The silver state. [volume] (Winnemucca, Nev.) 1909-1925, 1914-05-02
SOUTHERN pacific
FILES ITS ANSWER

The Southern Pacific company fled
yesterday in the United States Dis
trict Court at Salt Lake City its an
swer in the government suit to di-
vorce the Central Pacific from the
Southern Pacific.
The answer, after specifically de-
nying all allegations that the Sher-
an antitrust law has been violated,
points out not only that the two lines
were originally built, operated and
developed as one road, but that, as
far back as 1898, the United States
government, itself, practically recog-
nized the combination as wholesome
Claims Separation q Detriment.
It asserts that in the joint of these
lines, through trains have been run
| by the most direct or convenient
route with reference to their owner
Central Pacific lines from those of
the Southern Pacific cannot now be
had, without detriment to both prop
critics, and without impairing and in
conveniencing the public service and
the communities through which the
lines pass.
The company asserts that, relying
on the terms under which the Cen
trail Pacific IS ldebt to the government
of $58, 100000 was settled in 1898, the
Southern Pacific company undertook
heavy financing obligations, not only
guaranteeing payment of this debt,
but also guaranteeing the 100000
600 per cent mortgage bond issue of
the Central Pacific.
In this connection, it is contended
that the government could not, con-
sistently and with justice, have ac-
cepted this settlement, of which it
did have full knowledge as party
thereto, if the arrangement involved
relation between the roads con-
trary to public policy.
Court Did Not Disturb Roads.
Even as late as 1912, in the recent
so-cs.lled Hartman unmerger suit,
when the United States Supreme
Court ordered the dissolution of the
Union Pacific and the Southern Pa
cifc, the court, the highest tribunal
in the land, it is claimed, found nc
reason to disturb the relations be-
tween the Central Pacific and the
Southern Pacific.
Commenting on the 1act that the
lines were in one ownership and
managed and developed as one
property, the early part of the an
swer points out that, because of this
fact, little heed was given ia
which corporation should hold the
title to terminal properties and
branch lines
Accordingly branch lines from
points on the Central Pacific were
built and owned by the Southern
Pacific Railroad company, these
branches having no connection with
the main line of the Southern Pa
cifc Railroad company, except
through Central Pacific lines. At i'm
portant points the entire title to
valuable terminal properties was
taken and held in the name of the
Central Pacific Railroad company.
At other points the titles to terminal
property was held by the Southern
Pacific Railroad company
The answer alleges that it was well
understood by congress at the time of
the passage of this law that the said
Indebtedness of the Central Pacific
Railroad company to the United
States government amounted to at
least $5S,000,000 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 pay
ment of said debt the sum of $780,
900 per annum.
Exceeded Net Eearnings.
This sum, says the company, ex-
ceeded many times over any possible
net earnings of the Central Pacific
Railroad company that could be ap-
piled to the payment of this debt, and
it cannot be questioned that con-
gress intended and understood that
this debt could only be paid by the
employment of the credit and re-
sources of the Southern Pacific COM
pany and that compliance with the
prescribed terms of the settlement
necessarily involved participation
therein by the Southern Pacific COM
pany, and the only motive or consid-
Grafton which could induce the
Southern Pacific company to partiei-
pate in the payment of the Central
Pacific Railroad company's debt to
the government was the existence of
the aforesaid relations between ii
and that company and its desire to
continue such relations and to make
permanent its control of that part of
its system.
Says Participation Expected.
The defendants, therefore, allege
that congress at the time it enacted
the said law of July z, 1898, con
templated and expected such partici.
patton by the Southern Pacific com
pany in the settlement provided fol-
and had full power to arrange fol
such security for the payment of said
indebtedness as to said commission
might seem expedient.
Heavy Obligation Incurred.
In consequence, is is recited, the
Southern Pacific company incurred
the obligations of guaranteeing the
$1OO,000,000 of the first refunding
per cent mortgage bonds of the Cen
l. n