Omaha Daily Bee Newspaper, July 18, 1902, Page 7

THE OMAHA DAILY BEE: FRIDAY, JULY 18, 1902. RAILROAD TAXATION IN COURT Arguments of Coumnsel on the Issues Raised im the Mandamus Case Before Nebraska Supreme Court- Argument for the respondents by John N. Baldwin of the Union Pacific law depart- ment as amicus curiae: May it nle e the court, I desire again to exp teful | appreciation of the favor nuua me by the court to appear under the pleasing title of “Its Friend,” to discuss some of the questions involved In this controversy. By this time it s clearly apparent to the eourt that the rafiroads referred to in the application for the writ are particularly, vitally and materially interested in this cause and this court's determination thereof. The importance to the raliroads referred to s apparent because the record already discloses it and I hope even within the limited time allowed me to sbow that these raliroad companies in this great state of Nebraska are interested and have the right to appear here by their representa- tives as (he friends of ghe court to discuss these questions:.-Fisst, because they pay 16 40-100 of all the taxes of the stats; sec- ond, because they pay over 10 per cent of thelr nét earnings in taxes to this state third, because the standard or ratio of val- uation of all property other than that of rallroads in this 1s between one- ninth and one-tenth, gnd that of the rall- roads between one-sfxth and one-) 3 The raliroads havé no desire wha pe taxation, or their full and falr bur- den of the public tax. They could not it they s0 desired.” Their property s Itke Iand, It cannot be removed or concealed; it is open, subject 'to inyestigation. The rallroads have dt heart the interest of the communities they traverse and attempt to merve the same. They desire applied to thelr taxation that dominating maxim, “uniformity of taxation,” or the equal bur- den ‘of taxation. A pyinciple which was announted by Canute the Great in 1035 in that wonderful declaration of his 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 sald: Let those who are noble and those who ln nnt, equally obtain their rights accord- hw- from which no deviation lhlll h. either from fear of me or one of vor ot Ihn Zowertul, or for the purp supplyt treasury, 1 want no money ralsed By injustice: The railroads ap; to and invoke that principle with reference to their case. 1 know 1 am appearing before the highest fudicial tribunal In one of the greatest states of the mightiest republic on earth, and knew before such & tribunal as this sertions will not be taken as testimony, nor mere assurance Logio and evi- @enon will figure much better than the dec- larition of those who assert and those who assure, 1 say this because I shall insist and shall endeavor to show to the court betore I am through that from the beginning to the end of controversy there has been an evident efort to prejudice, to stir, to agitate. We hear the wild cry of ‘grabber,” “shark” and “shirker" ralsed againet state officery ana raliroad I have noted in my brief in commenting upon that of the relators, that the raftroad officlale are charged with being dishonost mep, dishonestly serving their employers. It Is charged in that brief that every public officials that has had anything to do with the assessments of railroads e March 1, 1867, have been counverted into ‘“servants of the railroads,” and as having been gulity of fraud and misfeasance and malfeasance In ‘their offices. 1 read, and I blush T do, that the peopla of the state of Nebraska | bave been charged with ‘“stupidity” and “{ndifferentism.” I have heard it asserted here before this court that the terminal f eflit of the Union Pacific Iroad at Omaha are worth $10,000,000, but your honops bave heard no proof. You have heard it asserted here that the Union Pa- e'fic Railroad company le worth $100,000 & mile, but your honors have heard no proof. It is sald that the Union Pacific has made $4,900,000 of improvements and $3,000,000 in | betterments and pald for them out of its earnings, but your honors have heard no proot. These are some of the statements that have been made before this court by ‘Mr. Harrington and are found on the pages of the record that have been transcribed. Can_we infer from wild gesticulation that thera iy some’ testimony in it? I desire that this court shall consider this case upon the pecord and the testimony. I know that ‘whent it retires to ita chamber that all of the eayings that are foundationless and alry pageant, ad gness. In the short time allowed counsel to pre- \sent this case they have experienced em- barrassment and annoyance in making a se- fection ‘of the different points they desire to présent. The subject of taxation is & wery interesting question and there are very many pleasing phases of it. I do mot claim that, as one of the counsel, I have created anything original relating to the questions fnvolved in this 1 can only say to the mnd that T have, with the assistance of oth- o6, found many interesting facts, but am compelled now simply In a few words to al lude to some of them, as there are so many 1t ‘would be fmpossible for me to allude to | them all. And I felt last night, when going over the points in the record to present, that 1 experienced the same sensation one would in going into a garden to pick a bou- quet_of flowers. pleasure of selecting and holding s tinged by the regret of leav- fog so many beautiful ones behina. Thoss that are mot re’e-red to in oral argument are touched upon in the brief. | Let us.for a moment get back to the real fssues in this case. Without re-stating the character and the full averments of the application for the writ and those in the answer and amended answer, it 1s charged | in effect that the board refused to assess the franchises of these corporations. It has been contended before the court ‘(and the court at the present time bas admitted evidence subject to further cousideration 88 to the