PUBLIC UTILITIES-SMYTHE v. AMES AGAIN

The suit arose in 1893 over railroad freight rates prescribed by an act of the legislature of Nebraska approved April 12, 1893 which went into effect August 1, 1893. The claim was that the rates prescribed were so low that the plaintiff stockholders\u27 railroads were deprived of property in contravention of the Fourteenth Amendment to the Constitution of the United States. The state officials showed that the railroads of Nebraska can be reproduced completely for about $20,000 per mile. Eleven railroads were concerned. The lowest funded debt was $12,324 per mile with four over $20,000 per mile. The par value of the capital stock per mile of one railroad was $ 5,021 and of five was more than $20,000 per mile each. The act of Congress under which the Union Pacific ( one of the railroads) was constructed reserved a second lien of $ 16,000 per mile for loans made by the government and authorized a prior lien of $16,000 per mile for loans to be made by private parties and the funded debt was $70,468 per mile. It was found that if the rates prescribed had been in effect for the test year with the same volume of business some of the railroads would not have earned operating expenses and some would have made some earnings-Union Pacific $55,596 and Burlington $77,617. It thus became necessary to determine whether the decrease of rates to such amounts of net earnings had deprived the railroads of their property