Fortified by his counsel, Receiver Pease put the arrangement into force, and beginning with March 20, 1885, a joint agent of the Standard pipe-line and of the Cincinnati and Marietta road collected thirty-five cents per barrel on the oil of all independent shippers from Macksburg to Marietta. Ten cents of this sum he turned over to the receiver and twenty-five cents to the pipe-line. When Mr. Rice found that the rate was certainly to be enforced he began to build a pipe of his own to the Muskingum River, whence he was to ship by barge to Marietta. By April 26 he was able to discontinue his shipments over the Cincinnati and Marietta road. This was not done until a rebate of twenty-five cents a barrel had been paid to the Standard Oil Company on 1,360 barrels of his oil — $340 in all.

Mr. Rice, outraged as he was by the discrimination, was looking for evidence to bring suit against the receiver, but it was not until October that he was ready to take the matter into court. On the 13th of that month he applied to Judge Baxter of the United States Circuit Court for an order that Phineas Pease, receiver of the Cleveland and Marietta Railroad, report to the court touching his freight rates and other matters complained of in the application. The order was granted on the same day the application was made. It was specific. Mr. Pease was to report his rates, drawbacks, methods of accounting for discrimination, terms of contracts, and all other details connected with his shipment of oil. No sooner was this order of the court to Receiver Pease known than the general freight agent, Mr. Terry, hurried to Cleveland, Ohio, to meet Mr. O'Day of the Standard Oil Company, with whom he had made the contract. The upshot of that interview was that on October 29, twelve days after the judge had ordered the contracts produced, a check for $340, signed by J. R. Campbell, Treasurer (a Standard pipe-line official), was received from Oil City, headquarters of the Standard pipe-line, by the agent who had been collecting and dividing the freight money. This check for $340 was the amount the pipe-line had received on Mr. Rice's shipments between March 20 and April 25. The agent was instructed to send the money to the receiver, and later, by order of the court, the money was refunded to Mr. Rice. But the Standard was not out of the scrape so easily.

Receiver Pease filed his report on November 2, but the judge found it "evasive and unsatisfactory," and further information was asked for. Finally the judge succeeded in securing the correspondence between Mr. Pease and Mr. Rapallo, quoted above, and enough other facts to show the nature of the discrimination. He lost no time in pronouncing a judgment, and he did not mince his words in doing it:

"But why should Rice be required to pay 250 per cent. more for the carriage of his oil than was exacted from his competitor? The answer is that thereby the receiver could increase his earnings. This pretence is not true; but suppose it was, would that fact justify, or even mitigate, the injustice done to Rice? May a receiver of a court, in the management of a railroad, thus discriminate between parties having equal claim upon him, because thereby he can accumulate money for the litigants? It has been repeatedly adjudged that he cannot legally do so. Railroads are constructed for the common and equal benefit of all persons wishing to avail themselves of the facilities which they afford. While the legal title thereof is in the corporation of individuals owning them, and to that extent private property, they are by the law and consent of the owners dedicated to the public use. By its charter and the general contemporaneous laws of the state which constitute the contract between the public and the railroad company — the state, in consideration of the undertaking of the corporators to build, equip, keep in repair and operate said road for the public accommodation, authorised it to demand reasonable compensation from everyone availing himself of its facilities, for the service rendered. But this franchise carried with it other and correlative obligations.

"Among these is the obligation to carry for every person offering business under like circumstances, at the same rate. All unjust discriminations are in violation of the sound public policy, and are forbidden by law. We have had frequent occasions to enunciate and enforce this doctrine in the past few years. If it were not so, the managers of railways in collusion with others in command of large capital could control the business of the country, at least to the extent that the business was dependent on railroad transportation for its success, and make and unmake the fortunes of men at will.

"The idea is justly abhorrent to all fair minds. No such dangerous power can be tolerated. Except in the modes of using them, every citizen has the same right to demand the service of railroads on equal terms that they have to the use of a public highway or the government mails. And hence when, in the vicissitudes of business, a railroad corporation becomes insolvent and is seized by the court and placed in the hands of a receiver to be by him operated pending the litigation, and until the rights of the litigants can be judicially ascertained and declared, the court is as much bound to protect the public interests therein as it is to protect and enforce the rights of the mortgagers and mortgagees. But after the receiver has performed all obligations due the public and every member of it — that is to say, after carrying passengers and freight offered, for a reasonable compensation not exceeding the maximum authorised by law, if such maximum rates shall have been prescribed, upon equal terms to all, he may make for the litigants as much money as the road thus managed is capable of earning.

"But all attempts to accumulate money for the benefit of corporators or their creditors, by making one shipper pay tribute to his rival in business at the rate of twenty-five dollars per day, or any greater or less sum, thereby enriching one and impoverishing another, is a gross, illegal, inexcusable abuse of a public trust that calls for the severest reprehension. The discrimination complained of in this case is so wanton and oppressive it could hardly have been accepted by an honest man having due regard for the rights of others, or conceded by a just and competent receiver who comprehended the nature and responsibility of his office; and a judge who would tolerate such a wrong or retain a receiver capable of perpetrating it ought to be impeached and degraded from his position.

