... the issue of said bonds and delivery to the company shall ipso facto constitute a first mortgage on the whole line of the railroad and telegraph, together with the rolling stock, fixtures and property of every kind and description, and in consideration of which said bonds may be issued; and on the refusal or failure of said company to redeem said bonds, or any part of them, when required so to do by the Secretary of the Treasury, in accordance with the provisions of the act, the said road, with all the rights, functions, immunities, and appurtenances thereunto belonging, and also all lands granted to the said company by the United States, which, at the time of said default, shall remain in the ownership of the said company, may be taken possession of by the Secretary of the Treasury, for the use and benefit of the United States.[568] By the Act of July 2, 1864, the lien of the subsidy bonds was subordinated to that of first mortgage bonds which the company was then authorized to issue, but no other change in the underlying security was made.[569] The meaning of Section 5 of the Act of 1862, as amended, was considered by the United States Supreme Court in 1878 in a case brought against the Kansas Pacific Railway to recover 5 per cent of the net earnings of the Kansas Pacific, payment of which was required by Section 6 of the same act. In these matters the Kansas Pacific and the Central Pacific were subject to the same requirements. It appeared that the Kansas Pacific had received subsidy bonds for 393-15/16 miles of line, from the Missouri River to the hundredth meridian, but had actually constructed 637 miles, reaching as far west as Denver. The question arose as to whether the company was responsible to the government for 5 per cent of its net earnings on the whole mileage, or only for 5 per cent on 393-15/16 miles. Upon this point the Supreme Court ruled that “the subsidy bonds granted to the company, being granted only in respect to the original road, terminating at the hundredth meridian, are a lien on that portion only; and that the five per cent of the net earnings is only demandable on the net earnings of said portion.”[570] Provision in Thurman Law The decision in the Kansas case clearly meant that the lien of the subsidy bonds authorized by the Act of 1862 did not extend to the non-bond-aided portions of the Central Pacific or to similar sections of any of the other Pacific railroads. This appears to be a conclusive answer to the later government argument, so far as the Act of 1862 is concerned. The legislation of 1862 was, however, amended in 1878, as we have seen in the previous chapter. Section 9 of the Thurman law read as follows: