>v1
THE KANSAS PACIFIC RAILWAY
V & *
AND ITS .
RELATIONS
TO THE
GOVERNMENT OF THE UNITED STATES.
To the Honorable the Secretary of the Interior of the United States,
Washington, D.C. :
Sir : The undersigned Committee of the first-mortgage bond¬
holders of the Kansas Pacific Pail way Company, late the Union
Pacific Pailway, Eastern Division, representing also the Denver
Pacific Pailway and Telegraph Company, respectfully show:
I. That the said Kansas Pacific Pailway Company, having
made default in the payment of the interest-coupons due on its
first-mortgage bonds on the 1st of November, 1873, did make an
agreement with said bondholders, or a majority of them, to fund
certain portions of their accruing interest, and to pay other por¬
tions, issuing certificates of indebtedness for the unpaid portions.
II. That on the.1st of November, 1876, the said Kansas Pacific
Pailway Company made farther default in the payment of the
interest stipulated to be paid under the aforesaid agreement;
and that thereupon—to wit, on the third day of November, 1876—
the. said railway was, by order of the District Court of Shawnee
County, State of Kansas, placed in the hands of receivers.
III. That the aggregate amount of the first-mortgage bonds of
the main line, upon which default has been made, is $12,707,000,
divided as follows : On the Eastern Division, being 140 miles next
west of Kansas City, $2,240,000; on the Middle Division, being the
next 254 miles westward, $4,063,000; on the Western Division,
2
being the remaining 244 miles to Denver, Colorado, $6,404,000;
upon the whole of which there was due on the 1st of February,
1877, the further sum of $2,066,150 as unpaid interest, secured also
by said first mortgage.
IV. That the Government of the United States had issued to
said Kansas Pacific Railway Company, to aid in the construction
of said railway, its six per cent, bonds payable thirty years after
date, to the amount of $6,303,000, and had paid as interest thereon
up to the 1st of April, 1877, the sum of $2,144,902 26 over and
above the sums earned by said railway for Government transporta¬
tion, making a total claim of the Government upon said railway
company to that date of $8,447,902 26, which claim is secured by
a second mortgage upon the Eastern and Middle Divisions of said
railway as aforesaid.
Y. That the first-mortgage bondholders of said railway, re¬
serving to themselves all rights belonging to them in law and
equity, do not desire that the interest and claim of the United
States in said railway under its second mortgage shall be put in
jeopardy or lost, believing that by proper and lawful proceedings
the said railway can be made to earn the interest on its first mort¬
gage and a sufficient surplus to reimburse the claim of the United
States when the same shall become due and payable.
VI. That the act of Congress approved July 1, 1862, and the
several acts amendatory thereof, commonly known as the Pacific
Railway Acts, did expressly and repeatedly provide that the whole
line of railway and branches to be built in pursuance thereof should
be "operated and used for all purposes of communication, travel,
and transportation, so far as the public and Government are con¬
cerned, as one connected and continuous line," "with equal
advantages and facilities as to rates, time, and transportation,
without any discrimination of any kind in favor of the road or
business of any or either of said companies, or adverse to the road
or business of any or either of the others" ; and that it was under
these j)i'0visions, and with this end in view, that the Government
issued its bonds, to the amount of about sixty millions of dollars, to
the Union Pacific Railroad Company, the Kansas Pacific Railway
Company, and the Central Pacific Railroad Company of California,
and that private individuals invested their money in the mortgage-
bonds of said companies.
VII. That the principal reason why the Kansas Pacific RajJ^ty
Company has been compelled to default on its first-mortgage bonds;
thereby impairing the security of the United States, as above men-,
tioned, is that the Union Pacific Railroad Company, which "is in
like manner indebted to the United States in the aggregate sum of
$37,828,247 21, has persistently refused to transport passengers and
freight in connection with the Kansas Pacific Railway Company
and the Denver Pacific Railway and Telegraph Company at their
point of intersection at Cheyenne, on the terms and in the man¬
ner required by the several acts of Congress applicable thereto,
to wit: the 12th section of the act of July 1, 1862 ; the 15th section
. of the act of July 2, 1864 ; the act of March 3, 1869; and the act
of June 20, 1874.
VIII. That the two last-mentioned acts did particularly desig¬
nate the Kansas Pacific Railway and the Denver Pacific Railway as
a part of the connected and continuous line between the Missouri
River and the Pacific Ocean intersecting with the Union Pacific
Railroad at Cheyenne, required to be operated, so far as the public
and the Government are concerned, without any discrimination of
any kind in favor of or adverse to the road or business of any or
either of said companies.
