
    THE UNION PACIFIC RAILWAY COMPANY v. THE UNITED STATES.
    [Nos. 11901, 12515, 14389.
    Decided February 2, 1885.]
    
      On the Proofs.
    The claimant seeks to recover for services rendered. The defendants set up a counter-claim for five per cent, of the net earnings prior to the Thurman Act 1878; and for twenty-five per cent, since. The questions of law presented are: Whether the government may send local passengers at through rates ? At what rate the government shall pay for passengers over the Omaha bridge ? Whether the Thurman Act provides a different rule for ascertaining the net earnings of the road than that previously laid down by the Supreme Court (99 U. S. R., 402) ? How the annual payments into the sinking fund prescribed by the Thurman Act shall he ascertained and computed ?
    I.If the court find the fact that rates allowed for mail transportation are fair and reasonable, and not in excess of rates paid by private parties, no question of law will arise under the Pacific Pailroad Act 1862 (12 Stat. L., p. 489, § 6), which requires the road to transport freight and passengers for the government “affair and reasonable rates of compensation, not to exceed the amounts pal'd by private parties for the same Icind of service.”
    
    II.The government is not entitled under that provision to through rates for local passengers, i. e., to rates which the railroad receives in its division with other companies for transportation over its own and other roads.
    III. The same provision governs the fare over the Omaha bridge. The Act 24 February, 1871 (16 Stat. L., p. 430), under which the bridge was built, does not supersede or modify it.
    IV. The words “necessary expenses of operating” in the Thurman Act 1878 (20 Stat. L., p. 56, $ 1) extend to the expenses of operating the road in accordance with the demands of the business coming to it, hut limit the expenses to such as are condusive to that end and exclude those that are not. The act accords with the rule previously laid down by the Supreme Court .(J9 U. S. R., 402).
    
      Y. The annual payment into the sinking fnnd prescribed by the Thurman Act (5 4) adds to 'the five per cent, of net earnings prescribed by the act 1862 so much, of $850,000 as will make with the five per cent, and with the compensation for services performed for the government an amount equal to twenty-five per cent, of the net earnings of the road, and no more.
    
      The Reporters’ statement of the case :
    The following are the, facts of the case as found by the court:
    I. The Union Pacific Railroad Company was a corporation duly organized under the act of Congress approved July 1, 1862, entitled “An act to aid in the construction of a railroad and telegraph line from the Missouri River to the Pacific Ocean, and to secure to the government the use of the same for postal, military, and other purposes,” and the act amendatory thereof, approved July 2,1864 $ and, as such, owned and operated a line of railroad and telegraph extending from Council Bluffs, in Iowa, to Ogden, in the Territory of Utah. Said company availed itself of the privileges conferred by the Act of February 24, 3871, chapter 67 (16 Stat. L., 430) by issuing bonds to the amount of $2,500,000 for the purpose of constructing the bridges contemplated by said act. The Union Pacific Railroad Company at the outset issued $27,237,000 of the first-mortgage bonds authorized by act of Congress, and the defendants furnished ^them with a similar amount of government bonds. The company also issued $10,400,000 of land-grant bonds and $9,268,000 of income bonds. The company disposed of all these at less than par, realizing therefrom as follows:
    $¿7,237,000 first-mortgage, less discount $3,494,991.23. $23,742, 008 77
    $27,237,000 government bonds, less $91,348.72. 27,145,651 21
    $10,400,000 land-grant, less $4,336,007.96 . 6,063,992 04
    $9,268,000 income, less $2,818,400 . 6,449,600. 00
    It also issued stock of par value. 34,716,000 00
    98,117,252 02
    The actual cost of engineering, right of way, building the road, station buildings, shops, tools, equipment, snow-sheds, roadway, track, bridging, fencing, telegraph, express outfit, expense government commissioners and directors, legal expenses, United States revenue stamps, discount, interest, preliminary expenses Cedar Rapids'and Missouri River Railroad, and interest on bonds during construction was $63,166,270.27, which left $35,000,000 available for such additions to the equipment and construction as the development of the country and the construction of feeders and tributaries would from time to time render necessary. Claimant made contracts with Hoxie, Ames, Davis, and tbe Crédit Mobilier by which the road cost the railroad company not only the money which was realized from the bonds, but also the $35,000,000 resulting from subscriptions to the stock. The contracts were in terms for the full sum of $98,000,000. The railroad company paid the consideration by turning over to the contractors, from time to time, the proceeds of the bonds, and checks amounting to $35,000,-000, and thereupon the contractors subscribed for the stock amounting to that sum and paid for it in their checks. For the payment of the checks the company had no cash on hand.
    II. “ The Kansas Pacific Railway Company ” was a corporation duly incorporated by an act of the legislature of the Territory of Kansas, under the name of “ Leavenworth, Pawnee and Western Railroad Company,” the name thereof being after-wards changed to “The Union Pacific Railway Company, Eastern Division,” and then to “The Kansas Pacific Railway Company”; that the said company is the same company named in the said acts of Congress of July 1, 1862, and July 2, 1864, as “ The Leavenworth, Pawnee and Western Railroad Company,” as entitled to the benefits of said acts of 1862 and 1864; the Kansas Pacific Railway Company owned and operated a railroad from Kansas City, Mo., to Denver, in Colorado, during* the periods hereinafter named. Said Union Pacific Railway Company, Eastern Division, received from the United States, under said act of July 1, 1862, and acts amendatory thereof and supplemental thereto, their bonds of $1,000 each to the amount of sixteen of said bonds per mile, amounting in all to $6,303,000, the last issue being based upon the following affidavit, application, report, indorsement, and order:
    “Union Pacific Railway Co., “Eastern Division,
    “ Washington, D. C., July 18,1868.
    “ I, John D. Perry, president of the Union Pacific Railway Company, Eastern Division, being duly sworn, depose and say that I am advised by the chief engineer of the company that twenty (20) additional miles of the railroad and telegraph line of this company are completed in accordance with the act of Congress entitled ‘An act to aid in the construction of a railroad and telegraph line from the Missouri River to the Pacific Ocean, and to secure to the government the use of the same for postal, military, and other purposes,’ approved July 1st,. 1862, and the acts amendatory thereof ; that said twenty (20) miles begins at a point 380 miles westward from the State line of Kansas and Missouri, and terminates at a point 400 miles westward from said State line, measured along the line of said road, and forms the sixteenth (16) section of said road.
    “John D. Perky.
    “Sworn and subscribed to before me this 18th day of July, 1868.
    “[NOTARIAL SEAL.] “ THOS. J. MYERS,
    “ Notary Public.”
    “Department of the Interior,
    “ Washington, D. 0., October 31st, 1868.
    “ Sir : I have tbe honor to transmit herewith, for your action, a report, dated July 30, 1868, of the commissioners, Messrs. "Wm.'M. White, Frank P. Blair, and H. P. Buford, appointed by you to examine and report upon the 16th section of twenty miles of the road and telegraph line of the Union Pacific Railway Company, Eastern Division, commencing at the 380th and terminating at the 400th mile post west from the initial point on the line dividing the States of Missouri and Kansas.
    “On the 30th instant I had the honor to submit to you the report and map of Brevet Major Howell’s survey of a route for a railroad from Fort Riley to the one hundredth meridian. The same was accepted and approved by you, and your order, issued thereon, restricts the distance for which this company becomes entitled to the bonds of the United States to 393-5^^0 miles.
    “The road and telegraph line of this company has already been accepted for the distance of 380 miles, leaving 13-/0^0 miles of this section to complete the distance for which the company became entitled to the subsidy in bonds.
    “The commissioners in their report represent the said section ready for present service and completed and equipped as a first-class railroad, and that the telegraph line is also completed; and as the said company have- paid to the said commissioners the per diem and mileage due them, under the 21st section of the act approved July 27,1866, on account of their examination thereof, I respectfully recommend the acceptance of the same for a distance of 13-^0^^- miles, and the issue to said company of bonds and patent for lands due on said 13--^,^ miles of road and telegraph line, agreeably to the act approved July 1st, 1862, entitled ‘An act to aid in the construction of a railroad and telegraph line from the Missouri River to the Pacific Ocean,’ &c., and the acts amendatory thereof.
    “I am, sir, with great respect, your ob’t servant, ’
    ’ “ O. H. Browning-,
    “The President.” Secretary.
    
    
      “Executive Mansion, Oct. 31sí, 1868.
    “ The within recommendations of the Secretary of the Interior are approved, and the Secretary of the Treasury and himself are hereby directed to carry the same into effect.
    “Andrew Johnson.”
    “Department oe the Interior,
    “ Washington, D. C., November 2, 1868.
    “Sir: I have the honor to transmit herewith, for your information, a certified copy of a letter from this department to the President of the United States, dated the 31st ultimo, respecting the acceptance of 13.9425 miles of the road and telegraph line of the Union Pacific Bailway Company, Eastern Division, and of the President’s order indorsed thereon; also certified copy of the report of the commissioners on the same, with copies of receipts from said commissioners to said company upon payment of the per diem and mileage due them under the 21st section of the act approved July 27, 1866.
    “Yery respectfully, your ob’t servant,
    “O. H. Browning,
    “ Secretary.
    
