City of Niagara Falls v. Public Service Commission

The appellant, International Railway Company, succeeded to the rights of several railroad companies operating railroads in and through the village of Niagara Falls, the village of Suspension Bridge and the town of Niagara between the two villages, a large portion of which was included in the city of Niagara Falls which was created in March, 1892.

! On August .22, 1905, the International Railway Company, desirous of extending its lines in said city, applied to the common council of the city of Niagara Falls for its consent to construct, maintain, operate and use single or double-track extensions of its railroad to be operated by electricity upon and along a number of streets constituting quite extended territory within the city of Niagara. Falls, together with the right to construct, maintain and operate turnouts, crossovers, etc., in connection with its existing tracks.

After due proceedings had, the common council granted consent to such extensions upon certain terms, the important one to be considered here being “ Said Company shall not charge more than one fare of five cents for each passenger for any continuous ride or passage over its railroad and extensions within the present limits of the city of Niagara Falls.” The consent was not to be operative unless the company filed its acceptance in writing of the consent and all conditions therein contained in the office of the clerk of the city of Niagara

Upwards of thirteen years thereafter the railway company applied to the public service commission for an order permitting it to increase from five cents to seven cents the rate of fare to be charged passengers upon its road within the city of Niagara Falls. The city of Niagara Falls applied for a writ of prohibition restraining the public service commission from assuming and exercising jurisdiction of the application. The Special Term denied the motion but the order made thereon was reversed by the Appellate Division and the writ granted on the authority of Matter of Quinby v. Public Service Comm. ( 223 N. Y. 244 ).

Our decision in Matter of Quinby is controlling here. That case was argued at length March 25th, 1918, by counsel representing the parties directly interested. In addition) by permission of the court, counsel representing the public service commission, first district, the New York State Railways Company and a committee of corporation counsels of the municipalities of the state filed briefs. After a due consideration of the questions presented to this court, a decision was handed down April 5th, 1918, determining that an absolute writ of prohibition should be awarded restraining the public service commission from acting upon the application made to it to increase the rates of fare. We distinctly held in that case, without determining the limits of legislative power, that the provisions of the Railroad Law did not disclose a legislative intent to deal with the matter of rates fixed by agreement between local authorities and the railroad corporation, consequently the public service commission was unauthorized to nullify conditions attached to such consents by increasing rates without the consent of the local authorities.

Eighteen months later a motion was made in this

In the instant case we are again asked to overrule our decision in the Quinby case. Here, as in that case, the question of the power of the legislature to confer upon the public service commission authority to abrogate conditions embodied in the agreement between local authorities and a railroad company is not presented, for the legislature has not undertaken to confer such power but has consistently for three successive sessions since the decision in the Quinby case declined so to do. We are now urged to hold that the legislature intended to delegate power to the public service commission to modify the rates prescribed in the contract between the local authorities and the railroad company, against the protest of the municipality, notwithstanding the refusal of three successive legislative bodies to accede to such demand for delegation of power. This we are not prepared to accede to.

The order should be affirmed, with costs.

(concurring). I think this case is controlled by our decision in Matter of Quinby v. Public Service Commission ( 223 N. Y. 244 ; 227 N. Y. 601 ).

I do not say that it is beyond the power of the legislature, either directly or through a commission, to abrogate or modify the conditions of a franchise. If such a question were here, I might agree in that respect with Judge McLaughlin. Because it is not here, I conceive that we are not at liberty to express an opinion on the

We held in the Quinby case that the instance had not arisen yet. Our ruling was that the legislature had not yet attempted to delegate to the public service commission the power to abrogate conditions in respect of fares, contained in franchise agreements between municipalities and railroads, when the agreements were already m existence at the adoption of the statute. The judges now dissenting attempt to limit the application of that ruling to the city of Rochester, where the controversy arose. No such limitation was suggested as the basis of the decision either when the case was first decided ( 223 N. Y. 244 ) or upon the motion for re-argument ( 227 N. Y. 601 ) or in other opinions in which its meaning has been restated (People ex rel. Village of South Glens Falls v. P. S. Comm., 225 N. Y. 216 ; Matter of Int. Ry. Co. v. P. S. Comm., 226 N. Y. 474 ). No such limitation, if suggested, would have been reasonable. Section 173 of the Railroad Law has no bearing upon the powers of the commission in respect of rates; it defines the terms upon which franchises are to be granted in the future. The act of 1915 (L. 1915, ch. 359, sec. 7) has no bearing: it withdrew from the commission no power that would

