APPENDIX (continued 2)

On Saturday, the ninth day of November, 1878, the negotiations were closed and payments made to Mrs. B. Affiant had no knowledge of dissatisfaction upon her part until the receipt of a letter dated Monday, November 11, which reached him on the 12th, and on November 13 the reply thereto was made, copy of which is as follows:

November 13, 1878.

Dear Madam: I have held your note of 11th inst., received yesterday, until to-day, as I wished to thoroughly review every point connected with the negotiation for the purchase of the stock of the B. Oil Company, to satisfy myself as to whether I had 2333unwittingly done anything whereby you would have any right to feel injured. It is true that in the interview I had with you I suggested that if you desired to do so you could retain an interest in the business of the B. Oil Company by keeping some number of its shares, and I then understood you to say that if you sold out you wished to go entirely out of the business. That being my understanding, our arrangements were made in case you concluded to make the sale, that precluded any other interests being represented, and therefore when you did make the inquiry as to your taking some of the stock our answer was given in accordance with the facts noted above, but not at all in the spirit in which you refer to the refusal in your note. In regard to the reference that you make as to my permitting the business of the B. Oil Company to be taken from you, I say that in this, as in all else that you have written in your letter of 11th inst., you do me most grievous wrong. It was of but little moment to the interests represented by me whether the business of the B. Oil Company was purchased or not. I believe that it was for your interest to make the sale, and am entirely candid in this statement, and beg to call your attention to the time, some two years ago, when you consulted Mr. Flagler and myself as to selling out your interests to Mr. Rose, at which time you were desirous of selling at considerably less price, and upon time, than you have now received in cash, and which sale you would have been glad to have closed if you could have obtained satisfactory security for the deferred payments. As to the price paid for the property, it is certainly three times greater than the cost at which we could now construct equal or better facilities; but wishing to take a liberal view of it, I urged the proposal of paying the sixty thousand dollars, which was thought much too high by some of our parties. I believe that if you would reconsider what you have written in your letter, to which this is a reply, you must admit having done me great injustice, and I am satisfied to await upon your innate sense of right for such admission. However, in view of what seems your present feelings, I now offer to restore to you the purchase made by us, you simply returning the amount of money which we have invested and leaving us as though no purchase had been made. Should you not desire to accept this proposal, I offer to you one hundred, two hundred, or three hundred shares of the stock at the same price that we paid for the same with, this addition that if we keep the property we are under engagement to pay into the treasury of the B. Oil Company an amount which, added to the amount already paid, would make a total of $100,000, and thereby make the shares one hundred dollars each.

That you may not be compelled to hastily come to conclusion, I will leave open for three days these propositions for your acceptance or declination, and in the meantime, believe me,

Yours very truly,

John D. Rockefeller.

To which letter no reply was ever received, and since which time affiant has had no communication with Mrs. B. upon any subject.

2334Affiant says that he has had his attention called to the affidavit of Daniel Shurmer, filed in this case October 18, 1880, and to the language as follows: “That the Standard Oil Company had already squeezed out one refining concern with which he was connected, whereby he had lost over twenty thousand dollars.” Affiant says that the same is false, as nothing of the kind ever occurred.

Affiant says that he conducted most of the negotiations which led to the making of the contract with defendants, and that at no time previous or during the same were any threats made by him or any officer of the Standard Oil Company or agent to his knowledge to the effect that the firm of Scofield, Shurmer and Teagle would be ruined if they did not make such a contract, and no promises were made by him nor anybody else in behalf of said Standard Oil Company to said Shurmer or any of the defendants, that if said contract was signed the Standard Oil Company and defendants would control and monopolise the whole refining business in Cleveland; nor is it true, as alleged by said Shurmer, that he was reluctant to enter into said agreement, but, so far as affiant knows, the said Shurmer was anxious to make the arrangement, believing it to be a profitable one for the defendants. That some time in the year 1872, when the refining business of the City of Cleveland was in the hands of a number of small refineries and was unproductive of profit, it was deemed advisable by many of the persons engaged therein, for the sake of economy, to concentrate the business and associate their joint capital therein. The state of the business was such at that time that it could not be retained profitably at the City of Cleveland by reason of the fact that points nearer the Oil Regions were enjoying privileges not shared by refiners at Cleveland, and could produce refined oil at a much less rate than could be made at this point. That it was a well-understood fact at that time among refiners that some arrangement would have to be made to economise and concentrate the business or ruinous losses would not only occur to the refiners themselves, but ultimately Cleveland as a point of refining oil would have to be abandoned. At that time those most prominently engaged in the business here consulted together, and as a result thereof several of the refiners conveyed to the plaintiff their refineries and had the option in pay therefor to take stock in the Standard Oil Company at par or to take cash. That at this time the Standard Oil Company, by reason of its facilities and large cash capital, was agreed upon as the one best adapted to concentrate the business, and for no other reason whatsoever. That said Standard Oil Company had no agency in creating this state of things which made that change in the refining business necessary at that time, but the same was the natural result of the trade; nor did it in the negotiations which followed use any undue or unfair means, but in all cases, to the general satisfaction of those whose refineries were acquired, the full value thereof either in stock or cash was paid, as the parties preferred.

Since that time the Standard Oil Company, by diligent and faithful attention to its business, by the exercise of the most rigid economy, by promptly taking advantage of all legitimate business opportunities, has acquired large and valuable property 2335at Cleveland with a capacity to refine oil largely in excess of any local refinery, but he denies that from 1872 to the present time, by any conclusion, conspiracy, or undue means from first to last, the present standing and capacity of the Standard Oil Company has been acquired, or that it seeks to maintain its hold upon business through any purpose to create or maintain a monopoly.

John D. Rockefeller.

2336

NUMBER 45 (See page 2072) FINDINGS OF FACT

[Transcript of record, Supreme Court of the United States, October term, 1886. Number 1,290. The Lake Shore and Michigan Southern Railway Company, plaintiff in error, vs. Scofield, Shurmer and Teagle, in error to the Supreme Court of the state of Ohio, pages 14–21.]

This cause came on to be heard upon the pleadings, exhibits, and testimony, and was argued by counsel; in consideration whereof the plaintiffs, having moved for a reservation to the Supreme Court, the judges are unanimously of opinion that important and difficult questions exist in the case, making it proper that the same should be reserved to the Supreme Court for decision, which questions embrace the following propositions:

1st. Is this a case upon the face of the petition and under the laws of the state in which the court ought to interfere by injunction?

2nd. Whether such remedy by injunction will apply as well to the case of shipments over the defendants’ road alone, as to cases of through shipments over such road and connecting roads?

3rd. What are the duties and obligations of common carriers at common law as distinguished from the statutory provisions of this and other states and countries?

4th. Are the defendants at common law obliged to carry freight at the same price for all parties or members of the public, without regard to quantity or circumstances connected with the transportation?

5th. May the defendant, as a common carrier and a corporation organised for that purpose, contract with a party controlling 90 100 or more of all the freight of a particular class, at a given city or point, to carry the same for less than general tariff rates, in consideration that it shall receive all the freight thus controlled by such party?

6th. May the defendant, as a common carrier, in consideration of receiving all the freight of such party, that the quantity shall not be diminished, and that terminal facilities as to loading, unloading, and delivering the freight shall be furnished different from regular or usual freight and with less expense and risk to the carrier, contract to carry such freight, with such convenience and benefits, for less than general tariff rates to the public?

7th. May the defendant, as common carrier, transport over its road large quantities 2337of oil, amounting to many full car-loads per day, for a less price per car-load than it charges the public generally per barrel or for single car-loads or less, provided all persons are charged like prices for like quantities?

8th. May defendant, as common carrier, make any distinction in prices for carrying like freight on the ground of quantity and covenants to continue the same if thereby it can make a greater profit than to charge the same prices for quantities small and great? Is defendant, under all circumstances, obliged to charge the same prices per ton or other quantity, for the same distance, to all persons tendering freight of the same class, or may it, in good faith and without intention to injure other producers or patrons, contract to carry for one party at a less price than general rates if thereby it can secure a large and profitable business which would otherwise be diverted from it, in whole or part?

8½. Should decree be rendered for plaintiffs; and, if so, to what extent should it be enforced—only within the bounds of the state or to all parts of the country within or without the state, to all points reached by defendant and connecting lines?

9th. Was section 3373 of the Revised Statutes intended to apply to cases like the present, and under it is there any authority for the injunction relief prayed for in this action?

10th. Whether upon such shipments so made by the defendant’s cars by the barrel, either in car-load lots or in less amounts, the plaintiffs are, either by common law or by the Ohio statutes on the subjects, entitled to have their said products carried at the same rate of charge between like points of shipment as are allowed to said Standard Oil Company or other shippers, either to points on its line or branches of said road beyond?

11th. Whether the defendant, as a common carrier, may exact from the plaintiffs upon such shipments in barrels any amount greater than the amount charged to said Standard Oil Company upon shipment of like amounts by such tank-cars so long as the plaintiffs offer to ship by their own tank-cars on substantially like terms?

12th. Whether, if such defendant can be required to give to said plaintiffs equal rates of freight upon its shipments with those allowed said Standard Oil Company to points upon its line and branches, it can be required to give as low a rate to terminal points as the rate it receives for its proportion of the service to such points, on shipments to points beyond, and on its connecting lines on a through rate fixed by it, and such connecting line or lines for the through shipment?

