But it is said that they violated a well-known rule of equity in dealing with themselves; that they were trustees, and that they were representing both sides of the contract.
The answer is that they did not find anybody else to deal with. They could not find anyone who would take the chances of building a road through what was then an almost uninhabited country and accept the bonds and stock of the road, in payment. And when it is said that they were trustees, if they did occupy such relation it was merely technical, for they represented only their own interests on both sides, there being no one else concerned in the transaction. They became the incorporators of the company that was to build the road, subscribed for its stock, and were the only subscribers; therefore it is difficult to see how anyone was wronged by their action. The rule of equity invoked, which has its origin in the injunction "No man can serve two masters," certainly did not apply to them, because they were acting in their own interests and were not charged with the duty of caring for others' rights, there being no other persons interested in the subject-matter.
In view of this statement and the facts developed in the commissioners' reports, it seems proper to recall the grants and benefits derived from the General Government by both the Union and Central Pacific companies for the purpose of aiding the construction of their roads.
By an act passed in 1862 it was provided that there should be advanced to said companies by the United States, to aid in such construction, the bonds of the Government amounting to $16,000 for every mile constructed, as often as a section of 40 miles of said roads should be built; that there should also be granted to said companies, upon the completion of every said section of 40 miles of road, five entire sections of public land for each mile so built; that the entire charges earned by said roads on account of transportation and service for the Government should be applied to the reimbursement of the bonds advanced by the United States and the interest thereon, and that to secure the repayment of the bonds so advanced, and interest, the issue and delivery to said companies of said bonds should constitute a first mortgage on the whole line of their roads and on their rolling stock, fixtures, and property of every kind and description.
The liberal donations, advances, and privileges provided for in this law were granted by the General Government for the purpose of securing the construction of these roads, which would complete the connection between our eastern and western coasts; and they were based upon a consideration of the public benefits which would accrue to the entire country from such consideration.
But the projectors of these roads were not content, and the sentiment which then seemed to pervade the Congress had not reached the limit of its generosity. Two years after the passage of this law it was supplemented and amended in various important particulars in favor of these companies by an act which provided, among other things, that the bonds, at the rate already specified, should be delivered upon the completion of sections of 20 miles in length instead of 40; that the lands to be conveyed to said companies on the completion of each section of said road should be ten sections per mile instead of five; that only half of the charges for transportation and service due from time to time from the United States should be retained and applied to the advances made to said companies by the Government, thus obliging immediate payment to its debtor of the other half of said charges, and that the lien of the United States to secure the reimbursement of the amount advanced to said companies in bonds, which lien was declared by the law of 1862 to constitute a first mortgage upon all the property of said companies, should become a junior lien and be subordinated to a mortgage which the companies were by the amendatory act authorized to execute to secure bonds which they might from time to time issue in sums not exceeding the amount of the United States bonds which should be advanced to them.
The immense advantages to the companies of this amendatory act are apparent; and in these days we may well wonder that even the anticipated public importance of the construction of these roads induced what must now appear to be a rather reckless and unguarded appropriation of the public funds and the public domain.
Under the operation of these laws the principal of the bonds which have been advanced is $64,023,512, as given in the reports of the commissioners; the interest to November 1, 1887, is calculated to be $76,024,206.58, making an aggregate at the date named of $140,047,718.58. The interest calculated to the maturity of the bonds added to the principal produces an aggregate of $178,884,759.50. Against these amounts there has been repaid by the companies the sum of $30,955,039.61.
It is almost needless to state that the companies have availed themselves to the utmost extent of the permission given them to issue their bonds and to mortgage their property to secure the payment of the same, by an incumbrance having preference to the Government's lien and precisely equal to it in amount.
It will be seen that there was available for the building of each mile of these roads $16,000 of United States bonds, due in thirty years, with 6 per cent interest; $16,000 in bonds of the companies, secured by a first mortgage on all their property, and ten sections of Government land, to say nothing of the stock of the companies.