Page images
PDF
EPUB

"That is hereby made the of each railroad, canal, navigation, telegraph and telephone company, or other corporation owning, operating or controlling lines or works in whole or in part within the limits of this State, to make cut and return to the Secretary of Internal Affairs a complete report, according to the form to be prescribed by the said Secretary of Internal Affairs, which, among other things, shall embrace in detail the operations and affairs of said corporations during the fiscal year, together with such other information as the Secretary shall direct. Said report shall be attested by the oath or affirmation of at least two of the following named officers of the company, president, general manager, superintendent, sequestrator, secretary, treasurer and auditor. That said report shall cover the transactions of each of said corporations for the fiscal year ending on the thirtieth day of June, each year, and shall be filed in the office of Secretary of Internal Affairs not later than the thirty-first day of August in each year."

"That every such railroad, canal, navigation, telegraph and telephone company, or other corporation owning, operating or controlling lines of railway, canal, transportation, telegraph or telephone, located in whole or in part in Pennsylvania, that shall refuse or neglect to make such report as herein provided and at the time specified in the second section of this act, shall be liable to a penalty of five thousand dollars to the use of the Commonwealth for every such refusal or neglect, to be sued for and recovered as debts of like amount are or may be by law recoverable."

The Constitution of Pennsylvania in the sections referred to, and the acts of 1874 and 1897 above referred to, constitute and embrace the powers and duties devolving upon the Secretary of Internal Af faris and upon the railroad and other transportation companies with reference to the making of annual or special reports to the Secretary of Internal Affairs.

There are two features in the complaint to be considered:

First. Is there a compliance with the Constitution and the law in the filing of an annual report by the Baltimore and Cumberland Valley Railroad Extension Company, the same being leased to the Western Maryland Railroad Company, and such report being the same as is required to be upon prescribed forms for subsidiary companies?

Second. Does the complaint raise any question of a public or of a private character which would demand or justify the Secretary of Internal Affairs in requiring to be made to him such a special report as is contemplated in Section 11, Article 17 of the constitu tion?

Prior to the establishmment of the Department of Internal Af fairs under the Constitution of 1873, the Auditor General of Pennsylvania was given some power of supervision over railroad and other transportation companies, and under the Acts of 1859 and 1870 was repuired to prepare and furnish these corporations with blanks upon which to make their annual reports to his department.

No material changes were made in the forms of blanks when the duties of supervision of transportation companies were conferred upon the new official, the Secretary of Internal Affairs, under the Constitution of 1873. While the data contained in the reports which were made were undoubtedly of great value, the information was not given in sufficient detail to insure entire satisfaction. An examination of the forms used discloses the fact that there was a purpose to improve the system of blanks in use, but not until the formation of the National Association of Railway Commissioners with the Inter-state Commerce Commission at Washington was a system of blanks perfected, which has seemed to meet the demands of the public, not only in this State but in the other states of the Union.

A committee was apointed representing the Inter-state Commerce Commission of Washington, the National Association of Railway Commissioners, and the American Steam Railway Accounting Association, upon whom devolved the work and the duty of the preparation of the blank forms for annual reports which are not only used by the Inter-state Commerce Commission, but by the Railroad Commissioners of the several states, and by state officers, as in Pennsylvania, exercising powers over transportation corporations. It has been about 15 years since this blank went into use, though some additions and changes with reference to the classification of accounts have since been made on recommmendation of a standing committee of said National Association. The blank, with instructions accompanying the same, is large in size and covers some eighty pages of space, devoted to instructions and for reports to be made by transportation companies.

Among other classification are these: one for railway companies making operating reports, and one for subsidiary companies or those that only make financial reports. A subsidiary company is understood to be a transportation company, which although merged in an operating system by means of a lease, an operating contract or agreement, or is controlled through the ownership of a majority of its capital stock, yet maintains an independent legal existence, and keeps separate accounts of its financial affairs. There are some thirty-three pages in the blank form upon which information is to be given by subsidiary companies. It is not provided that subsidiary companies shall make reports of operations, for a company whose lines are operated by another company is not in a position to give the details of operation, including receipts and expenditures as is an operating company. An operating company must give practically all the information that a subsidiary company does, but it must give in addition all data called for, in detail, with reference to all reI

ceipts, from whatever source, either from operation or otherwise and all expenditures on account of operation, lease of subsidiary lines, taxes, interest, or other fixed charges and current expenditures.

The blank does not provide that the operating company shall give the receipts and expenditures of its subsidiary lines, but it does require as above indicated, that the totals be given with reference to its entire system of transportation. There may be exigencies of a private and possibly of a public nature where the ends of justice and the desire for information would be conserved if an operating company were required to file with the Secretary of Internal Affairs the totals of operation with reference to each of its subsidiary railroads, embracing a system. The prodigious amount of labor incident to the preparation of such reports bearing upon receipts and expenditures in the operation of all subsidiary companies would probably not furnish a justifiable excuse for not requiring such detailed reports, although when it is known that of our great railway systems there are so many under-lying or subsidiary companies, it will be understood that the classification of operating receipts and expenditures applicable to each subsidiary road would involve a large amount of work, if indeed it were possible to keep such accounts accurately.