    “ Hon. H. McCulloch,
    “ Secretary of the Treasury.”
    Attached to and as part of said Kansas Pacific Bailway is a road from Leavenworth to Lawrence, Kans., belonging to the claimant, known as the Leavenworth Branch.
    III. “The Denver Pacific Railway and Telegraph Company” was a corporation organized for the purpose of constructing a railroad and telegraph line from the city of Denver, in Colorado, ■ to Cheyenne, in the Territory of Wyoming (under and by virtue of an act of Congress approved March 3, 1869, and an act of Congress approved June 30,1874).
    During the periods hereinafter mentioned the said “ Denver Pacific Bailway and Telegraph Company’’owned and operated a railroad and telegraph line from Denver to Cheyenne.
    IV. On the 24th day of January, A. D. 1880, under and by virtue of the 16th section of said acts of 1862 and 1864, said companies hereinbefore named entered into articles of union and consolidation, under the corporate name of “The Union Pacific Bail way Company,” a copy of which articles was duly filed in the Department of the Interior on the 26th day of January, A. D. 1880; and thereby and thereupon the claimant became a corporation under the said name of “The Union Pacific Bail-way Company.” At the time of the consolidation of the Union Pacific with the Kansas Pacific and Denver pacific, on the 24th of January, 1880, there were outstanding 367,623 shares of stock, of the par value of $36,762,300. In 1881 the company disposed of 20 per cent, more stock for cash at par, realizing therefrom $7,352,460. No part of this money was applied to the expenditures of the items in Exhibit D, but all entered into the construction of branch lines of road, which were feeders to said company’s road, and in which lines said company was a stockholder and bondholder.
    V.The claimant performed transportation of troops, mails, mail messengers, passengers, munitions of war, supplies, public stores, and telegrams from January 1, 1873, to December 31, 1882, over the Denver Pacific and Telegraph Division (including the Cheyenne Branch) of the claimant’s road from Denver to Cheyenne, for the defendants, to the amount—
    Mails. $51,451 97
    Other transportation. 37,113 34
    88,565 31
    VI. The claimant performed for the defendants transportation of mails, mail messengers, from January 1, 1873, to December 31, 1882, over the Leavenworth branch of the claimant’s road, amounting to $25,903.23.
    VII. The claimant performed for the defendants transportation of troops, mails, mail messengers, passengers, munitions of war, supplies, public stores, and telegrams from January 1, 1873, to December 31, 1882, over the Kansas Pacific Division of the claimant’s road, between Kansas City and Denver, amounting to—
    Mails and mail messengers . $1,096,117 05
    Other transportation, including Leavenworth Branch. 935, 827 62
    Of which there has been paid in cash. 1,657,27
    Of these amounts the apportionment between the aided portion of the Kansas Pacific proper, on the one hand, and the non-aided portion of the Kansas Pacific and the non-aided Leavenworth Branch, on the other, is as follows:
    General transportation, aided. $626,402 77
    General transportation, non-aided. 309,424 85
    Total. 935,827 62
    Mail, aided. 681,823 56
    Mail, non-aided. 414,293 49
    Total. 1,096,117 05
    Mail, Leavenworth Branch. 25,903 23
    
      Of this sum judgment bas been entered for claimant in No. 12380 for $34,623.08. From these sums the following deduction should be made:
    For oasli payment on account of general transportation.$1,657 27
    For judgment in No. 12380 on account of mails for one-half on aided portion. 15,442 83
    Full allowance on non-aicled. 19,180 25
    It was not proved what were the exact earnings of the aided and non-aided parts of said division taken separately, and this distribution of earnings of the general transportation, as well as the compensation for mail transportation, is made in proportion to the mileage of each part.
    VIII. The claimant performed for the defendants transportation of mails and mail messengers over the Union Pacific Division of its road from Council Bluffs to Ogden, from January 1,1876, to June 30,1878, to the amount, as allowed by the Treasury Department, of $875,787.
    IX. The claimant performed for the defendants transportation of passengers, munitions of Avar, supplies, public stores, and telegrams over said Union Pacific Division of claimant’s road, prior to July 1, 1878, as-allowed by thb Treasury Department (exclusive of amounts involved in former judgments of this court), $2,039,290.96.
    X. The company’s uniform rate for the transportation of passengers between Council Bluffs and Ogden, when said passengers purchase tickets at either of those places, is $78.50 each; but, by contracts with connecting railroad companies, the claimant receives from said companies who sell through tickets at reduced rates from New York, San Francisco, and other places over their oato and the claimant’s road $54 only for each passenger carried between said Council Bluffs and Ogden upon said through tickets as its proportion of money paid for the whole through distance. In computing the compensation set out in finding ix, the Treasury Department allowed the claimant only $54 for each passenger carried for the defendants when said passenger did nothavm a through ticket over its own and other roads, but took the train at Council Bluffs or Ogden upon an order from the defendants’ authorized officers to proceed o\mr the road between those places at the charge of the government. The difference between $54 allowed as aforesaid and $78.50 claimed by the company for each passenger so transported by the claimant is $2,855.38 for the period covered by this suit. The court finds that $78.50 is a fair and reasonable rate of compensation to be paid by the defendants for the transportation of a passenger taking a train at Ogden or Council Bluffs arid passing over the road between those places without a through ticket purchased of other roads as aforesaid, and not in excess of the rates charged private parties for the same-kind of service. In some instances the requisition for transportation presented to the agents of the company stated on its-face that the passenger was bound from seaboard to seaboard, and in others the requisition furnished no information on the subject. How much of the sum disallowed was for one and how much for the other kind of requisition is not shown, but. the company concedes the reduction in the former cases.
    XI. The company’s uniform rate, during the time covered by this suit, for the transportation of passengers between Council Bluff's and Omaha, over its bridge and approaches, a distance of 3.97 miles, was 50 cents each, which sum was included in the price of tickets sold for longer or shorter distances. That was-a fair and reasonable rate of compensation to be paid by the defendants, and not in excess of the rates paid by private parties for the same kind of service. The Treasury Department did riot allow 50 cents for each passenger so transported for-the defendants, but in each case, ascertaining over what railroad or public highway the passenger reached Council Bluff's or Omaha, and the rate per mile .paid by him over such part, of said railroad or public highway jis he had thus traveled, the-company was allowed only the same rate per mile for transporting such passenger between Council Bluffs and Omaha as he had so paid on the road leading to the bridge. On the roads, leading to said bridge thé rates per mile are different, and. the rates on the same road differ according to distance traveled.
    ' The difference between the amount so allowed by the Treasury Department for the transportation of such passengers for the defendants and that which the company should be allowed if' it has a right to charge 50 cents for each passenger so traris-ported during the time above specified is $3,693.31. Similar rules were applied by the Treasury Department to the transportation of freight over said bridge, and the disallowance resulting therefrom' amounted to $10,885.34. The rate claimed by the company for transportation of freight over said bridge-. was fair and reasonable, and notin excess of the rates paid by private parties for the same kind of service.
    COUNTER- CLAIMS.
    XII. The earnings and expenses of the Union Pacific Division of claimant’s road from November 6, 1875, each year, to June 30, 1878, were as follows:
    November 6, 1875, to November 5, 1876:
    Earnings by transportation, passengers, freight, supplies, &c., for United States. $¡952, 616 13
    Other earnings. 12, 048, 348 46
    Total. 13,000,964 59
    Expenses. 5,826,629 35
    Net earnings. 7,174,335 24
    5 per cent. 358,716 76
    From November 6, 1876, to November 5, 1877:
    Earnings by transportation, passengers, freight, supplies, &c., for United States. 1,029,635 01
    Other earnings. 11,888,228 08
    Total. 12,917,863 09
    Expenses..•. 5,721,222 76
    Net earnings. 7,196,640 33
    5 per cent, is. 359,832 02
    From November 6, 1877, to June 30, 1878:
    Earnings by transportation, passengers, freight, supplies for United States. 527, 027 04
    Other earnings. 7,254,256 77
    Total.*. 7,781,283 81
    Expenses. 3,892,262 06
    Net earnings. 3, 889, 021 75
    5 per cent. 194,451 09
    XIII. The earnings aud expenses of 3!)3if- miles of the Kansas Pacific Division of claimant’s road, which was aided by the government, as set out in finding ii, from November 2, 1868, to December 31, 1882, each year, apportioned ou a mileage basis between the aided and non-aided portions thereof, there being no proof of the actual earnings of each portion taken separately, were as follows:
    From November 2, 1868, to November 6, 1869 :
    Earnings.$2, 031,854 86
    Expenses. 1,451,470 40
    Net earnings. 580,384 46
    Net earnings 5 per cent. 29,019 22
    
      From November 6, 1869, to November 2, 1870:
    Earnings. $2,395,025 65
    Expenses. 2,604,447 93
    No net earnings.
    From November 2, 1870, to November-2, 1871:
    Earnings. 1,918,289 52
    Expenses. 1, 904, 346 53
    Net earnings. 13,942 99
    Net earnings, 5 per cent, of (insufficient to pay annual interest on first-mortgage bonds). 697 15
    From November 2, 1871, to November 2, 1872:
    Earnings. 2, 202, 704 60
    Expenses. 1,446,004 85
    Net earnings. 756,699 75
    Net 5 per cent, of. 37,834 99
    From November 2, 1872, to November 2, 1873 :
    Earnings. 2,212,842 80
    Expenses. 1, 441, 614 52
    Net earnings. 771,228 28
    Net 5 per cent. 38,561 41
    From November 2, 1873, to November 2, 1874:
    Earnings-. 1,979,401 77
    Expenses.. 1,114, 019 66
    Net. 865,382 11
    Net 5 per cent. 43,269 11
    From November 2, 1874, to November 2, 1875:
    Earnings. 1,987,323 86
    Expenses. 1,147,287 74
    Net. 840,036 12
    Net 5 per cent. 42, 001 81
    From November 2, 1875, to November 2, 1876:
    Earnings.*. 1,858,749 48
    Expenses. 1,178, 605 24
    Net.J. 680,144 24
    Net 5 per cent., or. 34, 007 21
    From November 2, 1876, to November 2, 1877:
    Earnings.. 2,287, 947 55
    Expenses. 1,339,456 81
    Net.'. 948,490 74
    5 percent.1. 47,424 54
    From November 2,1877, to November 2, 1878:
    Earnings. 2,799,914 48
    Expenses. 1,587, 521 25
    Net. 1,212,393 23
    5 per cent. 60, 619 66
    
