The San Francisco call., 1913-07-20
COURT ASKED To
DEF |NE POWERs0 Of
R. R. COMMISSION
Southern Pacific as Litigant
Denies State Board Lacks
Jurisdiction Over Ger
ti1cate Issues
FRIENDLY SUITS IN
TWO STATES FILED
Company Does Not Attack
Control Over Intrastate
Finances

IIS SOuInern Haclnc to determine the
power Of the railroad commissions of
California and Arizona as applied to the
financial affairs OF a railroad carrier
operating in more than one state, and
engaged in interstate commerce
The action is a friendly one, the
Southern Pacific announcing that it is
not quarreling with the general prin-
ciple of stock and bond regulation, but
IS insisting that, as its operations are
spread over number of states. 1t can
not concede that any one state has the
right TO interfere with its financial ar
rangements for money to be used in a
number of states especially when the
loan is not secured by a mortgage
The company says that If this power
is conceded to one state it must be con-
ceded to all. and that this would re-
suit in a conflict of authority, which
would prevent an interstate railroad
from working out financial plan that
would satisfy all the state commits
siOns.
SUITS IN EQUITY
bill in equity was filed yesterday
with the United States district court
for the northern district of California.
and similar bill viii be filed Mon
day with the United States district
court in Phoenix, Ariz. These proceed
ings are brought by the Southern Pa
clfc company as plaintiff against the
members of the railroad commission of
California in the one case and the mem
bers of the corporation commission of
Arizona in the other.
Tta
and the attorney general of each state
are also Joined as defendants Each
bill is signed by William F. Herrin,
chief counsel of the Southern Pacific
company, and by his assistants. Guy
Y. Shoup, C. w. Durbrow and Henley
c. Booth
The bill filed in the California case
Is based on the claim of the COMPANY
that the California railroad commission
mas no jurisdiction over the guaranty
by the Southern Pacific company of
equipment trust certificates.
CAN TRUST ISSUE
Three months ago the Southern Pa
enc applied to both the California and
Arizona commissions and secured their
PERMISSION to guarantee the payment
OF SIo,12O,o00 in equipment trust GER
tlhcates. known on the stock exchange
As car trust certificates This issuance
was 10 enable the Southern Pacific to
eXpend $12.00O.O0O in locomotives,
lFelShtc&rs, Workcars and passenger
cars
The s1o.12O.ooo of certificates tssned
was divided into 10 annual installments,
bearing interest at AZ per cent
ne title TO the equipment purchased
was TO remain in the seller until full
payment was made of the 10 install
ments; and the Southern Pacific guar
ahteed 10 the holders of the certificates
that the certifca tes. with interest.
would be paid when and as due.
PROCEDURE Is USUAL
The method of issuing car trust GER
tlhcates is common throughout the
nited states, and is used in cases
Where the value of the equipment to he
purchased is so great that the nurchase
is adVa ntageously handled by the paw
ihent OF annual installments. the title
10 the equipment remaining in the
seller until it is fully paid for.
In the bill in equity against the
callIoFnla commission it is recited thar
the Southern Pacific company desires
TO purchase still more enuinnoan+
amounting to $4,000. 900. and TO arranga r.,l,t
for its purchase by another issue Of
ceruncates guaranteed by it. This
purchase the company says is necessary
Tor the proper handling of it's local
and interstate business in the states of
oregon, California. Nevada. Utah. Ari-
zona and New Mexico
NO LOCAL JURISDICTION
The point is made that the guaranty
or these certificates by the comnanv
VIII not constitute a lien upon anv
property situated in the state of Cali
fornia; that these certificates will he
executed and guaranteed outside of
the state or California. and the en,,in-
ment distributed over the lines of ~
southern Pacific company in the va
rious states through which II rms
and as operating efficiency demands
It is said that therefore tbe C,aItfa
MA commission can have no iurisdic-
ton over the terms or character of Tho
equipment trust certificates 70 he
guaranteed by the Southern Pacifc
company. 1t is further pointed out
that II the California commission has
such jurisdiction, and can impose terms
and conditions on the guaranty and
the character Of equipment each state
through which the Southern Pacific
lines run may also authorize its com
mission to impose terms and condi-
tions, which may differ In the different
states, and thereby prevent the equip
ment from being purchased
In neither of the bills is the oues-
tion involved as to whether a state
has the right to regulate the creation
Of mortgages or liens upon property
of a public service corporation sit
uated entirely within that state or
of property OF such a corporation not
used in interstate commerce.