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Court of the United States January 7, 1919, the city of Englewood while a town-that is, before its incorporation as a city-granted a franchise to the Denver & South Platte Railway Company to operate its railway and charge certain fares, provided it would arrange for passengers on its road to be transported without extra fare over the line of the Denver City Tramway Company from a point of connection, and in a like manner for passengers on that company's line to be carried over the line of the Denver & South Platte Railway Company without additional charge. The last-named railroad company (Denver & South Platte) operates its street railway under that franchise, which it accepted, but does not comply with the terms of the agreement; its defense being that the said tramway company charges 5 cents, the maximum fare allowed, for its part of the service, so that the South Platte Railway Company, defendant in the suit, gets nothing, and that it had filed a schedule of rates with the state Public Utilities Commission (as required by it), which had become its established rates and charges. The suit was instituted to compel the defendant to comply with its agreement under which it operated. On demurrer to the bill the Supreme Court of the state of Colorado held that:

"The town. at least, deriving its powers from legislative grant, could make no contract of this sort that was not subject to control by the Legisluture; that the Public Utilities Commission had been authorized by the Legislature to regulate the matter in controversy; that it had done so, and that the proceeding (to compel the Denver & South Platte Railway Company to carry out its contract) should be dismissed."

The Supreme Court said:

"Of course we do not go behind the decision of the court that the matter in controversy was subject to regulation by the commission and was regulated by it in due form if the state could confer that power. The plaintiff says that the state could not confer it since to do so would impair the obligation of a contract. Upon that point we agree with the court below that clearer language than can be found in the state laws and this ordinance must be used before a public service is withdrawn from public control. Milwaukee Electric Ry. & Light Co. v. Railroad Commission of Wisconsin, 238 U. S. 174, 180 [35 Sup. Ct. 820, 59 L. Ed. 1254]. The cases generally are cases where the railroad or other company sets up contract rights against the city. Whether, when the railroad consents, a Legislature would not have all the power that the city could have to modify even a constitutionally protected contract, need not be considered here."

Here, again, we have a case where it is conceded the Legislature of the state had conferred on the Public Utilities Commission the necessary power to act in the matter and deal therewith. But it is intimated very strongly that when, as in the instant case, a city is authorized by the Legislature to consent to the construction and operation of street car lines on its public streets, and such consents are given, and actual contractual relations are entered into, which have the protection of the constitutional provisions, the Legislature itself, with the consent of the railroad, may abrogate or disregard such contracts without the consent of the city. In other words, the Legislature may not bargain away its power, or abdicate in those matters relating to the police power of the state, to which the fixing of rates to be charged by a public utilities corporation belongs. These powers are inalien

able even by express grant of the Legislature. Atlanta Coast Line R. R. Co. v. Goldsboro, 232 U. S. 548, 558, 34 Sup. Ct. 364, 58 L. Ed. 721, supra.

I am not to be understood as assenting to the holding in the Quimby Case, supra, that the Legislature of the state of New York has not and did not intend to confer on the Public Service Commission full power and authority to regulate and increase rates of fare on all railroads in the state, including all street car lines, when the facts found by such commission were such as to bring such railroad within its provisions. As I read the Quimby Case the court places its decision on the ground stated:

"But our Constitution, by requiring the consent of the local authorities, recognizes that our municipalities are pro tanto independent of legislative control, exercising some fragment of power, otherwise legislative in character, which has been thus irrevocably transferred by the fundamental law (meaning the Constitution) from the Legislature to the locality."

Of course, if the framers of the state Constitution of the state of New York in fact destroyed the integrity of the state as a state possessing all the sovereignty of an independent state as to fixing fares on street railways, and have made each city and village an independent sovereignty in such matters, then the state and its Legislature has nothing further to do with the matter, and the local authorities are supreme in the matter of fares on street railroads. As I read the constitutional provision, it neither grants nor surrenders to the local authorities any supreme or paramount power or sovereignty. It merely forbids the Legislature to enact a law authorizing the construction or operation of a street railroad, except such law provides for two things: (1) The consent of the owners of one-half in value of the property bounded on that portion of a street or highway upon which it is proposed to construct and operate such road; and (2) the consent of the local authorities having the control of the street or highway on which it is proposed to construct and operate such road. If the law contains such provisions, it is a valid law; and if it does not, it is an invalid law. This constitutional restriction on legislation has nothing to do either with rates of fare or with a surrender or abandonment of sovereignty by the state to the local authorities, and it says nothing as to the making of contracts when consents are obtained which shall be beyond the power of the Legislature.