      From November 2, 1878, to November 2, 1879:
    Earnings. $3,385,885 00
    Expenses...,. 2,26», 217 67
    Net. 1,117,667 33
    Net 5 per cent. 55,883 37
    From November 2, 1879, to November 2, 1880:
    Earnings. 3,661,197 46
    Expenses. 2,227,784 62
    Net. 1,433,412 84
    5 per cent. 71,670 64
    From November 2, 1880, to December 31, 1881 :
    Earnings.:.*. 4,409,463 37
    Expenses..- - 2,855,638 78
    Net. 1,553,824 59
    5 per cent.. 77,691 23
    From December 31, 1881, to December 31, 1882:
    Earnings. 3,162,351 36
    Expenses. 1,944,666 44
    Net.-■. 1,217,684 93
    5 per cent...-. 60,884 25
    XIV. The earnings and expenses of the Union Pacific Division of claimant’s road, from Council Bluffs to Ogden, from July 1, 1878, to December 31,1878, were as follows:
    From July 1 to December 31, 1878 :
    Earnings—
    By mail transportation.. $188,432 28
    By other transportation for the United States. 291,846 52
    (Both retained hy Treasury Department.)
    Amount disallowed for Omaha bridge and difference between through and local rates. 1,611 42
    Gross earnings. 7,017,409 98
    Expenses..•. 3,495,887 87
    Net earnings'.. 3,521,522 11
    5 per cent, of not earnings. 176,076 10
    Eetained by Treasury Department as above. 481,890 22
    25 per cent, of net earnings... 880,380 53
    5 per cent, of uet earnings. $176,076 10
    Eetained by Treasury Department. 481,890 22
    - 657,966 32
    222,414 21
    5 per cent, of net earnings.- 176,076 10
    Payable in cash for the'last half of 1878. 398,490 31
    
      From December 31, 1878, to December 31, 1879 :
    Earnings—
    By mail transportation. $378,853 08
    By other transportation for the United States. 564, 076 86
    (Both retained by Treasury Department.)
    By transportation, &c., for other parties. 12,051,389 65
    Amount disallowed for Omaha bridge and difference between through and local rates. 3,399 28
    Gross. 12,997,718 87
    Expenses. 7,213,520 35
    Net earnings. 5,784,198 52
    5 per cent, of net earnings. 289,209 93
    Retained as above. 946,329 22
    25 per cent, of net earnings. 1,446,048 63
    Retained by Treasury Department. 946,329 22
    - 1,235,539 15
    210,510 48
    5 per cent, of net earnings. 289,209 93
    Payable in cash for the year 1879 . 499,720 41
    From December 31, 1879, to December 31, 1880:
    Earnings—
    By mail transportation. 417,295 82
    By other transportation for the United States. 608,725 08
    (Both retained by the Treasury Department.)
    By transportation, &c., for other parties. 14,739,447 13
    Amount disallowed for Omaha bridge and difference between through and local rates. 4,693 29
    Gross. 15,770,161,32
    Expenses. 9,248,436 03
    Net earnings. 6,521,725 29
    5 per cent, of net earnings.... 326,086 26
    Retained as above.1. 1,030,714 19
    25 per cent, of earnings. 1,630,431 32
    Retained by Treasury Department. 1,030,714 19
    - 1,356,800 45
    273,630 87
    5 per cent, of net earnings. 326,086 26
    Payable in cash for the year 1880 .. 599,717 13
    From December 31, 1880, to December 31, 1881:
    Earnings—
    By mail transportation. 443,338 31
    By other transportation for the United States. 556,155 00
    (Both retained by the Treasury Department.)
    By transportation,' &c., for other parties. 16,125,312 64
    
      Amount disallowed for Omaha "bridge and difference
    between through and local rates.. $2,840 57
    Gross. 17,127,646 52
    Expenses. 11,249,497 83
    Net. 5,878,148 69
    5jper cent, of net earnings. 293,907 43 88
    Retained as above. 1,002,333 88
    25 per cent, of net earnings. 1,469,537 17
    5 per cent, of net earnings.. $293,907 43
    Retained by Treasury Department. 1,002,338 88
    - 1,296,241 31
    5 per cent, of net earnings. 293,907 43
    Payable in cash for the year 1881 . 467,203 29
    Prom December 31, 1881, to December 31, 1882:
    Earnings—
    By mail transportation.. 483,218 51
    By other transportation for the United States. 438,539 06
    (Both retained by the Treasury Department.)
    By transportation, &o., for other parties. 16,050,550 95
    Amount disallowed for Omaha bridge and difference
    between through and local rates. 2,758 05
    Gross. 16,975,066 57
    Expenses.. 9,233,768 33
    Net. 7,741,298 24
    5 per cent, of net earnings. 387,064 91
    per Retained as above. 924,515 62
    25 per cent, of net earnings. 1,935,324 56
    5 per cent, of net earnings. $387,064 91
    Retained by Treasury Department. 924,515 62
    - 1,311,580 53
    623,744 03
    5 per cent, of net earnings. 387,064 91
    Payable in cash for the year 1882. 1,010,808 94
    XT. In the expenses mentioned in the next preceding finding (xiv) are included all the items set out in Exhibit D hereto annexed. The court find that all said items were in good faith actually paid out of the earnings of the road, were not charged to construction or building of the road nor to capital, and they were necessary expenses for operating the road and keeping the same in repair and in a proper condition for the transaction of the current business of the road in a profitable and economical manner, although increasing the real value of the company’s property to that extent. The words “ operating expenses ” bave no technical sense accepted by railroad men. From 1869 tbe directors of tbe Union Pacific Company bave made annual printed reports to tbe stockholders, which were furnished to tbe government directors, to any one who applied, and were open to inspection to tbe general public. They were tbe only official publications that tbe company made. In these reports tbe statement of “ operating expenses ” was invariably kept separate from expenditures for new construction and new equipment. Tbe following extracts from tbe report of 1879 show tbe method in which tbe company, from 1869 to 1882, indirectly bave treated tbe matter in their reports:
    “ Tbe earnings and expenses for tbe year 1879 are as follows :
    Gross earnings, including Omaha bridge. $13,201,077 66
    Deduct operating expenses (including taxes). 5,475,503 44
    Surplus earnings. 7,725,574 22
    “The operating expenses were 41.48 per cent of tbe gross earnings.”
    “ Tbe earnings and expenses for the years 1878 and 1879, including Omaha bridge, compare as follows
    1878. 1879.
    Gross earnings.
    Operating expenses. $13,121,272 58 5,376,586 19 $13,201,077 06 5,475, 503 44
    Surplus earnings.... 7,744, 686 39 7,725, 574 22
    Percentage of expenses: Earnings. 40.98 41.48
    
      u For a more detailed statement of tbe operating expenses, and a comparison thereof with tbe year 1878, attention is called to tbe table hereto appended.”
    “ Tbe construction expenditures of -1879 were as follows.”
    Then follows a table identical with that of Exhibit D for that year. There is also found in said report a “ detailed statement of operating expenses for 1878-1879, tbe total of which is $6,476,503.44, as aforesaid. Exhibit D has been taken from tbe books of tbe company, where it is kept separately, tbe separation and division by tbe company being accepted by tbe defendants for tbe purposes of this case, tbe items being tbe expenditures shown by tbe books of tbe company for new constructions ” and “ new equipment.” Those items bave been reported by the company as “surplus earnings,” and as so far increasing the value of its property. The increase of business which demanded these expenditures resulted from the demands of the public mostly by reason of the construction of feeders by the company tributary to the main line, which opened a wider extent of country, and not from any special demands of the government.
    XYI. The amounts allowed and retained by the Treasury Department for transportation of mails as aforesaid are a fair and reasonable compensation for the service, and not in excess of the rates paid by private parties for the same kind of service.
    Exhibit D.
    
      From, July 1 to December 31, 1878.
    Depots:
    Council Bluffs. $26,365 61
    Water-works:
    Council Bluffs.-. $18,045 38
    Omaha. 3,421 89 ' - 21,467 27
    Car equipment.. 25,400 00
    Engine “ .-. 17,059 57
    Eight of way and land damage. 2,393 38
    Hotels and tenements, Council Bluffs. 5,685 61
    Bound-house, Eawlins. 9,393 50
    107,764 94
    Less general office building, Omaha. 40 18
    107,724 76
    
      Tear ending December 31si, 1879.
    Depots: Council Bluffs. 651 32
    Tenements: Council Bluffs.-. 35 00
    Shops: Bail mill, Grand Island. 12,532 03
    Tools and machinery: Plane at Omaha.-. $7,55 00
    
      “ “ Cheyenne... 780 00 - 1,535 00
    Water-works: Omaha. 9,147 61
    Jackson... 1,348 80
    Bawlins. 12,560 41
    - 23,056 82
    Locomotive equipments: 10 Taunton engines, Nos. 181 to 190. 83,244 41
    Less 4 engines sold to Utah Southern B. B.. 24,000 00 - 59,244 41
    Car equipments: 4 box cars.— 2,600 00
    Boyalty on plough and scraper . 3, 000 00 - 5,600 00
    
      Land and right of way : Land at Council Bluffs. $1,085 00
    “ “ Omaha. 648 80
    1,733 80
    Less land at Omaha, sold. 2,931 46
    Cr $1,197 66
    101,456 92
    
      Tear ending Deeemler 31, 1880.
    Depots:
    Passenger sheds at Council Bluffs. 27,901 45
    Water-works:
    Millard. $6,509 90
    Juleshurg Junction. 2,678 72
    Bawlins. '3,190 96
    .12,379 58
    Deduct one tank sold Utah Southern B. B .. 1,000 00
    11,379 58
    Car equipment: 100 stock cars. 54,550 00
    100 hox ears. 59,550 00
    350 hox cars.. 213,500 00
    Freight to Council Bluffs. 25,341 42
    8 mail cars.-. 48,139 67
    Boyalty on Tanner brake. 4,000 00
    405,081 09
    Deduct cars furnished as follows :
    Utah Southern B. E.:
    $2,200 00 1 baggage car.
    14,000 00 Omaha and ¡Republican Valley B. E.: 2 passenger cars.
    3,000 00 1 do. do.
    5,000 00 1 baggage do.
    1,400 00 1 caboose..
    3,000 00 5 box-cars.
    Omaha, Niobrara and Black Hills B. E.:
    4,000 00 2 passenger cars.
    1,200 00 2 baggage and mail.
    6,000 00 10 hox cars.
    2,750 00 5 coal cars.
    2,000 00 Marysville and Blue Valley B. B.: 1 passenger car.
    2,500 00 1 passenger and baggage.
    3,000 00 5 box cars..■...
    - 50,050 00
    355,031 09
    Locomotive equipment: 10 Taunton locomotives, Nos. 191 to 200 . 70,613 50
    18 Danforth locomotives, Nos. 201 to 218. 147,562 01
    Freight to Omaha and fitting for service. 18,533 36
    236,708 87
    