13th. Whether the fact of the existence of such arrangement, and the fact of the said Standard Oil Company being a shipper in amounts larger than the plaintiffs, is any justification for the making of such charges to the plaintiffs in excess of such charges made to said Standard Oil Company? And in order that the same may be legally presented to said Supreme Court, the District Court do find the facts as follows:

1st. The court find the plaintiffs are, and since 1875 have been, partners, carrying on, 2338in a large way, at Cleveland, Ohio, where this refinery is situated, the business of refining petroleum and selling the refined product mainly throughout the territory west and northwest of Cleveland, and extending throughout the Western and Northwestern states, this business being one in which they have invested a large amount of capital, and in which they have established a large and profitable trade throughout such territory, which constitutes the natural market for the sale of such products manufactured at Cleveland, the cost of plaintiffs’ refining being about $70,000, with a refining capacity of about 150,000 barrels per year.

2nd. That the defendant is a consolidated railroad company, owning and operating a railroad extending from Buffalo, in the state of New York, to Chicago, in the state of Illinois, and passing through parts of the states of New York, Pennsylvania, Ohio, Indiana, Michigan, and Illinois, and also owning and operating branches from Toledo, in the state of Ohio, to Detroit, in the state of Michigan, and also from White Pigeon, in the state of Michigan, to Grand Rapids, in the state of Michigan.

3rd. That said railroad, so far as the same is constructed and operated in the state of Ohio, extends from the Easterly line of Ashtabula County to the Westerly line of Williams County; that it is a corporation engaged as common carrier in the business of transporting persons and property for hire and reward over its said line of road and branches.

4th. That it crosses and connects with other lines of railroads at Toledo, Coldwater, and Chicago, over which it can and does forward passengers and freight to their destination and consignment points as requested and directed; that it holds itself out as ready to make and does make the rates to points reached by connecting roads; that defendant, as such common carrier, has been accustomed to receive for transportation property over its line and branches to points beyond the termini of the same by delivering the same at such termini to connecting roads for carriage to the points of consignment.

5th. That the rates for such through freights are fixed by agreement between the different companies owning the lines over which such freights are carried, and not by the defendant alone, and are charged by like agreement, from time to time.

6th. That what are termed local rates, being for property received and delivered at points on the line of defendant’s road, are fixed exclusively by the defendant.

7th. That some of the towns and cities on the main line and branches of the defendant’s road can only be reached by shippers from Cleveland over its said road and branches; and all of them, as well as the towns on most of its connecting branches, can be most directly reached by means of its line from Cleveland.

8th. That the defendant is sufficiently supplied with cars and engines and appliances for transportation necessary to enable it, in the ordinary course of its business, to receive and carry for the plaintiffs such products from Cleveland to such markets.

9th. That for a period of time extending back beyond the time when plaintiffs commenced 2339the manufacture of oil in the City of Cleveland, the defendant has published for the benefit of the public, tariff rates for local and through freights, which have been frequently changed, and including rates for the carriage of oil in barrels.

10th. The plaintiffs commenced and established their present business in Cleveland in the spring or summer of 1875, and subsequently, in July, 1876, became engaged in the same by arrangement with the Standard Oil Company to the partial extent of their own manufacturing establishment.

10½. That during the time in the petition named the Standard Oil Company, the plaintiffs’ principal competitor in business, has also been and still is engaged in a like business with them, it having at Cleveland a large refinery from which it sells like products in same markets; that the refineries of both are situate on the line of railroads other than that of the defendant, but having like connection with it; that each has switch tracks extending to their refineries from the main lines of its roads on which they are situate, by means of which shipments from them are made, the course of business in making shipments by defendant’s road by the car-load (which is the manner in which nearly all the business is done) being for the defendant, on request of either, to furnish its cars, which are switched from its connecting track by the road on which the refineries are situate to the refineries, then loaded by the shippers, and by said road drawn out and placed on the defendant’s tracks for shipment by its road. By some traffic arrangement between the roads a switching charge per car for such service is charged by the local road against the defendant, which is by it at its discretion charged against the shippers with its general freight charge. Upon shipments in less than car-load lots delivery is made to the defendant’s freight depot.

11th. That the Standard Oil Company was then, and ever since has been, engaged in the same business at Cleveland and elsewhere, and did then and ever since has manufactured and shipped more than ninety one-hundredths of all the illuminating oil and products of petroleum manufactured and shipped at and from the City of Cleveland.

12th. The court further find that prior to 1875 it was a question whether the Standard Oil Company would remain in Cleveland or remove its works to the oil-producing country, and such question depended mainly upon rates of transportation from Cleveland to market; that prior thereto said Standard Company did ship large quantities of its products by water to Chicago and other lake points, and from thence distributed the same by rail to inland markets; that it then represented to defendant the probability of such removal; that water transportation was very low during the season of navigation; that unless some arrangement was made for rates at which it could ship the year round as an inducement, it would ship by water and store for winter distribution; that it owned its tank-cars and had tank-stations and switches or would have at Chicago, Toledo, Detroit, and Grand Rapids, on and into which the cars and oil in bulk could be delivered and unloaded without expense and annoyance to defendant; 2340that it had switches at Cleveland leading to its works at which to load cars, and would load and unload all cars; that the quantity of oil to be shipped by the company was very large, and amounted to 90 per cent. or more of all the oil manufactured or shipped from Cleveland, and that if satisfactory rates could be agreed upon it would ship over defendant’s road all its oil products for territory and markets west and northwest of Cleveland, and agree that the quantity for each year should be equal to the amount shipped the preceding year; that upon the faith of these representations the defendant did enter into the contract and arrangement substantially as set forth in defendant’s answer; that the rates were not fixed rates, but depended upon the general card tariff rates as charged from time to time, but substantially to be carried from time to time for about ten cents per barrel less than tariff rates, and, in consideration of such reduced rates as to bulk oil, the Standard Company agreed to furnish its own cars and tanks, load them on switches at distributing points, and unload them into distributing tanks, and was also to load and unload oil shipped in barrels, and without expense to defendant, and with, by reason thereof, less risk to defendant, which entered into the consideration, and was also to ship all its freight to points west and northwest of Cleveland, except small quantities, to lake ports not reached by rail, and to so manage the shipments, as to cars and times, as would be most favourable to defendant; that defendant then agreed to said terms; that said agreement so made in 1875 has remained in force ever since.

13th. That at a cost exceeding $100,000 said Standard Company had and constructed the terminal facilities promised and herein found; that, in fact, the risk of danger from fire to defendant, the expense of handling, in loading and unloading, and in the use of the standard tank-cars is less (but how much the testimony does not show) than upon oil shipped without the use of such or similar terminal facilities; that said Standard Company commenced by shipping about 450,000 barrels a year over defendant’s road, which increased from year to year until, in 1882, the year before the filing the petition in this action, the quantity so shipped on defendant’s road amounted to 742,000 barrels, equal to 2,000 barrels or one full train-load per day.

14th. That said arrangement was not exclusive, but was at all times open to others shipping a like quantity and furnishing like service and facilities; that it was not made or continued with any intention on the part of the defendant to injure the plaintiffs in any manner; that plaintiffs knew of an arrangement between defendant and Standard Oil Company years before January 1, 1880, and on or about July 20, 1876, contracted with the Standard Company to give it the control of the shipments of plaintiffs’ oil and the plaintiffs the benefit, if any, of any arrangements then existing or that might thereafter exist with the Standard Oil Company upon shipment of oil, and which plaintiffs received until about January 1, 1880, when they ceased operating with the Standard Oil Company, and thereafter were charged and paid the regular tariff rates 2341published by defendant and by it charged and collected from all the public except the Standard Oil Company under the arrangement aforesaid.

15th. That the testimony on behalf of the plaintiffs fails to show the quantity manufactured or shipped by them, and how much they could or would ship by defendant’s road if the Standard Company were charged tariff rates, does not appear in the testimony, although the testimony does show that plaintiffs shipped many car-loads, but the court find that the Standard Company have shipped and do ship over defendant’s road more than 90 100 of all the oil manufactured at and shipped from Cleveland.

16th. The court further find that at the time of filing the petition, and at all times after November 29, 1882, the prices charged the Standard Company from Cleveland to Chicago was fifty cents per barrel on oil in barrels, and forty dollars for each tank-car; that at the time of filing the petition, and from and after May 19, 1883, the tariff rate between the points aforesaid was sixty cents per barrel, while from November 20, 1882, to May 19, 1883, the tariff was seventy cents per barrel; that prior to the dates aforesaid the tariff rates and rates to the Standard frequently changed, and the difference was frequently greater than after said dates; that sixty-one barrels constitute a car-load and eighty barrels are estimated to the tank, but that some tanks hold one hundred and some one hundred and twenty barrels, and that at no time were tariff rates made or published for tank-cars carried by defendant with refined oil except when furnished by said Standard Company.

