THE OMAHA DAILY BEE: FTUDAY, JULY 18, 1002.
RAILROAD TAXATION IN
Arguments of Counsel on the Issues Raised, in
Case Before Nebraska Supreme Court - -
Argument for the respondents by John N.
Baldwin of the Union Paclflo lit depart
ment aa amicus curiae: ,
May it pleaae the court, I desire again to
express my grateful i appreciation of tha
favor (ranted ma by tha court to appear
under tba pleasing title of "Its Friend," to
discuss some of tba queationa Involved In
thla controversy.
By tbfs time It la clearly apparent to tba
court thst tba railroads referred to In tha
application for tba writ are particularly,
Vitally and materially Interested In thla
causa and thla court's determination
thereof. ,Tbe Importance to tha railroads
referred to la apparent becauae the record
already discloses It and I bopa even within
the limited time allowed me to abow that
theae railroad companies In thla great state
of Nebraska are Interested and have the
right to appear here by their representa
Uvea as the friends of Jjhe court to dlscuaa
theae questions:; -Drat, becauae they pay
IS 40-100 of all the taxes of the state; see
nd, because tbey pay over 10 per cent of
their net earnings In taxes to this state;
third, becauae the atandard or ratio of val
uation of all property, other than that of
railroads In this state la between one
ninth and one-tenth, and that of the rail
roads between one-sfxth and one-seventh.
The railroads hate1 no desire whatever to
eacape taxation or their fall and fair bur
den of the public tax. Tbey could not It
they so desired. Their ' property la like
land. It cannot be removed or concealed;
It ts open, subject to Investigation. Tbs
railroads have at heart the Interest of the
communities they traverse and attempt to
serve the same. They dealre applied to
their taxation that dominating maxim,
"uniformity of taxation,'' or the equal bur
den' of taxation. A pinclple which waa
announced by Canute the Oreat la 1035 In
tbat wonderful declaration of hla to all of
the nations speaking English. It has been
but paraphrased In all of the constitutions
and great, charters of liberty since that
time. He aald:,
Let those who are noble and those who
are not, equally obtain their rights accord
ing to the laws, from which no deviation
shall be allowed, either from fear of me or
through favor of the powerful, or for the
purpone of supplying tny treasury, I want
no money raised by Injustice.
The railroads appeal to and Invoke tbat
principle with reference to tneir eaae. l
know 1 am appearing before the highest
Judicial tribunal In one of the greatest
states of the mightiest republic on earth.
and knew before auch a tribunal as thla as
sertions will not be tsken as testimony, nor
mere assurance aa evidence. Logto and evl-
tfenoe will figure much better than the dec
laration' of those 'who assert and those who
aesur. I say this becauae I ahall Insist
and shall endeavor to show to the court
before I am through that from the beginning
to tka end ot tots controversy there has
been an evident effort to prejudice, to stir.
to agitate. We hear the wild cry of
"crime," "grabber." "shark" and "shirker"
raised against, state offlcerr and railroad
officials.
I have noted In my brief In commenting
pen that of the relatora, that the railroad
officials are charged with being dlahonoat
men, . dishonestly serving their employers.
It Is charged In that brief that every publle
officials that has had anything to do with
the assessments of railroads since March 1,
1867, have been' converted into "servants of
the rallroada, and aa having been guilty of
.fraud and misfeasance and malfeasance In
their offices. X read, and I blush, aa I do,'
that the people of the atate of Nebraska
bare been charged with "stupidity" ana
' lndlfferentism." I have heard It asserted
here before this court tbat tha terminal fa
etlltlea of the Union Pacific railroad at
Omaha are . worth $10,000,000, but your
honors have heard no proof. Tou have
heard It asserted here that the Union Pa
c'flo Railroad company la worth $100,000 a
mile, but your honors have heard no proof.
It la aald that the Union Pacific hae made
$4,900,000 ot Improvements and $3,000,000 In
betterments and paid for them out of lta
earnings, but . your honors have heard no
proof. Theae are some of the statements
that have been made before thla court by
Mr. Harrington and are found on the pagea
of the record that have been tranacrlbed.
Can we Infer from wild gesticulation that
there. Is some' testimony In It? I desire tbat
this court shall consider this caae upon the
record and the testimony. I know that
when it retires to lta chamber that all of
the sayings that are toundatlonless and
without proof will, like Artel'a airy pageant,
fade away Into "airy nothingness."
' In tha short time allowed counsel to 'pre
vgent this esse they bave experienced em
barrassment and annoyance In making a se
lection 'of the different points tbey desire
to present The subject ot taxation la a
Very Interesting queatloa and there are very
many pleasing phases ot It. I do? not claim
that, aa one ot the oounael, I have created
anything original relating to the queationa
Involved In this caae. ' I can only say to the
court that .1 have put. In aoma considerable
time and study of the queationa involved,
nd that t have,- with tba assistance of oth
ers, found many Interesting facts, hut am
compelled now simply In a few words to al
lude to some ot them, as there are so many
K would be Impossible for me to allude to
them all. And I felt last eight, when going
ever the points in the record to present,
that 1 experienced the eame aenaatlon one
would In going Into a garden to pick a bou
quet of flowers. The pleasure ot aelecting
and holding la tinged by the regret ef leav
ing so maay beautiful onea behind, Thoae
that are not re erred to In oral argument
are touched upon In the brief. '
Let ua for a moment get back to the real
v Isauea In this rase. Without re-statlng
the character and the full averments ot the
application for the writ and those In the
answer and amended answsr. It Is charged
Ta effect that tha board refuaed to aaaess
the franchises ot these corporations. It
hss been contended before the court '(and
the court at the present time haa admitted
evidence subject to further consideration
aa to the extent of the plea), tbat fraud la
' charged. The averment that refers to fraud
1s "that the board grossly and knowingly
violated lta duties to the people of the
stats of Nebraska, and to thla relator, by
dtaregardtng tha plain provlaion of the
conatltution and lawa of tha atate of Ne
braska la not aaaeaslng the franchlaee of
all the said corporations at their fair
value for taxation tor the year 1903."
