George Adams Lumber Co. v. Long Island Railroad

Hill, J. The petitioners operate manufacturing plants adjacent to the Long Island railroad and are served by side tracks. The railroad is electrifying its line. The industries have petitioned the Public Service Commission to determine as to the necessity of electrification of the side tracks, which the railroad demands, and if found necessary, to require the railroad to pay the expense. Contracts containing the following provision concerning the maintenance and operation of these side tracks have been signed by the parties: “ The industry agrees that the railroad company shall relocate, readjust or add to said side tracks and switch connection if and when the same is made necessary by the opening or change in the line, grade or use of any public street or highway across, along or in the vicinity thereof, or by any change in the grade, location or use of the tracks or other structures of the railroad company at or about the point of connection, and to repay to the railroad company the actual cost of such relocation, readjustment or additions plus 15 per cent for organization, accounting and use of hand-tools. * * * ” Section 27, subdivision 3, of the Public Service Commission Law provides in part: '‘Whenever the shipper and the carrier shall be unable to agree as to the terms of agreements respecting such switches or side-tracks, * * * the same shall be subject to the approval of the Commission.” The counsel for the railroad construes this provision to apply to the making of contracts only, and says that if, prior to the execution of the agreement with the petitioners, the parties had been unable to agree, the Public Service Commission could have acted, with power to determine what terms [262] should be written into the contract, but the parties having agreed, the construction and enforcement of the terms of the contract is for a law court of competent jurisdiction. The Commission has adopted this view. The Public Service Commission Law “ was enacted in response to a pronounced and insistent public opinion and was a radical and important modification of the relations and policy of the people toward the corporations which are its subjects. Its paramount purpose was to protect and enforce the rights of the public. * * * It provided for a regulation and control which were intended to prevent, on the one hand, the evils of an unrestricted right of competition and, on the other hand, the abuses of monoply.” (People ex rel. New York Edison Co. v. Willcox, 207 N. Y. 86, 93.) The State, in the exercise of police power, protects the railroads from ruinous competition. The Legislature has empowered the Public Service Commission to determine under what circumstances competing lines may be built. Within a reasonable field, the operation of a railroad is a legalized monoply. This requires supervision of rates, charges and contracts with the people who must receive service from the monoply. The Legislature, by the Public Service Commission Law, has transferred its rate-making power to .the Commission, together with many other powers of supervision over the dealings between railroads and the public. These powers may be delegated by the Legislature. (Village of Saratoga Springs v. Saratoga Gas, etc., Co., 191 N. Y. 123.) The construction of side tracks and the terms of the agreements as to their use is governed by subdivision 3 of section 27 and by section 50 of the act. The intent of the Legislature to grant plenary powers to the Commission over the installation and use of side tracks is shown by the language used in the statute: “ Whenever the shipper and the carrier shall be unable to agree as to the terms of agreements respecting such switches or side-tracks, * * * the same shall be subject to the approval of the Commission.” This language should be read with the general policy of supervision in mind. Likewise, with regard to the evil it sought to eliminate. If it had been intended to limit the time when the Commission might exercise its power, the language used would have indicated such intention. Even if the power had not been so specifically granted, the determination as to which party should make this capital expenditure is so identified with rate making that supervision by the Commission would have been implied. The use of the side track over which cars are drawn is an element in the conveyance of freight from its [263] origin to destination. A railroad is entitled to a reasonable return on the fair value of its property used in the public service. Obviously, it would not be entitled to a return upon the investment if the industry built the side track. The construction by a law court of the exact meaning of this contract would be without effect, for the business dealings between the railroads and public have been said to be “ no longer an affair of predominantly private interest, in which the State would interfere without system and with spasmodic and intermittent action. A superintending agency of government had taken the matter in hand. The question soon arose whether the new rule was retroactive, and annulled existing contracts in conflict with its terms. Indisputably it annulled such contracts between carriers and passengers, or carriers and shippers. [Louisville & Nashville R. R. v. Mottley, 219 U. S. 467; People ex rel. N. Y. Steam Co. v. Straus, 186 App. Div. 787; 226 N. Y. 704; Postal Tel.-Cable Co. v. Associated Press, 228 id. 370; Producers Transp. Co. v. R. R. Comm., 251 U. S. 228.] ” (People ex rel. City of New York v. Nixon, 229 N. Y. 356, 359.) Were the parties to obtain a construction of this contract and a judgment from a law court, that would not terminate the controversy, as determination of this and kindred matters has been intrusted to the Public Service Commission. It should determine the rights here involved, and the parties “ cannot remove them from the power of the State by making a contract about them.” (Hudson Water Co. v. McCarter, 209 U. S. 349, 357.) The Commission has power to determine the rights of the industries, and the railroad, and to decide which party shall pay the expense of electrification, if it be made, and as an incident, if necessary, to construe the contract between the parties. The decision of the Public Service Commission should be annulled, and the matter remitted to the Commission, with fifty dollars costs and disbursements. Van Kirk, P. J., Davis and Whitmyer, JJ., concur; Hinman, J., concurs with a separate opinion.