"A good deal more might be said in condemnation of the unparalleled wrong complained of, but we forbear. The receiver will be removed. The matter will be referred to a master to ascertain and report the amount that has been as aforesaid unlawfully exacted by the receiver from Rice, which sum, when ascertained, will be repaid to him. The master will also inquire and report whether any part of the money collected by the receiver from Rice has been paid to the Standard Oil Company, and if so — how much, to the end that, if any such payments have been made, suit may be instituted for its recovery." [107]

On December 18 George K. Nash, a former governor of Ohio, was appointed master commissioner to take testimony and clear up the point doubtful in the judge's mind — to whom had the extra money paid by Rice been paid; the receiver declared that he never paid the Standard Oil Company any part of Rice's money. Mr. Nash summoned a large number of witnesses and gradually untangled the story told above. Mr. Pease spoke truly, he had never paid the Standard Oil Company any part of Mr. Rice's money. A joint agent of the railroad and the pipe-line had been appointed, at a salary of eighty-five dollars a month, sixty dollars paid by Pease and twenty-five dollars by the Standard, who collected the freight on independent shipments and divided the money between the two parties. It was from this agent that it was learned that, twelve days after Judge Baxter ordered Receiver Pease to bring his contracts into court, the money paid on Mr. Rice's oil had been returned by the Standard Oil Company. [108] While the investigation in regard to Mr. Rice's oil was going on, complaints came to Commissioner Nash from two other oil works at Marietta that they had been suffering a like discrimination for a much longer time. The commissioner investigated the cases and found the complaints justified. The Standard Oil Company had received $649.15 out of the money paid by one concern to the railroad for carrying its oil, and $639.75 out of the sum paid by another concern! Both of these sums were returned by the Standard. [109]

Of course the case aroused violent comment. In 1888 it came before the Congressional Committee which was investigating trusts, and an effort was made to explain the twenty-five cents extra as a charge of the pipe-line for carrying oil to the railway. Now, the practice in vogue in the Oil Regions then and now is that the purchaser of the oil pays the pipe-line charge. The railroad has nothing to do with it. Even if the Standard Oil Company puts a tax on railroads for allowing them to take oil carried by its pipe-lines — thus collecting double pay the tax would not apply in Mr. Rice's case, for the oil came to the Cincinnati and Marietta road not through Standard pipes but through Mr. Rice's own pipes. This much Mr. O'Day was obliged to admit in 1888:

Q. But did that other oil which was in competition with you pass through your pipe?

A. No, sir.

Q. Did not they, therefore, on that oil which only passed over their railroad and not through your pipe-line, pay to you the same allowance or rebate that they did on your oil which did pass?

A. They did, but we returned it through the advice of our counsel, Mr. Dodd.

Q. Now, out of that sum how much did you get from the railroad out of what they had received from Mr. Rice?

A. We did not get any; that is, we did not retain any. The railroad company agreed to account to us for the oil that went over its lines, and they did make an accounting, to my recollection, of about $200, or something like that, on oil other than that which passed through the lines. Our counsel, Mr. Dodd, advised me that we could not do that business, and we refunded the money.

Soon after the report of the Congressional Committee was published John D. Rockefeller himself explained the case in an interview published in the New York World for March 29, 1890: "When the arrangement was reported to the officers of the company at New York," Mr. Rockefeller told the interviewer, "it was not agreed to because our counsel pronounced it illegal in so far as it embraced oil carried by the pipe-line. Some $250 had been paid to the pipe-line under this contract on oil which the line had not transported. This was refunded. We repudiated the contract before it was passed upon by the courts and made full recompense. In a business as large as ours, conducted by so many agents, some things are likely to be done which we cannot approve. We correct them as soon as they come to our knowledge. The public hears of the wrong — it never hears of the correction." In the Digest of Evidence made by the Industrial Commission in its report published in 1900 (page 158), it is stated that the money collected was refunded before suit was brought. The facts show that the statement in the report of the Industrial Commission that the money was refunded before suit was brought is wrong, and that, while Mr. Rockefeller is technically correct in stating that the Standard repudiated the contract before it was passed on by the courts, he should have added they did not repudiate the contract until eight months after it was made, and did not refund the money until twelve days after it became certain that the contract would be produced in court. He also does not explain why the Standard Oil Company did not return the money unjustly paid to them on the shipments of the other independent oil concerns of Marietta until exposure by Commissioner Nash's investigation made it inevitable. [110]

But it was not only manipulation of the railroads by the Standard Oil Company of which the public was complaining at this time. The policy of making it impossible for even small independent concerns to do business was attracting more and more attention. Indeed, there was going on in Buffalo, New York, simultaneously with these two cases, a most sensational trial, growing out of an indictment for the crime of conspiracy, by the Grand Jury of Erie County, New York, of three prominent members of the Standard Oil Company — H. H. Rogers, John D. Archbold and Ambrose McGregor with two refiners with whom they were associated — H. B. Everest and C. M. Everest. The case is reported in the next chapter at some length, because of the importance it has assumed in the popular controversy which has been going on for the last twenty years over "Standard methods," it being the case on which is based the often-repeated charge that Mr. Rockefeller, to win his point, has been known to burn refineries.

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