-Caveat Lector-
From:
History of the Supreme Court
Gustavus Myers�1911-1912
Charles H Kerr & Company
Chicago
pps 823
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Justice Waite is also a member of Skull and Bones.
Om
K
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CHAPTER XIII
THE SUPREME COURT UNDER CHIEF JUSTICE WAITE
Recapitulating, we have seen that some years before Chief Justice Chase's
death, the railroad power had begun a systematic campaign to put its avowed
representatives upon the Supreme Court Bench. In the State courts the
transformation had already been accomplished; there was hardly an inferior
court which was not composed of railroad judges, or of men susceptible to
railroad influences. With the Supreme Court of the United States, the process
was a little slower, but none the less sure. The delay was unavoidable
because the Justices, appointed for life, often outlived the period and the
class section originally represented by them. Survivals, or rather relics, of
a bygone, outworn era, aged and usually infirm, they all could not be
expected to respond readily to the demands of later economic interests. Some
of them could hardly realize that the railroad corporations which they had
seen come forward a few years before as supplicants for public aid were now
the paramount capitalist power, arrogating the larger control of Government.
As fast as these hoary relics passed away, railroad attorneys were appointed
to succeed them. And when, in 1874, Morrison I. Waite was chosen as Chase's
successor as Chief Justice of the Supreme Court of the United States, it was
evident even to the most superficial observer that the new regime in had
become a dominant factor, and that the railroad corporations were the
sovereign power.
Williams and Cushing Compelled to Retire.
Like Chief Justices Jay, Marshall, Taney and Chase, Waite did not have any
judicial experience when appointed to preside over the Supreme Court. Unlike
his predecessors, he had not even filled a single political office of
national note. So far as public reputation was concerned, he was a total
nonentity; the public had never heard of him. But to the railroad politicians
surrounding President Grant, and filling the Senate, he was well known for
his ingrained conservative tendencies and affiliations.
At first, Grant had selected George H. Williams for the post. Williams had
been a judge in Iowa; a presidential elector in 1852; Chief justice of Oregon
Territory; a United States Senator from Oregon in 1862-1871; and Attorney
General of the United States from 1872 to 1875. The Bar Association of New
York protested against the nomination; Williams, it said, was "wanting in
those qualifications of intellect, experience and reputation which are
indispensable to uphold the dignity of the highest national court." [1]
Williams' nomination was withdrawn at his own request.
But when Grant then nominated Caleb Cushing for the Chief Justiceship, public
denunciation was even more severe. That Cushing was seared with corruption
was beyond doubt. One of his transactions we have discussed in a previous
chapter; how be had been counsel for the Peter's colony contract grant, and
how later, when Attorney General of the United States, he had given an
opinion in favor of that grant at the very time Texas was seeking to put a
stop to the fraudulent operations of its promoters. We have also described
(Chapter X) how General Sam Houston, in 1857, categorically exposed Cushing's
connection with the Peter's colony grant.
Of the numerous strictures made at the time upon Cushing's nomination as
Chief justice, we shall confine ourselves to quoting but one, that of the
Springfield Republican, perhaps the most influential, and certainly the most
accredited, newspaper in his native state. "His reputation," it said, "is
that of a man who has never allowed principle or conscience to stand in the
way of gain. . . . He is not an immoral, but rather an unmoral, man; he has
not become demoralized; he never was moralized."[2]
The onslaught upon Cushing's probity was so effective, and so strongly backed
with facts, that his nomination was withdrawn. Notwithstanding, Cushing held
Grant's ear; and in retiring Cushing was, it was understood, one of those
proposing to Grant the appointment of Waite as Chief justice. He was, indeed,
Waite's sponsor.[3] Cushing had an extensive railroad practice; he was, after
the Civil War, an attorney for Russell Sage's La Crosse and Milwaukee
Railroad Company, which, as we have narrated, had bribed an act through the
Wisconsin Legislature, in 1856, with $800,000 in bribes, giving it a land
grant then valued at $18,000,000. He was also attorney for Sage's Milwaukee
and Minnesota Railroad Company and for other railroads of similar fraudulent
origin now incorporated in the Chicago, Milwaukee and St. Paul Railroad.[4]
Waite's Record as a Lawyer.
The son of a Chief justice of Connecticut, Waite was born at Lyme, in that
State, on November 29, 1816. After graduating from Yale, in 1837, he had
settled in Toledo, Ohio. There he had become associated in law partnership
with Samuel R. Young, and later with his brother, Richard Waite. Their cases,
for twenty-five years, were an unbroken succession of lucrative appearances
for corporations of one kind or another. In the decades before and after the
Civil War, Morrison R. Waite represented the Bank of Toledo, the State Bank
of Ohio, the Toledo Insurance Company and similar institutions.[5] He and his
partner, Young, were receivers for the Commercial Bank of Toledo.[6] But the
greater part of Waite's practice was as attorney for railroad corporations.
He was counsel for the Southern Michigan Railroad Company; for the Northern
Indiana Railroad Company; for the Cleveland and Toledo Railroad Company; for
the Lake Shore and Michigan Southern Railroad Company, and for other railroad
corporations.[7]
During twenty-five years of practice, there was scarcely a case in which
Waite appeared in which he did not advocate the interests of some powerful
individual or corporation. Charles Butler, one of Toledo's richest
landholders, applied through Waite, in January, 1853, for a permanent
injunction restraining the City of Toledo from collecting an assessment for
the cost of grading streets. Waite argued that the legislative act
authorizing this assessment was retroactive and an impairment of vested
rights, and that the fund for the grading work was being misapplied and
wasted. Judge Brinckerhoff, in the Ohio Supreme Court, denied that an vested
right was being impaired, and dissolved the injunction.[8]
In cases affecting the interests of banks or railroads, Waite was more
fortunate. Of the successive judges of the Ohio Supreme Court, there was
hardly one who had not been, or who did not become, a corporation attorney.