17th. That after said May 19th, 1883, about the same difference of ten cents per barrel existed between tariff rates and the prices charged to the Standard Oil Company to the different points along the line and consignment points beyond the termini of defendant’s road; that five barrels of oil make a ton, and that the prices charged the Standard after November, 1882, from Cleveland to Chicago, amounted to 70 100 of one cent per ton, per mile, and tariff rates to 83 100 of one cent per ton per mile; that the contract of arrangement made with defendant has been largely profitable to defendant; that during the season of water navigation the Standard Company could have shipped to said distributing points on vessels by the lakes and river barreled oil for a less sum than the rates charged to it by defendant—to plaintiffs and the public were reasonable rates in themselves.

18th. That the defendant from time to time published and still does publish and hold forth to the public a certain printed tariff of rates of charge for the shipment and delivery of all classes of freight, including the products of the plaintiffs’ refinery, between Cleveland aforesaid and the various towns and cities upon its said line, branches, and connecting lines, and has refused and still does refuse to ship such products for the plaintiffs to any of such points named in its tariff or schedule except for the prices therein named; and that such schedule fixes the prices for oil shipment at so much per barrel to the public, irrespective of their being shipped in barrels by ordinary freight cars or in bulk by means of tank-cars.

234219th. That the plaintiffs have since December, 1879, frequently applied to the defendant both for reduced rates upon such tariff rates and for like rates with those made to such Standard Oil Company, both upon their general shipments by the ordinary freight cars of the defendant and also upon shipments to be by them made in bulk by means of tank-cars owned by them, they proposing to load and unload the same at terminal points, and to assume all risks by fire or leakage; but that the defendant has and still does refuse to allow them by either course of shipment rates less than such tariff rates, the tariff charged and demanded upon such shipments in bulk being on the basis of eighty barrels allowed to be shipped by each tank-car.

20th. The defendant has received ever since the first day of December, 1879, and still does receive from said Standard Oil Company at Cleveland and ship for him, like products to those of the plaintiffs at rates much less than such schedule rates, and receives and ships for said Standard Oil Company oil for shipment in bulk to such points by means of tank-cars of said Standard Company at rates much less than said schedule rates and much less than the rates allowed to said company for the shipment of oil by barrels in ordinary freight cars, and that such reduced rates to said Standard Oil Company by means of such tank-cars are allowed both by the making to it a lower rate upon its shipments by the defendant’s cars in barrels, and also by means of its being allowed to ship by means of its said tank-cars to their full capacity, running from 80 to 120 barrels each, and averaging over 100 barrels each, and the reduced rate being charged on a basis of 80 barrels per car. The defendant charged the plaintiffs the switching charge, and omitted to charge the same to the Standard Oil Company; that it was a further part of such understanding, that should the defendant give to other shippers like rates, said Standard Oil Company would as far as possible withdraw from it its shipments; and that for the purpose of effectually securing at least the greater part of said trade, the defendant, on the completion of the New York, Cleveland and St. Louis Railway, a competing line from Cleveland to the West, in the year 1883 entered into a traffic arrangement with it, giving to it a portion of the shipments of said Standard Oil Company west, on a condition of its uniting with it in the carrying out of such understanding as to reduced rates to said Standard Company, which arrangements still exist.

21st. That upon the shipment made by the defendant for said Standard Oil Company of such products the rates paid for shipment to points of delivery upon the defendant’s connecting lines and beyond its line have been and are less for the rateable amount of carriage charged for the distance transported over its own line, than said schedule rates or than the lower rates charged to said Standard Oil Company for shipments to the terminal points at which said shipments went from said road to its connecting line; how much less the defendant has refused to state.

22nd. That the reduced rates charged to said Standard Oil Company upon its shipments are arrived at by charging upon such shipments full tariff rates, and afterward, 2343in accordance with some prearranged method agreed on with said Standard Oil Company, refunding to it a portion of the freight so charged and collected, the amount refunded being known as a “drawback” or “rebate.”

23rd. That the evidence does not establish the fact whether or not all the various advantages claimed as secured to defendant by its contract with the Standard Oil Company are the equivalent for the discrimination made to it in freights.

2344

NUMBER 46 (See page 2080) LETTER OF EDWARD S. RAPALLO TO GENERAL PHINEAS PEASE, RECEIVER CLEVELAND AND MARIETTA RAILROAD COMPANY

[Proceedings in Relation to Trusts, House of Representatives, 1888. Report Number 3,112, pages 576–577.]

32 Nassau Street, New York, March 2, 1885.

General Phineas Pease,

Receiver Cleveland and Marietta Railroad Company.

Dear Sir: My opinion is asked as to the legality of your making such an arrangement with the Standard Oil Company as set forth below.

The facts, as I understand them, are as follows:

The Standard Oil Company proposes to ship or control the shipping of a large amount of oil over your road, say a quantity sufficient to yield to you $3,000 freight per month. That company also owns the pipes through which oil is conveyed from the wells owned by individuals to your railroad, except those pipes leading from the wells of George Rice, which pipes are his own. The company has, or can acquire, facilities for storing all its oil until such time as it can lay pipes to Marietta, and thus deprive your company of the carriage of all its oil.

The amount of oil shipped by Mr. Rice is comparatively small, say a quantity sufficient to yield $300 per month for freight.

The Standard Oil Company threatens to store, and afterward pipe all oil under its control unless you make the following arrangements, viz.: You shall make a uniform rate of thirty-five cents per barrel for all persons excepting the Standard Oil Company; you shall charge them ten cents per barrel for oil and also pay them twenty-five cents per barrel out of the thirty-five cents collected from other shippers.

It may render the subject less difficult of consideration to determine, first, those acts which you cannot with propriety do as receiver.

You are by the decree vested with all the powers of receiver, according to the rules and practice of the court; are directed to continue the operations of the railroad and can safely make disbursements from such moneys as come into your hands for such purposes only as the decree directs, viz.: wages, interest, taxes, rents, freights, mileage on rolling stock, traffic balances and certain debts for supplies.

In my opinion this would not protect you in collecting freight from one shipper and paying it over to another.

All moneys received, therefore, from any person for freight over your road, must pass into your hands and there remain to be disbursed by proper authority. After an examination of your statute, however, I find no prohibition against your allowing 2345a discount, or charging a rate less than a schedule rate to a shipper on account of the large amount shipped by him.

As you are acting, therefore, in the interest of the company, and endeavouring to increase its legitimate earnings as much as possible, I find nothing in the statutes to prevent your making a discrimination, especially where the circumstances are such that a large shipper declines to give your road his freight unless you allow him to ship at less than the schedule rates. Therefore, there is no legal objection to the making of an arrangement which in practical effect may be the same as that proposed, provided the objections pointed out above are obviated.

You may with propriety allow the Standard Oil Company to charge twenty-five cents per barrel for all oil transported through their pipes to your road, and I understand from Mr. Terry that it is practicable to so arrange the details that the company can, in effect, collect this direct, without its passing through your hands. You may agree to carry all such oil of the Standard Oil Company or of others delivered to your road through their pipes, at ten cents per barrel. You may also charge all other shippers thirty-five cents per barrel freight, even though they delivered oil to your road through their own pipes, and this I gather from your letter and from Mr. Terry would include Mr. Rice.

You are at liberty, also, to arrange for the payment of a freight by the Standard Oil Company calculated upon the following basis, viz.:

Such company to be charged an amount equal to ten cents per barrel, less an amount equivalent to twenty-five cents per barrel upon all oil shipped by Rice, the agreement between you and the company thus being that the charge to be paid by them is a certain sum ascertained by such a calculation. If it is impracticable so to arrange the business that the Standard Oil Company shall, in effect, collect the twenty-five cents per barrel from those persons using the company’s pipes from the wells to the railroad without its passing into your hands, you may properly also deduct from the price to be paid by this company an amount equal to twenty-five cents per barrel upon the oil shipped by such persons provided your accounts, bills, vouchers, etc., are consistent with the real arrangement actually made, you will incur no personal responsibility by carrying out such an arrangement as I suggest. It is possible that by a proper application to the court, some person may prevent you in the future from permitting any discrimination. Even if Mr. Rice should compel you, subsequently, to refund to him the excess charged over the Standard Oil Company, the result would not be a loss to your road, taking into consideration the receipts from the Standard Oil Company, if I understand correctly the figures. There is no theory, however, in my opinion under the decisions of the courts, relating to this subject, upon which, for the purpose, an action could be successfully maintained in this instance.

Yours truly,

Edward S. Rapallo.

2346

NUMBER 47 (See page 2084) TESTIMONY OF F. G. CARREL, FREIGHT AGENT OF THE CLEVELAND AND MARIETTA RAILROAD COMPANY

[In the case of Parker Handy and John Paton, Trustees, vs. The Cleveland and Marietta Railroad Company et al., Circuit Court of the United States, Southern District of Ohio, Eastern Division.]

Q. The auditor reports it (the $340) remitted on October 29, 1885. Please state by whom it was held from the first of May to that time.

A. We might as well go back of that, and I will make a clean sweep, so far as I am concerned. This overcharge of twenty-five cents was held by the Macksburg Pipe Line Company. Whether this was my fault or the fault of the general agent I am not able to say. I know no difference between Mr. Rice’s oil and the Pipe Line Company’s.

Q. The books of the company show from the 26th of March, 1885, until April 28, 1885, Mr. Rice shipped from Macksburg to Marietta 1,360 barrels; that upon these shipments $340, or twenty-five cents per barrel, were reported to the auditor of the Cleveland and Marietta Railway upon the 29th of October. Who sent the money—$340—to the railroad company, and who reported the amount of money to the auditor?