      Deduct:
    Locomotives furnished to Omaha and Eepublican Valley B. E. (4) . $28,000 00
    Omaha, Niobrara and Black Hills E. E. (2). 14,000 00
    Marysville and Blue Valley E. K. 7,500 00
    Utah Southern E.E. (1).. $7,500
    Discount on those sold previously. 3,750
    3,750 00
    1 excavator sold Oregon E. E ... 5, 952 70
    $59,202 70
    $177,506 17
    Land and right of way : Council Bluffs. 800 00
    Omaha. 1,119 00.
    Elkhorn. 137 50
    Columbus. 1,400 00
    Grand Island. 730 00
    4,186 50
    Deduct: Beceived from exchange of land at Elkhorn. 194 45
    3,992 05
    Shops: Addition to foundry, Omaha.. .. 4,620 97
    Bail mill .'at Grand Island .... 1,660 47
    Machine shops at do. ... 1'.'.. 75,690 15
    Bar mill at Laramie. 52,281 99
    Engine-house at Eock Springs. 867 35
    Do. Echo. 1,167 35
    Do. Uintah. 1,393 03
    137,681 31
    Tools and machinery: Blackford drill, punch press, pipe cutter, bolt cutter and header, wheel borer, foundry crane, etc., Om'aha.:. 4,860 72
    Slotting machine, axle lathe, wheel borer, ■ etc., at North Platte.:. 5,542 53
    Punch and shears, Eawlins...:. 1,685 00
    Driving-wheel lathe, punch and shears, etc., Evanston.6,653' 87
    18,742 12
    Ice-houses: North Platte.:.-' 1,422 02
    Cheyenne.. 1,921 58
    3,343 60
    Coal-sheds: Plum Creek. 2,344 34
    Julesburg Junction. 3,505 67“
    Echo. 3,442 56
    Uintah. 85 59
    9,378 16
    9, 378 16Coal-mine track, Carbon 17,485
    762,440 87
    
      Year ending December 31, 1881.
    Shops: " Car shops at Omaha.1. $61,293 82
    Machine shops at Grand Island. 123,646 00
    
      Machine shops at North Platte. $70,004 00
    Engine-house at Columbus. 2,461 61
    Do. Rock Springs. 1,142 78
    Do. Echo. 2,689 37
    Bar mill at Laramie. 2,824 31
    Blacksmiths’ shops at Cheyenne. 2,991 61
    -$267,053 50
    Tools and machinery: Omaha:
    Double-head axle lathe, punch and shears, planer, anvils, cast-iron forges, &c. 11,195 97
    Grand Island:
    Bolt cutter, planers, blower, swing lathes, axle lathe, Knowles pump, punch and shears, emery grinders and wheels, etc., etc. 32,523 39
    North Platte:
    Large wheel lathe and punch, upright drill, swing lathe, hydraulic press, planer, . steam hammer (complete), 1 Harrington drill, etc., etc. 12,417 08
    Cheyenne:
    Wheel boxes, axle lathe, etc. 2,957 53 Laramie:
    Emery grinders and wheels, Putnam lathe, planer, slotter, etc., etc. 3,673 10
    Rawlins:
    Emery grinders and wheels, Pox lathe, swing lathe, planer, &c. 5,886 65
    Evanston:
    Emery grinders, planer, &c. 665 30
    - 69,319 03
    Water-works:
    Clark’s. 4,870 55
    Gibbon. 4,939 91
    Kearney Junction. 4,683 32
    Antelope. 3,757 73
    Granite Oa-Son. 8,333 53
    Carbon. 1,582 -87
    Dana... 66 33
    . Fillmore. 11,328 68
    Rawlins.1. 5,045 36
    Salt Wells.... 5,714 78
    Rock Springs. 276 49
    Table Rock. 10,774 16
    Evanston. 1,499 56
    Echo. 2,762 95
    Car equipment:
    200 box cars. 169,276 00
    300 flat cars.'_'. 131,872 00
    300 stock cars. 165, 000 00
    800 box cars... 452,161 00
    12 passenger cars on account. 50,000 00
    6 baggage cars. 22,052 10
    16 cabooses. 23,650 75
    Freight on cars. 6,527 60
    Royalty on patent safety gate.. 1,250 00
    1,021,789 45
    Less rebate on freight charges in 1880. 6,610 48
    1,015,178 97
    
      Deduct:
    Equipment furnished Colorado
    Central E. B. Co., for Jules-burg Branch, viz:
    4 eight-wheel locomotives . |48,000 00
    6 ten-wheel “ 82.500 00
    2 first-class coaches. 12,000 00
    2 second-class coaches. 10.500 00
    2 cars. 7,350 00
    2 express “ . 7,350 00
    225 box “ . 126,000 00
    75 stock “ ... 42,000 00
    
    100 flat “ .. 42.500 00
    100 coal “ ... 45,000
    5 “ . 27.500 00
    7 cabooses . 10,332 00
    $461,032 00
    $554,146 97
    Locomotive equipment:
    26 Taunton, locomotives Nos. 233 to 258. 235,300 00
    15 Baldwin “ “ 219 to 233. 160,500 00
    Freight to Omaha and fitting for service- 13,850 96
    Air and automatic brakes. 3,559 26
    413,210 22
    Land and right of way:
    Omaha?.. 16,348 45
    Elkhorn. 3,000 00
    Almy .. 200 00
    19,548 45
    Deduct:
    Eeceived for damages awarded for crossing track, and lot 7, block 156, Omaha. 1,000 00
    - 18,548 45
    Coal-sheds:
    Columbus. 1,584 05
    Denver Junction.. 3,357 70
    Medicine Bow. 11,837 01
    Echo. 3,482 77
    - 20,261 53
    Buildings:
    Depot at Shelton.. 2,064 15
    Eating-house at Bock Creek... 8,500 00
    Tenement at Denver Junction. 1,340 19
    “ “ Carbon. 1,058 18
    “ ■ “ Bock Springs. 1,215 25
    
      “ Green Eiver. 633 20
    Ice-house “ Council Bluffs.. 1. 163 58
    “ “Omaha. 2,852 37
    
      “ “ Ogden. 332 44
    - 18,159 36
    Stock-yards at Omaha. 7,150 00
    Coal-mine track at Carbon. 1,332 00
    - 8,482 00
    1,434,817 27
    Less Grand Island precinct bonds, account location of shops... 25,000 00
    
      
      Tear ending December 31, 1882.
    Shops:
    Grand Island. $36,965 14
    North Platte. 33,539 29
    Evanston. 3,888 25
    Omaha (car shops)..... 36,802 14
    Evanston do. 224 52
    Green River do. 343 72
    06
    Tools and machinery:
    Grand Island .... 04
    Omaha. eo <N
    Laramie.
    Rawlins.
    Green River
    Evanston. cd
    North Platte. co
    Cheyenne.
    99
    Water-works:
    Tremont. 1,253 79
    Carbon.-.2,165 43
    Rawlins.-. 404 85
    Fillmore. 634 05
    Table Rock . 1, 323 40
    Salt Wells. 431 78
    Harper’s. 235 06
    6,448 36
    Ronnd-house, Columbus'.,. 329 60
    ldings:
    $1,485 79
    Ice-houses at Omaha. 207 00
    Ice-houses at Ogden.. 114 91
    Charcoal-house, Omaha. 346 02
    Tenement, Rock Springs. 644 58
    Store-room, Evanston. 445 45
    Paint mill, Omaha. 475 24
    Paint-mill machinery. 620 02
    Coal chutes, Columbus. 1,976 05
    Coal chutes, Medicine Bow. 4,944 54
    Coal platform, Grand Island. 146 90
    11,406 50
    estate at Omaha. 30,625 00
    Less 2 old houses at Omaha, sold. 500 00
    30,125 00
    Car equipment:
    12 coaches from Pullman Palace Car Co. 25,082 08
    cars, Nos.). 26,250 00
    Royalty on 25 refrigerator cars. 625 00
    100 20-ton platform cars (built by Co.)__ 61,735 23
    2 20-ton box cars “ . 1,431 60
    way cars _ 37,620 75
    cars 29,483 30
    1 baggage car . 3,685 45
    Deduct: 185,913 41
    30 flat cars. $13,290 00
    1 portable tank sold Salt Lake and Western R’y.800 00
    14,090 00
    
      U. P. bos car No. 5432, destroyed by W., S. L. and P. R’y at Ritchie. $385 49
    Rebate on springs from Detroit. 1,100 00
    -$15,575 49
    -•- $170,337 92
    395,957 43
    82,500 00 Locomotive equipment: 6 Taunton locomotives, Nos. 49,51,54, 55', 65, and 123.
    75,000 00 5 locomotives, Nos. 125, -144, 145, 260, and 261.
    7,171 90 1 locomotive, No. 9, built at Omaha.
    7,601-49 Freight and fitting locomotives.
    '2,273 39
    Deduct:
    Locomotive sold Salt Lake and
    Western R’y— 1 10-wheel engine, No. 54_ $13,750 00
    Sold Utah Central R. R. engine No. 65. 13,750 00
    Sold Oregon Short Line R. R.— 8 8-wheel engines, Nos. 19,20, 16,43-’5,47, and 18. 76,000 00
    6 10-wheel engines, Nos. 55,51, 235,49,123,140. 82,500 00
    i, 000 00
    - 13,726 61
    382,230 82
    RECAPITULATION.
    July 1 to December 31,1878.:.. ... $107,724 76
    Year ending December 31,1879 ... 101,456 92
    Year ending December 31,1880 .. 762,440 87
    Year ending December 31,1881 . . 1,409,817 27
    Year ending December 31,1882 ... 382,230 82
    2,763,670 64
    Upon the foregoing findings of fact the court decided as conclusions of law as follows:
    The Kansas Pacific Railway, so far as the same was aided by the United States by the issue of bonds, was completed on the 2d of November, 1868.
    The claimant is entitled to be paid for—
    Mails and other transportation over Denver Pacific (including Cheyenne). $88,565 31
    Mails and mail messengers over the Leavenworth Branch... 25,903 23
    Mails and mail messengers over the non-aided branch of Kansas Pacific. $414,293 49
    Less judgment in 12380 . 19,180 25
    . ■- 395,113 24
    One-half of mails on Kansas Pacific on aided... 340,911 78'
    Less j udgment in 12380. — .. .... 15,442 83
    325,46$ 95
    
      Amount allowed on the non-aided Kansas Pacific, including Leavenworth Branch, general • transportation other than mail. $309,424 85
    Deduct cash payments'. 1,657 27 . - $307,767 58
    One-half general transportation other than mail on aided - Kansas Pacific. 313,201 38
    One-half amounts allowed mails and mail messengers over Union Pacific to June 30, 1878_!. 437,893 50
    One-half amounts allowed for general transportation to July 1,1878, on Union Pacific... 1,015,145 18
    One-half amounts disallowed’ by Treasurer for transportation over Omaha bridge, and difference between local and through fares... 1,065 71
    2,910,124 08
    
      Ooimter-claim.
    