Allan G. Thurman, for some years Chief justice of that court, and
subsequently a United States Senator and a candidate for Vice-President of
the United States, was counsel for the Valley Bank, for the Ohio Life
Insurance and Trust Company (which failed under disastrous circumstances, in
1857); and he was counsel for a number of other corporations. Judge Swani had
been counsel for the State Bank of Ohio. Milton Sutliff, Chief justice of the
Ohio Supreme Court, in 1861, was so indifferent to public criticism that he
did not forbear bringing a very remarkable suit in which he demanded his full
share of watered railroad stock. He set forth that he was the owner of
Cleveland and Mahoning Railroad seven-per cent.-bonds, not specifying,
however, how he obtained them. These bonds be had elected to convert into
stock. Subsequently, be averred, the company had watered the stock to the
extent of forty-seven per cent., and had given him this depreciated stock in
exchange for his bonds. He sued to get an amount of stock equaling the value
of his bonds, plus forty-seven per cent. interest; but when the case was
decided, in 1873, be was defeated." As for Judge Birchard, he had been
counsel for a variety of corporations, and after leaving the bench resumed
corporation practice.
The Case of Veronica Muhl.
Most of Waite's cases dealt with some phase or other of vested rights, in the
pleading of which he was recognized as an expert, and in every hoary
precedent concerning which he was deeply read. These cases, blanketed as they
were in abstract technicalities, the reading public could not follow very
closely even when they were stated simply in the brief newspaper reports. But
there was one case argued before the Ohio Supreme Court, in 1859, which was
clear enough; it was so very plain that the workers of the railroad quarter
of Toledo bad no difficulty in keeping track of its aspects, and no
hesitation at expressing their indignation over the particular defense
advanced by Waite.
Veronica Muhl, a Swiss woman, had been killed in Toledo, on July 19, 1854, by
being run over on the street by a locomotive and a train of cars, going at a
speed of more than twenty-five miles an hour. The speed was proved and it was
also proved that no warning bell had been rung. A city ordinance prohibited,
in that part of Toledo, a speed of more than twenty-five miles an hour, and
forbade any running of trains at all without the constant ringing of the
locomotive bell so as to give ample warning of danger.
Veronica Muhl left a two-year old boy; and suit was brought in his behalf for
$5,000 damages. The Southern Michigan Railroad Company entered a general
denial. In July, 1855, the jury in the Court of Common Pleas returned a
verdict in favor of the orphan. The railroad then applied to the district
court, amending its answer, and not denying, in effect, its own culpability.
What, then, was the plea put forward by Waite, as attorney for the railroad?
A very extraordinary one; he concentrated his whole argument upon the point
that the plaintiff's counsel must prove that Veronica's son was legitimate,
and he moved that the action must be non-suited on the ground that the boy
was an illegitimate child, and, therefore, not next of kin within the meaning
of the statute governing the case. The Judge in the district court non-suited
the case.
The orphan's lawyer appealed the case to the Supreme Court of Ohio. In the
meantime, the news of the railroad's peculiar defense in the case had got
abroad. That it was generally received with execration is putting the fact
mildly. The mother had been killed by the railroad company running its trains
in violation of the law; her boy had been left a helpless orphan. To cheat
him out of the very modest damages awarded him by the lower court, the
railroad's attorneys, Morrison I. Waite and his brother Richard, had no
scruples in heaping contumely upon the name of the dead woman, and covering
her defenseless boy with public disgrace.
Public opinion made itself manifest; and when the Waite brothers,
representing the Southern Michigan Railroad, renewed their plea before the
Ohio Supreme Court, in December, 1859, the judges of that court, railroad
attorneys as they had been, could not avoid expressing disgust. Judges
Sutliff, Brinckerhoff, Scott, Peck and Ghoulson concurred with an unusual
unanimity. They reversed the action of the district court, and directed that
the child should get the awarded damages.
"It is difficult," said Judge Sutliff, in delivering the court's opinion, "to
perceive upon what ground the judgment of nonsuit, shown by the record, was
rendered. When the defendant's counsel, under leave to amend, had withdrawn
all that part of the answer that denied the killing of decedent by the
wrongful carelessness of defendant's servants, in operating their
locomotives, there remained no denial of the right of action." The question,
Judge Sutliff further declared, of whether Veronica's son was the nearest of
kin, could in nowise affect the cause of action. As to who was the legal
beneficiary could be adjudged after the action had been determined. Nearness
or remoteness of kin on the part of the boy, Judge Sutliff went on, did not
depend at all upon the circumstance of his being born within or without
lawful wedlock.[10]
Quite incidentally, the judges had no high opinion of Waite's character in
that he should have advanced what was regarded as so reprehensible a defense,
nor did they appraise his knowledge of law as worthy of much consideration.
Waite's Advocacy of Vested Private Rights.
Not a few of Waite's legal efforts as an attorney were attempts to break down
the constitutionality of this or that statute�a typical enough preparation
for a future Chief justice of the Supreme Court of the United States.
