124 N.Y.S. 252 | N.Y. App. Div. | 1910
Defendant appeals from a judgment entered upon the report of a referee.
There is no substantial dispute as to the facts,' the whole controversy turning upon the proper construction to be put upon a contract made between the parties on August 13, 1890. Both of the parties are railroad corporations, the plaintiff owning a small line of road not exceeding two and one-half miles in length, and the latter owning or leasing and operating an important line extending from Albany, H. Y., northward to the Canadian border, with a branch running to Baldwin, near the northerly end of Lake George. In' the year 1889 the plaintiff was organized under the laws of the State-of Hew York, by a number of the inhabitants of the villages of Ticonderoga and Glens Falls, the dominant purpose in the minds of the incorporators apparently being to benefit the village of Ticonderoga, and the business interests located therein, by affording better connections than then existed between said village and the defendant’s railroad. The capital stock of plaintiff was fixed at $30,000, and it issued an equal amount of bonds secured by a mortgage. Having determined to build its road plaintiff entered into a contract with defendant for the operation thereof, procuring from the Legislature, apparently with some aid from the defendant a special act (Laws of 1890, chap. 4) authorizing it to charge the unusual rate of fare of twenty-five cents per person for passage one way over the whole or any part of its railroad. In order to arrive at a just conclusion upon the particular question raised by this appeal •it will be necessary to consider the whole scope and tenor of the contract, including the preamble which discloses at once the object which plaintiff’s incorporators had in view, and the reasons which led to making the contract with the defendant. The contract was as follows: . ' '
“ This Agreement, made this 13th day of August, 1890, by and between the President, Managers and Company of the Delaware and Hudson Canal Company, of the first part, and The Ticonderoga Railroad Company, of the second part,
“Witnesseth:
“ Whereas, the first party is a corporation duly organized under and by virtue of the laws of the State of Hew York, with power to*544 lease and operate railroads within said State, under and by virtue of Chapter 841 of the Laws of 1867 of said State; and •
“Whereas, said first party with due authority is lessee in the possession, management and operation of the Hew York and Canada Railroad, which said Railroad extends from the Village, of Whitehall, Washington County, Hew York, to the Village of Plattsburgh, Clinton County, Hew York, and by branch (known as the Baldwin Branch) to tlie Village of Baldwin at the foot of Lake George; and
‘ “Whereas, said Baldwin Branch extends from the main line of the Hew York and Canada Railroad to the Village of Baldwin, a distance of about five miles, on very high ground, passing the Village of Ticonderoga on the south about three-quarters of a mile theréfrom,. and at a considerable elevation above the same.;, and
“Whereas, said Village'of Ticonderoga is a thriving manufacturing village located upon a stream, the outlet of Lake George, which affords water power and natural facilities for the development of manufacturing industries of an unusual order; and
“Whereas, the industrial development of said Village and surrounding territory has been impeded on account of the lack of adequate and convenient railroad facilities, and also by reason of the necessity' for carting all freight up a very steep .grade to the Academy Station on the Baldwin Branch, about three-quarters of a mile, or to Addison Junction on the main line about two and one-half' miles, thereby imposing very heavy charges for cartage on all such freight and placing manufacturers at a great disadvantage in competition with those located on other roads; and
“ Whereas, the said first party is desirous of promoting the industrial development of said Village and territory, and removing the disabilities that now operate against, the manufacturers and shippers, and thus secure an increase of traffic upon said railroad at the smallest expense to itself; and
“Whereas, the second party is a corporation duly organized by the citizens of said Village, under and by virtue of the Laws of the State, for the purpose of constructing a railroad from said Village of Ticonderoga, or a point west therefrom upon said outlet of Lake George, by the most feasible route, to connect at a convenient point with said Baldwin Branch; and
“ Whereas, said proposed road can be most economically operated.*545 by said first party as a side or switch track, at but a slight expense over that required to handle the freight and passenger traffic of said Village with present imperfect facilities;
“ Wow, therefore, in consideration of one dollar by each party to the other in hand duly paid, receipt hereof is whereby acknowledged, and in consideration of the premises and of the faithful performance of the covenants.and agreements hereinafter contained, it is mutually agreed as follows:
“ First. The party of the second part agrees to construct a single track railroad from a point at of near the village of Ticonderoga, Essex County, New York, by the most feasible route established by its engineer to connect with said Baldwin Branch at a convenient point to be-established by said engineer, which said railroad it is estimated will be about two miles in length. The said road shall consist of steel rails weighing not less than- sixty-seven pounds to the yard, and shall comprise a sufficient freight and passenger station at the Village of Ticonderoga, with the usual and necessary switches,, side tracks and other appurtenances.. All of such construction' shall be done in first-class manner and shall conform in all respects to the requirements of the Chief Engineer of the Delaware & Hudson Canal Company.
“ Second. The party of the second part agrees to. procure such legislation as may .be necessary to authorize and permit charges for transportation upon said railroad to be made at not exceeding the following rates, namely, for each passenger, twenty-five centsfor each gross ton of factory or mill supplies or products, twelve and one-half cents, and for each ton of general merchandise seventy-five cents. None of the provisions of this contract shall be binding upon the party of the first part, unless and until such necessary legislation and such authority and permission shall be obtained.
“ Third. Upon the completion of said proposed railroad, said first party agrees to take possession thereof, and maintain, manage and operate the same, and provide the freight and passenger connection with all day trains on the New York and Canada Railroad that may stop at Addison Junction, upon the terms and conditions hereinafter specified, during the .corporate existence of said second party.