A. If I understand correctly, if it is the amount I think it is, that is the amount for overcharge. It came through my office.

Q. In whose hands had the $340 been from the time paid by Mr. Rice until it was sent by you to the bank at Cambridge?

A. I received check from Pipe Line.

Q. How soon did you send money to Cambridge after receiving check?

A. I think the next day.

Q. How did you come to get that check?

A. I don’t understand.

Q. Did you go after it?

A. No, sir; it was sent to me by mail.

Q. Where was it mailed?

A. Oil City, I think.

2347Q. By whom was the check signed?

A. By the treasurer, J. R. Campbell, I think.

Q. If I understand the arrangement during the month of April, 1885, you collected thirty-five cents per barrel for all oil shipped by George Rice, and paid ten cents to the receiver of the railroad company and twenty-five cents to the Macksburg Pipe Line?

A. Yes, sir; as long as Mr. Rice shipped.

Q. Afterwards the Macksburg Pipe Line Company sent the money thus paid to it to you, and you paid the money into the depository of the railroad company on the 29th of October, 1885?

A. Yes, sir.

2348

NUMBER 48 (See page 2084) REPORT OF THE SPECIAL MASTER COMMISSIONER GEORGE K. NASH TO THE CIRCUIT COURT

[In the case of Parker Handy and John Paton, Trustees, vs. The Cleveland and Marietta Railroad Company et al., Circuit Court of the United States, Southern District of Ohio, Eastern Division.]

To the Honoured the Circuit Court of the United States,

Southern District of Ohio, Eastern Division.

By an order of your court made on the 18th day of December, 1885, in the case of Parker Handy and John Paton, Trustees, vs. The Cleveland and Marietta Railroad Company et al., I was appointed a special master commissioner to investigate and report to the court for its action what discriminations have been made in freights by Receiver Pease, or during his administration by those under him, and to this end I was authorised to summon and examine witnesses and to cause their testimony to be reduced to writing so far as in my discretion it might be necessary. I was also required to inquire fully and particularly into the facts and report to the court what discriminations had been made, under what arrangements and to what extent, and to report fully all the facts and show to what extent and under what circumstances discriminations have been made against shippers as well as in favour of shippers, and by whom such discriminations were authorised and by whom made. In compliance with this order I proceeded to examine the matters therein referred to, and in the course of such examination called the following-named persons as witnesses:

T. D. Dale, C. C. Pickering (auditor of the Cleveland and Marietta Railroad Company under Receiver Pease), F. G. Carrel, J. E. Terry, Daniel O’Day, George Rice, H. L. Wilgus, W. H. Slack, W. J. Cramm, George Best, Jr., and J. C. McCarty, whose evidence I caused to be reduced to writing by A. C. Armstrong, a stenographer, and is herewith submitted.

I find from the evidence that soon after General Pease was appointed receiver of the Cleveland and Marietta Railroad, an arrangement was entered into with Daniel O’Day and W. T. Scheide, by which it was agreed that the rate to be charged by Receiver Pease and his subordinates upon all crude oil shipped from Macksburg and vicinity upon the line of the Cleveland and Marietta Railroad Company to Marietta 2349should be thirty-five cents per barrel; that the agent of the receiver at Marietta should also pay the agent of the parties represented by O’Day and Scheide; that his compensation was to be $85 per month, $60 of which was to be paid by Receiver Pease and $25 by the parties represented by O’Day and Scheide; that it was the duty of this joint agent (one F. G. Carrel) to collect from all shippers the sum of thirty-five cents per barrel, and to account to Receiver Pease for ten cents of this sum, and to the parties represented by O’Day and Scheide for the balance. This arrangement went into force on the 20th day of March, 1885, and continued in force until September, 1885, at which time one George Rice made complaint to your court that discriminations were being made by the receiver against oil shippers.

Negotiations for this arrangement were opened in the City of Toledo on the 8th day of February, 1885, at a meeting which was attended by Daniel O’Day, W. T. Scheide, A. G. Blair (acting general freight and passenger agent of the receiver of the Wheeling and Lake Erie Railroad Company), and J. E. Terry (general freight and passenger agent of Pease, the receiver of the Cleveland and Marietta Railroad Company). The agreement above referred to was substantially reached at this meeting. Mr. Terry reported the same to General Pease, receiver of the Cleveland and Marietta Railroad Company, who thereupon wrote a letter to his general counsel in New York, asking advice in regard thereto, which letter was transmitted to said counsel by J. E. Terry in person. E. S. Rapallo, an attorney in New York City, replied to the letter of General Pease, and a copy of his letter is now on file in your court and is a part of a report filed by General Pease in November, 1885. This arrangement seems to have been entered into with full knowledge of General Pease, the receiver, and after consultation with his counsel, and with the full knowledge of his general freight and passenger agent, J. E. Terry.

George Rice was the owner of certain oil wells in the Macksburg Oil Region and he also purchased some oil from the owners of certain other wells in the same district. The oil which he produced and also the oil which he purchased he was in the habit of transporting to his refinery at Marietta, Ohio, by means of the Cleveland and Marietta Railroad. Before the arrangements to which I have referred went into effect he had been charged upon the shipment made by him the sum of seventeen and one-half cents per barrel. After the 20th of March, 1885, he was charged thirty-five cents per barrel upon all oil shipped by him. Between the 20th of March and the 30th of April following, Mr. Rice shipped from Macksburg to Marietta over the Cleveland and Marietta Railroad, 1,360 barrels of oil. Upon this oil he was charged thirty-five cents per barrel, or the sum of $476. This money was collected by F. G. Carrel, the agent of the receiver and also the agent of the parties represented at Toledo by O’Day and Scheide. This money was divided according to the agreement, and $136 was sent by Carrel to the bank of the receiver at Cambridge, Ohio, and the remaining $340, or twenty-five cents for each barrel of oil shipped by Rice, was sent by Carrel to 2350the oil parties who had their headquarters at Oil City, Pennsylvania. On or about the 29th of October, 1885, this $340 was returned to Mr. Carrel at Marietta, by a check from Oil City, which check was signed by one J. R. Campbell, treasurer. This money was sent by Carrel to the bank in Cambridge in which the receiver made his deposits. It will be observed that this money was returned from Oil City some ten or twelve days after Judge Baxter made his order directing the receiver to make a report showing what discriminations, if any, had been made by him in the shipments of oil, which order had been obtained upon the complaint of George Rice. It was also returned after a consultation had by J. E. Terry with Daniel O’Day in the City of Cleveland. Mr. Terry states that the receiver was made acquainted with the steps taken by him in connection with this transaction. The receiver did not submit himself to an examination in regard to this matter, but filed an affidavit with me which I attach to this report, in which he states in substance that he did not know at the time he filed his reports with your court that that part of the agreement between himself and the oil parties which required that twenty-five cents per barrel of the moneys collected by him should be paid to the oil parties had been carried out, or that the money thus paid by Rice, and by Carrel paid over to the oil parties, had been returned. The reason given by Receiver Pease and by Mr. Terry for entering into this agreement was that the parties represented by O’Day and Scheide were threatening to put down a pipe-line from Macksburg to Parkersburg, through which to transport the oil produced by them in this region to the latter city, and that if this threat was carried out, the Railroad Company would be prevented from carrying oil produced by them to Marietta. They further stated that in consideration of the arrangement to which I have referred, the parties represented by O’Day and Scheide agreed not to put down a pipe-line, but to ship their oil over the Cleveland and Marietta Railroad.

As soon as George Rice found that the rates on oil had been raised from seventeen and one-half to thirty-five cents per barrel, and that he could not get any better terms for his shipment from the railroad, he commenced to lay a pipe-line from his wells in the Macksburg field to Lowell, on the Muskingum River. This line was completed about the first of May, 1885, and from that time he transported all his oil through this pipe to Lowell, and thence shipped it to Marietta by boat on the Muskingum River. As soon as the parties represented by O’Day and Scheide ascertained that Rice was putting down a pipe-line, they proceeded also to lay a pipe-line from the Macksburg oil field to Parkersburg, in West Virginia. Since the completion of their pipe-line all the oil sent to Parkersburg and Marietta has been sent through this pipe-line. For several months they continued to ship some of their oil North over the Cleveland and Marietta Railroad to Cleveland, but during the last two months these shipments have ceased, and all the oils now produced by the parties represented by O’Day and Scheide are sent by them through their pipe-line to Parkersburg.

Mr. Rice, since the completion of his pipe-line, has shipped through it to Marietta 2351more than forty-five thousand barrels of oil. The shipments by Mr. Rice might have been retained for the benefit of the railroad had the rate of seventeen and one-half cents per barrel been continued. It is probable that had not the arrangement which we have been considering been entered into, a line would have been put down by the parties represented by O’Day and Scheide, but without the arrangement the patronage of Mr. Rice could have been retained. The result of the arrangement seems to be that the railroad has lost the patronage not only of the parties represented by O’Day and Scheide, but also of Mr. Rice, and it is not to-day carrying a barrel of oil.