In 1851 the Ohio Legislature had passed an act to tax banks and bank stock;
accordingly the City of Toledo assessed a tax Of $1,957.50 on the Toledo
Bank. That bank refused to pay, and when sued, Waite and Young, representing
the bank, pleaded that the legislative act was unconstitutional. Among the
precedents cited by them was Marshall's decision in the Dartmouth College
case; they argued that the charter of a private corporation was a contract
within the meaning of the restrictive clause of the Constitution of the
United States.
Chief Justice Bartley, in the Ohio Supreme Court, in June, 1853, decided
against the bank, declaring that the Dartmouth College decision had been
perverted "until it has become, to some extent, a subterfuge for fraud and a
means of shielding corporations from responsibility and correction for the
abuse of their corporate franchises." The antique precedents advanced by
Waite to enable his client to defraud the city of taxes, (lid not at all
impress Chief justice Bartley. " A legal principle," be said, "to be well
settled, must be founded upon sound reason, and tend to the purposes of
justice." In the course of his decision lie further stated that "it is a
humiliating reflection to the friends of our republican institutions, that
the efforts to place the rights and property of corporations upon a footing
of greater sanctity than those of private persons, have been resisted with
far greater success in England than they have been in this country. The right
of Parliament to amend or repeal the charters of private corporations has for
many years been undisputed." The property of every person, Bartley declared,
" must be liable to bear an equal an Jus; proportion of the public burdens. .
. ." [11]
Another example of Waite's activities was this: As a matter of public health,
the City of Toledo had passed an ordinance requiring owners to fill up
noisome vacant places; if they failed the city was to do it, and assess the
expense upon the owners. One of the landowners refusing to pay this
assessmerit was one Ezra Bliss. As Bliss' attorneys, the Waite brothers
claimed that the Ohio health statute under which the city acted, was
unconstitutional, in that it violated vested private rights. The Ohio Supreme
Court, in December, 1864, decided that it was constitutional.[12]
Morrison I. Waite and Richard Waite were also, together with Charles Pratt,
the attorneys in another action to have an Ohio legislative act construed in
favor of vested private rights. They represented Rollin B. Hubbard, the owner
of large flour mills. These mills had been run with water from a branch of
the Wabash and Erie Canal which had traversed Toledo. The Ohio Legislature,
in 1864, had passed an act discontinuing that particular canal, and
authorizing its being reconstructed into a public highway. Hubbard then came
forward with a claim that in 1840 he had received the right under a thirty
years' lease, renewable, to propel his mills with surplus water not required
for navigation. When, in 1868, the Governor of Ohio executed a formal grant
of the canal to the City of Toledo, Hubbard and others obtained a provisional
injunction restraining the city from interfering with the flow of water. The
injunction was later dissolved, and the case in full argued.
For Hubbard, Morrison I. Waite claimed that be held a vested right; that the
legislative act was subject to his prior rights; and that the city was liable
for all damages accruing from the discontinuance of the water supply. "The
State government," retorted the city's attorneys, "was not organized for the
purpose of running grist mills." The Ohio Supreme Court, in December, 1871,
decided in favor of the City of Toledo.[13]
Waite's Railroad Interests and Connections.
To ascertain the real importance of Waite's position as a railroad attorney,
it is necessary to know what large interests owned or controlled these
railroads. Samuel M. Young, law partner of Morrison I. Waite, was a director
of the Cleveland and Toledo Railroad." This railroad belonged to the
Vanderbilt system; William H. Vanderbilt was one of its directors; in turn it
was leased to the Cleveland, Painesville and Ashtabula Railroad, one of the
directors of which was Henry B. Payne, later so powerful a magnate as
treasurer of the Standard Oil Company, and such a sinister figure in the
bribery of Ohio legislators and officials.[15]
As for Morrison I. Waite, he was one of the directors of the Dayton and
Michigan Railroad, and for a time was its vice-president.[16] This railroad
had been leased, in 1863, to the Cincinnati, Hamilton and Dayton Railroad.
The president of the Dayton and Michigan Railroad, S. S. L'Hommedieu, was
also president of the Cincinnati, Richmond and Chicago Railroad, and was also
" interested " in the Kentucky Central Railroad. One of Waite's sons was
superintendent of the Cincinnati and Muskingum Railroad during a great part
of the time that Waite was Chief Justice of the Supreme Court of the United
States.
Only twice had Waite ever held any public office: in 1849, when he had been
elected to the Ohio Legislature, and in 1873, when he was president of the
Ohio Constitutional Convention. He had been defeated for delegate to the
State Constitutional Convention in 1850, and had not succeeded in his
candidacy for Congress in 1862.
Wonderment was publicly expressed that such an obscure person should have
been made Chief justice. Yet in official circles it was well known that the
interest that had chiefly pushed him was the powerful Vanderbilt family, at
that time, as it still is, one of the largest railroad owners in the United
States.
But although railroad magnates such as Vanderbilt and Gould were warring
fiercely upon one another, and in turn were ousting the lesser railroad
capitalists, all the railroad interests had certain ends in common so far as
the construction of law was concerned. On the interpretation of law in
general for their benefit, all the magnates, large and small, were united,
irrespective of what their own differences were.
While, therefore, a judge's antecedents were those of retainership for this
or that particular railroad magnate, still his previous training and
attachments would incline him to favor all railroad interests as against
public agitation.
