Pennsylvania Steel Co. v. New York City Ry. Co.

219 F. 939 | S.D.N.Y. | 1914

LACOMBE, Circuit Judge.

This claim has been treated by the special master in two separate opinions, viz., “Use and Occupation Proceeding” and “Motors Proceeding.” As a single report covers both, they will be disposed of here in a single opinion.

[1] 1. The main discussion is on the question whether the Second Avenue is entitled to recover rental (taxes being considered rental) stipulated in the lease for the entire period of occupation by receivers, or, as the special master held, for a part of that period, or the net earnings of the property during the entire period. Whatever may have been held in other cases, many of which are cited on the briefs, and none of which it is thought precisely fit the complications of this particular system, it seems to me that the several deliverances of the Circuit Court-of Appeals in the above-entitled causes have settled the •question for this court. As to each and every one of the many leased .lines, “unless and until [receivers] adopt the lease, there is no privity [between lessor and receivers] and no liability upon the lease.” 198 Fed. 721, 117 C. C. A. 503. From the very beginning, all these lessors knew that the whole system was in receivers’ hands, and knew that the latter were under no obligations to pay stipulated rental. If they were unwilling to have their property used and occupied under such an arrangement, which might end in their receiving net earnings •only for such use and occupation, the court was open to them for application to have a prompt determination made as to whether the lease would or would not be adopted. None of them made such application, for the very good reason that they well knew that these rentals were .all fixed in more prosperous times at high figures, amounting to more than could then be earned from the operation of the roads. Presumably it was hoped that with the lapse of time conditions would improve, and that either receivers or a reorganization company would eventually adopt the leases.

It might well be better to wait in uncertainty rather than to force a decision which would convert the uncertainty into a disastrous certainty. There seems to be no special equity which should call for a modification of the rule laid down by the Circuit Court of Appeals. The amount to be paid for use and occupation by receivers from September 25 to November 12, 1908, when the road was turned back to the lessor, is the net earnings of the road for that period. The total revenue from thé operation of the road should be first ascertained, and from it should be deducted the proper charges against such revenue; the result will be the net. Although all the figures were before him, the special master has apparently made no finding as to all of these items of charge and countercharge, except for the period from March 1, 1908, to November 12, 1908. In consequence it will not be possible for this court itself to determine the amount; the case will have to go back to the special master, with a statement of the opinion of this court as to various controversies which have arisen on the accounting.

[2] 2. In figuring as he did the amount of receipts for the shorter period, the special master prorated total receipts on the basis of mileage. It is objected that there should be a larger allowance to the Eighty-Sixth Street (branch) Line, because its eastern terminus was the Astoria Ferry, which claimant insists “controlled” a large part of the business. The master’s method is the only practical one; the other proposed method involves too many speculative elements.

3. Receivers contended that the pro rata of receipts from advertising in the cars should be reduced, on the theory that the advertising of the Second Avenue was only one-fifth the value compared to the rest of the system, because “the purchasing power of the passenger” determines the value of the line for advertising. This also is too speculative; the master’s method of determining these receipts was correct.

This disposes of all items on the one side of the account. Next to be considered are the items in controversy on the expenditure side of the account.

4. The first of these treated of in the report is “Maintenance of Way, Ordinary.” ft seems entirely clear upon the evidence that the amount of that can be determined only on the car mileage basis. The master so finds, although he does not give the figures for the full period. He allows, however, a deduction of $14,662.83, as his conclusion from conflicting testimony. In controversies concerning the large sums involved here, it would be a waste of time, costing more in the end to every one, to go into- the details of so small a sum. The master’s finding is approved, but if, when it comes to a question of deductions from the pro rata for the longer period, claimant undertakes upon evidence already in to increase the amount of this deduction to a more substantial sum, this court" will consider the whole amount of the claimed deduction open, and will examine into it.

It is understood from the opinion that the item “Maintenance of Equipment, Ordinary,” is not in dispute.

5. The next item is “Maintenance of Equipment, Extraordinary.” By reason of the unfortunate division of this single claim into two proceedings, the master seems to have concluded that he could not make an allowance for this amount. It is therefore referred to him to find what is the amount of such expenditures, directly chargeable on the proof to Second Avenue equipment for the whole period, exclusive of the motors, which will be referred to later on.

6. The next item, is “Wages of Car House Employes.”' There does not seem to be any objection to the master’s finding of this amount, and it is approved. Whether accounting for net earnings during the full period will produce some exception to his ruling cannot be told, until the accounting on that basis is concluded.