    Tbe defendants are entitled to be paid as follows:
    5 per cent, of net earnings of Union Pacific: Prom November 6, 1875, to November 5, 1876.. $358,716 76
    5 per cent, of net earnings of Union Pacific : Prom November 6, 1876, to November 5, 1877. 359,832 02
    5 per cent, of net earnings of Union Pacific: > Prom November 6, 1877, to June 30, 1878. 194,451 09
    5 per cent, of the net earnings of the aided portion of the Kansas Pacific Kailway from November 2, 1868, to December 31, 1882..'.;.. 598,867 44
    Cash payment on Union Pacific:
    Prom July 1, 1878, to December 31, 1878 . 398,490 31
    Cash payment on Union Pacific:
    For year 1879 . 499,720 41
    For year 1880. 599,717 13
    For year 1881. 467,203 29
    For .year 1882.. 1,010,808 94
    4,487,807 39
    
      On the ichole case.
    
    The defendants are entitled to judgment for the difference, amounting to $1,577,683.31.
    
      Mr. John F. Dillon and Mr. Jeremiah Wilson for the claimant :
    1. If the company may lawfully make a charge to the- general public for transportation over the line of its road, and make an addition to that compensation per passenger, per ton, or per car for transportation over the bridge, even though it be, for many purposes, apart and parcel of the road, and that additional charge for compensation over the bridge is not excessive, but is fair and reasonable, we can see no possible reason why the charge that is made to the public is not properly made against the government.
    
      And if tbe company were compelled, as it was in this case, to build an expensive structure for the purpose of crossing a great river like the Missouri, with its uncertain bottom and shifting banks, it might, in making its charges against the public for transportation over its line, take into consideration this inordinate and unusual outlay of money, and tax the public extra for transportation in order to meet this condition of things. And therefore we contend that under this provision of section 6, providing for the payment of fair and reasonable compensation, the company had the right to charge the government exactly what it charged the public for the use of this bridge.
    Congress has unmistakably dealt with the bridge as having an earning capacity separate from the road in general, and has recognized the right of the company to fix rates for transportation over it other and different and distinct from the rates over the road as such.
    Now we are brought to the question, Has Congress regulated rates over the bridge ? By the act of 1871 this right was reserved. Has it been exercised? We insist that it has not, and therefore the right of the company to fix rates for transportation over the bridge and its approaches per se belongs to the company; and so long as the company makes those rates fair and reasonable for the public, and charges the government no more than the public pays, the government is bound to pay them.
    We contend that the language of the act of 1871, to wit, that the company shall be “empowered, governed, and limited ’’ by the provisions of the act of 1866, has no reference to the language of section 3 of the act of 1866, but, on the contrary thereof, that it relates exclusively to the mode of constructing the bridge and the mode of using the bridge, as defined and prescribed by the said act of 1866. It is as to the use and protection of the bridge that the company is to be empowered, governed, and limited, so far as applicable by the act of 1866. .
    2. The right of the company to have its own tariff rates for business over its own road exclusively, and which originates at one terminus and ends at the other, will riot be disputed.
    It will not be seriously contended that the company may not fix a rate which it will charge the public for carrying a passenger from Council Bluffs to Odgen; nor that it may not at tbe same time unite with connecting roads infixing a through rate from seaboard to seaboard, and take a pro-rata proportion of that rate, although that proportion might be less than the amount charged per passenger in the case first mentioned. There is no law forbidding it, but physical considerations compel it.
    The government will hardly contend that this company shall be deprived of the right in this regard which is not denied to, but is accorded to, all other companies with which it connects and with which it comes in competition. If this be so, then, so far as the public is concerned, this difference in the amount of compensation may be made.
    Then it would follow that if this difference may be made as to the public, it may also be made as to the passengers transported for the government, provided the charge to the public and the government is fair and reasonable.
    The words the same kind of service ” cannot be limited to the mere matter of hauling the passenger from the one end of the road to the other. These words — “ the same kind of service ” — must be applied to the various conditions incident to railroad transportation.
    When two parties start from New Tork or Washington and go to San Francisco, the railroad company is rendering for the two precisely the same kind of service. The conditions which involve and require different rates of compensation, commonly known as local and through, are to be kept in mind in determining what is the same kind of service. It is not the same kind of service if the business originates in Council Bluffs that it is if it originates in the city of New York.
    3. The facts, more extensively and elaborately detailed in the testimony of the witnesses in the case, make the expense of operating this road unusual and excessive as compared with the cost of operating roads in more favored localities.
    It seems to us to be needless to argue to this court that what might be a fair and reasonable compensation for transportation over one road might be very unfair and unreasonable for transporting over another road. What is fair and reasonable must of necessity depend somewhat upon the cost o.f operating the road, if not also upon the cost of its original construction. What would be fair and reasonable to haul a ton of freight a mile on a level road would not be fair and reasonable to haul the same ton of freight a mile up the side of a steep mountain.
    4. What under the company’s charter is fair and reasonable compensation for carrying the mail ? We contend that express service is the true criterion by which to ñx what the company shall receive for the transportation in question. If the words of the statute — “the same kind of service” — have any weight whatever in respect of this matter, then the express service unmistakably is the service that is most nearly allied in kind to the mail service.
    In that it requires the exclusive use of a car. The exclusive use of a car is required for the express. It is similar, in that the cars are specially constructed for mail and express respectively, and are quite alike as to length and weight. It is similar, in that messengers are carried for both mail and express. It is similar, in that small packages of merchandise are carried both by mail and by express. It is similar, in that valuables, such as money, jewelry, &c., are carried both by mail and by express. It is similar, in that both cars are carried in the same train. It is similar, in that heavy packages of merchandise are carried in the express cars, and filled and heavy through mail pouches are carried unopened in the mail car, and car loads are carried by each.
    5. Cost of new construction (so called) and new equipment, &e., may be deducted from gross earnings, in order to ascertain net earnings under the Thurman Act.
    The following facts in respect thereto are not disputed:
    That the expenditures were actually made to the amount and for the purposes stated.
    That these were not of an extraordinary character, but only such as were actually and reasonably necessary at the time for the safe and convenient daily use of the road from Council Bluffs to Ogden, and required by its current needs, and were bona fide incurred by the directors, with the assent of the government directors, without any design or purpose to reduce the percentage of net earnings under the Thurman Act, and which expenditures contribuie to swell the earnings to which the Thurman Act looks for the indemnification of the government. The increased earnings made by reason of such expenditures are included in the. gross earnings.
    That the cost thereof was actually paid out of the current earnings and income of the company, and has never been made the subject of a stock or bond dividend, or in any manner capitalized.
    The national character and purposes of Congress in the chartering and subsidizing the Pacific railroads are clearly set forth in the opinion of the Supreme Court of the United States in the Interest Case, 91 U. S. R., 72, affirming the .judgment of this court. (United States v. Union Pacific Railroad Go., 91 U. S. R., 72.) The act displays the anxiety and care of Congress to secure these objects in perpetuity. It is to be noted how diligently Congress sought to secure—
    The building and completion of the entire system of roads which constituted the Pacific family.
    The continued maintenance, repair, operation, and use of the same by the companies after they were completed. The act did not specially define “ net earnings,” or how net earnings should be ascertained, further than shown in sections 6 and 18.
    Since then there have been two definitions of “ net earnings,” viz, a judicial definition and a legislative definition in the Thurman Act. The judicial definition by the Supreme Court will be found in the Wet Earnings Oases.” (Union Pacific R. R. Go. v. U. S., 99 U. S., 402, Oct. term, 1878, on appeal from this court, S. C. below, Court of Claims Rep.; United States v. Kansas Pacific Railway Go., 99 U. S., 455, Oct. term, 1878, on error from U. S. circuit court for Kansas.)
    It was there decided that under the acts of 1862 and 3864 “net earnings are ascertained by deducting from gross- earnings all ordinary expenses of organization and operating the road, and expenditures bona fide made in improvements and paid out of earnings, and not by the issue of bonds and stock.”
    This decision covers and embraces all the items for which the company now claims to be allowed, unless the rule herein established has been legislatively changed by the Thurman Act. A careful examination of the Net Earnings Cases will show that every question now here sought to be reopened and relitigated was there decided.
    The Thurman Act should not be stretched beyond the plain and obvious meaning of its words.
    Congress did not by the Thurman Act intend to disallow deductions from gross earnings for the cost of improvements bona fide made, and of necessary equipment purchased and paid for out of earnings, in ascertaining the net earnings, 25 per cent, whereof the act proceeds to appropriate for the indemnification of the government.
    It was so stated by its author and expounder in the carefully prepared speech in which its objects were unfolded and explained.
    The object of section 1 of the Thurman Act, in defining net earnings, was not to prevent or discourage the company from applying its earnings to the making of needful improvements and the purchase of needful equipment, or other expenses intended to secure a better and more economical service, and consequently larger earnings. This was no evil that needed legislative correction. But the object of section 1 was chiefly to determine what other expenses, and particularly what interest paid by the company, might be deducted from gross earn-itigs.
    The company’s contention was that as the government had not only authorized the first-mortgage debt, but had authorized or recognized the other debts of the company (sinking-fund mortgage, Omaha bridge bonds, &c.), the interest on all this indebtedness, “being interest paid on money borrowed to carry on the operations which have resulted in this gross income, are proper deductions to be made to arrive at net earnings or income.”
    The reasons which controlled the court in the net-earnings decision equally apply under the Thurman Act. The government counsel are insisting upon a view which is as injurious to the best interests of the government as to those of the company.
    The reasons given by Mr. Justice Bradley show a thorough study and familiarity with the whole subject. (See, particularly, p. 420 et seq, of 99 U. S. R.)
    The words of section 1 of the Thurman Act do not require the court to put the construction upon them for which the government contends. A construction which is severe and harsh upon the company, and at the same time injurious to the government, has nothing to recommend it.
    The Thurman Act relieved the company of none of its charter obligations to keep its road at all times “ in working order,” “ in repair,” and “ fit for use,” and “ to use and operate the same.” The construction account of the road had been closed years before. This court decided that the road was completed November 6, 1S69, and the Supreme Court, in the Net Earnings Case, affirmed its judgment on this point. The unreasonableness of supposing that Congress meant deliberately to create or recognize the undefinable distinction between “ operating ” and “ construction” expenses, without supplying a legislative definition or line of demarkation, ought of itself to end the controversy on this point. The language of the act is clear; it says, “ You may deduct the necessary expenses [that they were necessary is not disputed] actually paid within the year [that is not disputed] in operating the road and keeping the same in a state of repair ”; that is, not “operating expenses” in distinction to “construction expenses,” but any “ necessary expense actually paid” in conducting the business and operations of the road as required by its charter. If an old station is burned down, may we not build a new one and deduct it ? Clearly. But if a new one is needed, it is clear that it is our duty to provide it; but it is maintained that we cannot deduct its cost. Why this difference ¶ So as to rolling stock: we may replace old, but cannot, they say, make additions.
    Did Congress mean to say, “Your road is completed; the country has attained its growth; no new towns will spring up on your line; you have equipment enough; you may maintain the existing engines and cars, supply them with wheels this year and something else next, and thus give them a sort of immortality; but no matter how far behind the times they become, you can’t buy new.” Observe the broad language: Any “necessary expense actually paid in operating the road and keeping it in a state of repair”; that is, any expense in the conduct of the business and operation of the road necessary to discharge the company’s duty to the public and to the government under its charter, if actually paid (this is the effectual and only necessary limitation), may be deducted.
    We maintain that thereis a broad distinction between the operating expenses of a road in the ordinary acceptation of that term, to wit, such expenses as relate to the movement of trains and the operating a road. A railroad, in the language of Mr. Justice Bradley, is, in a sense, never completed. It must, of necessity, keep pace with the progress of the country. Unless it does this, its rivals will take the business and it will become useless. We insist, as this word “operate” is used in this statute, it means that the company shall keep its road in a condition, as to tracks, stations, sidings, station-houses, equipment, &c., such as will accommodate, from time to time, the business- of the public and government in accordance with its growth.
    6. The maximum cash requirement of the Union Pacific Railway Company in any one year, under the Thurman Act, is $850,000. It may be less, but cannot be more. Taking the language of the act by itself, it is so clear that it construes itself, or rather needs no construction.
    If it was not intended that there'should be any definite limit on the cash requirement, why was such limit specified by the words “ $850,000,” and, particularly, why were the words “ or so much thereof” used at all 1
    