Undoubtedly the people of a state may by its Constitution surrender power to local authorities, but the language to that end should be plain and unequivocal. See cases cited as to surrender of legislative powers. In fact, the consent of the property owners is not necessary, for the Constitution itself says, if they do not consent, the court may say, through commissioners and a confirmation of their finding, whether or not the road ought to be constructed and operated. If the local authorities do not consent, the road cannot be constructed and operated, if objection is made. No requirement is imposed on the local authorities. The local authorities are granted no power whatever by this constitutional provision. Article 3, § 18, as amended in 1875. The section is headed:

"Cases in Which Private and Local Bills shall Not be Passed; Restrictions as to Laws Authorizing Street Railroads."

By its original charter the city of Rochester is given power "to contract and be contracted with." Laws 1907, c. 755, § 2. It is a legislative grant of power pure and simple, and is subject to the control of its grantor, the Legislature. The right and power of the local authorities. to consent or not consent remain unaffected. The powers of the local authorities are neither greater nor less than they were before the adoption of this section 18 of article 3 of the Constitution. And the Constitution of the state of New York says nothing about power in the local authorities to make contracts respecting fares or otherwise when granting consents. If such contracts are made, they are subject to the paramount sovereignty of the state. The Legislature is not prohibited to impair them in such cases as this. See cases cited.

I cannot conceive of a broader jurisdictional power than that conferred by the Public Service Commissions Law (subdivision 1, § 49, as amended by Laws 1911, c. 546, § 1), of New York, which, so far as pertinent, reads as follows:

"Rates and Service to be Fixed by the Commission.-1. Whenever either commission shall be of opinion, after a hearing had upon its own motion or upon a complaint, that the rates, fares or charges demanded, exacted, charged or collected by any common carrier, railroad corporation or street railroad corporation subject to its jurisdiction for the transportation of persons or property within the state, or that the regulations or practices of such common carrier, railroad corporation or street railroad corporation affecting such rates are unjust, unreasonable, unjustly discriminatory or unduly preferential, or in any wise in violation of any provision of law, or that the maximum rates, fares or charges, chargeable by any such common carrier, railroad or street railroad corporation are insufficient to yield reasonable compensation for the service rendered, and are unjust and unreasonable, the commission shall with due regard among other things to a reasonable average return upon the value of the property actually used in the public service and to the necessity of making reservation out of income for surplus and contingencies, determine the just and reasonable rates, fares and charges to be thereafter observed and in force as the maximum to be charged for the service to be performed, notwithstanding that a higher rate, fare or charge has been heretofore authorized by statute, and shall fix the same by order to be served upon all common carriers, railroad corporations or street railroad corporations by whom such rates, fares and charges are thereafter to be observed."

The opinion in the Quimby Case concedes that the New York State Railways (involved there) was within the jurisdiction of the Public Service Commission, so far as rates of fare fixed "by statute" were concerned, but the decision asserts that, as the rates of fare in that case were fixed by contract between the city of Rochester and the Railways Company, the Public Service Commission was without jurisdiction to change the rate of fare; in short, that when rates of fare are fixed by agreement between a city and the railroad company, the Public Service Commission has no jurisdiction. If there be any such limitation on jurisdiction, it must be found in the words "notwithstanding that a higher rate, fare, or charge has been heretofore authorized by statute," and by the words "or in any wise in violation of any provision of law." These words last quoted are clearly disjunctive, and it is not to be implied that the preceding and following words refer

to rates or fares fixed by some statute and exclude those fixed by agreement, and which agreements, if made, are and must be "authorized by statute." The last words quoted evidently refer to cases where the Legislature has fixed a rate and it is desired to reduce that rate, and hence the power is given to reduce a rate so fixed in explicit terms. However, the holding in the Quimby Case is controlling as to the proper interpretation of the statute quoted, as there is no decision of the Supreme Court of the United States to the contrary. When the highest court of a state has interpreted a statute of such state, that interpretation is accepted by the Supreme Court; no infringement of the Constitution of the United States being involved, except when the Supreme Court has itself first passed thereon. This court is bound by the Quimby Case, as is the Public Service Commission of the state. Equitable Life Assurance Soc. v. Brown, 213 U. S. 25, 43-45, 29 Sup. Ct. 404, 53 L. Ed. 682; Peters v. Broward, 222 U. S. 483, 492, 32 Sup. Ct. 122, 56 L. Ed. 278; Hunter v. Pittsburgh, 207 U. S. 161, 28 Sup. Ct. 40, 52 L. Ed. 151; Ughbanks v. Armstrong, 208 U. S. 481, 28 Sup. Ct. 372, 52 L. Ed. 582; Lindsley v. Natural Carbonic Gas Co., 220 U. S. 61, 31 Sup. Ct. 337, 55 L. Ed. 369, Ann. Cas. 1912C, 160; VirginiaCarolina Co. v. Kirven, 215 U. S. 252, 30 Sup. Ct. 78, 54 L. Ed. 179; Brown Forman Co. v. Kentucky, 217 U. S. 563, 30 Sup. Ct. 578, 54 L. Ed. 883; and see 40 L. R. A. (N. S.) 380, 398, 402.

