other steamship lines for which the Pacific Mail acts as agent (including, singularly enough, a Japanese line known as the Nippon Yusen Kaisha), this independent Santa Fe line was abandoned in 1901. The percentage of this Oriental traffic allotted to the Santa Fe and the Southern Pacific, respectively, has varied from time to time; but the understanding is that the amount to be delivered to the Santa Fe shall approximate 25 per cent of the total. This San Diego steamship line was not a financial success; and it is no doubt the truth that the Santa Fe officials were pleased to be relieved of the burden of its maintenance in return for a not inconsiderable proportion of the freight brought to San Francisco by the longer-established lines.

CONSIDERATIONS OF NATIONAL POLICY.

It is a matter of large significance that our trade relations with the newly acquired territory of Hawaii and our Philippine dependencies, to say nothing whatever of the newly awakened lands on the other side of the Pacific Ocean, must depend to no slight degree upon the competitive relations between rail carriers reaching our Pacific coast ports.

There is a further consideration of national policy arising out of the history of the Union Pacific, the Central Pacific, and the Southern Pacific roads which distinguishes a combination of such roads. The Union Pacific and the Central Pacific were born out of national sentiment and need. The nation felt the necessity for rail connection to its isolated Pacific coast territory, and for this purpose, and to an unprecedented degree, pledged its own credit and donated its own lands to create a national highway between the Missouri River and the Bay of San Francisco. In every statute passed by Congress affecting these two roads there is to be found proof of the existence of such a policy. They were to be built toward each other--one from the east and the other from the west-and were to form one continuous line, which was to remain for all time available to the business and governmental necessities of our people. Under the act of June 20, 1874, "any officer or agent of the companies" (Central Pacific, Western Pacific, Union Pacific, Kansas City & Denver Pacific) "authorized to construct the aforesaid roads, or of any company engaged in operating 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 transportation, 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, and transportation, without any discrimination of any kind in favor of, or adverse to, the road or

business of any or either of said companies," is deemed guilty of a misdemeanor and punishable by fine not exceeding $1,000 and by imprisonment of not less than six months. The fact that the Union Pacific and Central Pacific companies were thereafter separately reorganized under the laws of Utah and acquired these lines does not relieve them from the public obligations imposed by the acts of Congress. Union Pacific Railroad Company v. Mason City & Fort Dodge Railroad Company, 199 U. S., 169. The Union Pacific was therefore forever guaranteed, without purchase, a connection with the Central Pacific upon terms as favorable as might be given to any other connection.

In the construction of these roads the people had in view the protection of the frontier in time of war, the settlement of a great wilderness west of the Missouri River, and the development of its resources; and to this end it was determined to procure the construction of a transcontinental line and to maintain it as a free, open, and continuous line of communication connecting with all railroads reaching Council Bluffs on the east, so that the public should have the benefit of a continuous line of transportation from the east to the Pacific coast unhampered by reason of the separate ownership and control of these lines of transportation. It is a fact that most of the lines of railway reaching Council Bluffs and Omaha were constructed with the view of connecting at these points with the Union Pacific railroad as the principal transcontinental line to and from the Pacific coast; and the Government has, perhaps, a peculiar obligation to maintain the freedom of this line.

In no other portion of the country is the Federal Government expending such large sums for purposes of development as in this great western region tributary to the Union Pacific and the Southern Pacific, and in no other part of the United States is the commerce of the country dependent upon so few railways covering so vast a territory and controlled by so few men; and in no part of the United States could such control have such far-reaching effect. The body of transcontinental and foreign commerce through Pacific ports has grown to enormous proportions, and its encouragement and development are of vital interest to the American people.

It is claimed by the Union Pacific that the principal reason for acquiring the Southern Pacific was to obtain the Central Pacific connection from Ogden to San Francisco. It is undoubtedly true that this is a desirable connection for that company; but, as we have seen, whether purchased or not, the Central Pacific is required to form a through line of transportation with the Union Pacific and not to discriminate against it in the receipt and transportation of freight and through traffic. The public is entitled to all the advantages of this line as a competitive line of transportation with other transcontinental railways.

The various lines which now compose the Southern Pacific from New Orleans to California were also built under patronage of the Federal Government by the donation of many millions of acres of Government land, and formed an independent and separate route. While Congress did not prohibit in express terms the union of these great Federal railroad systems, it is hardly to be believed that such prohibition would not have been imposed had it been thought that in the course of time they would have been brought under a single control.

CONTROL OF SAN PEDRO, LOS ANGELES & SALT LAKE RAILROAD COMPANY.

In or about the year 1902, Willian A. Clark-and his associates commenced the construction of a line of railway from San Pedro and Los Angeles, Cal., to Salt Lake City, Utah. At that time the Oregon Short Line Railroad Company owned about 512 miles of railroad situated south and southwest of Salt Lake. About 324 miles of this was main line, running from Salt Lake to Caliente, Nev.; the rest was branches. Many years before, the predecessor of said Oregon Short Line, having in contemplation an extension of its line of road to the southwest, had acquired rights of way in the State of Nevada, upon which a small amount of grading had been done; but the construction of the line had been abandoned, the grading had gone to decay, and the right of way so obtained had been for years sold for taxes.