    On our view they have a purpose, and we give them effect. In the government’s view, they have no purpose and no effect.
    
      Mr. John 8. Blair for the defendants:
    The number of miles subsidized was 393.9425, the last issue beiDg based upon the notice dated November 2, 1868, from the Secretary of the Interior to the Secretary of the Treasury that the President of the United States had accepted 13.9425 miles. It is contended by the defendants that the subsidized portion of said road was completed November 2,1868, and that upon the counter-claim they are entitled to recover 5 per cent, of the actual net earnings of these 393.9425 miles from that date to December 31,1882. It is further contendedjthat the evidence shows the actual net earnings of the subsidized portion of the road were per mile 41 per cent, greater than the actual net earnings per mile of the unsubsidized portion of the road, and that t-h oprima facie case made out by the United States for the years 1876,1877, and 1878 should be regarded as continuing to 1883, because the company has not shown from its books that the relative earnings of the two portions of the read had been altered. The plaintiff claims that it should be paid for transportation of the mails of the United States between Council Bluffs and Ogden from January 1, 1876, to December 31,1882, at the rates paid by private parties for the transportation of express matter. But in fixing the claim plaintiff includes-the higher-priced express matter, such as gold, silver, and bank notes, and excludes that which pays lower rates, such as fruit and fish. When all the express matter is taken into consideration, and a proper deduction made for the expense essential to express business consequent upon the reception and delivery of express matter at residences and places of business, the rate received by the railroad company for transportation of" express matter was about 4g cents per pound between Council Bluffs and Ogden. Again, the evidence shows that a fair and reasonable rate for carrying the mails was one and a half first-class, freight rates, which would give 4J cents per pound. (See-10 Fed. Rep., 869.)
    Again, the rate for fruit and fish carried on the trains with the mail was $2.25 per 100 pounds from Ogden to Omaha. The evidence shows that 100 per cent, should be added to this for increased cost of mail car, increased weight of car, increased length of car, light, fuel, ice, and station service, making the-rate 4J cents per pound.
    Again, if the earnings of the trains carrying' the mails, including passenger earnings as well as express, be taken as-the standard, and the proper deductions be made for expenses peculiar to the passenger express business, the earnings of the-whole train, exclusive of the mails, is about cents per pound.
    It is contended by the defendants that as claimant has refused to accept the amounts allowed by statute (about $1.78-per 100 pounds), and has brought suit upon the quantum mer-uit, the judgment of the court for the transportation of the mails should be"6 per cent, less than the allowances of the-Treasury Department.
    It is also contended by claimants that from January 24, 1880, to December 31, 1882, recovery for transportation of the mails over the Kansas Pacific Branch should be at express-rates, ascertained by excluding fruit and fish rates and ancillary expenses. Defendants contend that the judgment in favor of the claimant should be for less than the allowances by the Treasury Department, for the reasons urged as to the Union Pacific Branch.
    
      Defendants deny tbe right of the company to discriminate between a private passenger en route from the Atlantic to the Pacific coast and a government officer when he travels between Council Bluffs and Ogden. The service rendered by the Union Pacific in each case is identical in every respect — the same •quality of coaches is furnished and the two are carried at the same speed. If the company, for reasons of its own, transports the former for $50, the language of the act of 1862 requires it to transport the latter for the same price; and $78.50 for the latter is in excess of the rates paid by private parties for the same kind of service.
    It is contended by the defendants that the rate paid per mile over the railroads leading to the Omaha bridge is the maximum to be paid by the United States for transportation over said bridge. (Act February 24, 1871, ch. 67,16 Stat., 430; sec. 3, Act 1866, ch. 246,14 Stat., 243.)
    The Leavenworth, Pawnee and Western Bailroad Company of Kansas, mentioned in the ninth section of the act of Congress of July 1, 1862, accepted the provisions of that act, and was thereafter designated as the Union Pacific Bailway Company, Eastern Division. Under authority of the act of Congress of March 3, 1869, its board of directors, by resolution, changed its name to the Kansas Pacific Bailway Company, a copy of which resolution was duly filed in the office of the Secretary of the Interior.
    On the 24th January, 1880, the said Kansas Pacific Bailway Company, and the Denver Pacific Bailway and Telegraph Oom-jiany, mentioned in the act of Congress of June 20,1874, and the Union Pacific Bailroad Company, a corporation organized under the act of Congress of July 1, 1862, formed themselves into one consolidated company, called the Union Pacific Bail-way Company, in accordance with the act of Congress of July 1, 1862, and of acts amendatory thereof and supplemental thereto, and filed notice of such consolidation in the Department of the Interior.
    The said Union Pacific Bailway Company, Eastern Division, received from the United States, under said act of July'l, 1862,- and acts amendatory thereof and supplemental thereto, their bonds of $1,000 each to the amount of sixteen of said bonds per mile.
    
      Plaintiff claims interest from July 27,1875, to June 30,1878, on a judgment rendered by tbis court in its favor for $512,632.50. The defendants insist that the stipulation filed in that case postponing payment until the decision in No. 10899 was a waiver of interest until judgment should be rendered in the latter case; and the judgment in favor of the, company for $512,632.50 was swallowed up in the judgment for $614,710.24 rendered for the United States in No. 10899.
    It is contended by the defendants that the act of 1878 does not interfere with nor abrogate the acts of 1862 and 1864 as to the 5 per cent, of net earnings, and that the maximum of $850,000 fixed by the act of 1878 is a limit only upon the sum to be paid under the act of 1878. In other words, the cash requirement per annum may exceed $850,000 of the amount of 5 per cent, of the annual net earnings.
    It is contended by the United States that moneys expended year by year by the company upon the Union Pacific Division in bettering the road and improving the plant are not necessary expenses actually paid within the year in operating the road and keeping the same in a state of repair; because (1) the necessity for the expenditures in question comes entirely from the increased traffic of the road, and it is not fair to call upon the United States to contribute 25 per cent, of these expenditures; (2) the act of 1864 required the stock to> be paid for in money; if the plaintiff had complied with the' statute it would have had $35,000,000 to meet the expenditures-($2,763,670.64) in controversy; (3) the increased traffic was-not government but private business; (4) the expression “ operating the road and keeping the same in a state of repair was used by Congress in 1878 in the sense in which it had been used by the company from 1869. In the only publication made by the company, to wit, its annual report, the expenses of operating the road and keeping the same in a state of repair had been carefully distinguished from the expenses for new construction and new equipment. The items comprised in the $2,763,270.64 in dispute are identical with those, which the company from 1869 to 1878, in its annual reports, had excluded from operating expenses and included in new construction and new equipment.
   Richardson, Ch. J.,

delivered the opinion of the court:

The claimant’s railroad is composed of three divisions:

1. The Union Pacific Division, originally incorporated under the Act of July 2, 1862 (12 Stat. L., 489, ch. 120), amended by the Act of July 2, 1864 (13 Stat. L., 356), from Council Bluffs to Ogden. This division-was aided by the United States by bonds for each mile of the road.

