136 Misc. 569 | N.Y. Sup. Ct. | 1930
The present action has been brought by the Transit Commission of the State of New York, for and on behalf
It dates from the passage of the Rapid Transit Act of 1891 (Laws of 1891, chap. 4) by the Legislature of this State in an effort to aid in the provision of “ Rapid transit railways in cities of over one million inhabitants.” That statute contemplated private construction and operation of rapid transit lines under franchises to be granted by the Board of Rapid Transit Commissioners, therein appointed (Laws of 1891, chap. 4). Section 7 of the act provided that the terms of sale of such franchises “ must,” among other things, “ specify the * * * maximum rates of fares and freight which such' corporation may charge and collect for the carriage of persons and property.” The act also contained authority (section 32) for the Commissioners to permit the extension of existing or thereafter constructed lines and for the issuing of an extension “ certificate ” therefor upon specified conditions and upon “ such other terms, conditions and requirements as to the said board may appear just and proper.” In 1894 this act was amended to provide for a referendum at the next general election upon the question whether rapid transit facilities in the city of New York should be constructed by the city (Laws of 1894, chap. 752, §§ 12, 13). The people approved the proposal by an overwhelming vote in its favor, and under sanction of this act were constructed the lines owned by the city and now operated by the defendant as its subway division. What are known as contracts 1 and 2, covering these lines, were entered into on February 21, 1900, and July 21, 1902, and subsequently assigned to the defendant. Both of these contracts contain the following provision: “ The contractor shall during the term of the lease be entitled to charge for a single fare upon the railroad the sum of five cents, but not more.” The defendant apparently has never denied that contracts 1 and 2 established an inflexible five-cent fare.
The amendment referred to was contained in a bill introduced in the New York State Legislature by Senator Robert F. Wagner and which had been drafted by the Public Service Commission. Pending its passage the board of estimate and apportionment passed a resolution on March 21, 1912, wherein we find the following significant language:
“ Whereas, The Public Service Commission for the First District and the Board of Estimate and Apportionment of the City of New York have under consideration plans for the construction and operation of a system of subway and rapid transit lines that will extend rapid transit facilities to every part of the city and secure to the people an extension of service that will increase threefold the area throughout which passengers may be carried for a single five cent fare; and * * *
“ Whereas, There is now pending before the Legislature an act*572 amendatory of the rapid transit act * * * and designed to permit the public authorities to enter into contracts for the construction, equipment and operation of rapid transit lines. * * *
“ Resolved, That the Board of Estimate and Apportionment of the City of New York earnestly urges upon the Legislature the importance of the prompt passage of Senate Bill No. 1277 amending the rapid transit act and introduced by Senator Wagner on March 18th. * * * ”
The bill in question was enacted on April 9, 1912, as chapter 226 of the Laws of 1912. On March 19, 1913, contract No. 3 and the elevated extension certificate were executed. In both agreements the continuance of a maximum fare of five cents was agreed to by the defendant.
The five-cent fare clause in contract 3 is set forth as follows (Article XLII): “ The lessee shall during the term of the contract be entitled to charge for a single fare upon the railroad and existing railroads the sum of five cents but not more.” In return for the promise by the defendant of the five-cent fare, there was conferred upon it the benefit of certain preferential payments out of revenue in order that it might be compensated for a possible diminution of earnings from the operation of an extended system at a single fare. In the elevated extension certificate (Article VI) it is provided: “ The Interborough Company shall be entitled to charge for a single fare for each passenger for one continuous trip * * * the sum of five cents but not more.” In the certificate the division of earnings between the defendant and the city is such as to clearly demonstrate that the parties to the agreement understood that the preferential payments therein guaranteed to the company were promised to it as a protection for a possible falling off in earnings as a result of the operation of an extended system at a single fare of five cents. In both documents the bargain stands out as if the details of the negotiations were there set forth. The preferential payments and guaranteed revenue were the price the city paid for the defendant's promise that the five-cent fare would endure so long as the contracts would five.
Other provisions of contract No.. 3 are important, as follows: “ Article I. * * * The City and the Lessee further agree upon the modification of Contract No. 1 and Contract No. 2 in the respects herein set forth, but nothing in this contract shall be construed as a modification or waiver of any of the rights or obligations of the respective parties * * * except in the respect and to the extent herein specifically set forth.”
In this connection it must be noted that the five-cent fare provisions contained in contracts Nos. 1 and 2 are not specified among
The elevated extension certificate contained provisions defining the word “ city ” as used therein to mean the city of New York or any other corporation or division of government to which the ownership, rights, powers and privileges of the city of New York shall hereafter come, belong or appertain, “ under the Rapid Transit Act,” and similarly the word “ Commission ” to mean the Public Service Commission for the First District “ in so far as it acts herein under the Rapid Transit Act ” or any official to whom the powers now “ conferred upon the said Commission by the Rapid Transit Act ” may hereafter be transferred.