The Argand Oil Works and the Argand Refining Company, two corporations located at Marietta, Ohio, have made complaint that from the eighteenth day of February until the fourteenth day of October, 1885, they were shippers of oil from the Macksburg Oil Region, over the Cleveland and Marietta Railroad, and that they were discriminated against by the receiver and his agents. I conceived that the order of your court referring this subject to me was broad enough to cover the complaint made by these corporations and I accordingly called W. H. Slack, W. J. Cramm, C. C. Pickering, and F. G. Carrel as witnesses in regard to this complaint, and their testimony is herewith submitted, together with the account presented by these two corporations and the receipted bills taken by them in payment of freight. From the evidence of these witnesses it appears that these corporations, during the time covered by the complaint, were engaged in refining oil at Marietta, Ohio. They purchased their crude oil of the parties represented by O’Day and Scheide at Macksburg. Their purchases were made by ordering their oil when needed by telegraph from a man by the name of Seep, located at Oil City, Pennsylvania, and they were charged therefor the market price of oil at Oil City on the day when the telegraphic order was given. The oil was then shipped to them over the Cleveland and Marietta Railroad and a bill for freight presented to them in the form following: “The Argand Oil Works, Marietta, Ohio, To the Cleveland and Marietta Railroad Company, Dr.”

In these bills they were charged for all oil shipped at the rate of thirty-five cents per barrel. This amount was paid by them to Carrel, the agent of the receiver, at Marietta, Ohio. Of this amount Carrel paid to the receiver ten cents, and to the parties represented by O’Day and Scheide, twenty-five cents. I am of the opinion that these parties were in the same position as George Rice, with the exception that Mr. Rice produced his oil from the ground and shipped it over the Cleveland and Marietta Railroad, and these parties bought their oil instead of producing it from the ground. I cannot see as this difference modifies in any way the discrimination made against them. They claim that from February 18, 1885, until October 14, 1885, they shipped 3,6796 10 barrels of oil, for which they were charged $1,232.06 as freight, and that the discriminations against them amounted to $888.70. From their bill certain reduction should be made. All shipments made prior to March 20, 1885, should be excluded for the reason that the discriminating arrangement entered into between the receiver and the 2352parties represented by O’Day and Scheide did not go into effect until the 20th of March, 1885. Two shipments, one made on the 7th of August, and the other made on the 21st of September, from Dexter City, should also be excluded for the reason that all oils shipped from Dexter City were charged for at the same rates as these complainants were taxed. After making these deductions, I find that under the contract complained of, the Argand Oil Works and the Argand Refining Company shipped from the 20th of March until the 14th of October, 2,695 barrels of oil; that they were required to pay upon these shipments the sum of $894.59, and that of this sum Carrel, the agent of the receiver at Marietta, paid to the receiver the sum of $245.44, and to the parties in Pennsylvania represented by O’Day and Scheide the sum of $649.15.

A complaint of a similar character is made by the Marietta Oil Works, a partnership engaged in the business of refining oils at Marietta, Ohio. Upon their complaint, I examined George C. Best, Jr., J. C. McCarty, W. H. Slack, C. C. Pickering, and F. G. Carrel as witnesses, and their evidence is submitted herewith in full, together with the account presented by this partnership and the receipted bills presented by the Cleveland and Marietta Railroad and paid by them. Their case in all respects seems to be precisely like that of the Argand Oil Works and the Argand Refining Company. They claim that from the 1st day of April until the 31st day of August, 1885, inclusive, they shipped 2,717 barrels of oil, for which they were charged as freight $950.95, and that they were discriminated against to the extent of $679.25. From their bill I think that there should be excluded two shipments from Dexter City, one made on the 12th day of June, and the other on the 18th day of June, for the reason that no discriminations were made in freights, by the receiver, of oils shipped from Dexter City. After taking into account these two shipments, I find that the Marietta Oil Works shipped from Macksburg and Elba on their account 2,547 barrels of oil; that the freights paid by them upon these shipments amounted to the sum of $891.45, and that out of this sum Carrel, the agent at Marietta, paid to the receiver the sum of $251.70, and to the parties represented by O’Day and Scheide the sum of $639.75.

I find that during the receivership of General Pease, no oils were shipped from Macksburg North over the Cleveland and Marietta Railroad except such as were shipped by the parties represented by Messrs. O’Day and Scheide.

I have purposely referred to the parties who entered into this arrangement with Receiver Pease and his freight agent, J. E. Terry, as “the parties represented by O’Day and Scheide,” for the reason that I have not been able to ascertain who or what the parties are. It appears from the evidence that during the time that M. D. Woodford had control as manager of the Cleveland and Marietta Railroad, one W. J. Brundred and T. D. Dale conceived the idea of running pipes to all the wells in the Macksburg Oil Regions, and then by concentrating them together convey all the oils thus gathered through the main line to the Cleveland and Marietta Railroad and deposit it in tanks, and with this end in view entered into a contract in writing with said 2353Woodford, a copy of which contract is attached to the report of Receiver Pease, filed in your court in November, 1885. After this contract was entered into, they organised a corporation known as the Ohio Transit Company, with T. D. Dale as president and W. J. Brundred as vice-president, to which corporation this contract was assigned. This company continued in the business until January, 1885. Mr. Dale, the president, states that “We said we could not compete with the Standard Oil Company, and for that reason we sold out at a fair price.” When asked to whom his company sold their property, Mr. Dale answered, “I don’t know what company, but my recollection is that it might have been the National Transit Company.” “It was done in their office. I don’t know whether the bill of sale was made to Mr. O’Day or to Mr. Scheide.” Mr. Dale further states that “Mr. O’Day was vice-president of the National Transit Company, and that Mr. Scheide was its general manager; it, however, is conjecture on my part.” In another place Mr. Dale states that the gentleman managing the National Transit Company bought the property of the Ohio Transit Company, and gives as their names Daniel O’Day, W. T. Scheide, and J. R. Campbell. The corporation or partnership, or whatever it is which now manages the pipe-line system in Macksburg oil fields, and extending from there to Parkersburg, is known as the Macksburg Pipe Line. One Daniel O’Day, now having his headquarters at Macksburg, is the manager of this pipe-line. When O’Day was asked, “To whom does the Macksburg Pipe Line belong?” he answered, “I do not believe I can answer that; I do not know.” When asked, “Who has general control of it?” he answered, “Mr. Scheide, Mr. O’Day, and J. R. Campbell.” He stated that “Mr. Scheide lives in Titusville, Mr. Campbell at Oil City, and Mr. O’Day at Buffalo.” He also stated that these gentlemen were officers of the National Transit Company and the United Pipe Line, a division of the National Transit Company; that Mr. O’Day is general manager of the National Transit Company, and when asked whether the Macksburg Pipe Line is also a branch of the same system, he answered, “Really, I am not well enough posted to know, but I presume it is.” Daniel O’Day also stated that the National Transit Company is a corporation organised under the laws of New York, and that its principal office is located in New York City. He also stated that “its property is located throughout the state of New York and the state of Pennsylvania, and some in Ohio.” The line located in Ohio he described as running from Parker’s Landing, in Pennsylvania, to Cleveland. He also stated that the United Pipe Line is a division of the National Transit Company which runs from wells to railroad points or pumping stations, and that the wells to which he referred are located in Alleghany County, New York, and throughout a large portion of Pennsylvania. He also stated that the Macksburg Pipe Line controls, by lease and deed, sixty or seventy acres of land in this state of the line of the Cleveland and Marietta Railroad Company, and that the lease and deeds for this land are in the name of one Benjamin Brewster, of New York City, and that said Brewster is the vice-president of the National Transit Company. 2354When Mr. O’Day was asked, “What relation does the National Transit Company and the United Pipe Line Company sustain to the Standard Oil Company?” he answered, “I believe that people having stock in the National Transit Company or the United Pipe Line can hold stock, and do hold stock, in the Standard Oil Company, but I do not know what further relations they have.”

I have attempted to summarise in a very brief manner the evidence which has been taken by me under the order of your court, but in order to obtain a full understanding of the situation, it will perhaps be necessary to read all the evidence which is herewith submitted in full, in connection with the reports and exhibits filed by General Pease, in November, 1885.

Respectfully submitted,

(Signed) George K. Nash,

Special Master Commissioner.

2355

NUMBER 49 (See page 2120) A STATEMENT FROM AN OIL-PRODUCER’S STAND-POINT FOR 1886

[Circular used in the campaign against the Billingsley Bill.]

Total production for the year, 25,145,088 barrels.

Average price per barrel, .71½.

The gross income from the entire Oil Regions, based on these figures, $17,978,237.

The cost of producing the above amount of oil was as follows:

Wells drilled, 3,525—at an average cost of $3,000 each $10,575,000

Cost of pumping and raising the oil to the surface and keeping rigs and wells in repair, estimated at .25 per barrel of production 6,286,272

Add estimated cost of royalty, one-eighth 2,247,342

Total expenditures $19,108,614

Deduct total income of the entire Oil Regions 17,978,737

Net loss to oil producers during the year $1,129,877

If the estimated value of the one-eighth royalty be not added, then the value of five acres of land should be added to the cost of each well and the result would be practically the same.

