Rochester Ry. Co. v. Rochester, 205 U.S. 236 (1907)

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Rochester Railway Company v. City of Rochester

No. 156

Argued January 14, 15, 1907
Decided March 25, 1907
205 U.S. 236

ERROR TO THE SUPREME COURT

OF THE STATE OF NEW YORK

Syllabus

Although the obligations of a legislative contract granting immunity from the exercise of governmental authority are protected by the federal Constitution from impairment by the state, the contract itself is not property which, as such, can be transferred by the owner to another, but is personal to him with whom it is made, and incapable of assignment, unless by the same or a subsequent law the state authorizes or directs such transfer, and so held as to a contract of exemption with a street railway company from assessments for paving between its tracks.

The rule that every doubt is resolved in favor of the continuance of governmental power, and that clear and unmistakable evidence of the intent to part therewith is required, which applies to determining whether a legislative contract of exemption from such power was granted, also applies to determining whether its transfer to another was authorized or directed. A legislative authority to transfer the estate, property, rights, privileges, and franchises of a corporation to another corporation does not authorize the transfer of a legislative contract of immunity from assessment.

Where a corporation incorporates under a general act which creates certain obligations and regulations, it cannot receive by transfer from another corporation an exemption which is inconsistent with its own charter or with the constitution or laws of the state then applicable, even though under legislative authority the exemption is transferred by words which clearly include it.

Although two corporations may be so united by one of them holding the stock and franchises of the other that the latter may continue to exist and also to hold an exemption under legislative contract, that is not the case where its stock is exchanged for that of the former and by operation of law it is left without stock, officers, property or franchises, but, under such circumstances, it is dissolved by operation of the law which brings this condition into existence.

182 N.Y. 116 affirmed.

The defendant in error brought an action against the plaintiff in error, a street surface railroad corporation, hereinafter called the Rochester Railroad, to recover $18,274.02, the expense of making new pavements of two streets within the space between the tracks, the rails of the tracks, and two feet in width outside the tracks of the railroad. The action was brought under section 98 of chapter 39 of the General Laws of New York, which was enacted in 1890, and is as follows:

Every street surface railroad corporation, so long as it shall continue to use any of its tracks in any street, avenue, or public place, in any city or village, shall have and keep in permanent repair that portion of such street, avenue, or public place between its tracks, the rails of its tracks, and two feet in width outside of its tracks, under the supervision of the proper local authorities, and whenever required by them to do so, and in such manner as they may prescribe. In case of the neglect of any such corporation to make pavements or repairs after the expiration of thirty days’ notice to do so, the local authorities may make the same at the expense of such corporation.

The Rochester Railroad was incorporated on February 25, 1890, under a law of New York enacted May 6, 1884. Laws of New York, 1884. That law authorized the formation of street surface railroad corporations and provided that they should "have all the powers and privileges granted, and be subject to all the liabilities imposed, by this act." Among the liabilities was that imposed by section 9 of the act, which is as follows:

Every such corporation incorporated under, or constructing, extending, or operating a railroad constructed or extended under, the provisions of this act, within the incorporated cities and villages of this state, shall also, whenever and as required, and under the supervision of the proper local authorities, have and keep in permanent repair the portion of every street and avenue between its tracks, the rails of its tracks, and a space of two feet in width outside and adjoining the outside rails of its track or tracks, so long as it shall continue to use such tracks, so constructed, under the provisions of this act. In case of the neglect of such corporations to make such pavement or repairs, the local authorities may make the same at the expense of such corporation after the expiration of thirty days’ notice to do so.

Section 18 of the act provides that

all acts and parts of acts, whether general or special, inconsistent with this act, are hereby repealed, but nothing in this act shall . . . interfere with or repeal or invalidate any rights heretofore acquired under the laws of this state by any horse railroad company, or affect or repeal any right of any existing street surface railroad company to construct, extend, operate, and maintain its road in accordance with the terms and provisions of its charter and the acts amendatory thereof.

