Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-04-13
Street CAUTIOUS
ON OFALLON CASE
Failure to Forecast Decision
in lnterborough Suit
Is Recalled.

| NEW YORK, April 13.-After its I'M
fortunate experience of last Monday in
misinterpreting the early portions of
the United States Supreme Court deci-
sion in the Interborough Rapid Transit
case. Wall Street will be more cautious
in passing judgment in advance on what
| this same court may determine as to the
merits of the st. Louis and O'Fallon
Railroad case. which Is expected at an
early date, possibly next Monday.
| More has been written on what is
| known as "the greatest law suit in his
tory" than on any other corporation
case before the United States Supreme
Court In years. Elaborate analyses have
been made of the possible effects of
| favorable or unfavorable decisions based
| on what the court may determine to be
due the st. Louis and OFallon road in
the matter Of valuation and 'recapture"
features.
Legal Precedents.
The legal precedents to be established
| by the argument of the Supreme Court
may well determine the immediate
movements of railroad securities and the
dividend policies and credit prospects of
many Of the carriers for years to come.
The main issue is that Of appraising
| the property of the railroad for rate
making and "recapture" purposes on the
| basis of (a) investment value or (b)
cost of reproduction at present prices
or at prices that may have ruled at
given period subsequent to the date of
Interstate Commerce Commission valu-
atoms.
For some reason or other, the senti-
ment has grown that the Supreme Court
may not render a decision that will alb
solutely clear up the disputed questions
| involved in the st. Louis and O'Fallon
case, but that it will leave open for
further argument vital points requiring
several years of litigation to settle con-
clusively. The unwillingness of the
| he court to deal with certain features
| in the marlborough fare case has
strengthened the Wall Street idea that.
| when dealing with the st. Louis &
O'Fallon Railroad. the court may be
somewhat evasive in its decision.
Railroad Stocks.
| Railroad stocks are in a good tech
meal position to resist an unfavorable
I Judgment in this vital case and TO
| benefit from an opinion that might be
! regarded as generally favorable. There
/ has been no exploitation of them to
/ any CACCIlO dlLu Will Tic icdCJ4OlEo bIldI
| have occurred in the group as whole
from the high level of the year. they
have reached an average where they
produce a larger income return than
that of any other important body of
high-grade stocks.
| On the measurements of prices to
! earnings. they are also in a better
| position than most of the groups of
industrial and public utility shares.
Some of the stronger roads. like the
Atchison. Chesapeake & Ohio. Union
| Pacific and Pere Marquette have been
| showing earnings making them amen
able to 'recapture." It is the opinion
| Of railroad lawyers. however. that even
| in these instances the right of the Gov
eminent to take from road its excess
earnings would be disputed and that
actual payments on such revenues
would be indefinitely delayed by long
drawn-out legal controversy.