Now, what la the real fraudulent act
charged? Tha refusal to assess the fran
chises, grossly and knowingly, Ths
gravamen or substance of the chargea are
that It refused to assess the franchises.
Let us remember that there Is no evi
dence before your honora ot Inherent
fraud; there la no evidence of corruption
of any ot the officiate; there la no evi
dence of circumvention or coercion. It la
all negative and Inferential, and the howl
of counsel against Mr. Weatoo and Mr.
Btuefer that they bave been guilty of a
"crime," and that tbey are corrupt, and
that they have been "farmed." and tbat
they have besn made-"servants of the rail
roads," Is Just as unwarranted aa their at
tack in their brief that all offlclala of
thla atate since March 1. 1847, and there Is
Just aa much proof la one caae aa there Is
in ths othsr. ,
It Is true that the board did not assets
the trsachlsee separately, aa it understood
' It. It la true that "Mr. Blmeral" ap
peared before the board and told it that It
ought tt da It. It U true that "I, even
I Mr. Harrington," appeared before the
board and told It what It should do and
what a (franchise la. and that It ought to
aaaeas It. It Is true that "I, even I Mr.
Rosewater," appeared before the board and
told It what It ought to do In this particu
lar, and that It ought t assess the fran
chises, and It la true tbat Abe hoard did
not comply, aa la aald, with their re
quests. Is tbat fraud T Perhaps It bad
some doubt as to ths ability of these gen
tlemen, or ae to their knowledge, or aa
to their Information with reference to th
question Involved. The tact ta they
wanted this board ta assume all knowl
edge and Information relating to what Is
now one of the moat serious and debatable
of questions. Publicists, Jurists, courts
and boarda are all at "sixes and sevens"
as to what a "franchise" really Is; as to
whether It creates any value or not; as to
whether It Is simply a mere power and not
an element of property or value, or
whether It oaa create any value. -
The very cases these gentlemen rely upon
and cite In their brief In the United States
supreme court are but the result of a di
vided court. ' And, farther, in the estima
tion of aoma of the ablest members of the
court. In one of the greatest dissenting
opinions ever written, some of the princi
ples contended for here are denied. The
personnel of that court, which is subject to
change at any time, may change that rule
and change the application of these princi
ples. ' So, when these gentlemen assumed
all Information and all knowledge before
the board and attempted to educate It, the
board had the right to exercise lu Judgment
In regard to that, and Its refusal wae not
fraud. It had the right to queatlon the
knowledge and Information of Mr. Rose
watr. For Instance, there might have
been something before the board at that
time that It knew Mr. Rosewater was not
Informed upon, aa we know now that he has
appeared before thla court to give Informa
tion In reference to certain properties and
as to certain questions Involved, and yet,
upon cross-examination here, this educator,
aetlng as an Informer here and as one to
advise, says, "I don't even know how the
properties, the ahops or terminal facilities
In tha city of Omaha are asssesed, whether
locally or by the atate board," and gave hla
opinion ar to the value of these terminals,
and yet admitted that he had not seen the
new shops. So, because this board refused
to comply with their request, or said It
doubted their ability and doubted the ques
tions and objections that were ralssd, Is
tbat fraud T
Or Is It fraud because of It lack of Infor
mation or becauae, aa Mr. Harrington has
said, "Tou don't even know now what the
value of a mile of any of these railroads
tsT" No, It did not, and Mr. Harrington
does not. No member of this court knows.
No man In the United States known the
value of any mile of railroad In asy state In
the union. I would like to see the
color of the eye of the man tbat can an
swer tbat question' and subject him to a
cross-examination. - He may obstinately
and obdurately adhere to a statement that
tt la worth $30,000 or $40,000 a mile, but he
will do It In the faoe of the beat records
and arguments and letters and dissertations
and opinions of the wisest men In the
land. It la simply a matter of opinion.
Mr. Btuefer and Mr. Weston were right
about It. They. flid the beat they eould.
It waa a matter of" opinion. ..' It cannot
be determined by any mathematical rules;
there are no rigid tests or standard
There is no rule to find the value of a
mile of railroad. - There la no war fixed In
any of the books. ' There Is no way that ran
be fixed In any of the books. It Is all a
mattsr of opinion. . Tou can take Into con
sideration all Information that you can ob
tain. Tou can take Into consideration the
track, right-of-way. Iron, ties, superstruc
ture, material, earnings, gross and net,
stocks and bonds, tha action of other as
sessors, all of this Information, and then
you have to go back to a valuation of it,
which is a mere matter of opinion.
"Why," says counsel, "Just think of this
brldgs at Omaha .costing at least a mil
lion." It can abaolutely be reproduced for
about $500,000, that Is the evldenoe here In
the testimony of Mr. Berry. He says that
all bridges of the Union Paclfip in thla state
can be reproduced tor $1,106,643. Thla I
evidence, not assertion. Of what more
value, if the court pleaae, la the mile on
the weat half of the Union Paclflo bridge
at Omaha than a mile out In Kimball
'county T That mile out In Kimball oounty
Is Just aa easentlat to tha Integral part of
this company as the bridge at Omaha. The
interruption in that mile out there Inter
rupts the movement and operation of the
whole line. What is Its value T How are
you going to determine the value of the
line If you simply figure up the weight of
the Iron, the cost of the ties, etc. Tou
eould not possibly get the value. Tou have
to consider It In all Its environments and
all Its ramifications." There is no fixed
rule It all comes back to a mattsr of
opinion as ths decisions aay as the courts
ssy, as Mr. Steufer and Mr. Weston ssy,
Tbey took Into consideration the assess
ment of other aasessors and other hoards,
and tbat Is an element to be taken Into
consideration.