extent of the plea), that fraud is charged. The averment that refers to fraud s “that the board grossly and knowingly violated its dutles to the peaple of the te of Nebraska, and to this relator, by disregarding the plaln provision of the constitution and laws of the state of Ne- braska in not assessing the franchises of all the said corporations at their fair valug for taxation for the year 1902. Now, what Is the real fraudulent act charged? The refusal to assess the fran- chises, grossly and kuowingly. Ths gravamen or substance of the charges a that it refused to a the franchis Let us remember that there s no evi- dence before your honors of inherent fraud; there Is no evidence of corruption of any of the offic there is no evi- dence of circumvention or coerclon. It is all negative and inferential, and the owl of counsel agalnst Mr. Weston and Mr. they have been guilty of a e corrupt, aad that they have been “farmed,” and that they have been made “servants of the rail- roads,” Is just as unwarranted as thelr at- tack in thelr brief that all oficlals of this stat Just in the other. It is true that the board did not assess I—Mr. Harrington,” appeared before the board and told it what it should do and what & franchise is, and that it ought to ll is true that “I, even I—Mr. red before the board and told it what it ought to do in this partiou- lar, and that it ought to the fran- chises, and it {s true that the 4 did not comply, as is sald, with their re- quests. Is that fraud? Perhaps it had some doubt as to the ability of these gen- tlemen, or as to their knowledge, or to their information with reference to the question involved. The fact is they wanted this board to assume all knowl- edge and information relating to what Is now one of the most serious and debatable of questions, Publici and boards are all at whether it Is simply & mere power and not an element of property or value, or whether it can create any value. The very cases thess gentlemen rely upon and eite In their brief in the United States supreme court are but the result of a di- vided court. And, further, in the estima- tion of some of the ablest members of the court, in one of the greatest dissenting opinions ever writtes, 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 prinei- ples. ~ Bo, when these gentlemen assumed all Information and all knowledge before the board and attempted to educate it, the board had the right to exercise its judgment in regard to that, and Its refusal was not fraud. It had the right to question the knowledge and information of Mr. Rose- water. For instance, there might have been something before the board at that time that it knew Mr. Rosewater was not Informed upon, as we know now that he has appeared before this ¢ourt to give informa- tion in reference to certain properties and 65 to certain questions Involved, and ye: upon cross-examination here, this educator, acting as an informer here and as one to advise, says, “I don’t even know how the properties, the shops or terminal facilities in the city of Omaha are assessed, whether locally or by the state board,” and gave his opinion ae to the value of t! terminal and yet admitted that he had not seen the new shops. 80, because this board refused to comply with their request, or sald it doubted their ability and doubted the ques- tions and objections that were raised, Is that fraud? Or 1s it fraud because of ite lack of infor- s Mr. Harriogton has , “You don't even know now what the value of a mile of any of these rallroads il No, it did not, and Mr. Harrington does not. No member of this court knows. No man in the United States knows the value of any mile of raliroad in any state in the unifon. I would like to see the color of the eyes of the man that can an- swer that question and subject him to a cross-examination. He may obstinately and obdurately adhere to a statement that it 1s worth $30,000 or $40,000 a mile, but he will do it in the face of the best records and arguments and letters and dissertations It Is simply & mstter of opinion. Mr. Stuefer and Mr. Weston were right about it. They did the best they ecould. It was a matfer of opinlon. It cannmot be determined by any mathematical rule there are no rigld tests or standards. There is no rule to find the value of a wlle of railroad. There is no way fixed In any of the books, There s no way that can bo fixed In any of the books. It is all a matter of opinion. You can take Into con- sideration all information that you can ob- taln. You can take into consideration the track, right-of-way, iron, ties, superstrue- ture, material, g8, gross and net, ind bonds, thé action of other as- all of this information, and then you have to go back to a valuation of it, which is a mere matter of opinion. “‘Why," 1, “just think of this bridge at Omaha ,costing at least a mil- lion.” It can absolutely be reproduced for about $500,000, that {s the evidence here in the testimony of Mr. Berry. He all bridges of the Union Pacific in this state can ‘be reproduced for $1,806,643. This is evidence, not assertion. value, If the court ple: the west half of the Union Pacific bridge at Omaba than a mile out fn Kimball county? That mlle out in Kimball county s just as essential to the 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 Iine. What is its value? How are you going to determine the value of the line if you simply figure up the t of the irom, the cost of the tis ete. You could not possibly get the value. You have to consider it in all {ts environments and all Its remifications. There is no fixed rule—it all comes back to & matter of opinion as the decistons say—as the courts say, as Mr. Steufer and Mr. Weston say ‘They took Into consideration the asse: ment of other assessors and other boards, and that is an llmoll to be taken into conslderation. They say the market price of the stockr and bonds ehould be taken into considera tion. That is an unstable element. Us- derstand that the stocks