At the time Clark and his associates commenced the construction of their road there was no competition for traffic in and out of southern California as against the Southern Pacific, except such competition as was maintained by the Santa Fe. The San Pedro and Salt Lake road was projected as an independent competitive line with the expectation that it would exchange business at Salt Lake City with the Union Pacific system and with the Denver & Rio Grande-Missouri Pacific system, thus making in effect two new overland routes from the Mississippi River to Los Angeles.

Mr. Clark and his associates began by acquiring tax titles and such other titles as could be obtained to the old grade of the Oregon Short Line and other abandoned rights of way and by relocating right of way for themselves. These abandoned rights of way were partly situated in a mountain canyon in the State of Nevada, known as the Meadow Valley Wash. This canyon is about 100 miles in length. Surveying parties were also put at work locating a line from Salt Lake toward the west; and other surveying parties were put at work locating a line through the Cajon Pass, in California, and thence to the northeast in the State of Nevada, and that portion of the line between Los Angeles, Cal., and Riverside, Cal., was constructed.

At this stage the Oregon Short Line, claiming to be the successor of the former owners of the right of way and grade through the Meadow Valley Wash, instituted legal proceedings to assert this ownership as against the Clark line. It is a fair inference that this was done for the purpose of preventing the construction by Clark and his associates of a line competitive with the Southern Pacific system. The Short Line also began the construction of a line leading toward the Meadow Valley Wash from its line in southern Utah, and threatened, in case Clark and his associates were successful in constructing a line of railway from Salt Lake to San Pedro, to parallel said road throughout.

In this contest between the Short Line and the Clark road the canyon known as the Meadow Valley Wash appears to have been a strategic point of vital importance. It was possible, but not practicable, to construct two lines of railway through this canyon. After some months of the above and additional litigation, Mr. Clark and his associates abandoned their purpose of constructing and maintaining an independent competitive line. A settlement and agreement was made between William A. Clark, representing the San Pedro Company, and Edward H. Harriman, representing the Oregon Short Line and Union Pacific. A preliminary contract was entered into July 9, 1902, which resulted in a permanent contract dated June 7, 1903. This final contract was between William A. Clark, Edward H. Harriman, and the Farmers' Loan & Trust Company. The trust company was to hold the stock of the San Pedro Company and act as trustee. The substance of this agreement was that the Oregon Short Line conveyed its 512 miles of railway south of Salt Lake to the San Pedro Company. The San Pedro Company was capitalized at $25,000,000, one half of the stock thereof belonging to the Oregon Short Line Company and the other half to Clark and his associates. The stock was deposited with the Farmers' Loan & Trust Company as trustee. Shares were to be issued to proposed directors in order to qualify them, and trustees' certificates for the remaining shares were to be issued to William A. Clark, trustee, and Edward H. Harriman, trustee, by the trust company. In substance, the trust agreement provided that Mr. Harriman and Mr. Clark were to agree upon a board of directors. If they should fail to agree, each was to nominate one-half of the board and the trustee was to issue a proxy to some person or attorney to vote the shares for the persons so nominated. This made a joint control of the San Pedro Company.

A further agreement was made between the Oregon Short Line, the Union Pacific, and the San Pedro companies, by which, among other things, it was agreed that the San Pedro and Short Line companies should not invade each other's territory northward and southward,

respectively, from Salt Lake City, by building or aiding in the building of any main or branch lines of road other than those enumerated in the agreement. It was also provided that in the interchange of traffic as against competitors preference should be given each to the other by the contracting parties; business moving between points on the San Pedro line in Utah and points on the Short Line and Union Pacific and their connections was to be forwarded exclusively over the Short Line and Union Pacific. The San Pedro Company covenanted also to contract with the Southern Pacific Company to in the first instance adopt as its own rates all lawful rates used by the Southern Pacific for handling local traffic which was or might be subject to competition between the Southern Pacific and the San Pedro Company, and also to contract that thereafter neither party should change such rates without the consent of the other party, unless it was made necessary in order to meet the rates of another competing line of railroad.

To carry out this agreement a contract was made between the Southern Pacific Company and the San Pedro company, articles II and III of which read as follows:

ARTICLE II.

In partial consideration of the said covenants and agreements of the said Southern Company, contained in Article I hereof, said San Pedro Company hereby covenants and agrees with said Southern Company that it will, upon the execution of this agreement, adopt, print, publish, and put in force at all points upon its leased, owned, or operated railroad, for the handling of local business thereon, the lawful rates, tariffs, classifications, and charges used by said Southern Company for the handling of any local business which may be the subject of competition between them.

ARTICLE III.

Each party hereto mutually covenants and agrees to and with the other that after the adoption and putting in force of rates as provided by Article II hereof, neither of them shall or will change any such rates without the consent of the other party hereto unless such change may be made necessary in order to meet the rates, charges, classifications, or tariffs of any other company or competing line of railroad or to conform to the final decree or judgment of some court of competent jurisdiction, or some lawful and valid requirement of State or national law.

It is claimed by the Southern Pacific Company that these articles relate only to traffic local to the State of California and the contract was not, therefore, in violation of the laws of the United States; but in our opinion this contract can not be so construed.

Since the hearing in this matter this traffic contract has been abrogated and canceled by the Southern Pacific Company and the San Pedro, Los Angeles & Salt Lake Railroad Company, and notice thereof