Some of the great railroad questions certain to come up before the Supreme
Court were those dealing with the interpretations of laws by which the
various Pacific railroads had obtained immense land grants and Government
money subsidies.
In 1868-69 Jay Gould and Russell Sage had begun to get control of the Union
Pacific and allied railroads; and had, as later investigations and actions
showed, like Stanford and Huntington, set out to manipulate those roads in
order to cheat the Government. Caleb Cushing, one of Waite's principal
backers, was very close to Sage. The Vanderbilts, too, had their ambitious
schemes and interests; they were constantly extending their railroad power;
and issues affecting their interests would necessarily come for final
decision before the Supreme Court of the United States. In addition there
were questions of railroad stock and bond issues; of land grants either given
to railroads or in which they were interested; of railroad pools and many
other considerations determining whether the wealth and power of railroad
owners should be aggrandized or hindered by court decision. Not the least, it
was certain that pressing questions arising from conflicts with labor
organizations would be argued up to the Supreme Court.
Grant's Intimacy with the Vanderbilts.
With the Vanderbilt family ]'resident Grant was on the most excellent terms.
Indeed, ten years later, after the firm of which Grant was a member -that of
Grant and Ward � had gone into bankruptcy, it was to William H. Vanderbilt
that Grant appealed for a loan of $150,000, and it was from that powerful
magnate, � then the richest in the United States -that Grant obtained it.
On May 4, 1884, General Grant called at Vanderbilt's residence, at No. 640
Fifth Avenue, New York City, and asked for the loan of $150,000. " I gave him
my check without question," wrote Vanderbilt on January 10, 1885, to Mrs.
Grant, " not because the transaction was business-like, but simply because
the request came from General Grant." General and Mrs. Grant sent to
Vanderbilt deeds on their joint properties to cover the obligation, but
Vanderbilt returned the deeds.
Subsequently, when Vanderbilt was in Europe, General Grant delivered to
Vanderbilt's attorney mortgages upon everything that he owned, including
military trophies and presents from foreign governments. On January 10, 1885,
Vanderbilt presented as a gift to Mrs. Grant's personal estate the debt and
judgment that General Grant owed, and the mortgages on household goods and
articles pledged. The only condition was that at Grant's death, the articles
of historical value should be presented to the Government . . . . I have only
to add," wrote Grant in reply to Vanderbilt, on the same day, "that I regard
your giving me your check for the amount without inquiry as an act of marked
and unusual friendship. . . ." After considerable vacillation, General and
Mrs. Grant finally decided to have certain of their mortgaged property sold
toward the payment of the debt.[17]
At the time that Waite was appointed Chief Justice the Vanderbilts controlled
the New York and Harlem Railroad, the New York and Hudson River Railroad, the
Lake Shore Railroad; and they presently acquired the Canada Southern and
Michigan Central Railroad, and a large interest in the Northwestern Railway.
A Succession of Railroad Decisions.
The new Chief justice was of medium height, stout and straight in build, and
lie was strong, firm and quick in movement, with a self-confident manner. His
eyes were dark and keen, his hair iron-gray, his upper lip was kept clean of
growth, and carefully-trimmed whiskers covered the remainder of his face. His
mouth and nose were large, his chin heavy.
One of the first cases argued after Waite had taken his seat was one of the
greatest importance to the railroads on the one hand, and, on the other, to
the public.
Throughout the country railroad promoters bad influenced the authorities of
municipalities to issue vast amounts of bonds to assist in the private
construction of railroads. Indignant at this abuse of public funds, the
people of various States, in particular those of Michigan, had insisted upon
putting provisions in their State Constitutions forbidding such grants.
The township of Pine Grove, Michigan, had issued bonds to aid in the building
of the Kalamazoo and South Haven Railroad, and subsequently refused to pay,
on the ground that they were unconstitutional. Talcott, one of the
bondholders, brought suit to recover.
Chief Justice Waite was disqualified from participating in the case because
his interest was concerned.
Delivering the Supreme Court's opinion, Justice Swayne decided that the bonds
were valid; his chief ground was the assumed doctrine of acquiescence. ". . .
When the bonds were issued, he said, " there had been no authoritative
information from any quarter that such statutes were invalid. . . . And
during the period covered by their enactment, neither of the other
departments of the State lifted up its voice against them. The acquiescence
was universal." [18] The decision in this. case caused great exultation among
railroad owners, and formed a precedent much cited thereafter.
Following this decision came another decision also ranking as an
authoritative precedent, and many times cited. It allowed railroad
capitalists who had secured by every corrupt means immense land grants, to
keep those grants intact and safe from forfeiture.
Railroads Escape Forfeiture of Land Grants.
The case establishing their vested right to this plunder was that of
Schulenberg vs. Harriman, decided by the Supreme Court of the United States
in October, 1874. In June, 1856, Congress, after bribery had been freely
used,[19] passed an act granting about 2,388,000 acres of public land in
Wisconsin to be allotted by the Legislature of that State for the express
purpose of encouraging the building of railroads.
It was distinctly provided that the railroads were to be built within ten
years. In the same year � 1856 � various railroad adventurers corrupted the
Wisconsin Legislature to pass acts giving them land grants. The La Crosse and
Milwaukee Railroad, as we have seen, distributed at least $800,000 in bribes
for the passage of an act granting it 1,000,000 acres.[20] Another one of the
land grants obtained that year was for a railroad from Portage City to Lake
St. Croix, with extensions; this was the particular land grant involved in
the case of Schulenberg vs. Harriman.