They say ths market price of the stockr
and bonds should be taken into considera
tion. That la an unatable element. Ua
demand that ths stocks and bonds, earn
ings, or the capitalisation ot earnlnga, all
these things are Items of evidence, but
they cannot be metamorphosed ln,ta rules
or standards of valuation. They are mere
Iteme of evidence. The market quotations
have been condemned by all the courta aa
an unsatisfactory method and I ask oounael
' to atate one declaioa where stocks and
bonds, or earnings, or any one of thess
slements. Is taken as a rule to fix the value
ot railroad property. There le none.
Courta do aay that you can take them Into
conalderatton In forming an opinion ot
values. But It you should taks exclusively
the net earnlnga, or capitalisation of the
net earnings, or tha stocks and bonds, and
tha proof should show that the valuation
was placed solely thereon, it would be con
demned becauae It would be unconstitu
tional, becauae It could net be, or would
not be, anything elae than aa Income tax.
I am not aaylng you cannot take them Into
consideration, but I do say you cannot as
sess railroads according to any one ot
these Items solely. Market quotatlona
have been condemned by all the courta be
cause tbey are not so much the reault of
careful Investments of tsr-slgbted men aa
ot the manipulation of speculators on mar
gin. They are forced by stock exchange
practices. Management, good will and bus
iness standing are all covered by share
stock valuea, and an aaaeaament bassd en
such values, taxed as property to corpora
tions, tbst which Is not taxed to natural
person!. Hope of the future la an element
which Inflates values of atock above the
true value of the property. It expreaaM
only the Judgment or opinion of Investors
as to the walue of stocka and bonds.
Counael haa aald. in loud, ringing tones,
very effective, very impressive, "Why, you
could sell the Union Paclflo tomorrow for
$100,000 a mile." If you would place it
upon the market and throw all ot its stocks
and bonds upon ths market for aale, de
you euppoee the common stock would be
worth $104 and the preferred $($? The pre.
terred stork ot the Union Pacific Is selling
today at $89 and the common stock st $106,
and yet not one dollar of dividends can be
paid on the common until 4 per cent Is paid
on the preferred. Why la the preferred
selling at $89 and the common at $106? It
Is the hope of the future; It Is atock ma
nlpulatlona. It Is uncsrtsln and fluctuat
ing.
No, the rule Is that ths board csn tske
Into conslderstton all of these different
Items that I bave enumerated and then
form their best Judgment from all the cir
cumstances In the caae. I mean to aay
tbat If. It was conclusively shown that the
valuation was bared solely upon the net
earnings, or capitalization of the net earn
lnga, and no other elements taken Into
consideration. It would be absolutely void,
because It would be an income tag and be
cauae It would be a tax upon the labor and
good will. The labor Is what so largely
contributes to the returns, Independent of
the tangible property of the company. Be
cauae tt Is an arbitrary method of dis
tributing tbe earnings on the various divi
sions and they do not correctly represent
the net earnings ot Nebraska lines tn any
particular locality. Because, It you should
capitalise the earnings, you would Include
all of Its localized property, and the value
ot It does not appear and could not appear.
Now, what are theae localized values? Mr.
White, In his argument, clearly and forcibly
ahowed to the court that from 62 per cent
to 67 per cent of tbe operating expenaea of
the roads were Incurred for lsbor. There
are about 900,000 laborers In the employ
of the railroads of the United, with 4,000,000
depending upon them. Nearly one-twentieth
ot the people of the United States de
pendent upon service in the railroads
nearly 4,000 in the employ of tbe Union Pa
clflo railroad In this state alone. Tou can
not tax labor. Localised values also are
the headquarters, the shops, the good will
end the good management, and tbe skill and
ability and business enterprise, all of which
enter Into the net earnings. These cannot
be taxed and are not taxed In the case of
natural persons, and therefore could not be
In the case of corporations.
If the railroad permits Its road to run
down In order to show large earnlnga, the
property Is actually worth less. Yet on
a capitalization on the basil of net earn
lngs It would be worth more. On the
other hand. If the company would exhaust
Its earnings In Improving its property, a
capitalization on the basis of the earnings
would show It to be of less value. That
would be nothing more or leks than an
attempt to make an Item of evidence an
arbitrary formuja for the aasessment of
railroads. These are a few of the con
siderations which show that a capitaliza
tion of the net earnings Is not a rule and
cannot be a rule, and there Is no court
tn the land that haa said it can be a rule.
Earnings can only be taken into consider
ation. We come down to the next question.
whtch Is one of the Important ones In this
case. Did the board of equalization as
sess the franchisee of theae corporations?
We insist that it certainly did. That
there was no way for It to make any
assessment of the properties of these rail
roads without taking Into consideration
what la denominated "franchlae." "pre
rogative," rights, stc. That it was a phys
ical impossibility in the act of assessment
ta separate It or segregate It, and that
they did take Into consideration these
franchises. The court will, of course, bear
in mind It Is not a queatlon whether tbe
board took It Into consideration In a man
ner aatlsfactory to this court, or did it
skillfully, or whether It did It In a way
that thla court would have done It. Did
they do It? If they did. that Is the end
of this case. This court cannot substi
tute Us Judgment for tbat of thla tribunal.
If It will, tbess applications upon such a
showing as appsars here now, the first
thing we know It will be running all of
tha departments of tbe state, which are
not within the Jurisdiction of this co
ordinate branch of tbe government.