and bonds, earn- ings, or the capltalization of earnings, all these things are items of evidence, but they cannot be metamorphosed into rules or standards of valuation. They are mere items of evidence. The market quotations have been condemned by all the courts as an unsatisfactory method and I ask counsel to state one decislon where stocks and bonds, or earnings, or any ome of these elements, is taken as a rule to fix the value of rallroad property. There is none. Courts do say that you can take them into consideration in forming an opinion of values. But if you should take exclusively the net earnings, or capitalization of the net earnings, or the stocks and bonds, and the proof should show that the valuation ‘was placed solely thereon, it would be con- demned because it would be unconstitu- tional, because it could met be, or would not be, anything else than an income tax. I am not saying you cannot take them into consideration, but 1 do say you cannot as- sess rallroads according to any one of these items solely. Market quotations have been condemned by all the courts be- cause they are not so much the result of careful investments of far-sighted men as of manipulation of speculators on mar- gind. They are forced by stock exchange practices. Managoment, good will and bus- iness standing are all covered by share stock values, and an asscesment based on such values, taxed as property to corpors- tione, that which is not taxed to natural persons. Hope of the future is an element which inflates walues of stock above the true value of the property. It expresses only the judgment or apialon of investors s to the walue of stocks and bonds. Counsel has sald, in loud, ringing tones, very effective, very impressive, “Why, you could sell the Union Pacific tomorrow for $100000 & mile.” If you would place it the franchises separately, as it understood i, It 1s true that “Mr. Simeral” a peared before the board and told it that it ought to @0 1t It Is true that “I, even upon the market and throw all of its stocks bonds upon the market for sale, de you suppose the common stock would be orth §106 and the preforred ¥687 The pre- ferred stock of the Union Pacific is selling today at $89 and the common stock at $106, and yet not one dollar of dividends can be paid on the common untii 4 per cent is pald on the preferred. Why is the preferred selling at $89 and the common at $1067 1t is the hope of the future; it is stock ma- nipulations. It is uncertain and fluctua‘- ing. No, the rule is that the board can take icto consideration all of these different items that I have enumerated and then form their best judgment from all the eir- cumstances in the case. I mean to say that if.it was conclusively shown that the valuation was bared solely upon the net earnings, or capitalization of the net earn- ings, and no other elements taken Into consideration, it would be absolutely void, because it would be an income tax and be- cause 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- cause it is an arbitrary method of dls- tributing the earnings on the various divi- slons and they do not correctly represent the net earnings of Nebraska lines in any particular locality. Because, it you should capitalize the earnings, you would include all of its localized property, and the value of it does not appear and could not appear. Now, what are these locallzed values? Mr. White, in his argument, clearly and forcibly showed to the court that from 62 per cent to 67 per cent of the operating expenses of the roads were incurred for labor. There are about 900,000 laborers in the employ of the rallroads of the United, with 4,000,000 depending upon them. Nearly one-twen- tieth of the people of the United States de- pendent upon service in the rallroads— nearly 4,000 in the employ of the Union Pa- cific railroad in this state alone. You can- not tax labor. Localized values also are the headquarters, the shops, the good will and the good management, and the skill and abllity and business enterprise, all of which enter into the net earnin 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 rallroad permits its road to run down 1n order to show large earnings, the property is actually worth less. Yet on & capitalfzation on the basis of net earne ings 1t 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 less than an attempt to make an item of evidence an arbitrary formuja for the assessment 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 in the land that has sald it can be a rule. Earnings can only be taken into consider- ation. We come down to the mext question, which is one of the important ones in this case. Did the board of equalization as- sess the franchises of these corporations? We insist that it certainly did. That th Was no way for ft to make any assessment of the properties of these rail- roads without taking into consideration what is denominated “franchise,” “pre- rogative,” rights, etc. That it wi phys- leal fmpossibility 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 question whether the board took It into consideration in a man- ner satisfactory to this court, or aid it skilitully, or whether it did it in a way that this court would have done it. Did they do it? If they did, that is the end of this case. This court oannmot substi- tute its judgment for that of this tribunal. It it will, these applications upon such a showing as appears here now, the first thing we know it will be running all of the departments of the state, which are not within the jurisdiction of this co- ordinate branch of the government, Did it assess these franchises? It would bave been impossible for the board to have done other than assess the franchises, be- cause it could not say that it assessed the rails as iron, the ties as wood, the super- structure 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 ratlroad corporations as going, live comcerns, snd that these inanimate properties were belng used. It