The obvious fact was admitted in the suit that neither the railroad nor any
part of it had ever been constructed. Yet the railroad capitalists had
claimed the land grant as their absolute property, and by 1873, no less an
immense quantity than 1,600,000 feet of the most valuable pine timber had
been stripped from it. Since no part of the railroad had been constructed,
the State of Wisconsin took the position that the land grant reverted to the
State or Government, as explicitly provided in the original act of Congress.
The Supreme Court of the United States did not take this view. In its
decision, written by Justice Field[21] it held that inasmuch as no action had
been taken by legislative or judicial proceedings to enforce the forfeiture
of the grants, therefore, the lands had not reverted.[22]
It need scarcely be said that this decision legalized the consummation of the
most enormous frauds. Moreover, it gave an unmistakable cue to railroad
looters. All that they now had to do was to corrupt Congress to pass acts
extending the time for the construction of railroads, deriving meanwhile
prodigious profits from the exploitation of vast areas of land to gain which
they had done nothing. And that they did corrupt Congress was speedily shown
in the scandals concerning the Southern Pacific, the Central Pacific and
other railroad measures, not the least of which was the Texas Pacific bill
promoted by Senators Matthews and Lamar, who themselves became justices of
the Supreme Court of the United States.[23]
The Grange Movement.
At this period there developed an organized agrarian agitation which had
considerable influence upon politics. It grew to such strength that
politicians, especially of the agricultural regions, sought to propitiate it.
In the records of the Supreme Court of the United States we find references
to it; and that in its decisions affecting railroads the Supreme Court sought
to make an appearance of deference by handing down certain decisions
apparently, but not in reality, against the railroad corporations, is quite
certain.
This organized movement was called the Grangers, composed of American
agriculturalists. It was essentially a middle-class movement, and it later
merged into the Farmers' Alliance, which, in turn, blended into the Populist
Party. It was estimated that at the end of the year 1875, there were 30,000
granges in existence, with an average of about forty members each; the order
was strongest in the West and Northwest, and had a considerable following in
the South. Professing to be non-partisan, it was nevertheless the stimulus of
a powerful agitation against discrimination in railroad freight rates, and it
declared for the recovery of excess lands held by railroads, and the
prohibition of the ownership of land by aliens and foreign syndicates. Later
came a demand for Government ownership of railroads.
The Union Pacific Railroad Relieved from Restitution.
Goaded into action by public agitation, the Government, in 1878, brought a
suit against the Union Pacific Railroad Company for the restitution of the
enormous sums of which successive groups of capitalists had swindled the
Government.
This company, had obtained, by means of bribing Congress, a land grant of
12,000,000 acres, and also a loan Of $27,213,000 in Government bonds. The
Credit Mobilier Company had then been organized to construct the railroad.
Comprising the company were some of the most powerful capitalists in the
United States � conspicuous bankers, such as Levi P. Morton (later Vice
President of the United States) and William H. Macy; and factory owners, such
as Cyrus McCormick and George M. Pullman. Charges of enormous thefts
committed by the Credit Mobilier Company resulted in the appointment of an
investigating committee by the United States Senate. This committee, called
the "Wilson Committee," from the name of Senator Wilson, its chairman,
reported in 1873:
That the total cost of building the Union Pacific Railroad was $50,000,000.
That the Credit Mobilier Company had charged $93,546,287.28.
That " from the stock, income bonds, and land-grant bonds, the builders
received in cash value $23,366,000 as profit�about forty-eight per cent. on
the entire cost."
The total " profits " were, therefore, about $44,000,000, of which the sum of
$23,000,000 or more was in immediate cash. The committee reported that large
sums of money, borrowed for the ostensible purpose of building the railroad,
had at once been divided as plunder in the form of dividends upon stock for
which not a cent in money had been paid, in violation of law.[24]
Finally, as a matter of fact, the Union Pacific road was owned entirely by
private capitalists, although it had been built almost wholly with Government
grants and loans.
After this looting had been accomplished, the value of the stock of the Union
Pacific Railroad had necessarily fallen, at which auspicious time Jay Gould
and Russell Sage acquired the railroad, and, as the report of the Pacific
Railroad Commission of 1887 showed, subjected it to another comprehensive
process of looting.
In bringing its suit in 1878 for misappropriation and for restitution of the
stolen funds, the Government, in its bill of complaint, stated the
specifications of fraud and theft, page after page of them. It asked that the
construction contracts and land-grant and income mortgages be declared void.
The chief attorney for the railroad in this case was William M. Evarts. At
Yale Evarts had been a classmate of Chief Justice Waite. Evarts had been an
attorney for the Pacific Mail Steamship Company which, as we have seen, had
disbursed $1,000,000 in bribes, in 1872, to obtain the passage of an act of
Congress. Evarts had also represented the Chicago, Rock Island and Pacific
Railroad. Subsequently he became � 1885-1891 � a United States Senator from
New York.
Delivering the majority opinion, Justice Miller decided that the Government
had made out no case for relief. He concluded with these remarks, the first
of which was unfounded in fact, and the remainder of which have seldom been
equaled for their sardonic cynicism.
�. . . The Government " (said he) "has received all of the advantages for
which it had bargained, and more than it expected. In the feeble infancy of
this child of its creation," Miller went on, " the Government, fully alive to
its importance, did all that it could to strengthen, support and sustain it."