Did it assess tbeee franchises? It would
bave been impossible for the board to have
done other than assess the franchises, be
cause it eould not say tbat It assessed the
rails aa Iron, the ties as wood, ths super
structure as material and the whole prop
erty as dead. Inanimate and lifeless. The
respondents state in their answer, and state
before you, that they assessed the railroad
corporations as going, live concerns, snd
that theae Inanimate properties wsre being
used. If they did not take these thlncs
Into consideration, then, if your honora
pleaae, the assessment that was placed as
upon dead and Inanimate property was ex
tortionate and could be set aalde upon that
ground. i
Let me give a few Illustrations, taken
from the evidence, to show that they neces
sarily took Into consideration tbe fran
chises. Tbe assessment of the Burlington
ft Missouri main line from Plattamouth to
Kearney was fixed at a valuation of $10,530
a mile, while the assessed valuation of the
Grand Island. Wyoming ft Central divi
sion of the same company was
assessed at $3,400. I bave selected
these two lines because between
these two points they are praotically of
the aame phyalcal value, that Is, neither
of. these lines hss any very expensive or
valuable improvements, except at Lincoln.
possibly. In other respects they are about
the same, the same weight ot rails, the
ssme ordinary Improvements, the aame
shops and the same stations. Ths Grand
Island, Wyoming ft Central road also does
a transcontinental or through business.
carries through trains to the Northern Pa
clflo and Is used for similar purposes as
the line from Plattamouth to Kearney. Tbe
difference In ' the aassssed valuation be
tween theae two can only be accounted for
by the fact that the report of the audi tor
ot public accounts shows tbat tba net eaarn-
log per mile Is $12,860 on the main Hue,
while the Grand Island, Wyoming ft Central
ahowa tt was operated at a loaa ot $346 for
the aame year. One operated at a proflt
and the other at a loss. Did tbey aeaess
tha same phyalcal propertlea? Tbey took
Into conalderatton the earnlnga and the ca
pacity to earn, that they were moving con
cerns, or else thsy could not rlghtf.ilfy
bavs assessed these roads similarly tttiiated
In the same atate, with like tangible jrop
erty and doing a like business, wl'h sicb
marked disparity. They took into con
sideration the earnings.. What are (he
earnings? Is tbat tangible property?
What la tha capacity to earn? Is that
tangible property? No, if -your honors
please, It Is Intangible, It partakes of the
nature of prerogative or a franchlae or
whatever It may be denominated.'
Now, take the cost of reproduction. We
do not lnalat that the coat of reproduction
ahowa the value ot the road. We eimply
say that the coat of reproduction Is one of
the ttema of evidence. This Is the view
that waa expreaaed In the Amoa case, that
went up from thla atate, with which, of
course, your honora are familiar. Tbe su
preme court la that caae says It ia all a
matter of opinion. There ia no arbitrary
rule. As to the cost of reproduction I al
lude particularly to tbe Union Pacific, be
cauae we bave here evidence relative to
the property. I have evidence which waa
placed before thia board In the testimony
of Mr. Berry, and which m given In the
COURT
the Mandamus
' vm
suit of the state t Nebraska to collect the
penalties for violation ot the maximum
schedule of ratea. There was no desire to
put this value either up or down. It was
the desire of Mr. Berry to tell the truth,
and he told the truth. It made no differ
ence to htm whether it waa a rate cass or
whether it waa an asaesament caae, hs sim
ply had his facta and figures, which he had
taken tbe nereeeary time to prepare. He
swore tbat tbe cost of reproduction ot the
Union Pacific railroad In the etats of Ne
braska would be $21,653,057, or $30,239 a
mile. That Is the entire cost of the repro
duction ot the physical property ot the
Union Paclflo In the state ot Nebraska.
There are 947.66 miles of tbe mala line and
branch line of 'the Union Pacific in the
state, and the property Is assessed at
$9,847 a mile for the main line and $3,500
a mile for branches, being an average of
$6,572 a mile. It It la assessed as we claim
all other property In the state of Nebraaka
Is, on a ratio or standard of one-ninth or
one-tenth of the value, the value of tbrft
per mils would be $3,024 instead of $6,572
a mile. On the basis ot one-sixth, the dif
ference would be $1,611 a mile.
Now, what la this difference? $3,024
a mile on the basis of one-tenth and
$1,636 a mile on the basis ot one-sixth was
necessarily the amount the board asaessed
for the franchises, for the going, moving
concern, for earnings and earning capacity.
We bave heard in this room charges
hurled against the board and against rail
road officials, that tbey are In a eomb'ne
to rob the people, that they are dishonestly
working for their employers, and they
Charge that Mr. Weston and Mr. Btuefer
are moving about In the darkness of
Egyptian midnight. Mr. Harrington hie
aald to this court'
I will prove to the satisfaction of the
court bv the stock and bond Issue that
the Union Pacific Is worth $100,000 per
mile. I have studied the question. - I am
Informed. It haa been interesting to me.
I have appeared before these boards and
expect to appear again, and I know what
1 am talking about.
Let us see It Mr. Harrington ta moving
In the bright light of Intelligence. I as
sert that the darkness which, Mr. Sltneral
says that Mr, Btuefer and Mr. Weston are
wandering In Is aa a halo of light to tbe
darkness In which Mr.. Harrington gropes.
He moves as It he waa In the Impenetrable
darkness ot the deepest dungeon that oould
be found during the reign of the Spanish
Inquisition.
I would like to have the court look at
these tables. The bond and stock Issue of
the Union Paclflo Is lndlssolubly connected
with the bond and atock Issue of the Bhort
Line and the Oregon Railroad and Naviga
tion company. There Is no war tind no
man, Mr. Harrington or anyone else, can
segregate them, because these properties
are Intertwined and interwoven. Because
whatever stock and bond iasue of the
Union Paclflo there la covers all of theae
properties.
