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
None of these cases, however, can fairly be taken as precedents for so
radical an alteration in a bargain made as would have been produced
by an extension of the lien of the subsidy bonds to non-aided portions
of the Pacific railroads. On this precise point the nearest approach
to a decision is found in a dictum growing out of litigation under
the Thurman law with respect to the proper handling of compensation
for government services. As explained in the previous chapter, the
government contended at one time that all compensation for services
rendered to the government by the Central Pacific Railroad should be
paid into a sinking fund for the eventual retirement of the subsidy
bonds or should be applied in liquidation of interest on these bonds,
whether these services were rendered on bond-aided or on non-bond-aided
portions of the company’s lines. When this contention reached the
Supreme Court it was rejected, on the ground that the Thurman Act,
properly interpreted, applied only to the bond-aided lines.
The court went on to remark, moreover, that the construction which the
government here sought to place upon the law would not only render the
second section of the Thurman Act a breach of faith on the part of the
United States, but would make it an invasion of the constitutional
rights of the railroad company.[577] This indicates that the court
would not have approved a law which clearly compelled the Central
Pacific to turn over to the government the compensation for the
transportation of government troops and supplies earned over sections
of its lines which had not received a subsidy in government bonds. If
this really represented the attitude of the court, then it seems still
more unlikely that an attempt to extend the lien of subsidy bonds to
these same non-bond-aided sections would have been sustained.
Critical Situation
It is reasonable to suppose that the repeated discussion of refunding
plans in Washington was due to the fact that Congress was of the
opinion that a rigid insistence by the government upon its legal
rights would result in a minimum rather than a maximum recovery from
the Pacific railroads. At the same time, the shrewder heads in the
legislature were perhaps hopeful that results might be obtained by
negotiation which could not be secured by legal proceedings. Hence the
refusal to approve of any specific plan for the settlement of the debt.
Public-domain text, read in full here on John Shaqi.
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