Every justice of the Supreme Court knew that the Government had done nothing
of the kind. Everyone of them was aware that it was by corruption that the
Union Pacific Railroad promoters had accomplished their ends. Not a single
justice was ignorant of the report of the " Wilson Committee," handed in five
years previously, that those promoters had illicitly expended a corruption
fund of nearly $436,000 to get the act of July, 1864, passed, and that
another corruption fund of $126,000 bad been used to get the act of March 3,
1871, passed by Congress allowing the Union Pacific Railroad exorbitant rates
for the transportation of Government supplies and mail.[25] Every newspaper
in the country had been filled with the details of the testimony.
"Since," justice Miller concluded, "it [the Union Pacific Railroad] has grown
to vigorous manhood, it may not have displayed the gratitude which so much
care called for. If this be so, it is but another instance of the absence of
human affections which is said to characterize all corporations. . . ." [26]
One of the points of this decision was that the Government could not sue
until the company's debt matured in 1895. This, as we shall see, gave Gould,
Sage and associates a new lease of life in their operations, enabling them to
loot further on an enormous scale.
Fraudulent Bonds Given Precedence.
At the same time, the Supreme Court of the United States, in October, 1878,
handed down another decision in favor of the Union Pacific Railroad. The
railroad had sued the Government for compensation for transporting troops,
supplies, etc. The Government set up a counter-claim for five per cent. of
the net earnings of the company, as due under the act of July 1, 1862, for
the payment of bonds. The Court of Claims decided that the railroad had been
completed in 1869, and that the company's profit on the operation of the road
from 1869 to 1875 had been $29,052,045.67. The Court of Claims, accordingly,
gave the Government a judgment for $1,402,602.28, as being five per cent. on
the profits, and it awarded the company $593,627.10 for services. From this,
decision the company appealed.
Reversing the judgment, justice Bradley, writing the opinion of the Supreme
Court's majority, based his decision in favor of the company upon the
construction of the act of July 2, 1864. The fact that it was for the passage
of that very law that the Union Pacific Railroad Company had distributed
nearly $436,000 in bribes, was wholly ignored. Bradley held that the act in
question authorized the company to issue an equal amount of first-mortgage
bonds to have priority of the Government bonds.
It was well known that the act was lobbied through for the express purpose of
cheating the Government. Here, again, the vaunted principle of law that fraud
vitiated every contract, was serenely passed over by the Supreme Court. The
circumstances of the passage of the act, and of the great plundering going
on, were not even considered. Bradley held that the act of 1864 empowered the
company to issue an equal amount of first-mortgage bonds to have priority
over the Government bonds; hence those holding these bonds had the preference
of being paid before the Government could receive its five per cent. Justices
Strong and Harlan strongly dissented, practically saying that the effect of
the decision was to facilitate and legalize the swindling of the
Government.[27] The same decision was made in the case of actions against the
Denver Pacific Railroad and other railroads.
The Accompanying and Subsequent Thefts.
But who owned these first mortgage bonds? The majority report, nine years
later, of the Pacific Railway Commission,a Government investigating body �
reported in detail the vast thefts committed by the Credit Mobilier Company
and by Gould, Sage and associates. In consolidating the Kansas Pacific, the
Denver Pacific and other railroads with the Union Pacific, Gould, Sage and
company had misappropriated more than $20,000,000 by the fraudulent jugglery
of stocks and bonds. The Union Pacific Company had sold not less than
7,000,000 acres of land, although it had got no patent from the
Government.[28] Great areas of the most valuable coal lands had been
fraudulently appropriated.[29] The fraudulent shuffling of millions of
dollars from one corporation to another was another fertile source of loot.
The stock of the Union Pacific had been inflated from $38,000,000 to
$50,000,000; the bonded indebtedness from $88,000,000 to $126,000,000, and
sundry other indebtedness to nearly $10,000,000.
While this plundering was in process, Gould and Sage were putting the
railroad in a condition of bankruptcy for the double purpose of draining its
funds, and of pleading that the railroad could not afford to reimburse the
Government for its loans. The majority report of the Pacific Railway
Commission described " the lavish and reckless distribution of the assets of
the company in dividends," and pointedly asked why it was that although the
Union Pacific Company had been doing a large and profitable business, " it
found itself early in 1884 on the verge of bankruptcy."
Had it not been for the two decisions of the Supreme Court we have cited,
this looting would have received a check. The Supreme Court had virtually
legalized and justified it. And it is also set forth in the Pacific Railway
Commission's majority report that while stealing tens of millions of dollars,
and at the very time the Government's action for misappropriation of funds
was before the Supreme Court of the United States, Gould and Sage took
measures to relieve themselves from any liability to the Union Pacific
Railroad as a corporation.
"It appears," the majority report of Messrs. Littler and Anderson reads, "
that while this litigation was pending, certain proceedings were taken by the
directors whereby, by their own acts and votes, they undertook to release
themselves from any obligation or liabilities to the company."
The minority report of Commissioner Pattison was even more penetrating. It
declared that the Union Pacific Railroad and the Kansas Pacific Railroad had
received about $35,000,000 in loans from the Government, of which little had
been returned. It recited that up to 1887 the sum of $136,314,010-73 "had
been dissipated "by the directors of these two railroads.[30] Not less than
$84,000,000 Of watered stock had been issued. "The Union Pacific Company,"
the minority report continued, "has received $176,294,793.53 in surplus
earnings and land sales during eighteen years, and if its stock had been
fully paid, as Congress required that it should be, and its officers
certified under oath that it was, nearly all of that money would be
applicable to-day to the payment of the Government debt. The company has paid
out $28,650,770 in dividends, and $82,742,850 in interest on bonds, nearly
all of which was distributed to shareholders without consideration . . ."
