People ex rel. New York Edison Co. v. Willcox

151 A.D. 832, 136 N.Y.S. 1031, 1912 N.Y. App. Div. LEXIS 7855

Opinions

Dowling, J.:

The respondent Long Acre Electric Light and Power Company acquired by purchase on March 21, 1906, a franchise granted by the municipal authorities on May 31, 1887, to the American Electric Manufacturing Company “to locate and erect poles and hang wires and fixtures thereon,, and to place, construct and use wires, conduits and conductors for electrical purposes in the City of New York, in, over and under the streets, avenues, wharves, piers and parks therein, or adjacent thereto.” Space in the subway ducts for the respondent’s electrical conductors having been refused, mandamus proceedings were commenced in August, 1906, as authorized by the Laws of 1887 (Chap. 716, § 7) to compel the Consolidated Telegraph and Electrical Subway Company to furnish respondent “ just and equal facilities,” pursuant to law, for its electrical cables.

The right to the mandamus depended upon the respondent estabhshing that it was “ lawfully competent to manufacture, use or supply electricity, or to operate electrical conductors in any street, avenue or highway in the city of New York.” In that proceeding the respondent established the validity of its franchise and its right to manufacture, use and supply electricity for light, heat and power. (Matter of Long Acre El. L. & P. Co., 51 Misc. Rep. 407; 117 App. Div. 80; 188 N. Y. 361.) Throughout that litigation .the Consolidated Telegraph and Electrical Subway Company appeared by the same' attorneys representing the relator in this proceeding. After space had been assigned the respondent in the subway ducts the municipal authorities, through the department of water supply,- gas and electricity, issued' permits and gave its consent and authority to respondent t.o open the streets and draw its cables through the subway ducts; and in January, 1908, respondent erected a power plant and commenced supplying its customers with electricity. From its annual reports,' filed with the Public Service Commission, it appears that in 1908 it generated 134,926 kilowatts and sold 53,439; in 1909 it generated 168,880 kilowatts and sold 54,224, and in 1910 it generated 234,502 kilowatts and sold 92,094, so that in-1910 its business had almost equaled in volume that of the two preceding years.

In February, 1908, an application was filed by the respondent with the Public Service Commission under section 69 of chapter 429 of the Laws of 1907 for its approval to an issue of stocks and bonds for the enlargement of respondent’s plant and distributing system. That application was denied June 26, 1908, and on review by this court in April, 1910, it was held that the various reasons assigned by the commission for withholding its approval to the application were inadequate, and, as the commission had not -undertaken to decide what amount of securities should be permitted to be issued or io what purpose their proceeds should be applied,, the matter to ’that extent was referred back to the commission for consideration and action within the limits of its authority. {People ex rel. Long Acre El. L. & P. Co. v. Public Service Commission, 137 App. Div. 810.) An appeal to the Court of Appeals was dismissed September 29, 1910. (199 N. Y. 254.)

The commission, instead of simply passing upon the two questions remitted to it, i. e., the amount of securities to be issued and the purposes to which the proceeds should be applied, permitted the relator, which had been represented by counsel from the first public hearing, to introduce over the objection of the respondent additional evidence on the question whether the secondary franchise of the respondent had been operated prior to 1908. On this question considerable additional evidence was taken and the commission found as a fact that the secondary franchise had been operated in 1889 and 1890 (one of the commissioners dissenting). An order was finally made authorizing an issue of $2,000,000 of bonds, but only after $1,000,000 of new stock shall have been subscribed and paid for in cash, and an additional issue of $2,000,000 of bonds was authorized after an additional $1,000,000 of stock shall have been subscribed and paid for, the bonds only to be disposed of at public sale, after being publicly advertised for four successive weeks, and at not less than ninety per cent of their par value, and it was further provided by the order of the commission that the proceeds derived from the stocks and bonds were to be expended only after a proper itemized bill for each expenditure shall have been submitted to the commission and approved by it.

The New York Edison Company, which carries on a rival electric light business, seeks by writ of certiorari to review the action of the Public Service Commission. ' .>•

When this matter was remitted to the commission, With instructions to pass upon the amount of securities to be issued, and the purposes to which the proceeds should be applied, within the limits of its authority, its duties were circumscribed, and no evidence should have been taken upon any other subject than the two specified. The question of the operation of the secondary franchise prior to 1908 was considered and determined by this court, and we found, that it appears from the evidence and the report of the Commissioner who reported upon the application, that the American Electric Illuminating Company, the owner of the franchise, through mesne assignments, actually exercised it, and supplied electricity to customers in 1889 and 1890, when it was practically' driven out of business by the abolition of overhead wires in the city of New York.” (137 App. Div. 816.)