The Quinby case cannot be distinguished. It has not been overruled. The only question remaining is whether we shall overrule it now. The single point decided was one of statutory construction. Since that decision was announced, three successive legislatures have been asked to confer upon the public service commissions the power which in our view, of the existing statute had been theretofore withheld. In each year the bills embodying the proposed enlargement of jurisdiction failed. The public service commission for the first district has in the meanwhile been reconstituted with its existing powers, and no others (L. 1919, ch. 520; People ex rel. Outwater v. Green, 56 N. Y. 466 , 475; Fifth Ave. Bldg. Co. v. Kernochan, 221 N. Y. 370 , 375). We said that the legislature had a certain intention when it enacted a certain statute. The legislature by what it has done and by what it has refused to do, has said that we read

My vote is for affirmance.

(dissenting). In May, 1919, the appellant, the International Railway Company, a corporation organized under the Railroad Law, while operating a line of street surface railways in the city of Niagara Falls, filed with the public service commission, second district, a petition showing: That since January, 1915, the cost of labor and materials had increased, the former upwards of seventy per cent and the latter upwards of one hundred and twenty per cent; that by reason thereof it was, with the existing rate of fare, unable to pay operating expenses and receive any substantial return on an investment of upwards of $1,600,000; that on the 1st of November, 1918, it defaulted in the payment of interest then due on its refunding and improvement bonds; that it was unable to pay the state, county and city taxes long past due upon its property in such city; that it had many financial obligations which it was unable to meet; that it was absolutely necessary for it to receive increased revenue from the operation of its railways in order to maintain itself and render the service to the public for which it was organized. It, therefore, asked that the public service commission make an order permitting it to charge a fare of seven, instead of five cents, for each adult passenger transported over its lines in said city. The city interposed an answer to the petition, alleging, among other things, that the fare charged by the petitioner on certain of its lines is fixed

The only question presented by the appeal is whether the public service commission, assuming that the facts set out in the petition are true, had the power and jurisdiction, against the protest of the city, to approve and authorize street railway fares which were in excess of the fares prescribed in a resolution of the common council adopted on the 22d of August, 1905, under which the International Railway Company was granted the right to operate its railroads upon certain public streets. The answer to the question necessarily turns upon the construction to be put upon certain sections of the Railroad Law (Cons. Laws, ch. 49), the Public Service Commissions Law (Cons. Laws, ch. 48) and the resolution referred to.

On the 22d of August, 1905, the International Railway Company obtained from the city of Niagara Falls consent to the construction and operation of a street surface railroad in certain of its streets. ' The only part, however, which has, up to the present time, been constructed, is a few hundred feet on Eighteenth street between Cleveland and Ontario avenues, to make a connection between the lines of the Electric City and the International Railway Companies.

The resolution of the common council of the city, to which reference has been made, so far as material to the question under consideration, provides:

“ Resolved, that consent be and is hereby given pursuant to law to said International Railway Company to construct, maintain, operate and use single or double track extensions of its street surface railroad, to be operated by electricity by the single overhead trolley system, in, upon and along the following streets and portion of streets in said city, viz.:” (Here follow the names of the streets, including Eighteenth street between Cleveland and Ontario avenues.)

“ Resolved, that this consent be given upon the express condition that all of the provisions of Article IV of the Railroad Law pertinent to this consent shall be complied with by said company.

The conclusion at which I have arrived renders it unnecessary to examine the different franchises of the railroads merged in the International Railway Company or consents given to build or extend and maintain street surface railways in the public streets of the city, other than the one given and accepted under the resolution of the common council of the city of Niagara Falls quoted. The conditions imposed in granting this franchise had the effect of imposing similar conditions upon the rights theretofore acquired by railway companies to occupy public streets, whether by consent of the municipal authorities, or by the merging of other franchises, irrespective of the time when such rights were acquired. (Public Service Commission v. Westchester Street R. R. Co., 206 N. Y. 209 ; Parish v. Ulster & D. R. R. Co., 192 N. Y. 353 .) The old franchises were modified or superseded by the new one.