they did not take these things into consideration, then, if your honors please, the ment that was placed as upon dead and inanimate property was ex- tortionate and could be set aside upon that ground. Let me give a few {llustrations, taken from the evidence, to show that they neces- sarily took into consideration the fran- chises. The assessment of the BurHngton & Missouri main line from Plattsmouth to Kearney was fixed at a valuation of $10,580 & mile, while the assessed valuation of the Grand Island, Wyoming & Central divi- slon of the same company was Assessed at $3,400. I haw selected these two lins because between these two points they are practically of the same physical value, that s, reither of . these lines has any very expenmsive or valuahle improvements, except at Lincoln, possibly. In other respects they are about the same, the same welght of ralls, the same ordinary improvements, the same shops and the same stations. The Grand land, Wyoming & Central road also does & transcontinental or through business, carries through trains to the Northern Pi cific and is used for similar purpos: the line from Plattsmouth to Kearney. The differonce in’the assessed valuation be- tween these two can only be accounted for by the fact that the report of the wud'tor of public accounts shows that the net eaarn- ings per mile is $12,560 on the main line, while the Grand Island, Wyoming & Centrsl shows it was operated at a loss of $346 for the same year, One operated at a profit and the other at & loss. Did they assess the same physical properties? They took into consideration the earnings and the ca- pacity to they could nmot rightfally hese roads similarly sitnated ate, with like tangibls yrop- erty and dolng a like business, with sach marked disparity. They took inte con- sideration the earning What are the earnings? Is that tangible property? What s the capacity to earn? Is that tangible property? No, it vour honors please, 1t is Intangible, it partakcs of the nature of prerogative or a franchise or whatever it may be denominated. Now, take the cost of reproduction. We do not insist that the cost of reproduction shows the value of the road. We simply say that the cost of reproduction is one of the items of evidence. This is the view that was expressed in the Ames case, that went up from this s with which, of course, your honors are famillar. preme court in that o it is all & matter of opinion. There is no arbitrary rule. As to the cost of reproduction I al- lude particularly to the Union Pactfic, be- cause we have here evidence relative to the property. I have evidence which was placed before this board in the testimony of Mr. Berry, and which was given in the ’ Part VIIL sult of the state of Nebraska to collect the penalties for violgtion of the maximum schedule of rates. 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 him whether it was a rate case or whether it was an assessment case, he sim- ply had his facts and figures, which he had taken the necessary time to prepare. He swore that the cost of reproduction of the Union Pacific raiiroad in the state of Ne- braska would be $28,663,057, or $30,289 a mile. That {s the entire cost of the repro- duction of the physical property of the Union Pacific in the state of Nebraska. There are 947.56 miles of the main line and branch lines 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 & mile. If it 1s & as we clalm all other property in the state of Nebraska 1s, on & ratio or standard of one-ninth or one-tenth of the value, the value of that per mile would be $3,024 instead of $6,672 a mile. On the basis of one-gixth, bhe alf- ference would be $1633 a mile Now, what is this difference? $3,024 a mile on the basis of one-tenth and $1,63 a mile on the basis of one-sixth was necessarily the amount the board assessed for the franchises, for the going, moving concern, for earnings and earning capacity We have heard in this room charges hurled against the board and against rall- road officlals, that they are in a combine to rob the people, that they are dishonestly working for their employers, and they charge that Mr. Weston and Mr. Stuefer are moving about In the darkness of Egyptian midnight. Mr. Harrington hss sald to this court: I will prove to the satlsfaction of the court by the stock and bond fssue that Un| is worth $100,000 per .~ 1 have studied the question. 1 am {nformed. It has been interesting to me, I have appeared before these boards and expect to appear again, and I know what 1 am talking about. it Mr. Harrington s moving ght light of intelligence. I a sert that the darkmess which Mr. Simeral says that Mr, Stuefer and Mr. Weston are wandering in is as a balo of light to the darkness in which Mr. Harrington gropes. He moves as if he was in the inpenetrable darkness of the deepest dungeon that could be found during the reign of the Spanish inquisition. I would like to bave the court look at these tables, The bond and stock issue of the Union Pacific is indissolubly connected with the bond and stock issue of the Short Line and the Oregon Rallroad and Naviga- tion company. There is no way nnd no man, Mr. Harrington or anyone else, can segregate them, because these properties are intertwined Becauss ‘whatever stock Unlon Pacific there s coves properties. First, what is that issue, and what does it cover? It covers many, many properties, not only the mileage of the Union Pacifie, but the Short Line and the Navigation com- pany. The Union Pacific with this issue has become the ownmer by purchase of a large number of other properties, depot companies, ele: companies, water ‘works companjes, stock and bonds in other rallroad companis foeders to its lines, all operated as independent companies and corporations. It purchased them at the sale, purchased the stock of the: t corporations with these issu stocks and bonds. ‘It purchased tock ln the Oregon Short Line. It purchased stock in the Southern Pacific. It purchased stock in