Commissioner Pattison estimated that Jay Gould's personal share of the loot
was probably $40,000,000.[31]
This report reveals the condition of affairs nine years after the Supreme
Court of the United States decided in favor of Gould, Sage and associates of
the Union Pacific Railroad Company. Likewise it disclosed the futility of the
" Sinking Fund " decision that the Supreme Court of the United States had
rendered late in 1878 asserting that in the cases of the debt of the Pacific
railroads the act of Congress, of May 7, 1878, establishing a sinking fund,
was constitutional. First, the Supreme Court denied the application of the
Government for restitution, and allowed the manipulators to juggle and pocket
all the profits. Having done that, the Supreme Court then said that the
Government had a right to conduct a sinking fund! The empty right was
allowed, but from where was the money for the sinking fund to come? Stanford,
Huntington, Gould, Sage and associates were ap-propriating it by the hundreds
of millions for their private fortunes.
It should be noted that in the " Sinking Fund Cases," Justices Field, Strong
and Bradley dissented at length. In the previous cases they had concurred in
holding that a con-tract was to be strictly construed. In this case,
notwithstand-ing the fact that the Pacific railroads had received the
Gov-ernment funds on explicit condition of repaying them, Justice Strong
advanced this extraordinary proposition:
". . . Had it been dreamed that a call could have been made at any time
thereafter designated by Congress, it is inconceivable that the loan
proffered would have been ac- cepted . . . " [32] "The loan proffered " was a
rare way of putting the case considering that Congress had been bribed to
give that very loan. Vested rights, Justice Strong went on, "no matter how
they arise, are all equally sacred, beyond the reach of legislative
influence." [33]
Justice Bradley wrote a long dissenting opinion, and Justice Field, who
did likewise, began, " The decision will, in my opinion, tend to create
insecurity in the title to corporate property in the country," etc., etc.�a
groundless assertion, as Field himself no doubt well knew, and as events
fully proved. Then Justice Field proceeded to expound an elaborate defense of
the Pacific railroads, particularly of the Central Pacific Railroad.[34]
These are some typical instances of decisions regarding railroads handed down
under Chief Justice Waite. With a few adverse decisions of comparatively
slight importance, railroad interests were dissatisfied, but the greater
number of decisions were entirely favorable to the railroad owners. To enter
into the consideration of this mass of decisions is out of the question here.
Claims Confirmed to Forgers and Perjurers.
The decisions of the Supreme Court concerning private land claims were also
most uniformly favorable to the claimants.
Discovering new evidence of fraud, the Government brought suit to void a
decree of the lower court confirming a large California land claim to W. A.
Richardson, who, as we have seen, had been officially exposed as a notorious
perjurer. The Government's petition set forth that after submitting his claim
to the Board of Land Commissioners, in 1852, Richardson became satisfied that
he had not evidence enough to support his claim, and that he went to Mexico,
and obtained from Micheltorena, the former Mexican Governor of California, "
his signature, on or about the first day of July, 1852, to a grant which was
falsely and fraudulently antedated, so as to impose on the court the belief
that it was made at a time when Micheltorena had power to make such grants in
California." The Government also charged that Richardson, "in support of this
simulated and false document also procured and filed therewith the
depositions of perjured witnesses."
After getting a confirmation from the United States District Court,
Richardson turned over the claim to Throckmorton, George H. Howard and
others. Howard, in 1852, was the United States law agent before the land
commission. The Government now charged that " Howard, one of the present
defenders had, from the papers in some other suit, derived notice of the
fraudulent character of the Micheltorena grant, and that lie failed and
neglected [in 1852] to inform the commissioners of the fact, or otherwise
defend the interests of the United States in the matter." [35]
Howard, it may be remarked, had also been interested with Teschmaker and
others in a sixteen-league claim in Napa County, California, alleged to have
been granted by Micheltorena. The Supreme Court of the United States had, in
1858, denounced this sixteen-league claim as a forgery, supported by such
professional perjurers as Juan Castenada, and had voided it. [36]
Common sense alone would have dictated the fair assumption that if Howard had
been detected in promoting one forged grant, all his other acts would
inferentially stand impeached. But in deciding the Throckmorton case, the
Supreme Court of the United States presented some singular views. Writing the
court's opinion, justice Miller acknowledged, to begin with, that the
Government was not bound by the statute of limitations. He complained,
however, that the suit was brought twenty years after the decree of the
District Court, and that to retry the case would involve perhaps more
appeals. "If we can do this now, some other court may be called on twenty
years hence to retry the same matter on another allegation of fraudulent
combination in this suit to defeat the ends of justice, and so the number of
suits would be without limit." Moreover, he said, there were no
specifications of the means by which fraud had been accomplished.
The fact that Howard had been condemned twenty years previously by the
Supreme Court for pushing a forged grant, did not count with the eminent
justices. That in many cases proof had been presented that United States
district attorneys had often been in collusion with land-claim forgers and
had long concealed the fact-this, too, was ignored. Nor did the Supreme Court
give the slightest consideration to the fact that District judges in
California had been interested in these fraudulent claims, and that the
scandal was so great that Congress, in 1864, had passed an act prohibiting
those judges sitting. That successive Attorneys-General of the United States
had exposed the Michcltorena forgeries-this, also, had no weight with the
justices. The Throckmorton claim was declared valid, [37] serving as a
notable precedent in subsequent private land-claim cases.