“ Fourth. It is mutually agreed that all taxes and assessments*546 against said proposed road shall be paid by the second party, including corporation franchise tax, but excluding tax on rolling stock, which shall be paid by the first party.
“ Fifth. It is mutually agreed that the first party, so far as it lawfully may,' shall assume all- the duties, obligations, liabilities, rights, privileges and franchises of the second party incident to the maintenance and operation of said proposed road, except as herein .. otherwise specified, but the said first party shall in no event be liable or responsible for any debts or liabilities of the second party, •for whatever purpose the same may have been incurred.
■■■“'Sixth. It is mutually agreed that in the operation of said pfoposéd' railroad of the party of the second part, the charges for transportation of freight shall not exceed twelve and one-half (I2J) cents per gross ton for all freight to or from any manufactory for manufacturing purpose (over the whole or any part of said proposed road) and shall not exceed a maximum rate of seventy-fi.ve (75) cents per ton for all other freight. The charge for passenger traffic shall not exceed twenty-five (25) cents for each person one way over the • whole or any' part of said Ticonderoga road.
“ Seventh. It is mutually agreed that the party ’ of the first part may retain,twenty-five per cent of the annual gross earnings derived from all traffic upon said Ticonderoga Railroad, as full compensation for managing, operating and maintaining said railroad, and. the remaining seventy-five per cent of such annual gross earnings-shall be appropriated and used by them as follows, viz.:
“ 1st. To pay all taxes and assessments levied against said second' party or against said first party as operators of, and' on account of, said proposed road of,the second party, including corporation franchise tax, but excluding tax on rolling stock, which shall be paid by first party. ,
“ 2nd. To pay interest charges on' bonded indebtedness, which ■ interest charges shall not exceed Eighteen hundred dollars per ' annum. :
“ 3rd., To deposit with three trustees to be appointed when mortgage is executed for a sinking fund to liquidate its bonded , indebtedness when due, a .sum not to exceed One thousand dollars per annum over and above the expenditures required by the first • two mentioned items. ,
*547 “ 4th. To pay to the party of-the second párt all moneys'received . in excess of that required to meet the expenditures above stated to the extent of a sum sufficient to pay a dividend not to exceed five per cent' (5$)' upon its capital stock, which capital stock shall not exceed'Thirty thousand dollars. . . "
“,5th. To pay to the first party any unexpended balance that may remain after appropriating the aforesaid amounts, to 'be .applied in paying the cost of extensions or improvements, so far as i.t may find the same necessary.”
The controversy arises over the construction to be given ‘ to the 5tli and last-subdivision of the' 7tli article, and the disposition to be made of' what may be termed the surplus income of the road, after retention by defendant of twenty-five per cent of the gross receipts, and the payments by defendant, but of,the remaining seventy-five per cent of said gross receipts, of the various sums agreed to be paid by the 1st, 2d, 3d and- 4th subdivisions. • It appears that such- surplus has amounted to a very considerable -sum, much larger than defendant has, up to the present time, found necessary to expend in extensions or improvements of plaintiff’s road. • The referee has awarded all of this accumulated surplús, except a small sum to be retained for possible extensions and ■improvements, to plaintiff, together with interest thereon, upon the theory that the contract quoted above established a trust relation between plaintiff and defendant whereby defendant possessed ’and operated the railroad as trustee for plaintiff, collecting the revenue ' . therefrom in- plaintiff’s right and as its agent, and consequently being bound to account to plaintiff for all' of the receipts after paying therefrom the several sums specified in the 7th clause. The ' ' learned referee has given much attention to the question whether the contract can properly be denominated a lease, under which defendant, would collect the revenue from the railroad in its own right as lessee, being required to pay .by way of rent the several sums specially agreed to be paid,-'and entitled as lessee to retain'whatever surplus, income might remain.' He concluded that the contract should- not be considered a lease, being led to that conclusion in large part because the document nowhere contains the words “ lease ” or “ lessor ” or “ lessee.” It is equally true that .the contract nowhere contains the words “ trust” or “ trustee”
By the -.2d clause the plaintiff agrees to procure legislation to-authorize and permit the charges to passengers and freight tratisportation, which by the 6th clause áre made' the maximum which might be charged. The procuring of such legislation was deemed so important that it was provided that none of the terms of the contract. should be deemed binding' upon the defendant until such authority and permission should be obtained. By the 3d and 5th clauses provision is made for turning over the property to the defendant, and, short of an absolute deed of conveyance, nothing could be more complete. Defendant agreed,, upon completion of the railroad, to take possession thereof and maintain, manage and operate the same, and provide freight and passenger connections during the whole period of the corporate existence of plaintiff; and, as if to emphasize the completeness of the transfer, it was mutually-agreed that the defendant should, in so far as it lawfully might, assume all the duties, obligations, liabilities, rights, privileges and franchises of plaintiff incident to the maintenance and operation of
It follows that the judgment appealed from must be reversed, and since, in the nature of the case, the controlling facts could not be changed on a retrial, judgment will be directed for the defendant upon the merits, with costs to the appellant in this court and in the court below.
Ingeaham, P. J., McLaughlin, . Clarke" and Milleb, JJ., concurred.
Judgment reversed and judgment ordered for defendant .upon the merits, with costs in this court and in the court below.