the Northern Pacifie. It purchased some elght or nine water works companies, in- dent compantes. The elevator at Couneil Bluffs, the elevator at Omaha, union depots at Denver, Cheyenne, Ogden, Atchison al Leavenworth, coal compa. nles. These are independent companies with Independent 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 is the Union Pacific. The blue is the Oregon Short Line, The orange is the Navigation company. The green is the . Southern Pacifie. Their bond and stock issues cover all of these properties, and it covers the land grant lands. In addition to the enumeration of the com- panies which appear upon pages 18 and 19, from which Mr. Harrington mal his de- duction, and rts_to this court that he figures out the stock and bond issue at $100,000 & mile. The companies are there enumerated, depot companies, water works companies, coal companies and land com- panies. I have prepared two statements, one of which appears in my briet (and I thought that was as clear and pellucid as & moun- tain stream), but it brought about o much muddiness and obscurity on the part of Mr. Harriogton that I prepared another statement In another way. Take the total amount of the bond issue of the Union Pa- cific, Oregon Short Line and Oregon Navi- gation company apd you will find that in the first columu at the top of page 18, the total outstanding of the bond issue. It s figured down to a total, Union Pacific and suxiliary lines, $331,279,809; that is the total outstanding bond issue. This, to- gether with the stock lasue covers all these properties that are shown upon the map; covers all of thege properties and was used to purehase these different properties; used to purchase an interest in the Union eleva- tor at Council Bluffs, Union Elevator -at Omaha, the Bozeman Coal company, Green River Waterworks company, Leavenworth Unlon depot, Rattlesnake Creek Water com- pany, Unlon depot at Denver and at Kan- City and many others, and all inde- pendent companies baving thelr properties in different states and subject to taxation in the different states, but owned by the Unlon Pacific and purchased by the bond issue of $381,279,800 and stock issue of $203,- 999,000 The stock issue is shown on the page below and is $203,999,000. Add those together and we find we have $595,278,500 s the total stock and bond issue for all of these purposes. Is that bopd lssue to cover simply the 3.000 miles/of the railroad sys- tem of the Unlon Pacifie? No. Understand, please, your honors, we do not say this is the way to find the value and we have not ingisted upon it. But Mr. Harrington says “this s the way to find the value of the road.” We say it ls not the value of the road at We simply say the stock and bond issue is an item of evidence merely. We do mot say that is the 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 bere it shows what was done with it. It pur- chased all of these properties, eo that now the Union Pacific, Oregon Short Line and Oregon Raliroad & Navigation company bave in thelr possession and own these different securities, which amount to $332,- 631,250.37. The value of these securities must be deducted becaus, if you are adopt- ing a method of finding the value according to the stock and bond iseue, you must con- fine the amount of the stock and bonds that are issued solely and simply to cover the rafiroad mileage. You cannot apply the amount of value of stocks and bonds ls- sued, which are used for the pureh other properties, We have taken out the land assets, valued at $6,350,853.95, and we are charged with bad falth in doing so. The lande are sub- ject ‘to afsessment locally, and outside of the rallroad property, and them, as the schedule shows, the companies own water rights and boats from Portland to San Francisco, and we have made the best esti- mate we can of the value of those at $3,000, 000, becauso they are subject to asseesment locally and outside of rallroad property. Theso two items, amounting to $8,350,353.95, must be deducted. This leaves $254,207, 186.68. How Is this to be divided? st would be ridiculously and manifestly wrong to ap: ply this to the 3,000 miles of the Unton Pa- cific Raliroad company. It covers the en- tire mileage of all three of these roads. It covers all of this raliroad property, the rallroad property of these three companies. We deduct the value of the securities of the other companies, and to find, under thelr theory, the value of the road, according to the stock and bond issue, you muse divide thie $254,207,186.68 by the total mileage of of gives us $45,674 as the amount of bonds and stocks per mile. Mr. Harrington has charged the Union Pacific as the worst einner of all, gullty of fraud, and other counsel have charged the public officials and raliroad officials with fraud and crime. This he says is because the stock and bond issue is $100,000 per mile! Why, these gentiemen a: stately murderers or graceful the characters of men—they are bungling contentlon! Suppoee the Lindell hotel in Lincoln was owned by a corporation, capitalized for $100,000, and the corporation called the “Lindell Hotel company;” and the Lincoln hotel was owned by a corporation, eapital- 1zed for $100,000, and called the *Lincoln Hotel company.” The Lindell 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 coerporate ac- tlon, 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 the llabilities of the Lindell Hotel company are $300,000 of stock lssue, and that the additional stock issued by the Lindell Hotel company and the additlonal stock which it purchased from the Lincoln Hotel company are liabilities Insteaa of as- sets. And, If we dedire to find the value of the Lindell hotel by this stock and bond iseue he would aay the Lindell hotel is worth $300,000. These mathematics are per- fectly ridicuous, and yet this is tha basts of the cry of fraud. When you want to find the mileage of all the roads upon tme stock and bond issue you canmot confine it to Unlon Pacific mileage, it must extend over all the property. Lot us make another compllatton. Take, the last column on pagés 18 and 19. It shows “balance afioat.” That means out- slde, not in the treasury of the company, not owned by the company, but owned by out- siders and afloat. You will find that the Unlon Pacific and Its auxillary companies haye 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 stock of All theso other companies. You wiil find in the column headed “Total owned by the three companies” the following: Bonds of other rallroad com- panies ... . Bonds ot other companies. total of. llockl "ot other sbocks or ‘ot O & total of., Grand total of which these tnro- companies have in thelr possession as assets and which represent properties other than the railroad mileage of these three companies. 