First, what is that issue, and what does
It cover? It covers many, many properties,
not only the mileage of the Union Pacific,
but the Short Line and the Navigation com
pany. . The Union Paclflo with thla Issue
haa become the owner by purchaae of a
large number of "other propertlea, depot
companies, elevator' companies, water
works companjea,' stock and bonds In other
railroad companies' feeders to Its lines,
all operated aa Independent companies and
corporation. It purchased them at the
sale, purchased the stock of these differ
ent corporations with these lssusa ot its
stocks and bonds. " It purchased tock in
the Oregon Short Line. It purchased stock
In the Southern Paclflo. It purchaaed stock
In the Northern Paclflc. It purchaaed some
eight or nine water works companies, in
dependent companies. The elevator ' at
Council Bluffs, ths elevator at Omaha,
union depots at Denver, Cheyenne, Ogden,
Atchison and Leavenworth, coal compa
nies. These are ' Independent companies
with Indepsndent property, and are sub
ject to assessment in the different states
in which they exist. Will your honors turn
to the map, please, found In the back of
this report, as an evidence of this state
ment'' The red W the Union Pacific - The
blue Is the Oregon Bhort Line. The orange
is the Navigation company. Tbe "green is
the . Southern Paclflc. Their bond and
stock Issues cover all of these properties,
and it covera the land grant lands. In
addition to the enumeration of the com
panies which appear upon pages IS and 19,
from which Mr. Harrington makes hla de
duction, and asserts to this court tbat hs
figures out the stock and bond Issue at
$100,000 a mile. The companies are there
enumerated, depot companies, water works
companies, coal companies and land com
panies. I have prepared two statements, one ot
which appears In my brief (and I thought
that was aa clear and pellucid as a moun
tain strsam), hut It brought about ao much
muddlneas and obscurity on ths part of
Mr. Harrington that I . prepared another
statement in another way. Take the total
amount of the bond laaue of the Union Pa
clflc, Oregon Bhort Line and Oregon Navi
gation company and you will find that In
tbe first column at tha top of page IS, the
total outstanding of the bond issue. It is
figured down to a total, Union Paclflo and
auxiliary lines. $331,279,809; that U the
total outstanding bond lssus. This, to
gether with the stock laaue covers all these
properties that are shown upon the map;
covera all ot these properties and was used
to purchase these different properties; use4
to purchase an interest in the Union eleva
tor at Council Bluffs, Union Elevator at
Omaha, the Boseman Coal company, Green
River Waterworks company, Leavenworth
Union depot, Rattleanake Creek Water com
pany. Union depot at Denver and at Kan
aaa City and many others, and all Inde
pendent companies having their propertlea
In different states and subject to taxation
in the different etates, but owned by the
Union Paclflc and purchaaed by the bond
Issue of $331,279,800 and stock Issue of $263.
999,000. The stock issue la shown on the
page below and is $263,999,000. Add those
together and we find we have $595,278,800
aa the total atock and bond Issue for all ot
theae purposes. Is that bond lssus to cover
simply the 1.000 miles 'of the railroad sys
tem ot the Union Paclflo? No.
Underetand. please, your honors, we do
not say thla ia the way to find the value
and we have not insisted upon It. But Mr.
Harrington aays "this is the way to find
tbe value of the road." We aay It la not
the value of the road at all. We simply
say the stock and bond lssus Is an Item of
evidence merely. We do not say that Is
ths only way to find the value of a rail
road or the real way. All of that $595,000,
000 of stocks and bonds Is Issued and here
It shows what waa done with It. It pur
chaaed all of theae properties, ao that now
the Union Pacific, Oregon Short Line and
Oregon Railroad ft Navigation company
have In their poeaeaslon and own, theae
different securities, which amount to $332,
631,259.17. Tbe value of these securities
must be deducted became, if you are adopt
log a method of finding the value according
to the atock and bond laaue, you muat eon
fine the amount of the stock and bonds
that are laaued aolely and simply to ecver
tbe railroad mileage. Tou cannot apply the
amount of value of slocks and bonds Is
sued, which are used for the purchase of
other properties.
We have taken out the land aaaets, valued
at t5.3S0,V.3.96, and we are charged with
bad faith In doing so. The lande are sub
ject to assessment locally, and outside ot
the railroad property, and then, aa the
schedule shows, the companies own water
rights and boata from Portland to San
Francisco, and we have made the beet esti
mate we can ot tbe value ot thoae at $3,000,
000, becauao they are subject to asseesmeat
locally and outside of railroad property.
These two Items, amounting to $8,350,153.93,
must be deducted. This leaves $254,297,
186 63. How la this to be divided? it would
be ridiculously and manifestly wrong to sp
ply this to tbe 8,000 miles of the Union Pa
cific Railroad company. It covera the en
tire mileage ot all three of these roade. It
covera all ot thla railroad property, the
railroad property of theae three eompanlea.
We deduct the value of the securities of ths
other companies, and to find, under their
theory, the value of the road, according to
the atock and bond Issue, you must divide
tble $254,297,186.68 by the total mileage of
the three roads, which is 8,679.8, and this
gives us $46,674 aa the amount ot bonds and
stocks per mile.
Mr. Harrington haa charged the Union
Pacific as tha worst alnner of all, guilty of
fraud, and other counael have charged the
public officials and railroad officials with
fraud and crime. This he says Is because
the stock and bond Issue Is $100,009 psr
mile! Why, these gentlemen are not even
stately murderers or graceful assassins ot
the characters of men they are bungling
butchers. How supremely ridiculous Is their
contention!
Suppose tbe Llndell hotel In Lincoln wss
owned by a corporation, capitalized for
$100,000, and the corporation called the
"Llndell Hotel company;" and the Lincoln
hotel was owned by a corporation, capital
ized for $100,000, and called the "Lincoln
Hotel company." Tbe Llndell Hotel com
pany desires to buy the Lincoln hotel and
can get It for $100,000. It holds a meeting
of the stockholders and board of directors;
records are made; they take corporate ac
tion, increase their capital atock $100,000
and with that buy the capital stocw. of the
Lincoln Hotel company and become the
owner of that property. Mr. Harrington
contends that ths liabilities ot the Llndell
Hotel company are $300,000 of stock Issue.
and that the additional stock Issued by the
Llndell Hotel company and the additional
stock which it purchased from the Lincoln
Hotel company are liabilities Instead ot as
sets. And. If we desire to find the value of
the Llndell hotel by this stock and bond
leaue he would aay the Llndell hotel Is
worth $300,000. These mathematlca are per
fectly rldlcuous, and yet this Is tba basts of
the cry of fraud. When you want to find
the mileage of all the roads upon te stock
snd bond Issue you cannot confine It to
Union Paclflo mileage, it must extend over
will uiu jyi UfCI t Je '11
Let us make another compilation. Take
the last column on pagea 18 and 19. It'
shows "balance afloat." That means out
side, not In the treasury ot the company, not
owned by the company, but owned by out-'
alders and afloat. Tou will find that the
Union Paclflo and lta auxiliary companies
nave bonds afloat outstanding of $248,220,000
and a total of stocks afloat of $201,638,744.
