Chapters on the History of the Southern PacificDaggett, Stuart
History
Chapters on the History of the Southern Pacific
Daggett, Stuart
Pacific railroads -- History; Railroads -- California -- History; Southern Pacific Company
Alarmed at the probable failure of the sinking fund provisions, the
Secretary of the Treasury, on advice of the Attorney-General, withheld
from the Central Pacific Railroad _all_ the compensation due it for
services rendered to the government. The same action was taken with
respect to the other bond-aided lines. This was clearly illegal, and
Congress accordingly passed the Act of March 3, 1871, directing payment
of the sums withheld.[524] On passage of the Act of 1871, the Secretary
of the Treasury began to pay to the Central Pacific and to the other
bond-aided companies, the 50 per cent of compensation for services
rendered to the government which the statutes required. Since, however,
there seemed to be a legitimate difference of opinion as to whether the
government should continue to pay money to companies already heavily in
debt to it, Congress proceeded two years later to pass the Act of March
3, 1873, which, in effect, remitted the whole controversy to the court.
The terms of the Act of 1873 were as follows:
That the Secretary of the Treasury is directed to withhold all
payments to any railroad company and its assigns, on account of
freights or transportation, over their respective roads, of any kind,
to the amount of payments made by the United States for interest upon
bonds of the United States issued to any such company, and which
shall not have been reimbursed together with the five per cent. of
net earnings due and unapplied as provided by law; and any such
company may bring suit in the court of claims to recover the price of
such freight and transportation; and in such suit the right of such
company to recover the same upon the law and the facts of the case
shall be determined and also the rights of the United States upon the
merits of all the points presented by it in answer thereto by them and
either party to such suit may appeal to the Supreme Court; and both
said courts shall give such cause or causes precedence of all other
business.[525]
The intent of Congress in 1873 was that, in order to make a case, the
Secretary of the Treasury should withhold the sums demanded by the
bond-aided railroads including the Central Pacific, that the companies
should sue, and that the court should then decide. In pursuance of this
idea, the Union Pacific promptly brought suit against the government
in the Court of Claims to recover the amount due from the United
States for transportation of government passengers and property after
deducting one-half of the amount as required by law. A decision being
rendered in favor of the company, the United States appealed to the
Supreme Court, where the judgment was affirmed.
Public-domain text, read in full here on John Shaqi.
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