80 to arrive, if you desire, at the valua- tion of the rallroad property, according to the stock and bonds, you must deduct from the total stock and bonds afloat, of $449,- 859,744, the amount of the bonds and stocks representing the values of the other prop- ertles, $187,212,202.67, which leaves $262,647,~ 541.33, and from this must be made a fur- ther deduction of the land assets and water line assets amounting to $8,350,853.95. And you have a balance of §254,207,187.38, repre- senting the raliroad mileage of the three companies. Divide this by the mil 6,679.88, and it gives $45,674. This is another of showing that the stock and bond issue of this company is $45,674 per mile. It your honors plense, I ask you to take this fourth annual report and examine it in. every feature and In every way. It has been put in evidence by the relators for the purpose of showing the stock and bond iseue. All of the courfs and counsel for relators say that the maximum valuation is the stock issued and bonded Indebtedness. You take the issue of stock and the bonded debt, not the current expense debt, and that represents the extreme value of the property of the corporation, and 8o for that purpose they have taken the stocks and bonds of the Union Pacific for the purpose of showing that it fs worth $120,000 a mlle. But it is not port, where reference is made to the issue of the convertible 4 per cent bonds. “Of these convertible bonds $6,043,000 have been converted into common stock, leaving out- nding $98,957,000, against which an equal amount of unissued common stock is re- served,” and now in the bhands of the treasurer. Mr. Harrington, in his question to Mr. Weston and Mr. Stuefer, complained and aeserted that $10,000,000 of the bond issue of the Union Pacific Land company had been deducted in our statement. These bonds are owned by the Union Pacific Rafl- road company and are deducted from the total stock and bond issue because the lands are' assessed sepprately. You will find in our statement that the Unlon Pi cific Rallroad company’s lands are also deducted. They are not returned to the state board for assessment. They are as- sessed locally in the different states in lines run and In which the lands are situated. Mr. Harrington, in the examination of “Didn’t you know, Mr. improvements and bet- terments were paid for out of the earnin, of the company? Didn't you know that Mr. Weston sald: “No, I dld not kmow that. Is there any proof of that? He asserts that. What did be want to ha this court understand? Was that for the purpose of being viclous in addition to charglng crime upon the part of Mr. Wes- ton? Page 5 of this document, that they put in evidence themselves, being the fourth annual report of the Union Pacific railroad, states as follows: The procesds of all sscurities sold have been applied toward the bullding of new lines, for betterments and new equipment, and 'for the acquisition of stocks of the Boughern Pacific and Northern Pacific com- panies, as stated below. Our improvements and betterments were paid for out of the stock and bond issue, and mot out of the earnings, and 1 counsel and the representatives of the relators to prove their statement. 1 can only very hurriedly and very briefly state our position with reference to section 32. I have abstracted it and would I to argue it, but must give way to my aeso- clates and the other friends of the court. Section 32 Is not applicable to rallroad corporations at all. If your honors, please, that is the section which demands the r port and return of the capital stock of all corporations lncorporated iu the state. It the three roads, which is 5,579.8, and this | butchers, How supremely ridiculous 1s thelr | | of the statutes of Nebraska, 1s not applicable to rallroads at all. 1 deny rlh' year 1880 to the year 1800. The farm the proposition that there has ever been | Properties any legislative enactment in pursuance of the constitutional mandate fixing a rule for ascert rallroads. It 1s all now in a chaotic con ditlon. But, for the purposes of this argu- ment, 1 will aesume that some place, somo- where or somehow In the different statutes of the state of Nebraska the board has the right to assess the franchises of the rail- ning the valug of the franchises of | | 960,057, or an roads, or rather to take the franchises into | conslderation in determining the value of rallroads. We must keep clearly in mind the mode of ascertaining the value of the property and the mode of assessing that property. There are two distinct proposi- tions. At the time of the passage of e tion 82, in 1879, it was then a very doubttul | 80Ut question as to whether franchises in any way meparately and apart_could be taken into consideration with the assessment of properties. So it was very clear that the legialature never intended section 32 to apply to railroad corporations or corpora- tions- organized outside of this state. Fur- ther, section 1, I think it is, of the revenue act relates to capital stock of corporations incorporated under the laws of the atate In section 32 it enumerates all of the cor- porations, steamboats, companies, street