IX. That the undersigned committee are informed and believe,
and they assert, that the Kansas Pacific Railway Company and the
Denver Pacific Railway and Telegraph Company have often re¬
quested the Union Pacific Railroad Company to observe and abide
by such provisions of said acts of Congress, but that the said Union
Pacific Railway Company has wholly disregarded such requests
and denied its obligation to conform to such provisions ; but, on
the contrary, has established and still maintains unlawful and dis¬
criminating rates of fare for passengers, and of freight for merchan¬
dise, to and from the Kansas Pacific Railway Company and the
Denver Pacific Railway Company at their point of intersection at
Cheyenne.
X. That the Union Pacific Railroad Company has, in violation of
said acts of Congress, fixed its charges between the western ter¬
minus at Ogden and the point of intersection aforesaid at Cheyenne,
being a distance of 516 miles, at unlawful figures, in many cases as
high as, and in some cases even higher than, for transportation over
the whole length of their road from Ogden to Omaha, a distance of
1,032 miles, and in all cases out of all proportion to the distance tra¬
versed, thereby destroying the business of the Kansas Pacific Rail¬
way and the Denver Pacific Railway as a part of one continuous
and connected line, forcing the Kansas Pacific Railway to default
4
on its first-mortgage bonds, impairing and jeopardizing the security
of the United States in said property, and creating a monopoly
odious and dangerous to the public, in total disregard of the letter
and spirit of the acts of Congress above mentioned.
XI. That the Union Pacific Railroad Company has sought to
justify its unlawful discrimination in charges as aforesaid by
alleging that the portion of its road west of Cheyenne was more
difficult and costly of construction than the portion east of that
point. It is respectfully submitted that, even if this be a sufficient
reason for a greater mileage charge on that portion of its road west
of Cheyenne, it is nevertheless not a reason for a discriminating
charge adverse to the Kansas Pacific and Denver Pacific Railways ;
and considering that the additional cost of construction mentioned
was paid principally by bonds of the United States, issued at
the rate of $32,000 and $48,000 per mile for such portion of said
railway, the distinction sought to be made is equally frivolous
and unauthorized.
XII. That it is unjust and against public policy to compel
travellers and shippers to go to Omaha as a starting-point for the
Pacific coast, for whom a more advantageous and convenient route
exists ma Kansas City.
XIII. That the Union Pacific Railroad Company, by means of the
monopoly thus unlawfully established, was enabled during the year
1876, notwithstanding the great depression of business in the
country at large, to make net earnings to the amount of $7,618,-
647 64, out of which it has paid interest on its debt (other than its
Government debt) and dividends of eight per cent, on an imagi¬
nary capital of $35,000,000, besides expending large sums in the con¬
struction of branch roads. Such facts prove clearly that the busi¬
ness legitimately belonging to the Pacific railways constructed in
pursuance of the above-mentioned acts of Congress, and intended
to be operated as one connected and continuous line, is sufficient to
enable all of them to meet their obligations, including their obliga¬
tions to the Government, if not unlawfully monopolized by one of
them to the injury of others.
It is manifest from the foregoing facts that the earnings of the
Union Pacific Railroad were acquired largely at the expense of
the Kansas Pacific Railway and of the proprietary interest of
the United States Government therein. Meanwhile, the Kansas
Pacific Railway Company has been reduced to bankruptcy,
and its property has been turned over to receivers, to be ope-
o
rated in trust for the "benefit of the holders of the first-mortgage
bonds.
The holders of these bonds have invested their money on the
faith of the several acts of Congress herein referred to, in the belief
that said acts would be duly obeyed and enforced, and that the
Government of the United States, by reason of its'large pecuniary
interest, amounting eventually to more than 815,000,000, if for no
other reason, would protect them against such flagrant injuries as
have been and are now committed by the Union Pacific Railroad
Company by its infractions of law and justice as above recited.
Instead of foreclosing their several first mortgages, they prefer to
co-operate with the Government of the United States, to the end
that the interests of both may be fully protected.
It is not for the undersigned committee to suggest any policy or
course of action to be pursued by the Government of the United
States in these premises. They feel in duty bound, however, to
make the foregoing representations to the Department having
charge of the relations of the Government to the Pacific Railway
O
Companies, to the end that the Executive may take such steps as
in its wisdom may seem proper and needful.
Subjoining hereto, for convenience, the several laws of Congress
above referred to, and schedules of the discriminating rates of
charges now or heretofore established by the Union Pacific Railroad
Company to and from Cheyenne, herein complained of, and re¬
questing the privilege of further hearing from time to time as may
be consonant with law and justice, we have the honor to subscribe
ourselves your most obedient servants,
By order of the Committee of Nine of first-mortgage bondholders
* of the Kansas Pacific Railway.