2. The Kansas Pacific Division, extending from Kansas City to Denver, was aided by the United States by'bonds for each of 393^f miles, and not aided for the remaining 245f miles.

3. The Denver Pacific Division, extending from Denver to Cheyenne, and that division was not aided by the United States.

The act of 1862, section 6, required the company to perform transportation for the government at fair and reasonable rates of compensation, not exceeding the amounts paid by private parties for the same kind of service; that all compensation for such services should be applied to the payment of the bonds which it had received from the defendants, with interest until the whole amount should be fully paid; and that after the road should be completed and until the bonds and interest were paid at least 5 per centum of the net earnings of the road should be annually applied to the payment thereof.

By the act of 1864, section 5, only one-half of the compensation for services rendered to the government by the company was required to be applied to the payment of the bonds issued ■by the defendants to aid in the construction of the road.

The Act of mS, May 7, ch. 96 (20 St. L., 56), commonly called the Thurman Act, requires the whole amount of compensation -due from the government after June 30,1878, to be retained by the defendants, and makes some other provisions hereafter mentioned.

These provisions apply not only to the Union Pacific Division, but also to the 293|f miles of the Kansas Pacific Division which were aided by the government. They do not apply to the other 245-^ miles of said road, nor to the Denver Pacific Division.

The claimant brings this action to recover the whole compensation for services rendered to the government over the non-aided Denver Pacific Division and the Don-aided portion of the Kansas Pacific Division to December 31, 1882, and one-half of the compensation for services rendered to the government over the Union Pacific Division and the aided x>ortions of the Kansas Pacific Division to June 30,1878, when the provisions of the Thurman Act took effect.

In this branch of the case the principal controversy was as to amount of compensation to which the claimant was entitled for carrying the mails over the aided portions of its road under the act of 1862. The Treasury Department, in making up the account for carrying the mails, has allowed to the claimant the maximum rates established by law for the same kind of service by non-aided railroads, less the deduction made and fines imposed by the Postmaster-General. The claimant demands a much greater rate and the Assistant Attorney-General contends for a much less rate.

The court has found as a fact that the rates allowed by the Treasury Department are fair and reasonable, and not in excess of the rates paid by private parties for the same kind of service. No question of law arises upon that finding.

There are, however, two questions of law involved in this branch of the case:

1. The claimant has arrangements with the companies of connecting roads by which said companies sell through passenger tickets at reduced rates from New York, San Francisco, and other places over their own and the claimant’s road, and pay to the claimant, as its proportion of the through fare between Council Bluffs and Ogden, $54 each. All passengers buying tickets at Council Bluffs or Ogden and taking passage over the claimant’s road between those places are charged $78.50. This rate is claimed by the company for every passenger taking passage in like manner at either of those places and traveling for and at the expense of the government over its road, and not having purchased a through ticket from other places on other railroads, or not having a requisition showing that he was traveling over such other roads in connection with the claimant’s road.

The court has found that $78.50 is a fair and reasonable compensation for the transportation of a passenger purchasing a ticket at Council Bluffs or Ogden and traveling over the road between those places, and, so far as it is a question of fact, that it is not in excess of tile rate paid by private parties for the same kind of service. The question now is, as a matter of law, if it be a question of law, whether the defendants are bound to pay $78.50 or only $54 for each of their passengers so transported. The Treasury Department have allowed only the latter sum.

In our opinion the defendants are bound to pay the same rate for each of its passengers so transported as is paid by private parties taking the train in like manner at the same places and traveling over the same parts of its road, that being found to be a fair and reasonable compensation; and that when these passengers do not purchase through tickets, and do not have requisitions showing that they are traveling over other roads in connection with the claimant’s road, but travel as local passengers, the defendants cannot have them transported at the same rates as the company receives in its division with other companies for the transportation on through tickets over its own and other roads.

2. The claimant’s uniform rate for the transportation of a passenger between Council Bluffs and Omaha, a distance of 3.97 miles, over its bridge and approaches, was 50 cents during the time involved in this branch of the case. The court has found as a fact that 50 cents for each of the passengers traveling at the expense of the United States was a fair and reasonable compensation, and not in excess of the rate paid by private parties for the same kind of service.

But the Treasury Department has allowed in its accounts much less rates, not uniform, but varying according to the rate per mile paid by the passenger over the connecting road by which he reached the claimant’s road. This latter rate was different over different roads and different over the same road, according to the distance traveled thereon. This, it is urged on the part of the defendants, they have a right to do, by reason of the provisions of the Act of February 24, 1871, chap. 67 (16 Stat. L., 430), the privileges of which the claimant has availed itself of by building its bridge and issuing its bonds in accordance therewith, and which provides that—

“ Said bridge may be so constructed as to provide for the passage of ordinary vehicles and travel, and said company may levy and collect tolls and charges for the use of the same; and for the use and protection of said bridge and property the Union Pacific Bailway Company shall be empowered, governed, and limited by the provisions of the act entitled ‘An act to authorize the construction of certain bridges and to establish them as post-roads,’ approved July twenty-five, eighteen hundred and sixty-sis, so far as the same is applicable thereto.”

The act thus referred to is chapter 24G of 1866 (14 Stat. L., 245), of which section 3 is as follows:

“ Any bridge constructed under this act, and according to its limitation, shall be a lawful structure, and shall be recognized and known as a post-route, upon which, also, no higher charge shall be made for the transportation over the same of the mails, the troops, and the munitions of war of the United States, than the rate per mile paid for the transportation over the railroads or public highways leading to the said bridge.”

In our opinion the words “for the use and protection of said bridge and property” in the act of 1871, to which any bridge built under its provisions was made subject to the act of 1866, do not apply to the rates of compensation to be paid by the defendants for the transportation of their passengers between Council Bluffs and Omaha, a distance of 3.97 miles, over the claimant’s road, within which this bridge is constructed.

In the case of the Union Pacific Railroad Company v. Hall et al. (91 U. S. R., 343) the SupremeCourt decided that the bridge constructed by the company between Omaha and Council Bluffs became part of its road, and that it was bound to run and operate the whole road, including the bridge, as one connected and continuous line.

When the bridge was built it became subject to the act of 1862, wherein it was provided that transportation for the government should be at fair and reasonable rates and not in excess of those paid by private parties for the same kind of service. We do not think that Congress intended by the act of 1871 to supersede or modify this provision as to any part of the claimant’s road.

This disposes of all the controverted questions arising on the causes of action set out by the claimant. The conclusion, therefore, is that the claimant is entitled to recover for all the services performed by it for the defendants over the Denver Pacific Division and its branches (set out in findings v, vi, and vii), and over the non-aided portion of the Kansas Pacific Division to December 31, 1882; also one-half for its services over the aided part of said Kansas Pacific Division and over the Union Pacific Division, aggregating $2,910,124.08.

The defendants have filed a set-off and counter-claim to recover of the claimant, under the act of 1862, 5 per cent, of the net earning's of the aided part of the Kansas Pacific Division from November 2, 1868, to December 31, 1882, and 5 per cent, of the net earnings of the Union Pacific Division from November 6, 1875, to June 30,1878, when the Thurman Act took effect and made additional provisions on the subject of payments by the company.

On this branch of the case the only controversy was as to the compensation to be allowed and computed as part of the gross earnings for carrying the mails. This the court has found to be the same as allowed by the Treasury Department.

There was formerly a controversy between the parties as to whether certain items of expenditure, partly in the nature of permanent improvements, should be deducted from the gross earnings in determiningthe net earnings, upon which the 5 per cent, was to be calculated. But that controversy was terminated as to earnings before the passage of the Thurman Act, by the decision of the Supreme Court in Union Pacific Railroad Company v. United States (99 U. S. R., 402), and we have followed that decision in all its parts in findiug the facts in that part of these cases.

The defendants set up further counter-claims to recover, under the act of 1862,5 per cent, of the net earnings of the Union Pacific Division from June 30,1878, to December 31,1882, and so much of $850,000 each year as, with said 5 per cent; and the whole compensation for services for the government, will with said two items equal 25 per cent, of the net earnings, under the requirements of section 1 of the Thurman Act of May 7, 1878 (ch. 96, 20 Stat. L., 56).

In addition to the controversy as to the compensation to be allowed for carrying the mails which is settled by the findings of fact, a question of law is involved as to whether or not certain items of expenditure, partly in the nature of permanent improvements (set out in Schedule D), shall be deducted from the gross earnings in determining the net earnings under the language of the Thurman Act.

In the case of the Union Pacific Railroad Company v. United States (99 U. S. R., 402), above cited, the Supreme Court decided that, under the act of 1862, in determining the net earnings there was to be deducted from the gross earnings expendí-tures which the company had actually paid out of its earnings for the following objects:

1. Station buildings; 2. Shops and fixtures; 3. Equipment; 4. Government commissioners; 5. Fencing; 6. Snow sheds and fences; 7. Express outfit; 8. Engineering;.9. Bridging; 10. Car shops and sheds; 11. Roadway and track; 12. Hotels; 13. Tenements; 14. Coal sheds; 15. Omaha depot buildings; 16. Omaha general offices; 17. Real estate; 18. Laramie rolling mill; 19. Water-works.

Between July 1,1878, and December 31,1882, the company paid out of its earnings the sum of $2,763,670.64 for equipment and improvements of one or another description specified in those nineteen items, as shown by Exhibit D, and it claims a legal right, in ascertaining its net earnings during that period, to deduct that amount from its gross earnings during the same period.

If the Act of May 7, 1878 (20 Stat. L., 56, ch. 96), commonly called the Thurman Act, had not been passed, the Supreme Court’s decision would be conclusive in favor of the company’s claim to that deduction; but it is contended for the government that a different rule is prescribed by that act. Whether this is so or not is the question we are required to decide.