These added make a total of $449,859,744 of
stocks and bonds of these three companies
outstanding.
What do these three companies have for'
that? They have the bonds and atock of
all theso othsr companies. Tou will find In
the column headed "Total owned by the
three companies" the following:
Bonds of other nil
pames $ 4.876,904 00
n vi oumr companies U.SZ1.700 00
Ol" t A t a 1 a tn in, uv. aa
stocks of other railroad com
panies 187,290.00 00
Stocks or other companies 9,773,298 67
Or a total nf ai 7 m i ooa 7
Grand total of ; I87i212.'202 61
whloh these three companies have in thetr
possession aa assets and which represent
properties other than the railroad mileage
of these three companies.
So to arrive, if you desire, at the valua
tion of the railroad property, according to
the atock and bonds, you must deduct from
the total stock and bonds afloat, of $449,
859,744, the amount ot the bonds and stocks
representing the values of the other prop
erties, $187,212,202.67. which leaves $262,647,
641.13, and from this must be made a fur-,
ther deduction of the land aaaets and water
line assets amounting to $8,860,853.95. And
you have a balance of $254,297,187.38, repre
senting the railroad mileage of the three
companies. Divide thla by tbe mlleaa-e.
6,679.83. and it gives $45,674.
This Is another way of ahowlng that tha
stock and bond issue of . this company is
$45,674 per mile. If your honora please, I
ask you to take this fourth annual report
and examine It In. every feature and In
every way. It has besn put In evidence by
the relators for the purpose of showing the
stock and bond Issue.
All of the courts and counael for relatora
say that the maximum valuation la tha
atock laaued and bonded Indebtedness. Tou
take the Issue of stock and the bonded
debt, not the current expense debt, and
mat represents the extreme value of the
property of the corporation, and so for that
purpose they have taken the stocks and
bonds of the Union Paclflo for the purpose
of showing that It Is worth $120,000 a mile.
But It Is not so. It Is not In tbe figures.
I call attention to page 4 of tbe annual re
port, where reference Is made to the Issue
ot ths convertible 4 per cent bonds. "Of
these convertible bonds $6,043,000 have been
converted Into common stock, leaving out
standing $93,957,000, agalnat which an equal
amount of unlaaued common stock ia re
served," and now in ths hands of tbe
treasurer.
Mr. Harrington, In hla queatlon to Mr.
Weston and Mr. Btuefer,. complained and
aaaerted tbat $10,000,000 of the bond Issue
of the Union Paclflo Land company had
been deducted in our statement. Theae
bonds are owned by tbe Union Paclflo Rail
road company and are deducted from the
total atock and bond lasue because the
lands arc assessed separately. Tou will
find In our statement that the Union Pa
clflo Railroad company's lands are also
deducted. They are not returned to the
state board for assessment. They are as
sessed locally tn ths different states in
which tbe lines run and In which the
lands are situated.
Mr. Harrington, In tbs examination ot
Mr, Weaton, aays, "Didn't you know, Mr.
Weston, that theae Improvements and bet
terments were paid for out ot tbe earnlnga
ot tbe company? Didn't you know that?"
Mr. Weston said: "No, I did not know
that." Is there any proof ot that? He
asserts that. What did be want to have
this court understand? Waa that for tha
purpoae of being vicious in addition to
charging crime upon tbe part of Mr. Wes
ton? Pags 6 of this document, that they
put 1a evidence themselves, being the
fourth annual report of the Union Paclflo
railroad, states aa follows:
The proceeds of all securities sold havs
been applied toward the building of new
lines, tor betterments and new equipment,
snd for the acquisition ot stocks of the
Southern Paclflo and Northern Paclflo com
panies, as stated below.
Our improvements and betterments were
paid for out of the stock and bond lssus,
and not out ot the earnlnga, and I ask
counsel and the representatives of ths
relators to prove their statement.
I can only very hurriedly and very briefly
state our poattloa with reference to section
12. I have abstracted It and would like ta
argue It, but must give way to my asso
ciates and ths othsr friends of tbe court.
Section 11 Is not applicable to railroad
corporations at all. It your honors, please,
that is the section which demands the re
port and return of the capital atock ot all
corporations Incorporated In the state. It
Is not applicable to railroads at all. I deny
the proposition that there baa ever been
any legislative enactment tn pursuance ot
tbe ronatltutlonal mandate fixing a rule for
ascertaining ths value, of ths franchisee of
railroad. It Is all now in a chaotic con
dition. But, for ths purpoaea of thla argu
ment, I will assume that some place, some
where or somehow In the different statutes
of ths state ot Nebraaka tha board has the
right to aseesa the franchlaee of the rail
roads, or rather to take the franchlae Into
consideration In determining the value ot
rallroada. We must keep clearly In mind
ths mode ot ascertaining the value of the
property and the mode of assessing that
property. There are two distinct propoal
tlons. At the time of the passage ot sec
tion 81, tn 1879. It was then a very doubtful
question as to whether frsnchlses In any
way separately and apart could be taken
Into consideration with the assessment ot
properties. Bo It wss very clear that the
leglatature never intended aection 82 to
apply to railroad corporatlona or corpora
tlona organised outalds of thla state. Fur
ther, section 1, 1 think It Is. ot the revenue
act relates to capital stock of corporatlona
Incorporated under tbe laws of the atate.