In the preparation of the blanks which are now used and have been used since 1891 by the Secretary of Internal Affairs, the necessities for the details of receipts and expenditures alone upon subsidiary lines do not appear to have been seriously considered. That is, the interests of the public did not seem to require such reports, and as we understand the Constitution and the laws of Pennsylvania no legal obligation requires the Secretary of Internal Affairs to prepare a blank wherein each operating company should classify the receipts and expenditures to such an extent as would enable a return to be made showing the receipts and expenditures for operations of each subsidiary company. If the Acts of 1859 and 1870, of which the Act of 1897 is an amendment, are taken into consideration, there will be nothing found to indicate such legal requirement in the preparation of the blanks, either by the Auditor General or the Secretary of Internal Affairs.

In the case in question raised by the complaint of Mr. Bartol, it is found that the Baltimore and Cumberland Valley Railroad Extension Company is leased to the Western Maryland Railroad Company, and that it has been subsidiary to the Western Maryland Railroad Company for many years, its line a part of that of the Western Maryland Railroad Company. Presumably the lease was made in accordance with existing laws, the laws governing corpora

tions and with the consent of the stock-holders through its Board of Directors, and that such lease was based upon a fair rental or upon other valuable consideration. If the proceedings were not in harmony with law, it would seem that the Courts, through the instrumentalities of the Statute and Common Laws could furnish the means for the correction of any wrongs, suffered by any stockholder.

It must be remembered that under the Acts of 1874, based on Section 11, Article 17 of the Constitution, the Secretary of Internal Affairs is not required to certify all cases to the Attorney General, but only those which in his opinion can not be properly considered under the ordinary remedies for redressing wrongs which are provided by law.

It is apparent that the blank upon which the Baltimore and Cumberland Valley Railroad Extension Company makes its annual report to this office as a subsidiary company, and the blank used by the Western Maryland Railroad Company in making its annual report as an operating company including in its totals the receipts and expenditures incident to the operation of one of its subsidiary companies, the Baltimore and Cumberland Valley Railroad Extension Company, are in conformity with both the Constitution and the law above quoted. They are certainly most comprehensive, and in their scope embrace every feature of an operating transportation company and of a subsidiary transportation company, even though no provision is made to require an operating company to classify its receipts and expenditures with reference to its subsidiary lines. This we do not consider a necessity from a public standpoint and we do not consider that it is required by the Constitution or any of the Acts of Assembly heretofore referred to.

How can a great railroad system make a correct statement of receipts and expenditures from operations of one of its leased lines? At the best such statement would only be an approximation to the actual facts.

Assuming that the total mileage of lines owned and operated by a railroad system is one thousand miles. Along some of this mileage there is a density of traffic, both passenger and freight; other por tions of the mileage are in a mountainous country where there is but little demand for facilities for transportation. This mileage is made up in part of several leased lines. A conductor and other train men say in the discharge of their duties run over part of the proprietary mileage and over the mileage of one, two three or more of the leased lines, so the expense of maintenance, the services of track men and other employes, the salaries of general officers and hundreds of other things are to be taken into consideration in determining what expenses are chargeable to the leased lines.

In determining receipts, there must be considered passenger receipts, re-payments, redeemed tickets, refunded excess fares, expressage, extra baggage, baggage storage, freight revenue, freight re-payments, over charges, stock yards, elevators, switching charges, mileage for use of cars, rent of equipment, telegraph and telephone receipts, rentals, &c., &c.

The classification of operating expenses is complex, confusing and in great detail, as the repairs of roadway, renewal of rails, renewal of ties, repairs, or rental of bridges, renewal of fences, road crossings, signs and cattle guards, repairs of buildings, fixtures, docks, wharves, telegraph lines, and stationery and printing; the repairs and renewals of locomotives, passenger cars, freight cars, marine equipment, shop machinery and tools, salaries of round house men, fuel, water supply, oil, tallow, waste, salaries of switchmen, flagmen and watchmen, and station expenses.

Then there are wreck expenses, damages for fatal and non-fatal accidents, insurance, legal expenses, and so on with scores of other items of expense. All to be classified and arranged in such a manner as to be assigned and made applicable to each subsidiary company, so that the receipts and expenses incident to the operation of each subsidiary company may be given to the public. Can it be that any reasonable construction of our Statutes would lead to the placing of such burdens on the accounting departments of transportation corporations? What public interests can demand such assignment of operating receipts and expenditures?

The other feature of the case represented by this complaint is that which relates to a special report to be made by the Western Maryland Railroad Company, showing a classification of its receipts and expenditures as applied to the operation of its subsidiary line, the Baltimore and Cumberland Valley Railroad Extension Company.

Section 11, Article 17 of the Constitution gives the Secretary of Internal Affairs discretionary powers with reference to the securing of special reports from transportation companies. There are exigencies which may arise that from a public standpoint the duty would be imperative that the Secretary should require such special reports to be made by transportation companies, and while his powers are discretionary, they should not be exercised unless conditions absolutely demand his action.

What thoughts were in the minds of those members of the Constitutional convention who framed this clause in Section 11, Article 17, is of course conjecture, but it is certain that it was not intended that the Secretary should ever exercise this power except at times public interests demanded such exercise.

To assume that this discretionary power would be used as a means

« PreviousContinue »