The daily production January 1, 1886, was 59,603 barrels, valued at $750 per barrel $44,702,250

The daily production January 1, 1887, was 66,383 barrels, valued at $500 per barrel 33,191,500

Showing a shrinkage in value of the producing territory for the year 1886 to be $11,510,750

Note.—To make it more clear to the uninitiated, the foregoing means that producing territory was bought and sold in 1885 on the basis of $750 to each barrel of production, and in 1886 on the basis of $500. It is on this basis that the value of oil-producing territory is estimated. A well producing one barrel a day at the present time is valued at $500; one year ago it was worth $750.

2356The valuation of the stock of the Standard Oil Company at the present time is $150,000,000, or nearly five times as great as the entire Oil Region country valuation. The profits of the Standard Oil Company for the year 1886 were over $26,000,000.

Strangers may ask, Why is there no competition in pipage and storage of oil if the profits are so great? We answer, that with rebates, drawbacks, discrimination, and conspiracies the Standard Oil Company has been able to freeze out and suppress nearly every attempt at competition.

Does not the foregoing array of figures, showing as it does the terrible shrinkage which the property of the oil producers has sustained, amounting to nearly twenty-five per cent. in one year, demand such relief in pipage, storage, and shrinkage, as is contemplated by the Billingsley Bill, now before the Senate of Pennsylvania?

2357

NUMBER 50 (See page 2121) THE BILLINGSLEY BILL

[Legislature of Pennsylvania. File of the House of Representatives. Number 104, session of 1887.]

An act to punish corporations, companies, firms, associations and persons and each of them engaged in business of transporting by pipe-lines or lines or storing petroleum in tank or tanks, under certain restrictions and penalties from charging in excess of certain fixed rates for receiving, transporting, storing, and delivering petroleum, and to regulate deductions for losses caused to petroleum in pipe-lines and storage tanks by lightning, fire, storm, or other unavoidable causes.

Sec. 1. Be it enacted by the Senate and House of Representatives of the Commonwealth of Pennsylvania in general assembly met, and it is hereby enacted by authority of the same: That no corporation, company, firm, association, person or persons who are now, or shall hereafter engage in the business of transporting or storing crude or refined petroleum by means of pipe-line or pipe-lines, or storage by tank or tanks, shall demand or receive any rate of charge in excess of ten cents per barrel, reckoning forty-two gallons for each barrel, for all services performed within this commonwealth in receiving petroleum from tank or tanks or other receptacle on the lease or farm at the place of its production and transporting and delivering the same, or petroleum of like kind and quantity in every essential particular in the division of such pipe-line within which the same shall have been received at any shipping point in said division which may be designated by the holder, owner, or purchaser of said petroleum, whether said petroleum is held by certificate, voucher, receipt, credit balance, accepted order or otherwise. And such corporation, company, firm, association, person or persons, and each of them are hereby required immediately upon this act becoming a law to erect and establish, if not already established, and maintain thereafter at least one shipping point within each pipe-line division within this commonwealth of sufficient dimensions, capacity and equipment to accommodate the entire trade within each such pipe-line division.

Sec. 2. No such corporation, company, firm, association, person or persons shall demand or receive from any person or persons, firms, association, company or corporation owning or holding a credit balance for petroleum in line or tank within this commonwealth, any rate of charge whatever for the tankage or storage of petroleum owned 2358or so held by credit balance for the first thirty days from the date of said credit balance. And no corporation, company, firm, association, person or persons who are now engaged or shall hereafter engage in the business of transporting or storing crude or refined petroleum by means of pipe-line or pipe-lines, or storage tank or tanks, shall demand or receive, from any source whatever, for the tankage of crude or refined petroleum within this commonwealth any rate of charge in excess of one-sixtieth of one cent per barrel of forty-two gallons a day or fractional part thereof so long as said petroleum shall thereafter be held and stored in tank.

Sec. 3. Such corporation, company, firm, association, person or persons are hereby obliged and required, and it is hereby made the duty of such corporation, company, firm, association, person or persons, and each of them, to hold and store in tank any and all petroleum offered for storage or transportation, or any and all petroleum received and transported by them or either of them for the owner thereof; or for the person or persons holding certificate, voucher, receipt, credit balance or accepted order thereof, for a period of one year or for any shorter period than one year from the time when said petroleum was first received by such corporation, company, firm, association, person or persons for storage, if requested so to do by the owner thereof, or by the person or persons holding certificate, voucher, receipt, credit balance or accepted order therefor, at and for the rate of charge of one-sixtieth of one cent per barrel of forty-two gallons for each day, or fractional part thereof thereafter. Except that when said petroleum is held by credit balance, no rate of charge whatever shall be made or charged on said credit balance for the first thirty days from the date of said credit balance.

Sec. 4. Such corporation, company, firm, association, person or persons shall be allowed to make a deduction from the crude petroleum received, transported or stored, not to exceed one-half of one per cent. of said petroleum so received, transported or stored, on account of water, sediment, evaporation, waste, and the like. The deduction mentioned in this section shall be made when the petroleum is first run or transported by such corporation, company, firm, association, person or persons, from the tank or receptacle on the lease or farm where produced, and it is hereby declared to be unlawful for such corporation, company, firm, association, person or persons to make the reduction in this section provided for at any other time or place than as above provided.

Sec. 5. Any corporation, company, firm, association, officer or officers, agent or agents, person or persons, engaged in the business of transporting or storing crude or refined petroleum within this commonwealth by means of pipe-line or pipe-lines or storage tank or tanks shall, upon application of the owner of any well or wells, lay pipe or pipes to any well or wells on any lease or leases in any locality where there is any oil on any farm or farms in this commonwealth, and receive the oil therefrom and transport the same through their pipe-line or pipe-lines and store the same in 2359their storage tank or tanks, in any division or in any place in any division designated by the owner or purchaser of said petroleum, and hold the same subject to the owner or purchaser at the rate or charge prescribed in the preceding sections.

Sec. 6. Such corporation, company, firm, association, person or persons shall be liable for all loss caused by lightning, fire, storm, or other unavoidable cause to the petroleum received, transported or stored by them, and in the event of any such loss the same shall be charged by said corporation, company, firm, association, person or persons, pro rata, upon and deducted from all petroleum in the custody of such corporation, company, firm, association, person or persons, at the date of such loss.

Sec. 7. Any corporation, company, firm, association, officer or officers, agent or agents thereof, person or persons engaged in the business of transporting or storing crude or refined petroleum within this commonwealth by means of pipe-line or pipe-lines or storage tank or tanks, who shall demand or receive any rate of charge in excess of ten cents per barrel, reckoning forty-two gallons for each barrel, for all services performed within this commonwealth for receiving petroleum from tank or tanks or other receptacle on the lease or farm at the place of its production and transporting and delivering the same or petroleum of like kind and quality in every essential particular in the division of the pipe-line within which the same shall have been received at the shipping points designated by the holder, owner or purchaser of said petroleum, or who shall fail or neglect to erect and establish immediately upon this act becoming a law—if not already established—and maintain thereafter at least one shipping point within each pipe-line division within this commonwealth of sufficient dimensions and capacity and properly equip the same to accommodate the entire trade within each such district, or who shall demand or receive for the storage of petroleum within this commonwealth any rate of charge in excess of one-sixtieth of one cent a barrel of forty-two gallons a day or a fractional part thereof so long as said petroleum shall thereafter be held and stored in tank, or who shall demand or receive from any person or persons, firm, association, company, or corporation owning or holding a credit balance for petroleum in line or tank within this commonwealth, any rate of charge whatsoever for the tankage or storage of petroleum so owned or held by credit balance for the first thirty days commencing from the date of said credit balance, or who shall refuse to hold and store in tank any and all petroleum received and transported by them or either of them for the owner thereof, or for the person or persons holding certificate, voucher, receipt, credit balance or accepted order therefor for the period of one year, or for any shorter period than one year from the time when said petroleum was first received, by such corporation, company, firm, association, person or persons for storage if requested so to do by the owner thereof, or by the person or persons holding certificate, voucher, receipt, credit balance or accepted order therefor, at and for the rate of charge of one-sixtieth of one cent per barrel of forty-two gallons for each day or fractional part thereof thereafter—but no rate of charge whatever shall be had or made for the 2360first thirty days from date of credit balance when oil is held by credit balance—or who shall make any deduction on account of water, sediment, evaporation, waste, or the like, in excess of one-half of one per cent. of the petroleum received, transported, and stored, or who shall violate any or either of the provisions or requirements of any or either of the first sections of this act, shall be deemed guilty of a misdemeanour, and on conviction thereof shall be sentenced to pay a fine of not less than one thousand dollars nor more than two thousand dollars for the first offense, and for the second and any subsequent offenses to pay a fine of not less than two thousand dollars nor more than five thousand dollars, and to undergo an imprisonment of not less than sixty days and not exceeding one year, one-half of any such fine or fines to be paid to the prosecutor and the other one-half to be for the use of the county in which such offence or offences shall have been committed, and in addition to the penalties hereinbefore provided shall be liable in any action of debt to any person or persons, firm, company, association, or corporation thereby aggrieved for double the amount of the damage sustained by reason of the violation of any of the provisions of this act.

Sec. 8. No contract heretofore made or now existing for receiving, transporting, or storing petroleum within this commonwealth shall be in any manner impaired or affected by the provisions of this act.