In another case it was shown that in 1845, Alcalde George Hyde had
fraudulently presented to George Donner, then only ten years old, and a dummy
for officials, a large and now valuable plot of municipal land one hundred
varas square .(about 3333 feet), in the heart of San Francisco. The law
allowed distribution of land to settlers only. In validating this grant, the
Supreme Court of the Unilted States, in 1878, said: "We are not aware that
the Mexican law prohibited such a grant to an infant."[38] These are some
characteristic examples of the Supreme Court's decisions regarding land
claims.
New Associate Justices.
Many changes occurred in the personnel of the Supreme Court at this time.
Justice David Davis resigned in 1877, and became a United States Senator from
Illinois. His successor, appointed by President Hayes, was John M. Harlan, of
Kentucky.
Harlan's father, James Harlan, had been a Whig politician of some note
representing a Kentucky district in Congress, 1836 to 1844, and had been
Attorney-General of Kentucky from 1850 to 1863. Entering politics, John M.
Harlan had been defeated for Congress, in 1859; had been breveted a colonel
in the Union Army during the Civil War; had been elected Attorney-General of
Kentucky in 1863; had then practiced law, and had been unsuccessful in 1871
and 1875 in his candidacy for Governor of Kentucky.
He was one of the visiting commissioners to Louisiana in the Hayes-Tilden
electoral contest; and it was openly charged by Senator Chandler that for his
services to Hayes on this occasion, Hayes rewarded him by an appointment to
the Supreme Court of the United States. On January 21, 1901,
Senator Pettigrew read in the United States Senate a letter signed by Senator
Chandler, published in a New York newspaper in 1877, In this letter Chandler
made the charge that Justice Harlan was appointed to the Supreme Court as a
result of his services as a visiting commissioner to Louisiana during the
Hayes-Tilden dispute. After Pettigrew had finished reading the letter,
Chandler arose and said that every word of it was true.[39]
The choice of Harlan was largely a personal appointment of Hayes. Harlan was
not conspicuous as a railroad lawyer, although the fact that his nomination
was confirmed by a Senate controlled by railroad attorneys and stockholders
did not pass unnoticed. He was forty-two years old at the time.
Retiring on a pension, in 1880, Justice Strong was succeeded by William B.
Woods, of Ohio. Woods was regarded as a political adventurer. Born in 1824,
he had been a Democratic politician in Ohio. An officer in the Union army
during the Civil War, he, in 1866, had settled in Alabama, during the
reconstruction period, and had become a leading " carpet-bagger " Republican.
He became State Chancellor in 1868, and a United States Circuit Court judge,
in 1870. His decisions in that court were notoriously in favor of railroad
corporations.
Opposition to Stanley Matthews.
The next appointment, that of Stanley Matthews by President Hayes, aroused
the most intense opposition.
Matthews was nominated to succeed Swayne, who resigned because of disability.
In 1877, Matthews had succeeded John Sherman, as a United States Senator from
Ohio. Matthews was not only Jay Gould's chief attorney in the middle West,
but while in the Senate he frequently appeared in court as attorney for the
Louisville and Nashville Railroad.[40] the Adams Express Company[41] and
other corporations. While a member of the United States Senate, and at the
very time he was appointed to the Supreme Court, he was a director of the
Knoxville and Ohio Railroad.[42] He was also counsel for the Springfield and
Mansfield Railroad [43] and for other railroads, and held considerable stock
in railroad companies. For many years lie had been attorney for the
Cincinnati, Hamilton and Dayton Railroad [44] for which, as we have noted,
Chief Justice Waite had also been counsel, when an attorney. Matthews had
been one of the counsel for the Hayes electors before the Electoral
Commission, and had industriously worked for the seating of Hayes.
Matthews' activities in the Senate for railroad corporations were
notorious; he and Senator Lamar (who succeeded him on the Supreme Court
bench) were the chief pushers and advocates of the amendatory bill of 1878 in
favor of the Texas Pacific Railway. This railroad company, in 1871, had
received a great land grant of 18,000,000 acres, and Gov-ernment aid Of
$31,750,000 in bonds, on condition that it construct, within a certain time,
a railroad from the Mississippi River to San Diego, California. But it had
only built a small portion of the road, and a move was under way to declare
its subsidies forfeited.
Senator Matthews, on March 19, 1878, reported Senate Bill No. 942,
extending the time for building the railroad,[45] and Senator Lamar followed
with a long speech in favor of the bill. Matthews also reported Senate Bill
No. 474 authorizing the Southern Pacific Railroad to build railroad and
telegraph extensions, and giving Government aid.[46] Likewise he reported
another bill in favor of the Northern Pacific Railroad. Of the flagrant
corruption of Congress by the Texas Pacific Railway promoters, and by Jay
Gould and Collis P. Huntington, details are given later in this chap-ter.
Matthews was one of the Senators conspicuously striving to defeat the Pacific
Railroads Funding Act. The bill, however, was passed.
-----
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Om, Shalom, Salaam.
Em Hotep, Peace Be,
All My Relations.
Omnia Bona Bonis,
Adieu, Adios, Aloha.
Amen.
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