[Signed.] L. H. MEYER, Chairman.
ARTEMAS H. HOLMES, Secretary.
Dated New York, April 21, 1877.
6
APPENDIX A.
acts and parts of acts of congress herein referred to.
Act of July 1, 1862, Section 12 [Extract].
. . . The whole line of said railroad and brandies and tele¬
graph shall be operated and nsed for all purposes of communica¬
tion, travel, and transportation, so far as the public and Govern¬
ment are concerned, as one connected, continuous line.
Act of July 2, 1864, Section 15.
Sec. 15. And be it further enacted, That the several companies
authorized to construct the aforesaid roads are hereby required to
operate and use said roads and telegraph for all purposes of com¬
munication, tra vel, and transportation, so far as the public and the
Government are concerned, as one continuous line ; and in such
operation and use to afford and secure to each equal advantages
and facilities as to rates, time, and transportation, without any
discrimination of any kind in favor of the road or business of either
of said companies, or adverse to the road or business of any or
either of the others. ...
Act of March 3, 1869.
AN ACT to authorize the transfer of lands granted to the Union Pacific Railway Company,
Eastern Division, between Denver and the point of its connection with the Union Pacific
Railroad, to the Denver Pacific Railway and Telegraph Company, and to expedite the
- completion of railroads to Denver in the Territory of Colorado.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That the Union
Pacific Railway Company, Eastern Division, be, and it hereby is,
authorized to contract with the Denver Pacific Railway and Tele¬
graph Company, a corporation existing under the laws of the Terri¬
tory of- Colorado, for the construction,-operation, and maintenance
of that part of its line of railroad and telegraph between Denver
City and its point of connection with the Union Pacific Railroad,
which point shall be at Cheyenne, and to adopt the road-bed
i
already graded by said Denver Pacific Railway and Telegraph Com¬
pany as said line, and to grant to said Denver Pacific Railway and
Telegraph Company the perpetual use of its right of way and depot
grounds, and to transfer to it all the rights and privileges, subject
to all the obligations, pertaining to said part of its line.
Sec. 2. And be it further enacted, That the said Union Pacific
Railway Company, Eastern Division, shall extend its railroad and
telegraph to a connection at the city of Denver, so as to form, with
that part of its line herein authorized to be constructed, operated,
and maintained by the Denver Pacific Railway and Telegraph Com¬
pany, a continuous line of railroad and telegraph from Kansas City,
by way of Denver, to Cheyenne. And all the provisions of law for
the operation of the Union Pacific Railroad, its branches and con¬
nections, as a continuous line, without discrimination,-shall apply
the same as if the road from Denver to Cheyenne had been con¬
structed by the said Union Pacific Railway Company, Eastern Divi¬
sion ; but nothing herein shall authorize the said Eastern Division
company to operate the road or to fix the rates of tariff for the
Denver Pacific Railway and Telegraph Compan}7.
Sec. 3. And be it further enacted, That said companies are
hereby authorized to mortgage their respective portions of said
road, as herein defined, for an amount not exceeding $32,000 per
mile, to enable them respectively to borrow money to construct the
same ; and that each of said companies shall receive patents to the
alternate sections of land along their respective lines of road as
herein defined, in like manner and within the same limits as is pro¬
vided by law in the case of lands granted to the Union Pacific Rail¬
way Company, Eastern Division : Provided, That neither of the
companies hereinbefore mentioned shall be entitled to subsidy in
United States bonds, under the provisions of this act.
Approved, March 3, 1869.
Act of June 20, 1874.