Sec. 9. All acts and parts of acts inconsistent herewith are hereby repealed.

Sec. 10. This act shall take effect immediately upon its becoming a law.

2361

NUMBER 51 (See page 2130) EXTRACTS FROM TESTIMONY OF H. H. ROGERS

[Report of Special Committee on Railroads, New York Assembly, 1879. Volume III, pages 2613–2618.]

Q. Was your firm’s business sold out to the Standard Oil Company?

A. I would like to have the question explained.

Q. Was there a sale or transfer made of your business to the Standard Oil Company, by which practically the Standard Oil Company really controlled your business?

A. I will answer this much of the question, by saying that the Standard Oil Company does not practically control our business.

Q. Do they control the rates at which your business gets the transportation of oil?

A. That I don’t know anything about; I don’t know anything about the rates of transportation.

By the Chairman.

Q. Was not your firm taken in with the Standard Oil Company upon some agreed basis or arrangement, whether you regard it as a purchase or transfer or not?

A. We worked in harmony with the Standard Oil Company for a number of years.

Q. Upon an agreed basis of general business?

A. Our interest was in common, to a certain extent.

Q. Has your firm any contract with the Standard Oil Company?

A. That I cannot answer.

Q. What member of your firm would be able to answer that?

A. I think Mr. Pratt would, if he were here.

Q. When was it that your firm began to work in harmony with the Standard Oil Company?

A. I cannot say exactly how long ago; seven or eight years ago we got up a refining association here; that was the first, and then we got up another, and we got up another, and we have always been trying to get into some relations with all the refiners, so that we might make some money out of the business.

Q. Had you difficulty before you entered into relations with the Standard Oil Company to make money out of the business?

2362A. The competition was always very sharp, and there was always some one that was willing to sell goods for less than they cost, and that made the market price for everything; we got up an association, and took in all the refiners until some of them went back on us, and that would break up the association; we tried that two or three times.

Q. Then finally you entered the Standard Oil arrangement?

A. Then we made an alliance or association with some of the refiners about here, and it was more successful.

Q. What are the refiners about here with whom that alliance was made, and are they or are they not all of them covered by the Standard Oil arrangement?

A. They would come in and then they would go out; there is no refiner that I know of, with one exception, about New York but what has been in the association.

Q. What are the refiners that are now in association of the Standard Oil?

A. The people that are working in harmony with us comprise about, I should think, 90 or 95 per cent. of the refiners.

Q. Now tell us their names, the leading ones.

A. Some of the leading ones? The Standard Oil Company; Charles Pratt and Company; the Sone and Fleming Manufacturing Company; Warden, Frew and Company of Philadelphia; the Standard Oil Company of Pittsburg; the Acme Oil Refining Company of Titusville; the Imperial Refining Company of Oil City; the Baltimore United Oil Company of Baltimore.

Q. You said that substantially 95 per cent. of the refiners were in the Standard arrangement?

A. I said 90 to 95 per cent. I thought were in harmony.

Q. When you speak of their being in harmony with the Standard, what do you mean by that?

A. I mean just what harmony implies.

Q. Do you mean that they have an arrangement with the Standard?

A. If I am in harmony with my wife, I presume I am at peace with her, and am working with her.

Q. You are married to her, and you have a contract with her?

A. Yes, sir.

Q. Is that what you mean?

A. Well, some people live in harmony without being married.

Q. Without having a contract?

A. Yes; I have heard so.

Q. Now, which do you mean? Do you mean the people who are in the Standard arrangement, and are in harmony with it, are married to the Standard or in a state of freedom—celibacy?

2363A. Not necessarily, so long as they are happy.

Q. Is it the harmony that arises from a marriage contract?

A. Not necessarily, so long as they are happy.

Q. When you speak of their harmony, is it a relation of contract?

A. I mean by harmony that if you and I agree to go on Wall Street and buy a hundred shares of Erie at 33, and we agree to sell it out together at 40, that is harmony. I mean just the same that way—if I go into the Standard Oil office and conclude to buy some oil of them and agree on a fair price to sell it out at, that is harmony.

Q. Is that the harmony that you mean—that you gentlemen have agreed between each other the rate at which you will buy and the rate at which you will sell?

A. Well, not going too far into detail, I would say that the relations are very pleasant.

Q. But we want the detail; we want precisely what that harmony is, what it consists of, and what produces it.

A. Well, is it a railroad abuse, or is it an abuse to be in harmony with people?

Q. No; it is not abuse to be in harmony; there are some kinds of harmony that the law considers conspiracy.

A. Well, I have heard so.

By the Chairman.

Q. What we want to know is this: This Standard Oil Company in itself is, as we understand it, a large organisation, not very extensive, but is made so by contracts with various other organisations, that are not a part of it, by their written contract or verbal contract or understanding, or whatever you term it; we want to know whether that is not the fact, and if that is not what you refer to when you speak about working in harmony.

A. Mr. Chairman, I want to give you all the information that is necessary in this matter for your purposes, but it is a question in my mind whether it is a proper thing for me, even if there is no harm done by it, to divulge my business secrets.

Q. We do not ask you for your secrets; we simply ask you the general nature of this organisation.

A. I have explained it, I think, to you quite as fully as I can.

2364

NUMBER 52 (See page 2136) THE TRUST AGREEMENT OF 1882

[Proceedings in Relation to Trusts, House of Representatives, 1888. Report Number 3,112, pages 307–313.]

This agreement, made and entered upon this second day of January, A.D. 1882, by and between all the persons who shall now or may hereafter execute the same as parties thereto:

Witnesseth: I. It is intended that the parties to this agreement shall embrace three classes, to wit:

1st. All the stockholders and members of the following corporations and limited partnerships, to wit:

Acme Oil Company, New York; Acme Oil Company, Pennsylvania; Atlantic Refining Company of Philadelphia; Bush and Company (limited); Camden Consolidated Oil Company; Elizabethport Acid Works; Imperial Refining Company (limited); Charles Pratt and Company; Paine, Abbett and Company; Standard Oil Company, Ohio; Standard Oil Company, Pittsburg; Smith’s Ferry Oil Transportation Company; Solar Oil Company (limited); Sone and Fleming Manufacturing Company (limited).

Also, all the stockholders and members of such other corporations and limited partnerships as may hereafter join in this agreement, at the request of the trustees herein provided for.

2d. The following individuals, to wit:

W. C. Andrews, John D. Archbold, Lide K. Arter, J. A. Bostwick, Benjamin Brewster, D. Bushnell, Thomas C. Bushnell, J. N. Camden, Henry L. Davis, H. M. Flagler, Mrs. H. M. Flagler, John Huntington, H. A. Hutchins, Charles F. G. Heye, A. B. Jennings, Charles Lockhart, A. M. McGregor, William H. Macy, William H. Macy, Jr., estate of Josiah Macy, William H. Macy, Jr., executor, O. H. Payne, A. J. Pouch, John D. Rockefeller, William Rockefeller, Henry H. Rogers, W. P. Thompson, J. J. Vandergrift, William T. Wardwell, W. G. Warden, Joseph L. Warden, Warden, Frew and Company, Louise C. Wheaton, H. M. Hanna and George W. Chapin, D. M. Harkness, D. M. Harkness, trustee, S. V. Harkness, O. H. Payne, trustee; Charles 2365Pratt, Horace A. Pratt, C. M. Pratt, Julia H. York, George H. Vilas, M. R. Keith, trustees, George F. Chester.

Also, all such individuals as may hereafter join in the agreement at the request of the trustees herein provided for.

3d. A portion of the stockholders and members of the following corporations and limited partnerships, to wit:

American Lubricating Oil Company; Baltimore United Oil Company; Beacon Oil Company; Bush and Denslow Manufacturing Company; Central Refining Company of Pittsburg; Cheesborough Manufacturing Company; Chess, Carley Company; Consolidated Tank Line Company; Inland Oil Company; Keystone Refining Company; Maverick Oil Company; National Transit Company; Portland Kerosene Oil Company; Producers’ Consolidated Land and Petroleum Company; Signal Oil Works (limited); Thompson and Bedford Company (limited); Devoe Manufacturing Company; Eclipse Lubricating Oil Company (limited); Empire Refining Company (limited); Franklin Pipe Company (limited); Galena Oil Works (limited); Galena Farm Oil Company (limited); Germania Mining Company; Vacuum Oil Company; H. C. Van Tine and Company (limited); Waters-Pierce Oil Company.

Also, stockholders and members (not being all thereof) of other corporations and limited partnerships who may hereafter join in this agreement at the request of the trustees herein provided for.

II. The parties hereto do covenant and agree to and with each other, each in consideration of the mutual covenants and agreements of the others, as follows:

1st. As soon as practicable a corporation shall be formed in each of the following states, under the laws thereof, to wit, Ohio, New York, Pennsylvania, New Jersey; provided, however, that instead of organising a new corporation any existing charter and organisation may be used for the purpose when it can advantageously be done.

2d. The purposes and powers of said corporations shall be to mine for, produce, manufacture, refine, and deal in petroleum and all its products, and all the materials used in such businesses, and transact other business collateral thereto. But other purposes and powers shall be embraced in the several charters such as shall seem expedient to the parties procuring the charter, or, if necessary to comply with the law, the powers aforesaid may be restricted and reduced.