Section 1 of the Thurman Act reads as follows:

“ That the net earnings mentioned in said act of eighteen hundred and sixty-two, of said railroad companies respectively, shall be ascertained by deducting from the gross amount of their earnings respectively the necessary expenses actually paid within the year in operating the same and keeping the same in a state of repair, and also the sum paid by them respectively within the year in discharge of interest on their first-mortgage bonds, whose lien has priority over the lien of the United States, and excluding from consideration all sums owing or paid by said companies respectively for interest upon any other portion of their indebtedness; and the foregoing provision shall be deemed and taken as an amendment of said act of eighteen hundred and sixty-four, as well as of said act of eighteen hundred and sixty-two. This section shall take effect on the thirtieth day of June next, and be applicable to all computations of net earnings thereafter; but it shall not affect any right of the United States or of either of said railroad companies existing prior thereto.”

The question growing out of this provision is mainly connected with the use of the word “ necessary ” along with the words “expenses actually paid * * * in operating” the road. Tbe company claims that the expenses embraced in the aforesaid sum of $2,763,670.04 were necessary within the meaning of the ’ statute ; the government contends that they were not.

Were the word “necessary” omitted, it could not, we think, be justly questioned that the ruling of the Supreme Court would directly apply to and fully sustain the company’s position. Does the insertion of that word change the aspect of the case in this regard? In answering this question we must, of course, endeavor to get at the meaning of the word in that connection.

In McCulloch v. Maryland, (4 Wheaton, 316), Chief-Justice Marshall, in delivering the opinion of the Supreme Court on one of the gravest questions of constitutional law ever brought before that tribunal, considered the meaning of the word in that clause of the Constitution which gives Congress the power “ to make all laws which shall be necessary and proper for carrying into effect the foregoing powers, and all other powers vested by this Constitution in the government of the United States; ” and in discussing that meaning he used language which we consider fairly applicable here.

The position taken in the argument of that case, and which the court deemed it necessary to meet, was that the word “necessary ” limited the right to pass laws for the execution of the granted powers to such as are indispensable and without which the power would be nugatory. This is substantially the claim of the government in the present case in construing the Thurman Act. If we sustain it we can allow the company only, first, expenses of repair; and, secondly, expenses indispensable to the mere operating of the road as a highway of traffic, without permitting it to meet out of its earnings the growing demands of an ever-increasing business, and so keep itself ready and able to respond efficiently to those demands.

The Supreme Court expounded the meaning of the contested word as follows:

“ Is it true that this is the sense in which the word necessary’ is always used? Does it always import an absolute physical necessity, so strong that one thing to which another may be termed necessary cannot exist without that other? We think it does not. If reference be had to its.use in the common affairs of the world or in approved authors, we find that it frequently imports no more than that one thing is convenient, or useful, or essential to another. To employ the means necessary to an end is generally understood as employing any means calculated to produce the end, and not as being-confined to those single means, without which the end would be entirely unattainable. Such is the character of human language that no word conveys to the mind in all situations one single definite idea; and nothing is more common than to use words in a figurative sense. Almost all compositions contain words which taken in their rigorous sense would convey a meaning different from that which is obviously intended. It is essential to just construction that many words which import something excessive should be understood in a more mitigated sense — in that sense which common usage justifies. The word ‘necessary’ is of this description. It has not a fixed character peculiar to itself. It admits of all degrees of comparison, and is often connected with other words which increase or diminish the impression the mind receives of the urgency it imports. A thing may be necessary, very necessary, absolutely or indispensably necessary. To no mind would the same idea be conveyed by these several phrases. * * * This word, then, like others, is used in various senses; and in its construction the subject, the context, the intention of the person using them, are all to be taken into view.”

.And again, in The Legal Tender Case (110 U. S. R., 421-440) the Supreme Court said, in reference to the same words in the Constitution:

“ By the settled construction and the only reasonable interpretation of this clause, the words ‘ necessary and proper’ are not limited to such measures as are absolutely and indispensably necessary, without which the powers granted must fail of execution; hut they include all appropriate means which are conducive or adapted to the end to he accomplished, and which, in the judgment of Congress, will most advantageously effect it.”

In the light of these expressions, we feel quite justified in . considering the word “ necessary ” in the Thurman Act untrammeled by any rigorous obligation to impose on it a severely restrictive sense.

The Union Pacific Railroad, in the words of the Supreme Court, “ was a national work, originating in national necessities, and requiring national assistance. * * * Although this road was a military necessity, there were other reasons active at the time in producing an opinion for its completion besides the protection of an exposed frontier. There was a vast unpeopled territory lying between the Missouri and Sacramento Rivers, which was practically worthless without the facilities afforded by a railroad for the transportation of persons and property. With its construction the agricultural and mineral resources of this territory could be developed, settlements made where settlements were possible, and thereby the wealth and power of the United States largely increased; and there was also the pressing want, in time of peace even, of an improved and cheaper method for the transportation of the mails, and of supplies for the Army and the Indians. It was in the presence of these facts that Congress undertook to deal with the subject of this railroad.” (United States v. Union Pacific R. R. Co., 91 U. S. R., 72.)

We cannot lose sight of these views in the consideration of the present controversy without doing probable injustice to both the legislature and the company. We cannot regard this subject in a cramped or jealous spirit; nor, on the other hand, can we treat it in a spirit of inconsiderate liberality. Our inquiry is, what may the intention of Congress be fairly considered to have been in the use of the words “ necessary expenses in * * * operating” the road ?

The answer to this involves, also, the meaning to be ascribed to the word “ operating.”

In its restricted sense it might be confined to the mere running of trains over the road, and the ordinary incidents thereof; but we do not feel bound so to limit it. We think it was intended by the legislature to be understood in its larger and more comprehensive sense of fully performing the greater work which the road was intended to do, in promoting the reclaiming, peopling, and developing of a vast unpeopled territory * * * which was practically worthless without the facilities afforded by a railroad for the transportation of persons and property.”

However viewed, it was quite certain, in the light of all experience, that there would be a growth in the business of this road. It was not supposable that its traffic would remain stationary for any length of time. As settlements were made'along the line, its business would increase; in what ratio time alone could determine. Is it reasonable to suppose that this was not foreseen by Congress'? And if foreseen, is it fair to assume that that body intended to enact provisions which would obstruct the efforts of the company to meet the increase We think not. On the contrary, we are led to the opposite conclusion. It seems to us clear that when, in the Thurman Act, that body used the terms “ necessary expenses * * * of operating” the road, it referred to the expenses of operating it, in all respects, pari passu with all the fair and legitimate demands of the business coming to it; and that the word "necessary ” was not meant in its most stringent and restrictive import, but in the sense of limiting the company to such expenses as were bona fide conducive or adapted to that end, and to exclude those which were not. And this leads us to the ultimate conclusion that those words in the Thurman Act do not in reality make a rule different from that indicated by the Supreme Court in 99 U. S. R., 402. The outlays which were there approved included all kinds of expenditures which the company now claims a right to deduct from its gross earnings in the process of ascertaining the amount of its net earnings. Hence, in our opinion, the company is just as much entitled to deduct them now as it would be if that act had not been passed.

Therefore, our judgment is that the company is entitled, in ascertaining the net earnings between July 1, 1878, and December 31, 1882, to deduct from the gross earnings of that period the sum of $2,763,670.64 on account of the items set out in Schedule D and actually paid by it out of earnings for equipment and improvements, and in the computation of the net earnings the court has included all those items in necessary expenses of operating and keeping the road in repair.

Another question of law is raised on the construction of that part of the Thurman Act which requires the company to pay certain money into the Treasury of the United States.

Section 2 requires one-half of the whole amount of compensation which may, from time to time, be due to. the Union Pacific Railroad Company, for services rendered to the government, returned by the defendants, to be turned into the sinking fund thereinafter provided, for the uses therein mentioned; and section 3 of the act establishes and regulates that fund.

Section 4 provides as follows :

That there shall be carried to the credit of the said fund, 'on the first day of February in each year, the one-half of the compensation for services hereinbefore named, rendered for the government by said Union Pacific Railroad Company, hot applied in liquidation of interest; and, in addition thereto, the said company shall, on said day in each year, pay into the Treasury, to the credit of said sinking fund, the sum of eight hundred and fifty thousand dollars, or so much thereof as shall be necessary to make the five per centum of the net earnings of its said road payable to the United States under said act of eighteen hundred and sixty-two, and the whole sum earned by it as compensation for services rendered for the United States, together with the sum by this section required to be paid, amount in the aggregate to twenty-five per centum of the whole net earnings of said railroad company, ascertained and defined as hereinbefore provided, for the year ending on the thirty-first day of December next preceding.”

We do not feel called to enter on an extended discussion of the section, but will state in brief terms our view of it.

It seems quite clear to us that the purpose of that act was not to alter the provision of the act of 1862 requiring 5 per cent, of the net earnings to be paid into the Treasury, but to add thereto so much of $850,000 each year as with said 5 per cent, and the whole compensation for services performed for the government should equal 25 per cent, of its net earnings, and no more.

In accordance with these views the defendants are entitled to recover on their counter-claim, as set out in findings xii and xiii, the sum of $4,487,807.39 •, deducting the amount recoverable by the claimant, $2,910,124.08, leaves a balance in favor of the defendants of $1,577,683.31 for the purposes set forth in the acts of 1862, 1864, and 1878.

On the whole case the judgment of the court is that the defendants are entitled to judgment against the claimants for that difference, and it will be so entered of record.

Note. — Chief Justice Drake was present at the trial and determination of this case, concurred in the findings of fact and conclusions of law adopted by the court, and was engaged in the preparation of the opinion thereon when he availed himself of the benefit of section 714 of the Be vised Statutes by resigning his office, January 12,1885, in the seventy-fourth year of his age and the fifteenth of his service as Chief Justice. So much of the foregoing opinion as refers to the matter of the ascertainment of the net earnings of the road was prepared by him. He took no part in any case subsequent to this.

Nott, J., being an executor of an estate which held some of the stock of the claimant’s company, took no part in the decision.  