Ia section 12 It enumerates all ot the cor
porations, steamboats, express eompanlea,
street railways, etc., but there Is no men
tion ot railroads at all. "The inclusion of
one Is the exclnsion of all others." By
this process of elimination the railroads
are excluded, and section 33 Itself says
corporations "Incorporated under tbe laws
of this stats. Bo that wherever there Is a
reference to the capital stock of a corpora
tion for the purpose of assessment In any
of the statutes of Nebraska, tt refers to
corporatlona organized under tbe lawa ot
the atate of Nebraska and not corporations
Incorporated elsewhere. And how striking
is this fact When w get to aectlon 19.
where the legislature used the peculiar
phrase and language including "corpora
tions Incorporated In other states, whether
Incorporated under the laws' ot this state
or not," desiring evidently to give peculiar
significance and emphasis to that phrase,
because in aection 39 It Is "whether In
corporated under the laws of this state or
not." '
So that If there Is any rule or any
statute .for the . aasessment of tbe fran
chises of railroads it must necessarily be
by Sections 39 and 40, and ws say for the
purpose of this argument tbat the board,
being an assessor, assessed all of the prop
erties of the ratlroada. We say. It the con
tention Is that the assessment Is mads
under sections 19 and 40 because that
power Is given to the board, there Is where
the power Ilea and la lodged. Well, how
la that to be exercised? How are they
to assess the -capital atock? There fcs no
rule-. We have in aection 12 a proceeding
somewhat explicit and definite, but In refer
ence to railroads, there Is no ruls at all.
The leglslaturs then, at least having a
doubt aa to the power and ability or au
thority to assess franchises, left the power
of assessment -to the . board to fix In its
own way by no fixed or arbitrary rule. It
is left with the board tor assessment in
Its own peculiar way, by no rule:
To recapitulate my proposition, I aay
under section 32 It is applicable to cor
porations organized in tbe state of Ne
braaka. It was not, meant to apply to rail
road corporatlona, because they are not
mentioned, and because confined to cor
porations incorporated in thla state. While
again section 19 particularly refers to cor
poratlona whether Incorporated in thla atate
or not If it ia under section to it is leu
to the sound discretion ot the board and the
board has told this court that it took these
things Into conalderatton; that It exercised
Its beat Judgment and made the aaaeaament
accordingly.
We oome next to the particularly Impor
tant cry and the charges are rung upon It.
Don't you know the Union Paclflo was a
bankrupt corporation? Don't you know it
wasn't earning anything? Don't you know
Its franchise was taken away from It? Now
it la a new. corporation, with a right of
franchise, the right to collect tolls and
make charges." Tbe Union Paclflo never
lost lta franchise. It has always collected
tolls, freight and pasaengers. There Is no
difference now. It went along Just the same.
Ihey aay, .'.'Look at lta- Improvementa.
Look at- lta betterments and lta earnings
and the assessments are the aame now
as ten years ago no increase," and that la
taken up in every varied form that can be
Imagined and It is poured down from the
lips 'of counsel aa It In a lava torrent ot
fevor frenzy. He was so agitated about It
he could not control his conduct in assail
ing good and upright men who have borne
good namea in' the communities in whloh'
they have . lived. . Who have never before
been accused ot wrong doing and who have
discharged, all tbe dutlea of their station
to the best of their ability for tbe last
twenty-five years. I will show In a fsw
minutes why It has not been Increased. Be
cause there has been auch a marked In
crease ot all the propertlea ot thla great
and growing state of Nebraaka; that there
has been and had to be to conform to the
dominating maxim of uniformity a reduc
tion in the assessment and consequently In
tbe taxation. ' But la that reduction, if
your honora please, the railroads have
not had their fair share and proportion.
These gentlemen absolutely - seem to ex
clude from thetr : reasoning tbat element
in their arguments. They fall to think of
it when" they refer to tha condition of the
propertlea in thia atate.
These figures are from the auditor's re
port and from tbe Interstate Commerce
commission;' they are In evidence, every
item ot thorn, and prove conclusively that
there la nothing . whatever ,ln their com
plaint. The decrease in the last eight yeara
In tbe assesanisnt of all kinds of property
other than railroads haa bsen 11.5 per cent.
If you have 1.000 farms ia 1891 and have
6,000 farms in 1901, you have more prop
erty to assess, consequently you csn re
duce your levy. It wss reduced 13.6 per
cent on all property other than railroads.
Rallroada in this time were only reduced
7.6 per cent in their valuation. Now, on
tbs otbsr hand, the increase ta lands
assessed in the state of Nebraaka was 12.1
per cent; cattle, 60 per cent; sheep, 140
per cent; hogs, 10 per eent, and the in
crease In railroad property, 1.1 per cent.
Bo, while there haa been a decrease In the
assessed valuation of all property othsr
than rallroada of 12.5 per cent, there has
been a decrease In aaaeaaed valuation ot
railroads of only T t per cent. There hss
been an Increase ot from 60 to 140 per cent
of other property. In the state, and only
2.1 per cent of railroads we are talking
now of tangible property.
To illustrate It again by these remark
able figures, taken from tbe census from
roa
jQ Cxi STB
DRINK
Natural
Laxative
ConyacMcinoij
When buying be sure and ns
Otherwise If yen ask simply for Hunyadl Water, yon may be imposed npon.
LABEL ON BOTTLB 14
the year 18M to the year 1900. Tbe farm
propertlea In the state of Nebraaka In !
1SP0 were worth $51l.7!Min. In lon. $747.- I
(60,057, or an Increase of $236,150,247, or
46 per rent. Farm lamia and Improvtmenta
In 1890, $402,358,913: In 1900. $f.77,66,0:o. an
Increase ot $:75,1'T1,170, an lnrree.se of 47
per rent; farm Implements and machinery,
tn 1890. $16.46S.977: In 1900, $24,940,450, an
Increaee of 61.4 per rent; live stork on
farms $92,971,920 In 1890. and In ii'OO $145,
149,667. an Increaae of $52,377.6(7. or 66.1
per rent; farm producta In 1890 $16,83?,612.
In 1900 $162,698,356. an Increase of $95.
858.769, or 143.4 per cent. And jet the
asseaamenta for 1900 on thoae properties
were less than the assessment for 1890.