rallways, etc., 18 no men- tion of raiiroads at all. *The inclusion of one s the exclusion of all others.” By this process of elimination the railroads are excluded, and section 32 itselt corporations “Incorporated under the laws of this state. So that wherever there I a Toference to the capital stock of a corpora- tion for the purpose of assessment in any it refers to corporations organized under the laws of the state of Nebraska and not corporations incorporated elsewhere. is this fact when we get to section 39, where the legislature used the peculiar phrase and language including *‘corpora- tions inoorporated in other states, whether ineorporated under the laws of this state or not,” desiring evidently to give peculiar significance and emphasis to that phrase, becauso in mection 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 assessment of the fran- chises of rallroads it must nec | by sections 39 and 40, and we purpose of this argument that the board, belng an assessor, assossed all of the prop- erties of the rallronds. We say, it the con- tention s that the assessment s made under sections 39 and 40—because that power Is given to the board, there {8 where the power lies and is lodged. Well, how i5 that to be exercised? How are they to assess the vapital stock? There ie no rule. We have in section 32 a proceeding somewhat explicit and definite, but in refer- ence to rallroads, there is no rule at all The legislature then, at least having a Qoubt ms 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 1s left with the board for assessment in its own pecular way, by no rule. To recapitulate my proposition, I say under section 32 it is applicable to cor- porations organized in the state of Ne- brasks. It was not meant to apply to rail- road corporations, because they are not mentioned, and beca: confined to ocor- porations incorporated in this state. While again section 39 particularly refers to cor- '| porations whether incorporated in this state or mot. If it is under section 40 1t is left /| to the sound discretion of the board and the board has told this court that it took these things into consideration; that it exercised its best judgment and made the assessment. accordingly. We come next to the particularly impor- tant cry and the charges are rung upon it, “Don't you know the Unlon Pacific 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 is a new. corporation, Wwith a right of franchise, the right to collect tolls and make charges.” The Unlon Pacific never lost ite franchise. It has always collected tolls, freight and passengers. There is no Qifference now. It went along just the same. They say, -“Look at its. improvements Look at. its betterments and ita earnings and the assessments are the same now ten years ago—no increase,” and that is takep up In every varled form that can be imagined and it is poured down from the 1ips ‘of eounsel as if in a lava torrent of fever frenzy. He was 5o agitated about {t he could not control his conduct in mssail- ing good and upright men who have borne g0od names in the communities in which they have lived. Who have never before been accused of wrong doing and who have discharged all the duties of their station to the best of thelr ability for the last twenty-five years. 1 will show in a few minutes why it has not been increased. Be- cause there has been such a marked in- crease of all the properties of this great and' growing state of Nebraska; that there has been and had to be to conform to the dominating maxim of uniformity a reduo- tion in the amsesstient and consequently in the taxation. But in that reduction, if your honors please, the raiiroads have pot had their fair share and proportion. These gentlemen absolutely seem to ex- clude from their yeasoning that element in their arguments. They fail to think of it when they refer to the condition of the properties in this state. These figures are from the auditor’s re- port and from the Interstate Commerce commission; they are in evidence item of them, and prove conclus there is nothing whatever in their com- plalnt. The decrease in the last eight years in the assessment of all kinds of property other than rallroads has been 12.5 per cent. It you have 1,000 farms in 1893 and bave 5,000 farms in 1901, you have more prop- erty to assess, consequently you ean re duce your levy. It was reduced 1.5 per cent on_all property other than rallroads. Rallroads in this time were only reduced 7.5 per cent in their valuation. Now, on the other hand, the increase in lands assessed in the state of Nebraska was 12.3 per cent; cattle, 60 per cent; sh per cent; hogs, 30 per cent, and the in- crease in railroad property, 2.1 per ceut. So, while there has been a decrease in the assessed valuation of all property other than rallroads of 12.5 per cenf, there has been 8 decrease in assessed valuation of rallroads of only 7.5 per cedt. There has been an increase of from 50 to 140 per cent of other property. in the state, and only 2.1 per cent of raliroade—we are talking now of tangible property. To {llustrate it sgain by these remark- able fgures, taken from the census from And how striking | in the staté of Nebraska in 1860 were worth $511,700,810, in 1900, $747,- increase of $236,150,247, or 46 per cent. Fart lands and improvem in 1890, $402,358,918; in 1900, $577,666,020, an Increase of $275,301,170, an increase of 47 per cent; farm implements and machinery, in 1890, $16,468,977: in 1900, $24.940,450, an increase of 614 per cent; live stock farms $02,971,920 in 1890, and 900 $145, 349,567, an increase of $52, , or b8 per cent; farm products in 1890 $66,837.61 in 1900 $162,605,388, an Increase of 868,760, or 143.4 per cent. And yet the Assossments for 1900 on those propert|es were less than the asseasment for 1890. | These are the facts and figures before this You have for the farm products an Increase of 143 per cent, very nearly, and the whole averaging 45 per cent on all properties in this