7. The next item is for “Tube Cleaning,” as to which there seems to be no exception to the master’s finding, which is for the full period, and which is affirmed.

8. The next item is for “Power Charges” during the long period. No argument against his finding is presented, and it is affirmed.

9. The same disposition is made of the item “Legal and Claim Expenses” for the same reason. Also general expenses — prorated on mileage basis.

[3] 10. The next subject of controversy is the motors G. E. 1000 and G. E. 57. The subject is most fully and carefully discussed in the master’s separate report, “Motors Proceeding.” His conclusion that the receivers should have turned over to the claimant the motors of the later type, which, before their advent on the scene of operations, had been substituted for the older type as more efficient, is entirely correct. So, also, are his findings as to value; it being agreed all around that physical delivery is undesirable now. It is understood that $156,750 represents the value in November, 1908, when equipment was turned over, and these G. E. 57 motors should have been. • Receivers, however, were bound only to turn over the substituted motors in the condition, in which they found them. If they spent money to put them in an improved condition at the time when they should have turned them over, but did not turn them over in the condition in which they were in September, 1907, that would be a proper reduction.

To the proposition that claimant is to have its semiobsolete motors, as well as the higher type motors which have been substituted in their place to make its cars more efficient, I cannot assent. This conclusion is based solely on the text of the lease, which provides that on termination the lessee will return equipment, except what has passed from existence by death or destruction, and also substitutes, increments, and additions. As construed, this would lead to the following result: Having received a small car carrying 20 passengers and a team of horses worth $200, the lessee substituted a larger car carrying 40 passengers, which this team of horses was too light to haul. Therefore it bought a new team of heavier horses worth $300, and substituted them for service on this road, turning over the lighter team to other branches of the system, where the lighter cars were still run. The clause as construed would require the lessee to turn over, not only the more valuable new team, but also the old team, for which the new had been substituted, unless it had taken the precaution to shoot the new team the day before the lease terminated, so that “death or destruction” would eliminate them from further consideration. There is no argument in the briefs — other than the text of the clause — to support this construction, and I find it so difficult to conceive that intelligent men would have agreed on such a contract, for no obtensible reason, that it is much easier to conclude that the draftsman of the document was not gifted with the faculty of clear expression in his use of language. Quite possibly he drew a perfectly intelligible and intelligent paragraph, into which amendments, intended to cover some special points, have been so inartificially injected as to distort its meaning.

The proper construction seems to be this: If the particular piece of equipment still exists and there has been no substitute installed, it is to be returned. If there has been a substitute installed, that is to be returned. If the substitute is less valuable than the original, the lessor shall have his original, not the inferior, substitute. If the original has perished, so that he cánnot get it, then to the returned substitute there must be added enough money to make it equal to the original. Therefore from the $156,750 there should be deducted the value in November, 1908, of the G. E. 1000’s turned over.

11. The master’s conclusions as to the item of claim on account of the destruction of the car barn at Ninety-Sixth street are fully concurred in.

12. There does not seem to be any contention that the master erred in his conclusions as to furnishing power; they are confirmed.

[4] 13. The master’s conclusion as to the offset by receivers of the amounts they expended for electrification of First Avenue Line/ etc., are fully concurred in. The decision of the Circuit Court of Appeals in the constroversy between lessor and lessee requires no different disposition of this item. Receivers occupy a very different position from that of the lessee. They expended general funds for the express benefit, and, since the lease was not adopted, for the sole benefit, of the Second Avenue, and it would seem grossly inequitable that the latter should have its property thus improved at the expense of all others interested in the fund.

14. The master’s conclusions as to ducts and feeder cables located on franchises are also affirmed.

15. It .is found on the proofs that the amount due by receivers for use of surplus space in Second Avenue car house during the period of occupation is $28,362.62.

As stated before, the entire subject-matter of this claim, argued here in two subdivisions, is sent back to the special master for a revised report in conformity to views above expressed. It might be possible, with the assistance of some concessions on both sides as to figures, to amend the findings and conclusions on the record now here. But the items are so numerous, and there is such a mass of detailed figuring, that it would be unsafe to do so, and much time would be lost in the attempt; the special master, being thoroughly familiar with the details, can dispose of them more accurately and expeditiously. Especially so because the sending of the case back to him for reconstruction of the report on the lines indicated in this opinion will not necessarily open the door to the taking of any additional testimony, except as indicated. When his revised report comes here, it may be affirmed pro forma; all exceptions to the original and the revised report being reserved to objectors. It may then go to the Court tof Appeals.

A decretal order may be entered, recommitting the report to the special master for revision in accordance with the views expressed in this opinion.