AN ACT making additions to the fifteenth section of the act approved July 2, 1864, entitled
"An Act to amend an Act entitled ' An Act to aid in the construction of a railroad and
telegraph line from the Missouri River to the Pacific Ocean, and to secure to the Govern-
ment"the use of the same for postal, military, and other purposes,' approved July 1,
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled, That there
shall be, and is hereby, added to the fifteenth section of the act
approved July second, eighteen hundred and sixty-four, entitled
"An act to amend an Act entitled 'An Act to aid in the construc¬
tion of a railroad and telegraph line from the Missouri River to
the Pacific Ocean, and to secure to the Government the use of the
same for postal, military, and other purposes,' approved July first,
eighteen hundred and sixty-two,", the following words, namely:
6
"And any officer or agent of tlie companies authorized to con¬
struct the aforesaid roads, or of any company engaged in operat¬
ing either of said roads, who shall refuse to operate and use the
road or telegraph under his control, or which he is engaged in
operating, for all purposes of communication, travel, and trans¬
portation, so far as the public and the Government are concerned,
as one continuous line, or shall refuse, in such operation and use,
to afford and secure to each of said roads equal advantages and
facilities as to rates, time, or transportation, without any dis¬
crimination of any kind in favor of, or adverse to, the road or
business of any or either of said companies, shall be deemed guilty
of a misdemeanor, and, upon conviction thereof, shall be fined in
any sum not exceeding one thousand dollars, and may be im¬
prisoned not less than six months. In case of failure or refusal
of the Union Pacific Railroad Company, or either of said branches,
to comply with the requirements of this act and the acts to which
this act is amendatory, the party injured or the company aggrieved
may bring an action in the district or circuit court of the United
States in the Territory, district, or circuit in which any portion of
the road of the defendant may be situated, for damages on account
of such failure or refusal; and, upon recovery, the plaintiff shall
be entitled to judgment for treble the amount of all excess of
freight and fares collected by the defendant, and for treble the
amount of damages sustained by the plaintiff by such failure or
refusal ; and for each and every violation of, or failure to comply
with, the requirements of this act, a new cause of action shall arise;
and in case of suit in any such Territory, district, or circuit, process
may be served upon any agent of the defendant found in the
Territory, district, or circuit in which such suit may be brought,
and such service shall be by the court held to be good and suf¬
ficient ; and it is hereby provided that for all the purposes of said
act, and of the acts amendatory thereof, the railway of the Denver
Pacific Railway and Telegraph Company shall be deemed and
taken to be a part and extension of the road of the Kansas Pacific
Railroad, to the point of junction thereof with the road of the
Union Pacific Railroad Company at Cheyenne, as provided in the
act of March third, eighteen hundred and sixty-nine."
Approved, June 20, 1874.
9
• APPENDIX B.
Discriminating Rates of Passenger Fares and Freight
Charges of the Union Pacific Railroad Company to
and from Cheyenne.
The Kansas Pacific Railway Company, at the time of making its
last demand upon the Union Pacific Railroad Company for a faith¬
ful compliance with the laws of Congress herein recited, ascertained
that the following among other discriminating charges were in force
at the offices of the latter Company at Omaha and Cheyenne :
Through Freights to the Pacific Coast, in cents per 100 pounds.
ARTICLES.
Omaha to Cheyenne to
Ogden, Ogden,
1,032 miles. 516 miles.
Agricultural implements
Aie and beer (in wood)..
Bacon
Bitters
Canned goods
Candles
Coal-oil
Dried fruit
Dry-goods
Paints
Furniture
Hardware '
Household goods
Iron and nails
Liquors (in wood)
Sugar
Stoves
273
101
101
135
78
78
78
135
227
78
273
135
273
78
112
135
101
219
163
163
219
219
191
191
191
219
163
219
191
219
163
191
163
219
10
Local Freights.
ARTICLES.
Between
Omaha and Ogden,
1,032 miles.
•
Between
Cheyenne and Ogden,
516 miles.
Cents per
Per car¬
Cents per
Per car¬
100 lbs.
load.
100 lbs.
load.
Agricultural implements....
230
§219 50
219
§220 00
Bacon
165
245 00
163
290 00
Beans
myi
245 00
163
326 00
Beef (mess)
122 y
245 00
163
326 00
Butter
207
219
Candles
207)4
191
Coal-oil
122)4
245 00
191
326 00
Cheese
207)4
219
Coffee
122 %
163
Dried fruit
207)4
191
Dry-goods
250
219
Drugs
250
219
Earthenware
122^
168 50
219
• 220 00
Fence wire
122)4
163
Furniture
219 50
220 00
Window-glass
122)4
163
Grain
122%
117 50
163
206 00
Hides
168 50
382 00
Iron and nails
122%
245 00
163
220 00
Live stock
168 50
240 00
Lumber
117 50
187 50
Stoves and fixtures
250
279 00
219
240 00
Sugar
122)4
245 00
163
326 00
Passenger Fares.
An enquiry made at tlie office of the Union Pacific Railroad Com¬
pany in New York on the 20th April inst. elicited the answer that
passenger fares were the same from Cheyenne to Ogden (516 miles)
as from Omaha to Ogden (1,032 miles). It has been customary, how¬
ever, for the Union Pacific Railroad Company to charge local rates
(§46 50) on emigrant business coming to Cheyenne via the Kansas
Pacific Railway en route to Ogden, while its charge for the same
business from Omaha to Ogden is only $21 60—or §29 40 more for
516 miles than for 1,032 miles.