The San Francisco call., 1897-01-26
ITS RIGHT
FORFEITED
The S. P. Company Cannot
Complain, Say the Com.
miSSi0nerS.
IT is AN "UNLAWFUL
CORPORATION"
Contend the Organization Has
Violated Law and Con.
Stitution.
TAKING THE BROAD VIEW.
The Answer TO the Comp amt of the
Company Filed by AttOrney.Gsn.
era. Fitzgerald.

y
#led an answer to the complaint OF the
southern Pacific Company against the
, Board of Railroad Commissioners, in the |
action to have the board restrained from
enforcing its per cent reduction in grain |
rates and the 25 per cent reduction in
other freight rates proposed.
The answer makes some strong home |
thrusts against the defendants. 1t de-
clares the Southern Pacific Company to be |
an unlawful organization, having violated |
the laws, State and Federal, and the State |
constitution in leasing and operating the |
al roads mentioned in the bill. |
It declares that the company has no |
right to an injunction, because it |
has a recourse at law in defending |
against suits to enforce the rate,
and that the board cannot be
restrained, as it does not attempt to en-
force the rate, its function being wholly
legislative. The complainant, 1t says, is a
corporation of another State, ana is not
authorized to DO business in this State,
except upon such terms and conditions
and IN obedience to such laws, rules and
regulations as the State of California
chooses TO enact, and is in no position to
complain of the provisions of the consti-
tuition or laws of the Stale OF California,
or OF anything done under them by any
board or officer of the State.
The document is long one, but full of
neat and interesting reading to the ship
pers OF the State. In the first place 1t is
denied that the Southern Pacific Company
Is, or has been, operating lawfully any of
the roads described in the bill under any
lease. 1t is averred that the so-called
leases mentioned in the bill are invalid,
and of no effect whatever.
Having no information sufficient to an
abe them to answer the point the
defendants deny that the complainant
has ever had a paid-up capital stock of
$l20, ,934. TO- or any paid-up capital stock.
Il is denied that the Southern Pacific
holds lease from the Oregon and CaIlfor-
MIA Railroad Company, and for lack of
q Information it is denied that the Oregon
Il and California has a paid-up capital of
$19, 100000. 1t is also denied that any of
\ the lines mentioned in the bill are held
under a lease from the Central Pacific.
The same denial is made also as to the
alleged S67, 275.O0O Of the capital stock of
The Central Pacific.
The same denials as to lease from the
California Pacific Railroad and as to the
alleged $12 o00,000 ca pital stock of that
road, also as to the Northern California
Railway Company and its alleged Sl2-
see, 600 capital stock, also as 10 leases from
the Northern California Railroad Com
panv and its alleged capital stock OF
81 2S0, ,00O also as to leases from the
South Pacific Coast Railway Company
and as to its alleged capitat stock
of Sc, ,000, 900. also as to leases from the
Southern Pacific Railroad Company and
as to its alleged capital stock of $68, ,402,
500, also as to the Southern Pacific Rail-
road Company of Arizona and as to its al
legged capital stock OF $l9 995, coo, also as
to the Southern Pacific Railroad Company
of New Mexico and its alleged capital
stock of Sc, 888, 800.
1t is denied that none of the corpora
tions mentioned in the bill, other than
the California Pacific Railroad Company
and the Northern Railway Company, have
or more than one year received and been
entitled to any profit above their actual
expenses, or that any of them have paid
dividends to stockholders. 1t is averred
that in 1894 the Southern Pacific Com.
pany agreed with Sir Rivers Wilson, the
representative Of the English stockhold-
ers of the Central Pacific Company,
that the Southern Pacific Company
would pay TO the stockholders of
the Central Pacific Company a dividend
of l per cent per annum until "satisfac-
tory egislation" could be obtained for the
adjustment of the company's debt to the
Government, and that after such legisla-
tion to pay per cent for a period of two
years, and that that agreement was ke pt
and the dividend paid during 1894, 1895
and 1896.
1t is averred further that the payment
OF this dividend of $672,0 900 per year was
Kept secret and not disclosed to the court
upon the hearing CT the preliminary in
llunction.
A specific denial is made of the allega-
kOns OF the complainants as to the in
debtedness the gross earnings and the
taxes levied and paid. On this basis it is
denied that any reductions in freights
proposed by the Board of Railroad Com
missioners would, if they had been en-
forced for the year 1894, have resulted in
any dim1nutionof the rfe of theSouth-
ern Pacific Company or the Central Pa
cine railroad or would have amour ted to
$l,775OO0 or in any sum; but it is
everred instead that such reduction
would have resulted in an increase of
business and of the profits thereof.
The Railroad Commission further de-
nies the correctness of the reports of the
company as to gross earnings and az To
its expenses, and denies that the pronosed
reduction would make any diffe renee in
the relationship OF these two, except for
the betterment of the company.
1t is denied that the services of its
officers have been secured as cheaplv as
possible and AYERS that 'it is notoriouslv
true that for many Vars last past the
Southern Pacific CONF any has expended
large sums of money in the employment
of politicians and others to Improperly
and State governments and to obtain for
itself advantages to which it is not
entitled" ana that a large part of the
sum named as operating expenses is ex-
pended for such unlawful purposes.
With regard to construction expenses it
is aVerred that a larger part if not all of
the supplies and material for the roads
have been obtained through subsidiary
com panies, composed of its own officers
land certain stockholders, and has paid
kherefor much greater sums than the
kame could otherwise have been obtained
for to the fraudulent advantage OF the per-
sons composing these subsidiary COM
panies.
Answering the allegation that the
rates IN many cases are now fixed at
thes actual cost of transportation by rea-
son oil competitio with other carriers by
railroad and water, it is averred the rates
were never fixed so low in any instance,
except where 1t is the object of the South