The Railroad Law was passed in 1890 (Chap. 565); the Public Service Commissions Law in 1907 (Chap. 429). Each was revised and amended in 1910 and on the same day became, respectively, chapters 480 and 481 of the Laws of that year. Various provisions of the former Railroad Law deemed to be inconsistent with the Public Service Commissions Law viere omitted and the act

Before considering the 'effect of the Railroad Law and the Public Service Commissions Law, as bearing upon the question to be answered, it may not be out of place to state a few general principles of law, the correctness of which I do not believe can be successfully challenged. The state, acting through the legislature, has, by virtue of its police power, the right to regulate the fare to be charged by a street surface railroad corporation. This right or power, whichever it may be called, is an attribute of

(People v. Adirondack Ry. Co., 160 N. Y. 225 .) All contracts and property rights are held subject to the fair exercise of this power which embraces, among other things, regulations designed to promote public convenience and general welfare, as well as those in the interest of the public health, morals and safety. (Chicago & Alton R. R. Co. v. Tranbarger, 238 U. S. 67 ; Atlantic Coast Line R. R. Co. v. City of Goldsboro, 232 U. S. 548 .) Contracts cannot be made which in any. way impair or limit this power, nor can one legislature limit or control a subsequent one in its exercise. (Buffalo E. S. R. R. Co. v. Buffalo St. R. R. Co., 111 N. Y. 132 ; Union Dry Goods Co. v. Georgia P. S. Corp., 248 U. S. 372 ; Manigault v. Springs, 199 U. S. 473 ; Hite v. C., I. & W. R. R. Co., 284 Ill. 297 ; Puget Sound Traction L. & P. Co. v. Reynolds, supra; Chicago Railways Co. v. City of Chicago, 292 Ill. 190 .)

It is suggested, not by counsel, that the state, in the exercise of its discretion, by an act of the legislature in terms so clear and unequivocal as to permit of no doubt, may vest in a municipality the authority to enter into an inviolable contract for a reasonable period regulating the rates to be charged by a public utility by suspending, during such period, its authority to interfere- with or change such rates. This, however, is a question not presented by the appeal and is not considered or passed upon.

The provision in the Constitution of the state that “No law shall authorize the construction or operation of a street railroad except upon the condition that the consent of the owners of one-half in value of the property bounded

If it be true, as indicated, that the state, as an attribute of sovereignty in the exercise of police power, has the right to regulate fares of a public service corporation, with the right to delegate such power to an agent, the inquiry necessarily follows, in order to answer the question propounded, whether it has, in fact, delegated this power to the public service commission. I assert with the utmost confidence that such power has been so delegated.

Section 101 of the Railroad Law of 1890 (Chap. 565) (in force at the time the International Railway Company was incorporated and the city of Niagara Falls created), and which, by the resolution of August 22, 1905, was read into the consent as fully and effectively as though therein set out at length, provided that: “No corporation con

In 1907 the Public Service Commissions Law (Chap. 429) was passed. Section 49 then provided, among other things, as to the power of the commission to fix fares of street surface railroad corporations. Subsequently it was discovered that certain sections of the Public Service Commissions Law and the Railroad Law were somewhat in conflict. For the purpose of making-them harmonious, the legislature, in 1910, revised and amended both acts and section 101 of the Railroad Law became section 181, and there was added at the end thereof the words: “And the public service commission shall possess the same power, to be exercised as prescribed in the public service commissions law.” Section 49 of the Public Service Commissions Law was also amended and thereafter provided, among other things, that: “ Whenever either Commission shall be of the opinion, after a hearing had * * *, that * * * the maximum rates, fares or charges chargeable by any * * * street railroad corporation are insufficient to yield reasonable compensation for the service rendered, and are unjust and unreasonable, the commission shall with due regard

Reading this section of the Public Service Commissions Law in connection with section 181 of the Railroad Law, I am of the opinion that the legislature intended to and did delegate to the public service commission all the power which it had, unless the same were expressly reserved, to lower fares of public service corporations if too high, and to “raise them if too low. The language of section 181 is clear: “ The Legislature expressly reserves the right to regulate and reduce the rate of fare.” The power “ to regulate ” fares necessarily includes the power to increase the same if inadequate. (Matter of International Railway Co. v. Public Service Commission, 226 N. Y. 474 ; People ex rel. Village of South Glens Falls v. Public Service Commission, 225 N. Y. 216 ; People ex rel. N. Y. Steam Co. v. Straus, 186 App. Div. 787 ; affd., 226 N. Y. 704 ; People ex rel. Ulster & D. R. R. Co. v. Public Service Commission, supra; Board of Survey of Arlington v. Bay State Street Ry. Co., 224 Mass. 463 .) That this was the sense in which the word “ regulate ” was used is clearly indicated by the amendment to section 49 of the Public Service Commissions Law, made the same year. These provisions applied to every street surface railroad in the state, unless, as indicated, a specific exception were made.