state, and yet the sessment was less in 1900 than it was in 1800, This must all be oconsidered rela- tively. One member of this court was on the board for four years, and he can readily appreciate the force of that. You cannot fix it in any arbitrary way. You have to take into consideration all of these things, and therefore you have to do it relatively. If they reduce for other prop- erties, they must reduce for raliroads There is no evidence of absolute fraud, as 1 have sald. The only possible way any fraud could be olaimed would be, as has been said in some of the authorities, where there 1s such a striking dlsparity in the as- sessment as that a legal fraud could be found. For instange, if the board assessed thess rallronds at $100 a mile such a strik- ing disparity in the assessment might be held fraudulent. It is now my purpose to show that the Integrity of this assessment, the result of thin assessment, Is fair, meas- ured by any rule you want to measured by any criterfon you want to es- tablish. It was iu falr proportion to all the other assessments. It does not make any difterence if these gentlemen cannot figure it out the way counsel would like to have it figured out. What was the final result? The claim that the valuation s lower than is simply due to the face tnat of the e In the volume of the property subject to taxation. We have sald that the ratio of assessment on property in this state f& now in the nefghborhood of one-ninth and one-tenth and of the rail- roads between one-fifth and one-stxth. Relators to disprove this put in evidence the lettérs from the county clerks. I can only say to your honors that it does not make any difference what the county clerks reported or what they agreed to do, it is what they did do, and these very letters show what they agreed to. do and then what they €id do. Mr. Harrington has read you the compllation of these letters. I bave taken the time to select a fow and I will read those to show you just what they dld do. Your homors know that In 1891 the lands in this state were nesessed 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 consclence you know that that % not more than one-tenth of the value of these properties. The board knew this, for it had the reports before it. We picked out twelve or fourteen of, these letters to Ullustrate. The asecssors of Butler county agreed on one- seventh. When they met it was moved and seconded that all property be assessed at one-seventh of the full value. That was carried. Then it was “moved that $6 worth of household furniture be exempt Carried.” Thed it was of corn be exempt and all over 600 bushels be assessed at 3 centd less than market price the first day of April. Carrie Then it was “moved that wheat and rye being held for market be assessed. Lost.”” How perfectly ridiculous is this all. Here s one from Sidney, Chey~ enne county, saying: Th regard to the values fixed by assessors s given in my former letter and one-third of that amount was to have been the true basis on which the assessment was n made. was the motion clrrud at their mmln' But I can't tell course they may take when they hacss. Banner . county. reports tbat all lands and personal property is listed at one-third cnsh value; that s, that is what they sald they would do, but what did they do when they came to assess? -Improved lands, -65 cents; unimproved lands, 66 cents, horses, $12, $8 and $5; cattle, 36, $5 and $3; sheep, 50 cents and 90 cents; hogs, $1 per hundred; yet they sald they would assess at one-third the cash value and they say from $5 to $12 on horses and $3 to $6 on cattle, but in every instance they took the lower: price. Saline county says improved and unim- proved lands in Baline county to average $4 per acre;' borses, imported, $50 stralght; common one-fourth of $40, one-fourth of $20; cattle, $1 per hundred; sheep, 50 cents per head; hogs, §1 per hundred. I ocon- tend that relators own proof shows about one-fourth valuation. There was submitted here a statement of the lands, prepared for the years 1890 and 1891 in & numibér of the counties of t] state of Nebraska. Tor instanoe, for Dodge county the record shows the consideration is $111,350 and the assessment was §9,334, which is about one-twelfth, and the agree- ment was one-fourth, These are taken from the record. Saunders county, comsidera- tion 354,660, astessmeni $4,680, or about one-twelfth, and the agreemept was one- fifth to one-tenth. Butler county, consid- eration $07,008, assessmeng 37,204, or about one-fourteehth; the agreement was one- seventh. York county, $110,120, assessment $11,402, one-tenth; one-seventh was the agroement. Adams county, $63,000, as- sessment $8,075; about one-seventh, and the agreement ‘was_one-fifth, Filimore county, $35,950, assessment $2,800; about ene- eleventh. Cuming county, $04,860, as- sesment $5,898; ‘about one-eleventh, and the agroement was one-fifth. Antelope county, $43,425, assessment $2,780; about one-fitteenth. Colfax county, $98,020, as- sessment $5,035; About one-eleventh. atte county, 969,845, assessment $5,687, about. one-twelfth, Boone county, $79,504, assessment §7,271; about . one-eleventh. Seward county, $65,300, assessm 3 about one-eighth, and the agre one-fitth. Total, $903,613. Total 988,908, or about one-éleventh. 1 contend that these records show that all other property is assessed in (uls atato from one-ninth to one-elevepth and we have endeavored to show your honors that the assessment of rallroads is on the basis ixth to one-seventh. The fndis- uncontradicted and unimpeachable record is that they pay 15.40 per cent of all of the taxes of this state. If they do, they should own between one-aixth and one- seventh of this great state of Nebraska, be- cause, If they pay 15 per cent of the tax (Continued on Ninth Page.) When buying be sure and use the full name Hunyad{ Janos. Otherwise if you ask simply for Hunyadi Water, you may be imposed upon. LABEL ON BOTTLE IS BLUE, WITH RED CENTRE.