Pennsylvania Railroad v. State

Coon, J. Plaintiff, the Long Island Rail Road Company, is a railroad redevelopment corporation incorporated under article 7 of the Railroad Law. Article 7 (§§ 300-313) of the Railroad Law was enacted in 1954, (L. 1954, ch. 824.) It provided that certain domestic railroad corporations which could then or thereafter meet the conditions set forth in the act might qualify as a railroad redevelopment corporation. After qualifying, the corporation’s existence, subject to certain exceptions not pertinent here, would continue for a 12-year period. (§ 303.) Under section 307 of the 1954 act a railroad redevelopment corporation was authorized to make emergency changes in its passenger fares without prior approval by the Public Service Commission whenever it determined that its revenues would be inadequate during the following 12-month period to meet the [271] expenditures authorized by section 306 of the Railroad Law. Such changes were, nevertheless, subject to review by the Public Service Commission. Section 307 of the Railroad Law was amended by chapter 386 of the Laws of 1958 so as to require advance approval of the Public Service Commission before changes in existing fares could become effective. The validity of this 1958 act is challenged here. It is the principal contention of plaintiffs that the right to make such emergency changes in fares without advance approval constitutes one of the provisions of a contract between plaintiffs and the State which culminated in the legislation of 1954, and that chapter 386 of the Laws of 1958, taking away from Long Island the right to make such emergency changes, unconstitutionally impairs the obligation of such contract. The complaint sought a declaration to that effect. The complaint and annexed exhibits set forth in great detail the history of the financial plight of Long Island; the creation of the Long Island Transit Authority under chapter 361 of the Laws of 1951; the long negotiations which finally resulted in a ‘1 plan ” for the rehabilitation of Long Island, the long-term payment of its debts, current financing of improvements, and an order of the Federal court terminating the bankruptcy proceeding for reorganization under section 77 of the Bankruptcy Act (U. S. Code, tit. 11, § 205), which had been previously instituted by Long Island. In general the complaint alleges that Pennsylvania (which wholly owned Long Island) advanced very substantial immediate financial relief to Long Island; deferred payments and waived interest on a large existing indebtedness from Long Island to Pennsylvania; that certain banks made loans to Long Island, guaranteed by Pennsylvania, to help the rehabilitation of Long Island, and that all of this was in accordance with a ‘ ‘ plan ’ ’ which was agreed upon by Pennsylvania, Long Island and the Long Island Transit Authority; and, that the final result was the 1954 legislation, hence a contract between the State and the plaintiffs, which could not be constitutionally impaired by the subsequent legislation in 1958. Of course this court must accept the allegations of the complaint as the facts for the purposes of the motion and upon this appeal. Doing so, however, does not abrogate the long established and strong presumption of constitutionality. The court at Special Term has held that the act of 1958 was constitutional and valid. Two other decisions of the New York State Supreme Court have held that article 7 of the Railroad [272] Law (L. 1954, ch. 824) is a general law and not a private or local enactment. (Gerosa v. Long Is. R. R. Co., 207 Misc. 360; Klein v. Long Is. R. R. Co., 9 Misc 2d 486.) We agree that it is a general law and therefore not open to contract with any individual corporation or corporations. The fact that only one corporation, at the moment may meet the qualifying requirements, does not alter the type of legislation which encompasses any corporation which now or later may meet those requirements. There is nothing in the act itself (L. 1954, ch. 824) which binds the State or even suggests any contractual obligations on the part of the State, or that the State waived its powers to alter any corporate privileges therein granted. As stated in Stanislaus County v. San Joaquin Canal & Irrigation Co. (192 U. S. 201, 207-208): “ There is no promise made in the act that the legislature would not itself subsequently alter that authority. * * * In order to make such a contract the language must be plain and susceptible of no other reasonable construction.” Moreover, assuming a contractual plan for the 1954 legislation, the State openly reserved the power to alter it under the “ reserved power ” found in section 1 of article X of the New York State Constitution, which says: “ Corporations may be formed under general laws; but shall not be created by special act, except for municipal purposes, and in cases where, in the judgment of the legislature, the objects of the corporation cannot be attained under general laws. All general laws and special acts passed pursuant to this section may be altered from time to time or repealed. ’ ’ With this constitutional authority the Legislature has provided: “ The charter of every corporation shall be subject to alteration, suspension and repeal, in the discretion of the legislature.” (General Corporation Law, § 5.) These provisions were in full effect during all the preliminary steps leading to the 1954 legislation, were known to all parties, and became a part of the charter of the Long Island. (Beloff v. Consolidated Edison Co. of N. Y., 300 N. Y. 11, 19.) Under the reserved power noted, the Legislature could do anything that it could have done if the United States Constitution contained no provision prohibiting State legislation impairing the obligation of contracts, and such reserved power ‘ ‘ prevents the charter from becoming a contract between the State and corporation protected from impairment by the Constitution.” (Matter of Mount Sinai Hosp., 250 N. Y. 103, 110; see Matter of Roosevelt Raceway v. Monaghan, 9 N Y 2d 293 [appeal dismissed for want of a substantial Federal question, 368 U. S. 12].) [273] Plaintiffs argue that the constitutional and legislative reservation was designed to overcome the “ evils ” of the Dartmouth College case (4 Wheat. [17 U. S.] 518), and to guard against the acquirement of perpetual corporate privilege, and therefore is inapplicable to a statute which limits the corporate existence to 12 years. But, whatever may have motivated the adoption of the reservation clauses quoted above, they contain no reference to perpetual grants and are not limited at all. The Legislature was thus empowered, without limitation, to determine that it was in the public interest to alter or revoke corporate privileges at any time. It should be noted that the order and judgment appealed from decides only that chapter 386 of the Laws of 1958 is constitutional and valid. We may not be concerned with and do not decide the equities involved. We are concerned only with the lawful power of the Legislature. In reality all that act did was to require advance approval of the Public Service Commission as to the reasonableness of passenger fares instead of subsequent approval or disapproval of fares fixed by Long Island. The end result by either method is supposed to arrive at a fare which will enable the railroad to meet the expenditures authorized by the Legislature, without excessiveness. Although the fare has to be eventually approved by the Public Service Commission in either case, the plaintiffs contend that the delay in obtaining Public Service Commission approval is costly and detrimental to the “ plan”. Nevertheless, the Legislature had the right to exercise the sovereign authority of the State (which was not relinquished under the 1954 act) to decide that the public welfare required advance approval of fares by a State agency. The judgment should be affirmed, with costs to respondent.