its value might have somewhat
deprecated. 1t was not fair to expect
that men of wealth should wish to see
their funds become unproductive. He
earnestly contended that those whose
money had made the railways what they
are should be considered entitled to fair
rate of interest on their investment.
The feature OF this case, he said, was the
fact that there was no legislative provision
for bad years. The Legislature had fixed
q maximum rate, and if the losses of
the company in any certain year
exceeded its profits the stockholders
would be forced to make up the deficit
from their own pockets without being al
lowed to reimburse themselves by tempo
rariIy raising the rates. He cited deci-
sion of Justice Brewer in similar case.
He asked whether schedules stablished
by railway companies might not be con-
sidered prima face reasonable in view of
the points cited in the Granger cases.
However, Justice Brewers decision in the
Day case would seem to indicate that even
limitations. 1t had the right to
fix reasonable rates, but not
any rates reasonable or unreasona Bile.
The power is limited to the establishment
of reasonable rates. The minute any court
or Legislative body transcends this power
and passes beyond the limits of it's legiti-
mate exercise its act, he maintained,
would stralghtway become null and void
and absolutely of no effect. This right on
the part OF Legislatures and courts necessi-
tates a correlative right on the part of the
railways TO be exempted from all danger
OF being forced TO charge rates so low as to
be unjust to their stockholders.
Mr.. Herrin cited number of cases to
the effect that where rates of transporta-
ton were SO low as to preclude a railway
making Legitimate profit, and prevent its
owners from obtaining just and fair re-
turn for their invested funds, the courts
should have the right to fix those rates at
a higher figure. There was no question
that the rates should be high enough to
enable the owners OF the road to pay for
proper service and meet the running ex-
penses. Ordinarily speaking, he said.
courts should allow the directors of rail-
way certain degree of discretion in the
matter of establishing rate schedules, and
as rule, should not interfere except in
cases of evident malfeasance. Courts could
not disregard the cost of q road in
estimating the reasonableness OF its rate
charges. This invested capital seemed
to call for fair return, even though the
present value of a road be less than the
amount expended in it's construction. He
cited the case of the Central Pacific road,
which was built at cost far in excess OF
the amount paid for the construction of
any road subsequently put in operation,
since materials for the frst-named road
had to be conveyed to places where they
were needed by means of expensive and
cum brous modes of transportation,
whereas the materials for other roads