What is the answer to this conclusion? Two are

The state may increase or diminish a rate fixed in a franchise or contract. This is so well settled that the citation of authorities ought not to be necessary. It is the federal rule. (See authorities before cited.) It is the rule established in many of the states. (In re Searsport Water Co., 108 Atl. Rep. 452 , and authorities there cited. See, also, authorities cited in 3 A. L. R. 746 .)

I assert there is a clear, well-defined and fundamental distinction between the Quiriby and the instant case. The . only question presented in the Quinby case was whether the public service commission had jurisdiction to raise the fare of street surface railroads in the city of Rochester from five to six cents, and it was held that it did not clearly appear such power had been given to it. The contract between the street surface railroads and the city of Rochester was entered into in 1890 under the Railroad Law as it then existed, the provisions of which, so far as pertinent, were read into it. The Public Service Commissions Law was not, as previously pointed out, enacted until 1907. Obviously, so far as this contract was concerned, the public service commission had no power to fix fares prior to such enactment. The most that should be claimed was that intermediate the passage of the Public Service Commissions Law and its revision in 1910, the public service commission had power to fix fares. In 1910, by section 173 of the Railroad Law, the power, if any, theretofore given to the public service commission to fix fares was expressly withdrawn. Otherwise there is no meaning to the words: “ Nothing herein contained shall be construed * * * as modifying or affecting the terms of a certain contract bearing date the twenty-fifth day of February, eighteen hundred and ninety, entered into by and between the city of Rochester and the street surface railroad corporation therein named.”

I am of the opinion, for the reasons stated, that the public service commission of the second district is invested with power to increase the fares on the petitioner’s railroads in the city of Niagara Falls in case the proof, after investigation, shall warrant the conclusion that the present fares are insufficient to yield reasonable compensation for the services rendered and are unjust and unreasonable.

The order of the Appellate Division should be reversed

(dissenting). The authority of the public service commission to regulate and increase rates of fare on street surface railroads in the city of Eochester, where such rates had been fixed as a condition of the consent of the local authorities to the operation of the road, was denied in Matter of Quinby v. Public Service Commission ( 223 N. Y. 244 ; S. C., 227 N. Y. 601 .)

When the case of People ex rel. Village of South Glens Falls v. Public Service Commission ( 225 N. Y. 16 ) was before this court for consideration, one of the questions discussed was whether the statutes affecting a franchise given to a gas corporation were so different from those affecting a franchise given to a street surface railroad corporation that a decision different from that rendered in the Quinby case should be made because thereof. I was of the opinion that where the facts and statutes were similar in other respects the public service commission had the same right and the same right only to regulate and modify the conditions attached to a franchise relating to the price of gas as it had to regulate and modify the conditions attached to a franchise relating to fares to be charged on street surface railroads, and that in view of what had been said in the opinion in the Quinby case the matter should be left, to the legislature for its determination. The views expressed by me in.the South Glens Falls case did not meet with the approval of a majority of the court. It was held that the legislature had the power to regulate the price of gas in that case although the franchise fixed a limited compensation to be paid for gas to be furnished pursuant to the franchise and that the legislature had conferred power on the public service commission to regulate such rates.

Although, as shown by Judge McLaughlin herein, the decision in the South Glens Falls case is not in conflict

This court in Matter of International Railway Company v. Public Service Commission ( 226 N. Y. 474 ) held that the public service commission had jurisdiction to regulate rates of fare in the- city of Buffalo. In the opinion in that case it is said, in substance, that in deciding the Quinby case the question whether the legislature may wipe out the conditions annexed to the consent of the locality altogether and transform a consent that was qualified into one that is absolute was left open, and added, “ We leave it open now.”

The decision in the Quinby case was made without necessarily determining that the reserve police power of the legislature has been contracted away or that the legislature- directly or through the public service commission is without power and authority inherent or •otherwise to regulate and modify conditions attached to a consent by local authorities.

In view of the subsequent decisions of this court the decision in the Quinby case should not be deemed a precedent except to the extent that the questions involved' were necessarily decided in reaching the conclusion that was therein announced.

I concur in the opinion of Judge McLaughlin for reversal.

Andrews and Elkus, JJ., concur with Hogan, J.; Cardozo, J., concurs in memorandum, in which Elkus, J., also concurs; McLaughlin, J., dissents in opinion, in which Chase, J., concurs in memorandum, and in which Collin, J., also concurs; Andrews, J., also concurs in so much of opinion of McLaughlin, J., as holds that the legislature has constitutional power to modify rates fixed in the local franchise.

Order affirmed.