This case and the action of the Public Service Commission, in view of the Quimby Case, must rest on the proposition that no valid binding contract as to and fixing rates of fare on the line of the Binghamton Railway Company is now in force..

That no such contract is in force is the conclusion reached and stated above. If this conclusion is correct, there is no obstacle in the way of favorable action by the Public Service Commission, for, as stated, the necessity in view of the facts is obvious. It is plain that the maximum rate of fare chargeable by the Binghamton Railway Company under the statutes to which reference has been made is not only unjust and in fact, confiscatory, but is insufficient to yield reasonable compensation for the service rendered, and is unjust and unreasonable, and that, therefore, the commission should exercise its power in the premises and determine the just and reasonable rates, fares, and charges to be hereafter observed and in force as the maximum to be charged by said railway company for the service to be performed. This court is at liberty to recommend to its receiver that he respectfully request the fixing of a certain fare, inasmuch as such receiver is but the arm of the court itself.

This court, in view of the facts and existing conditions, which are liable to continue, and so far as human foresight can determine will continue for at least two years without substantial change, therefore authorizes and directs its receiver, William G. Phelps, to apply to the Public Service Commission, Second Division, for an increase of fare from 5 cents to 6 cents during the continuance of the war and for two years thereafter, and to incur the necessary expense of such application.

The following figures should be presented here, viz.:

Since 1914, the operating expenses of the Binghamton Railway Company, this defendant, have increased from $321,473.32 to $446,545.26 in 1917, an increase of $125,071.94.

During the first six months of 1918, such expenses increased $31,173.82 over such expenses for the first six months of 1917.

During the first six months of 1918, the revenues of this road decreased $27,525.36 as compared with the corresponding period of 1917. During the first six months of 1918, the Binghamton Railway Company, this defendant, had a deficit of $18,748.27, as against a surplus of $60,682.27 for the corresponding period of 1917.

During the four years last past the taxes levied against the defendant company have been as follows: 1914, $16,200; 1915, $18,000; 1916, $21,000; 1917, $30,800; 1918, $41,255.65.

Due to advance in prices, the expenditures of the railroad company have increased from $28,263.27, in 1914, to $104,701.65, in 1917.

The defendant's necessary outlay for materials used in repairs is about $50,000 per year.

The defendant company has been under the necessity of making four increases in wages during the three years last past the fourth increase in October, 1918.

The receiver appointed by this court took possession of the road on the 10th day of October, 1918. His receipts from operation of the road and lighting plant from October 10, 1918, to October 31, 1918, and his necessary disbursements for the bare expenses of running the road for the same period of time, were as follows:

Cash on hand October 10, 1919...

Receipts.

Receipts, October 10 to October 31, 1918.

Disbursements.

Expenses of operation paid during and for same period..$25,291.14
Coal purchased and used, not paid for.....

Deficit

.$ 2,461.09 27,229.63 $29,690.72

4,500.00 29,791.14

.$100.42

This is the result of keeping the road running for that period of 21 days.

There were no payments on interest on bonds or other obligations, taxes, insurances, or any existing indebtedness or claims for damages, or betterments, or necessary general repairs.

There are three sets of bonds outstanding against the Binghamton Railway Company secured by mortgage, viz.:

On Binghamton, Lestershire & Union...

Interest at 5 per cent.

On Binghamton Railroad Company....

Interest at 5 per cent.

.$ 147,000.00

502,000.00

On Binghamton Railway Company (first consolidation)........... 1,813,000.00

Of these $68,000 are in escrow.

Interest at 5 per cent.

The defendant owes for steel cars...

On car trust certificates.

The note indebtedness of the defendant is....

It owes on open account.

63,000.00

197,948.00 76,691.13

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