Orderly judicial procedure requires a subordinate body to follow the instructions of this court when a matter is remitted to it, with instructions. A “party aggrieved” may appeal to the Court of Appeals from the final order made pursuant to the directions of this court, but the commission had nothing to determine but.,the amount of securities it would authorize, and the application of the proceeds.

The Court of Appeals, in dismissing the appeal from our order, drew the distinction between this proceeding and one in which an assessment is annulled, holding that “in the latter case the proceeding leading up to the second assessment is to all intents and purposes a new and independent proceeding,” but this proceeding “ cannot be said to be finally terminated until the public service commission has again acted pursuant to the order of the Appellate Division.” (199 N. Y. 255.) We may, therefore, upon this review, only consider the additional evidence so far as it relates to the two subjects remitted to the commission, and in respect of them no complaint is made by any one. Indeed, none could be made by the relator, because it is not a “party aggrieved.” It is of no concern to a rival public service corporation what securities the commission may authorize a competing company to issue. In any event, the commission was very careful to conserve and protect the interests of the public. The amount of securities approved was modest in amount, considering the nature of the enterprise and operations; no bond could be sold at less than ninety per cent of its par value, and then only after a large amount of cash for stock had been placed in the treasury of the company, to insure good faith; and none of the proceeds of the sale could be disposed of without the approval of the commission.

The relator, after arguing that the commission was authorized to take additional proof on the question of operation, contends that the proceedings are governed, not by the law existing at the time the petition was filed by the Long Acre Company, in February, 1908, but by the statute in force when the order under review was made. It is contended by counsel that if this proceeding is governed by the law in force when the petition was filed, the relator is.not a “party aggrieved.”

When in February, 1908, the respondent filed its petition under section 69 of the Public Service Commissions Law (Laws of 1907, chap. 429), it was provided by section 68 as follows:

“§68. Approval of incorporation and franchises; certificate. No gas corporation or electrical corporation incorporated under the laws of this or any other State shall begin construction, or exercise any right or privilege under any franchise hereafter granted, or under any franchise heretofore granted but not heretofore actually exercised, without first having obtained the permission and approval of the proper commission. Before such certificate shall be issued a certified copy of the charter-of such corporation shall be filed in the office of the commission, together with a verified statement of the president, and secretary of the corportation [corporation], showing that it has received the required consent of the proper municipal authorities. No municipality shall build, maintain and operate for other than municipal purposes any works or systems for the manufacture and supplying of gas or electricity for lighting purposes without a certificate of authority granted by the commission. If the certificate of authority is refused, no further proceedings shall be taken before the commission but anew application may be made therefor after one year from the date of such refusal.”

In 1910 the statute was revised (Consol. Laws, chap. 48; Laws of 1910, chap. 480), and section 68 was amended so as to read as follows (the important new matter being here italicized):

“§ 68. Approval of incorporation and franchises; certificate. No gas corporation or electrical corporation shall begin construction of a gas plant or electric plant without first having obtained the permission and approval of the commission of each district within which any part of the work of construction is to be performed. No such corporation shall exercise any right or privilege under any franchise hereafter granted, or under any franchise heretofore granted, but not heretofore actually exercised, or the exercise of which shall have been suspended for more than one year, without first having obtained the permission and approval of the proper commission. Before such certificate shall be issued a certified copy of the charter of such corporation shall be filed in the office of the commission, together with a verified statement of the president and secretary of the corporation, showing that it has received the required consent of the proper municipal authorities. The commission within whose district such construction is to be made, or within tuhose district such right, privilege or franchise is to be exercised, shall have power to grant the permission and approval herein specified whenever it shall after due hearing determine that such construction or such exercise of the right, privilege or franchise is necessary or convenient for the public service. No municipality shall build, maintain, and operate for other than municipal purposes any works or systems for the manufacture and supplying of gas or electricity for lighting purposes without a certificate of authority granted by the commission. If the certificate of authority is refused, no further proceedings shall be taken by such municipality before the commission, but a new application may be made therefor after one year from the date of such refusal.”