These are the facts and figures before this
eourt. Tou have for the farm products an
Increase of 143 per cent, very nearly, and
the whole averaging 45 per cent on a'l
piopettlea in this state, and yet the aa
aeaament was less In 1900 than It waa ta
1890. This must all be considered rela
tively. One member of thla court was on
ths bosrd tor tour years, and he caa
readily appreciate the force of tbat. Ton
cannot fix It In any arbitrary way. Tou
bare to take Into consideration all of theae
things, and 'therefore you have to do it
relatively. If they reduce for other prop
ertlea, they muat reduce tor railroads.
There la no evidence ot abaolute fraud, aa
I have said. The only possible way any
fraud could be claimed would be, aa haa
been ssld In some ot the authorities, where
there la such a striking disparity In ths as
aeaament aa that a legal fraud could be
found. For Instance. If the board aaaeaaed
thesa railroads at $100 a mile such a etrlk
lng disparity In the aaaeaament might be
held fraudulent. It ka now my purpose to
show that the Integrity of this aasaaament.
ths reault of thla aaaeaament. Is fair, meaa
ured by any rule you want to take, or
measured by any criterion you want to es
tablish. It was tn fair proportion to all the
other assessments. It does not make any
difference If theae gentlemen cannot figure
It out the way counsel would like to have it
figured out. What waa the final reault?
The claim that the valuation la lower than
It waa la almply due to the fact rnat of the
Inoreaae tn the volume of the property
which Is subject to taxation. Ws have said
tbat tbe ratio ot aaaeaament on property la
thla state ta now lh the neighborhood of
one-ninth and one-tenth and of tbe ratl
roada between one-fifth and one-atxtb.
Relatora to disprove thla put In evidence
the letters from the coanty clerks. I oan
only aay to your honors that It does not
make any difference what the county clerks
reported cr what they agreed to do. It la
what they did do, and these very letters
show what they agreed, to, do and then
what they did do, Mr. Harrington haa read
you the compilation Ot these letters. I
have taken the time to select a few and I
will read those to show you Just what they
did do. Tour honors know that tn 1891 the
lands In this atate were assessed at $3.61,
horses at $7.01.. cattle at $4.43. mules at
$8.07, hogs at $1.06 and sheep at 68 cents,
and down in your innermost heart and In
your conscience you know that that ta not
more than one-tenth of the value of theae
properties. The board knew this, for it had
the reports before It. We picked out twelve
or fourteen ot these letters to Illustrate. The
assessors of Butler county agreed on one
seventh. When they met It was moved and
seconded that all property be assessed at
ons-aeventh of the full value. That was
carried. Then it . was "moved that $26
worth of household furniture be exempt
from taxation. Carried." Then it waa
moved that 600 bushels of corn be exempt
and all over (00 bushels be assessed at S
cents' less than market price the first day ot
April. Carried." Then it waa "moved that
wheat and rye being held for market be
assessed. Lost' How perfectly ridiculous
la this all. Here la one from Sidney, Chey
enne county, aaylng.
Mi regard, to the valuea fixed by assessor
they were aa given In my former letter and
one-4hird of that amount was to have been
the true basis on which the assessment wse
to have been made. This waa the motion
carried at their meeting. But I can't tell
what course they may take when they
assess.
Banner county reports that all lands and
personal property la listed at one-third
cash value; that la, that Is what they aald
they would do, but what did they do when
they came to assess? -Improved lands, -5
cents; unimproved lands, 66 cents, horses,
$12, $8 and $6; cattle, $6. $5 and $3; sheep.
60 cents and 90 cents; hogs, $1 per hundred;
yet they said they would assess at one-third
the cash value and they say from $5 to
$11 on horses and t to $6 on cattle, but In
every instance they took the lower price.
Saline county- aays Improved and unim
proved lands In Saline oounty to average
$4 per acre;' horses, imported,. $50 straight;
common one-fourth of $40, one-fourth ot
$20; cattle, $1 per hundred; sheep, 60 cents
psr head; hoga, $1 per hundred. I con
tend that relatora own proof ahows about .
ne-fourth valuation. . .
There waa submitted here a statement
of the lands, prepared for the years 1890
and 1891 In a number of tbe counties ot tbe
atate of Nebraska. Tor instance, for Dodge
county the record ahows the conslderstton
Is $111,850 and the assessment wsa $9,334,
which Is about one-twelfth, and the agree
ment was one-fourth. These are taken from
tbe record. Saunders county, considera
tion $54,550, assessment $4,680, or about
one-twelfth, and the agreement was one
fifth to one-tenth. Butler county, consid
eration $97,098, asaessmsnf $7,204, or about
one-fourteenth; the agreement was one
seventh. York county, $110,720, aasessment
$11,401, one-tenth; . one-seventh waa the
agreement. Adams county. $63,000, aa
sessment $8,975; about one-seventh, and the
agreement was one-fifth. Fillmore county,
$35,960, assessment $2,800; about one
eleventh. Cuming county, $94,860, as
aesment $8,898; about one-eleventh, and
the agroement was one-fifth. Antelope
county. $42,425, assessment $2,780; about
one-fifteenth. Colfax county, $98420, as
sessment $8,986; about . one-eleventh.
Platte county. $69,846, assessmsnt $5,687,
about, one-twelfth. Boons county, $79,50f,
aasessment $7,271; about one-eleventh.
Seward county, $65,100, assessment $5,942;
about one-eighth, and the agreement was
one-fifth. Total, $903.61$. Total assessment,
$88,908, or about one-eleventh.
I contend that these records show that all
othsr property is assessed In this state
from one-ninth to one-eleventh and we
have endeavored to show your honors that
tbs assessment of railroads la on ths basis
of one-sixth to one-seven tb. Tbe Indis
putable, uncontradicted and unimpeachable
record Is that they pay 16.40 per cent ot all
of the taxea ot thla atate. If they do, tbey
should own between cne-aixth and one
seventh of this great stste of Nebraska, be
cauae, if they pay 15 per cent ot tbe tax
(Continued on Ninth Page.)
PAT D M
Mineral
Water.
the full nsme Hwsayskslf Jano.
BLUB, WITH RED CENTRE.
X
1 1