In order that the picture may be complete, reference must be made to the efforts of the defendant in the past decade to obtain an increase of fare on its lines covered by the contracts in question. In 1920 it applied to the Public Service Commission for a higher fare on its subway fines. The application was denied, whereupon defendant instituted certiorari proceedings to review the action of the Commission which proceeding it discontinued two years later. In 1922 defendant applied anew for the increase on both subway and elevated fines, and when the Transit Commission refused to take jurisdiction of the petition, no further steps were taken by the defendant. On February 14, 1928, the defendant instituted an action in the United States District Court for the Southern District of New York, and sought therein an injunction against an attempt to interfere with the establishment of a seven-cent fare on the subway division and Manhattan division. An interlocutory injunction was granted by the District Court (26 F. [2d] 912), but on appeal to the Supreme Court of the United States the determination of the District Court was reversed. (Gilchrist v. Interborough Rapid Transit Co,, 279 U. S. 159.) The present action was also commenced on February 14, 1928, the same day as the action in the Federal District Court, following the rejection by the Transit Commission of the seven-cent fare schedules filed by the defendant under section 29 of the Public Service Commission Law (as amd. by Laws of 1921, chap. 134). By an order of this court, signed by Mr. Justice Frankenthaler,
It is settled beyond successful dispute that a State may authorize
As has been pointed out, the agreements in question were entered into pursuant to the authority of the 1912 amendments to the Rapid Transit Act (Laws of 1912, chap. 226). This fact was recognized by the Supreme Court of the United States, when it said in Gilchrist v. Interborough Rapid Transit Co. (supra): “ In 1912, as specially requested by the Board of Estimate and with full knowledge of the circumstances, the Legislature enacted the Wagner Bill which amended the Rapid Transit Act so as definitely to authorize the Contracts and Certificates, finally signed March 19, 1913, and above described, whose provisions, after long negotiations, had been tentatively agreed upon prior to the amendment.”
While apparently under prior legislation the Commission was empowered to enter into such contracts, any possible doubt was entirely dissipated by the enactment of the Wagner Bill. (Admiral Really Co. v. City of New York, 206 N. Y. 110.) The Public Service Commission Law, as was indicated by the United States Supreme Court in the Gilchrist case, “ is a general law relative to regulation and control of public utilities throughout the State. It contains no words purporting to amend or modify the Rapid Transit Act except: — Those abohshing the Board of Rapid Transit Railroad Commissioners and directing that, in addition to other duties ‘ * * * the Commission * * * shall have and exercise all the powers heretofore conferred upon the Board of Rapid Transit Railroad Commissioners.’ ”
Section 27, subdivision 2, of the Rapid Transit Act, as amended in 1912 (Laws of 1912, chap. 226, § 8), empowered the Commission to enter into a contract with the defendant and provided that such contract should contain “ such terms and conditions as to the rates of fare to be charged and the character of services to be furnished and otherwise as said commission shall deem to be best suited to the public interests.” Section 24, subdivision 1, of the act, as similarly amended (Laws of 1912, chap. 226, § 3) with reference to the
This phase of the question has received the consideration of the United States Supreme Court in Gilchrist v. Interborough Rapid Transit Co. (supra), wherein is found the following significant language: “ The power of the city to enter into contracts Nos. 1 and 2 was affirmed in Sun [Printing &] Publishing Ass’n v. The Mayor [City of New York] supra [152 N. Y. 257]; likewise the validity of contract No. 3 was declared in Admiral Realty Co. v. City of New York, supra. These cases point out that the object of those contracts was to secure the operation of railways properly declared by statute to be part of the public streets and highways
The Nixon case, therefore, contains no authority for the proposition advanced by defendant here to sustain its attempt to annul a condition accepted by it as a part of its agreement and to impair the obligation which it assumed in return for the benefits it has received under the contracts which it now seeks to abrogate. Neither are People ex rel. Village of South Glens Falls v. Public Service Commission (225 N. Y. 216) and Town of North Hempstead v. Public Service Corporation of Long Island (231 id. 447) productive of authority to support defendant’s contention. In those cases there was lacking the very authority to contract, which the parties here received by virtue of the Rapid Transit Act and amendments thereto.
I cannot agree with defendant’s claim that the fare provisions of contracts 1 and 2 were abrogated and superseded by the provisions of contract 3. As has been pointed out, the recitals in contract
That the Legislature intended the parties to establish a contractual rate which would be free from subsequent alteration or regulation, except by the consent of the contracting parties, and that such inten
Defendant fails to point out a single instance where the Public Service Commission attempted to exercise regulatory jurisdiction over the rate of fare charged upon defendant’s lines. That such regulation may have existed in other particulars fails to justify the conclusion that the contracts in question were to be subject to the regulatory powers of the Commission. Contracts between municipalities and transit companies are subject to the same rules, before the law, as agreements between individuals. The importance of the subject-matter or the magnitude of the contracting parties is powerless to affect the rules of law regarding the enforcement of a binding agreement. The contracts here, and the rate of fare clauses therein, were specifically authorized by the Legislature which delegated to the parties the power to contract concerning fares. That the contract may subsequently have proved unprofitable for one party is not sufficient ground to relieve that party from its duty of performance.
To pursue defendant’s argument to its logical conclusion would be tantamount to branding the 1912 amendments to the Rapid Transit Act as a meaningless gesture. To do so would be to hold that although the Legislature authorized the contracts in question, they are subject to regulation and alteration just as if no specific sanction conferred authority for their execution. For what purpose then was the Wagner Bill enacted? Not to ascribe to it its apparent
Plaintiff is entitled to the relief demanded. Present, on notice, proposed findings of fact and conclusions of law, together with final judgment.
Changed to Public Service Commission Law by Laws of 1921, chap. 134.— ]Rep.
See 134 Misc. 827.