This .act took effect June 14, 1910. The contention of the relator is that the amendment is effective upon the pending application of the Long Acre Company, and that thereunder before said corporation can exercise any right or privilege, it must obtain the permission and approval of the proper commission, and then after a determination that such exercise is necessary or convenient for the public service.

When these proceedings were commenced there was no provision calling for a certificate of public necessity or convenience before the construction of a plant, or the exercise of any right or privilege under an electric light franchise, and the petition filed by the respondent contains no allegation on the subject of public necessity or convenience. No such allegation could well be made in the petition, because the statute providing therefor was only passed two years thereafter. If the contention of the relator is well taken, the petition and the entire proceedings are defective because provision is not made for something which had not become important or essential until after the proceed ings were commenced. The relator’s argument proceeds upon the theory that when the matter was remitted to the commission, and additional testimony taken on the relator's motion, it was practically a new proceeding, and, therefore, governed hy the statute of 1910. It was not a new proceeding. It was but a continuation of the pending proceeding “for further action ” by the commission under instructions, and was only “finally terminated” when the Public Service Commission “ again acted pursuant to the order of the Appellate Division.” (People ex rel. Long Acre Electric Light & Power Company v. Public Service Commission, 199 N. Y. 254.) It was not treated as a new proceeding either by the commission or the parties appearing before it. The record, which was before us for review under a writ of certiorari sued out hy the Long Acre Company, was taken as the record for the further action of the commission (without requiring the consent of any of the parties), supplemented by the additional evidence taken on application of relator, over respondent’s objection. Under the General Construction Law (Consol. Laws, chap. 22 [Laws of 1909, chap. 27], §§ 93, 94, 95) the repeal or amendment of a statute does not affect a pending proceeding, nor impair any act done, or right accruing, accrued or acquired prior to such appeal or amendment, unless otherwise specially provided hy law. This proceeding had not only been pending for two years prior to the amendment of 1910, but the testimony had been closed and the application determined by the Public Service Commission on June 26, 1908, almost two years prior to the amendment; and this court had reviewed the record and made its decision before June 14, 1910.

Proceedings such as those under review are not affected by subsequent legislation, which is not specifically made retroactive. The question is considered at length in the cases which called for the construction of the Grade Crossing Act of 1897 (Laws of 1897, chap. 754), repealing chapter 62 of the Laws of 1853.

The Court of Appeals held that the repeal did not affect pending proceedings. (People ex rel. City of Buffalo v. N. Y. C. & H. R. R. R. Co., 156 N. Y. 570; People ex rel. City of Niagara Falls v. N. Y. C. & H. R. R. R. Co., 158 id. 410; Geneva & Waterloo R. Co. v. N. Y. C. & H. R. R. R. Co., 163 id. 228; Matter of Ludlow Street, 172 id. 542. See, also, People ex rel. Provident Sav. Life Assur. Soc. v. Miller, 179 N.. Y. 229; Village of Champlain v. McCrea, 165 id. 264.)

The case of People ex rel. Binghamton L., H. & P. Co. v. Stevens (143 App. Div. 789), cited by the relator, was reversed by the Court of Appeals (203 N. Y. 7) the court holding that “wholly apart from the claim of the commission that this Case must be determined upon the statute as it now exists, and assuming for the purpose of what we are here saying, that the relator is right in claiming that this appeal must be determined upon the statute as it existed on the day when the original petition herein was filed, we are nevertheless of the opinion that it was the duty of the commission to determine whether the stock and bonds proposed by the relator were to secure money to pay floating indebtedness incurred in the ordinary running expenses of the corporation.” (Id. 22.) The amendment which was considered in that case did not, in respect of the matter before the court, “give to the commission new and theretofore non-existing power.” (Id. 25.)