3d. At any time hereafter, when it may seem advisable to the trustees herein provided for, similar corporations may be formed in other states and territories.

4th. Each of said corporations shall be known as the Standard Oil Company of (and here shall follow the name of the state or territory by virtue of the laws of which said corporation is organised).

5th. The capital stock of each of said corporations shall be fixed at such an amount as may seem necessary and advisable to the parties organising the same, in view of the purpose to be accomplished.

23666th. The shares of stock of each of said corporations shall be issued only for money, property, or assets equal at a fair valuation to the par value of the stock delivered therefor.

7th. All of the property, real and personal, assets and business of each and all of the corporations and limited partnerships mentioned or embraced in class first, shall be transferred to and vested in the said several Standard Oil companies. All of the property, assets, and business in or of each particular state shall be transferred to and vested in the Standard Oil Company of that particular state, and in order to accomplish such purpose the directors and managers of each and all of the several corporations and limited partnerships mentioned in class first are hereby authorised and directed by the stockholders and members thereof (all of them being parties to this agreement) to sell, assign, transfer, convey, and make over, for the consideration hereinafter mentioned, to the Standard Oil Company or companies of the proper state or states, as soon as said corporations are organised and ready to receive the same, all the property, real and personal, assets and business of said corporations and limited partnerships. Correct schedules of such property, assets, and business shall accompany each transfer.

8th. The individuals embraced in class second of this agreement do, each for himself, agree for the consideration hereinafter mentioned to sell, assign, transfer, convey, and set over all the property, real and personal, assets and business mentioned and embraced in schedules accompanying such sale, and transfer to the Standard Oil Company or companies of the proper state or states, as soon as the said corporations are organised and ready to receive the same.

9th. The parties embraced in class third of this agreement do covenant and agree to assign and transfer all of the stock held by them in the corporations or limited partnerships herein named, to the trustees herein provided for, for the consideration and upon the terms hereinafter set forth. It is understood and agreed that the said trustees and their successors may hereafter take the assignment of stocks in the same or similar companies upon the terms herein provided, and that whenever and as often as all the stocks of any corporations or limited partnerships are vested in said trustees, the proper steps may then be taken to have all the moneys, property, real and personal, of such corporation or partnership assigned or conveyed to the Standard Oil Company, of the proper state, on the terms and in the mode herein set forth, in which event the trustees shall receive stocks of the Standard Oil companies, equal to the value of the money, property, and business assigned, to be held in place of the stocks of the company or companies assigning such property.

10th. The consideration for the transfer and conveyance of the money, property, and business aforesaid to each or any of the Standard Oil companies shall be stock of the respective Standard Oil Company to which said transfer or conveyance is made, 2367equal at par value to the appraised value of the money, property, and business so transferred. Said stock shall be delivered to the trustees hereinafter provided for, and their successors, and no stock of any of said companies shall ever be issued except for money, property, or business, equal, at least, to the par value of the stock so issued, nor shall any stock be issued by any of said companies for any purpose, except to the trustees herein provided for, to be held subject to the trusts hereinafter specified. It is understood, however, that this provision is not intended to restrict the purchase, sale, and exchange of property by said Standard Oil companies as fully as they may be authorised to do by their respective charters; provided only that no stock be issued therefor except to said trustees.

11th. The consideration for any stocks delivered to said trustees, as above provided for, as well as for stocks delivered to said trustees by persons mentioned or included in class third of this agreement, shall be the delivery by said trustees, to the persons entitled thereto, of trust certificates hereinafter provided for, equal at par value to the par value of the stocks of the said several Standard Oil companies so received by said trustees and equal to the appraised value of the stocks of other companies or partnerships delivered to said trustees.

The said appraised value shall be determined in a manner agreed upon by the parties in interest and said trustees.

It is understood and agreed, however, that the said trustees may, with any trust funds in their hands, in addition to the mode above provided, purchase the bonds and stocks of other companies engaged in business similar or collateral to the business of said Standard Oil companies on such terms and in such mode as they may deem advisable, and shall hold the same for the benefit of the owners of said trust certificates, and may sell, assign, transfer, and pledge such bonds and stocks whenever they may deem it advantageous to said trust so to do.

III. The trusts upon which said stock shall be held, and the number, powers, and duties of said trustees shall be as follows:

1st. The number of trustees shall be nine.

2d. J. D. Rockefeller, O. H. Payne and William Rockefeller are hereby appointed trustees, to hold their office until the first Wednesday of April, A.D. 1885.

3d. J. A. Bostwick, H. M. Flagler and W. G. Warden are hereby appointed trustees, to hold their office until the first Wednesday of April, A.D. 1884.

4th. Charles Pratt, Benjamin Brewster and John Archbold are hereby appointed trustees, to hold their office until the first Wednesday of April, A.D. 1883.

5th. Elections for trustees to succeed those herein appointed shall be held annually, at which election a sufficient number of trustees shall be elected to fill all vacancies occurring either from expiration of the term of the office of trustee or from any other cause. All trustees shall be elected to hold their office for three years, except those 2368elected to fill a vacancy arising from any cause except expiration of term, who shall be elected for the balance of the term of the trustee whose place they are elected to fill. Every trustee shall hold his office until his successor is elected.

6th. Trustees shall be elected by ballot by the owners of trust certificates or their proxies. At all meetings the owners of trust certificates, who may be registered as such on the books of the trustees, may vote in person or by proxy, and shall have one vote for each and every share of trust certificates standing in their names, but no such owner shall be entitled to vote upon any share which has not stood in his name thirty days prior to the day appointed for the election. The transfer books may be closed for thirty days immediately preceding the annual election. A majority of the shares represented at such election shall elect.

7th. The annual meeting of the owners of said trust certificates for the election of trustees, and for other business, shall be held at the office of the trustees in the City of New York, on the first Wednesday of April of each year, unless the place of meeting be changed by the trustees, and said meeting may be adjourned from day to day until its business is completed. Special meetings of the owners of said trust certificates may be called by a majority of the trustees, at such times and places as they may appoint. It shall also be the duty of the trustees to call a special meeting of holders of trust certificates whenever requested to do so by a petition signed by the holders of ten per cent. in value of such certificates. The business of such special meetings shall be confined to the object specified in the notice given therefor. Notice of the time and place of all meetings of the owners of trust certificates shall be given by personal notice so far as possible, and by public notice in one of the principal newspapers of each state in which a Standard Oil Company exists, at least ten days before such meeting. At any meeting, a majority in value of the holders of trust certificates represented consenting thereto, by-laws may be made, amended, and repealed relative to the mode of the election of trustees, and other business of the holders of trust certificates; provided, however, that said by-laws shall be in conformity with this agreement. By-laws may also be made, amended, and repealed at any meeting, by and with the consent of a majority in value of the holders of trust certificates, which alter this agreement relative to the number, powers, and duties of the trustees, and to other matters tending to the more efficient accomplishment of the objects for which the trust is created; provided only, that the essential intents and purposes of this agreement be not thereby changed.

8th. Whenever a vacancy occurs in the board of trustees, more than sixty days prior to the annual meeting for the election of trustees, it shall be the duty of the remaining trustees to call a meeting of the owners of Standard Oil Trust certificates for the purpose of electing a trustee or trustees to fill the vacancy or vacancies. If any vacancy occurs in the board of trustees, from any cause, within sixty days of the date of the annual meeting for the election of trustees, the vacancy may be filled by a majority 2369of the remaining trustees, or, at their option, may remain vacant until the annual election.

9th. If for any reason at any time a trustee or trustees shall be appointed by any court to fill any vacancy or vacancies in said board of trustees, the trustee or trustees so appointed shall hold his or their respective office or offices only until a successor or successors shall be elected in the manner above provided for.

10th. Whenever any change shall occur in the board of trustees, the legal title to the stock and other property held in trust shall pass to and vest in the successors of said trustees without any formal transfer thereof. But if at any such time formal transfer shall be deemed necessary or advisable, it shall be the duty of the board of trustees to obtain the same, and it shall be the duty of any retiring trustee, or the administrator or executor of any deceased trustee, to make said transfer.

11th. The trustees shall prepare certificates which shall show the interest of each beneficiary in said trust and deliver them to the persons properly entitled thereto. They shall be divided into shares of the par value of $100 each, and shall be known as the Standard Oil Trust certificates, and shall be issued subject to all the terms and conditions of this agreement. The trustees shall have power to agree upon and direct the form and contents of said certificates and the mode in which they shall be signed, attested, and transferred. The certificates shall contain an express stipulation that the holders thereof shall be bound by the terms of this agreement and by the by-laws herein provided for.

12th. No certificates shall be issued except for stocks and bonds held in trust as herein provided for, and the par value of certificates issued by said trustees shall be equal to the par value of the stocks of said Standard Oil Company and the appraised value of other bonds and stocks held in trust. The various bonds, stocks, and moneys held under said trust shall be held for all parties in interest jointly, and the trust certificates so issued shall be the evidence of the interest held by the several parties in this trust. No duplicate certificates shall be issued by the trustees, except upon surrender of the original certificate or certificates for cancellation, or upon satisfactory proof of the loss thereof, and in the latter case they shall require a sufficient bond of indemnity.