The Rochester Railroad Company was incorporated for the purpose of acquiring the property of the Rochester City and Brighton Railroad Company, hereinafter called the Brighton Railroad. The Brighton Railroad was incorporated March 5, 1868, under a general law of the State of New York. Laws of 1850. That law contained no provision respecting the repairs of streets, and, differences having arisen between the Brighton Railroad and the city as to the extent of the burden of such repairs properly to be borne by the railroad, they joined in an application to the legislature for the enactment of a law which should regulate that and other subjects. Such a law was enacted February 27, 1869, and its fifth section was as follows:

Said company shall put, keep, and maintain the surface of the streets inside the rails of its tracks in good and thorough repair, under the direction of the Committee on Streets and Bridges of the Common Council of said City of Rochester; but, whenever any of said streets are, by ordinance or otherwise, permanently improved, said company shall not be required to make any part or portion of such improvement, or bear any part of the expense thereof, but it shall make its rails in such street or streets conform to the grade thereof.

On the twenty-fifth day of February, 1890, the Brighton Railroad duly executed and delivered a lease of its property, franchises, rights, and privileges, for the unexpired term of its charter, to the Rochester Railroad, which accepted the lease and took possession of the property. Subsequently, in the same year, the Rochester Railroad acquired the entire capital stock of the Brighton Railroad. The acquisition of stock was in pursuance of the authority contained in chapter 254 of the Laws of New York of 1867, which, as amended by chapter 503 of the Laws of 1879, is as follows:

Any railroad corporation created by the laws of this state, or its successors, being the lessee of the road of any other railroad corporation may take a surrender or transfer of the capital stock of the stockholders, or any of them, in the corporation whose road is held under lease, and issue in exchange therefor the like additional amount of its own capital stock at par, or on such other terms and conditions as may be agreed upon between the two corporations, and whenever the greater part of the capital stock of any such corporation shall have been so surrendered or transferred, the directors of the corporation taking such surrender or transfer shall thereafter, on a resolution electing so to do, to be entered on their minutes, become ex officio the directors of the corporation whose road is so held under lease, and shall manage and conduct the affairs thereof as provided by law, and whenever the whole of the said capital stock shall have been so surrendered or transferred, and a certificate thereof filed in the office of the secretary of state, under the common seal of the corporation to whom such surrender or transfer shall have been made, the estate, property, rights, privileges, and franchises or the said corporation whose stock shall have been so surrendered or transferred shall thereupon vest in and be held and enjoyed by the said corporation to whom such surrender or transfer shall have been made as fully and entirely, and without change or diminution, as the same were before held and enjoyed, and be managed and controlled by the board of directors of the said corporation to whom such surrender or transfer of the said stock shall have been made, and in the corporate name of such corporation. The rights of any stockholder not so surrendering or transferring his stock shall not be in any way affected hereby, nor shall existing liabilities or the rights of creditors of the corporation, where stock shall have been so surrendered or transferred, be in any way affected or impaired by this act.

Subsequently the Rochester Railroad duly obtained permission to convert the road into an electric trolley road, expended large sums of money in doing so, and, in the acquisition of the stock of the Brighton Railroad and the conversion of its road into an electric road, relied upon the provisions of the act of 1869 as a contract exempting it, with respect to the streets covered by the tracks of the Brighton Railroad, from other street repairs than those therein described. The city acquiesced in this view until October, 1898, when, upon the suit of an owner of adjoining property, the Court of Appeals held that, under section 9 of the act of 1884 and section 98 of chapter 39 of the General Laws, which were regarded as substantially the same, the Rochester Railroad was bound to bear the expense of a new pavement on the location acquired from the Brighton Railroad. Conway v. Rochester, 157 N.Y. 33. Subsequently, the city repaved two streets which were within the location acquired and operated by the Brighton Railroad prior to the passage of the act of 1884, and, in obedience to the decision in the Conway case, assessed against the Rochester Railroad its share of the expense of pavement, and brought this action to recover the amount of the assessment. It was set up in defense of the action that, by the act of 1869, the State of New York had entered into an inviolable contract with the Brighton Railroad, exempting it from the expense of pavement, that the contract had passed with the property of the Brighton Railroad to the Rochester Railroad, and that the assessment was in violation of the Constitution of the United States. The contentions of the Rochester Railroad were denied by the Court of Appeals of New York, 182 N.Y. 116, which held, first, that the statute mentioned did not constitute a contract between the state and the railroad company, and, second, that, if it did, the exemption granted by the statute was personal to the Brighton Railroad, and did not pass to the Rochester Railroad. The case was remanded to the supreme court and a judgment entered pursuant to the remittitur from the Court of Appeals, and by writ of error that judgment is brought here for review.