Year: 1879

F; RAILROAD SUBSIDIES


yHE >uP&aWE CnUhY SUsrAINs.THI
THURMAN AGT.


Railroads Subject to I.egislat We Control 81


Far rs Its Business Affects Public Inter


ests-Cengrcss Unable to Undo Contracts


But It Can Compel the Due Performanc,


of Such Contracts-Powers IF the Gov


crnment In the Twofold Relation of Sow


ereign and Creditor-DissentingO Opinlonl


of Justices Bradley, Strong and Field.
WASHINGTON Oct. 20.-Supreme court No
1,063 of 1878. Union Pacific Railroad COM
pany, appellant, vs.. the United States. Appeal
from the court of claims, aud No. 972 of 1878,
The Central Pacific Railroad company ct al,
appellant, VS.. Albert Gallatin. Appeal from
the circuit court of the United States for the
district of California. These cases, both of
which involve the constitutionality of the Pa
cifc railroad act of May 7, 1878, known as the
Thurman act, were decided and the decisions
announced on the last Monday of the last term,
but owing to the great pressure of business
neither the majority of the court nor the JUS
ticcs who dissented, were able to prepare writ
decisions were rendered. The opinions have
since, however, been prepared and were de-
livered this afternoon. Chief Justice Waite
read the opinion of the majority of the court,
sustaining the 'constitutionality of the act in
question, and dissenting opinions were deliv-
cred by Associate Justices Bradley, Strong and
Field. The opinion of the chief justice which
deals especially with the case Of the Union
Pacific, is in substance az follows:


The precise point to be determined, in the
opinion of the court, is whether a statute
which requires the company, in the manage
ment of its affairs, to set aside portion of its
income as sinking fund to meet it's
subsidy bonds and other mortgage
debts when they mature, deprives
the company of its property without due pro-
cess Of Jaw cr in any other way improperly in.
terferes with vested rights. The court holds
that railroad company is subject to legislative
control so far as its business affects the public
interests that by the reservation contsined in
the chartering act of 1862 and 1854, Congress
retains full power to make such alterations and
amendments of the charter come within the
just scope of legislative power. In 50 doing it
cannot undo what has already been done, nor
unmake contracts which have already been
made, but it may provide for what shall be
done in the future and may direct what prepa-
ration shall be made for the due performance
of contracts already entered into.


In less than twenty years from the present
time there will become due from the Union Pa
cifc com pany about eighty millions of dollars,
secured by first and subsidy mortgages be-
sides the capital stock representing thirty-six
millions of dollars more. With the exception
of the land grant little if any thing except
- <s,@ h~ ~l,<l
upon to met these obligations when they ma
ture These earnings, the company after pay
ing interest on it's own bonds, have been divid-
ed from time to time among its Stockholders,
without laying by anything to meet the cnor-
nous debt which is soon to become due.
Thus the stockholders of the present time are
receiving in the shape of dividends that which
those Of the future may be compelled to lose.


The United States occupy towards this cor
poration two-fold relation, that of sovereign,
And that of creditor. In their relation of SOW
ereisn it is their duty to see to it that current
stockholders do not appropriate to their own
use that which in equity belongs to others. A
require them to submit their first contribution
toward the payment of the bonded debt, can
not in any sense be said to deprive them of
their property without due process of law.


The court holds, therefore, that the legisla-
tion complained of may be sustained as a rea-





tion and promotive of the interests Of the pub
lilo and corporators. It is also warranted, un-
der authority, by way of amendment to change
or modify the rights, privileges and immunity
granted by the charter. The judgment of low
court is affirmed.


From this decision Justices Strong, Bradley
and Field dissent in long and care
fully prepared opinions. Justice Strong
maintains that the Thurman act is a
plain transgression of legislative power;
that the government in it's cor tract with the
railroad companies laid aside the sovereignty,
and that the contract is as part of the charter
Of the Union Pacific com pany, or of the acts
of 1862 and 1864 It was a subsequent trans
action and the United States became a party to
it, not in its sovereign character, but as civil
corporation, with the same rights and obliga-
tions as q private person and no more. But
~hat does the act Of May Z, 1878, attempt to
do? 1t does not purport to be repeal of the
charter. All its provisions have in view the
imposition of an additional obligation upon
the railroad com panies. Its leading purpose
Is to take control of the property of the deb
tor and sequester for security of debt, which
by the terms of the contract is not due and
proahly for years to come. To claim such
pow er ia to claim the right to disregard the
contract and substitute for it different one
without consent of the debtor. If the q. s.
can exact now one quarter of the net earnings
of each of these companies and place it in
the treasury, they can by the same power and
with the same reason exact the whole of the
earnings of the property equal to the amount
| of the debt. Such legislative power as this is
not only conferred by the constitution but in
effect is expressly denied in these clauses of
the fifth amendment which provides no person
shall be deprived of life, liberty or property
without due process of law; that private pro-
perty shall not be taken for public use with
| out just compensation.


Furthermore it may be doubted whether Hthe
act of 1873 is even an attempted exercise OF
legislative power. statute undertaking to
take property of 4 and transfer it to B is not
legislation. 1t would not be lawful, it would
be 4 decree, or sentence the right to declare
which, if it exists at ALL is in the judicial de-
partment of the government. Congress would
in such case be trying to perform the functions
of q court. BY the act under consideration
the creditor becomes the custodian o1
| right to hold and manage as if it were
his own. It is absurd to say that
this is not practically radical change in the
relations between the parties established by the
contract, and it is equally impossible to main
tain that it is not depriving debtors of theil
property without due process of law. Justice
Strong concludes, therefore, that the act OF
1878 Is not only unauthorized by any power nov
existing in Congress, but it is an infraction o1
the prohibition contained in the fifth amend
ment to the constitution.


The dissenslon opinion of Justice Field be
gins as follows: l also dissent from the iudg
ment Of the court in these cases. The doctrinei
| announced will, in my opinion, create great IN
security il the title to corporate property in tn.
| country. With many assertions to th.
contrary, they in fact declare that the genera
government is under no legal obligation
to fulfil its contracts, and whether it shall d,
so il any case not, is a question of policy
and not of duty. They also recognize it's righ
to appropriate by legislative decree the earn
ings of corporations with which it deals, with
out judicial inquiry and determination as t,
its claim as to such earnings, thus sanction
own case, and finally they asserta supremac,
! of the federal over the State government IN tn