. The amendment of 1910, which the relator seeks to apply to this proceeding is urged, not only to have given the commission new and theretofore non-existing power, but to have required allegations in the petition and proof entirely unnecessary when the proceedings were instituted. Indeed, if it were held that the amendment of 1910 applies to this proceeding, a serious question would arise as to its constitutionality. The respondent, as we held in the former review, had fully complied with all the provisions of the act of 1907. It was an active, operating company, in business for over two years prior to' the passage of the amendment of 1910, making reports to the Public Service Commission and operating under its jurisdiction and supervision. It had not. only fully complied with the provisions of section 68 but it was entitled to have the commission permit it to issue securities under section 69, as we held, without a certificate of public necessity or convenience. The right to mortgage property to raise funds for' construction and operation is a valuable property right (Pearsall v. Great Northern Railway, 161 U. S. 646), and if the act of 1910 can be made to apply to the respondent we have an active, operating corporation, possessing a valuable franchise, legislated out of business because of its failure or inability to secure a certificate of public necessity or convenience, when it applies for leave to mortgage its property and issue securities for purposes of operation. The statute, which is general, affects the entire State, and applies to every corporation exercising any rights under a gas or electric franchise. If the amendment of 1910 is to be construed to apply to operating companies and to proceedings under section 69, instituted in 1908, it ' would, in my opinion, render the statute ■unconstitutional in that it would deprive such corporations of vested rights and valuable property without compensation and without due process of law.

But even if under any permissible construction the act of 1910 can be said to apply to this proceeding, I am clearly of the opinion that the finding of the commission, that the secondary franchise of the respondent was operated in 1889 and 1890 is sustained by the evidence.

The amendment of 1910 provides for a certificate of public necessity and convenience before any right or privilege is exercised “ under any franchise hereafter granted, or under any franchise heretofore granted, but not heretofore actually exercised, or the exercise of which shall have been suspended for more than one year.” It is undisputed that the exercise of the secondary franchise of the respondent was not suspended for more than one year immediately prior to the passage of the amendment. It was actively and continuously exercised under the jurisdiction of the Public Service Commission since January, 1908. The construction of its plant and subsequent operation under the franchise were with the knowledge and acquiescence not only of the municipal authorities, but of the Public Service Commission. If any exercise of the franchise had been attempted or carried on, contrary to the provisions of law, the commission, under section 14 of the Public Service Commissions Law of 1901, could have prevented further action in a summary manner. The operation from 1908 was not only with the . acquiescence and approval of the commission, to which annual reports were made, but, as we held, the respondent had fully complied with all the provisions of that act, justifying an issue of additional securitiés to enlarge .its operations. It is very clear that this franchise was not suspended for more than one year immediately prior to June 14, 1910, and no one will seriously contend that the provision of the act of 1910 in this respect applies to an active, operating company, which may, at some time in the distant past, have suspended operation for more than one year.

The contention is, however, that if the act of 1910 does apply, a certificate of public necessity and convenience is required because the secondary franchise was not “actually exercised ” prior to 1907.

When the case was before us on the writ of certiorari of the Long Acre Company we construed the act of 1907, which provided that “no gas corporation or electrical corporation incorporated under the laws of this or any other State shall begin construction, or exercise any right or privilege under any franchise hereafter granted, or under any franchise heretofore granted but not heretofore actually exercised, without first having obtained the permission and approval of the proper commission.” As this was a franchise which had been granted prior to 1907, the question for consideration was whether it was a franchise which had been “heretofore actually exercised,” and we found that “the franchise .under which the, relator [Long Acre Company] seeks to operate its business did not fall within the class of franchises ‘not heretofore actually, exercised.’ ” (137 App. Div. 816.)

The additional evidence which has been offered by the respondent to meet that introduced by the relator shows to a demonstration actual operation in 1889 and 1890.

In reviewing a finding of fact by the commission we can only set it aside when there is such a preponderance of proof against the existence of the fact found that the Verdict of a jury affirming the existence thereof would be set aside by the court as against the weight of evidence. (Code Civ. Proc. § 2140.) ■ The fact of operation was found by every tribunal before which the question came for adjudication since the commencement of the mandamus proceedings in 1906.

The secondary franchise granted to the American Electric Manufacturing Company in 1887 was acquired by the American Electric Illuminating Company in 1889. At that time the policy of the State was to prevent the erection of additional poles and wires over the surface of the streets, and provision had been made for the removal of all electrical conductors overhead, then in use, and for the construction of conduits or subways underground by the Consolidated Telegraph and Electrical Subway Company. (Laws of 1884, chap. 534; Laws of 1885, chap. 499; Laws of 1886, chap. 503; Laws of 1887, chap. 716.) The American Electric Illuminating Company, therefore, could not exercise its franchise by erecting additional poles and wires. There was only one way in which this secondary franchise could be operated, and that was by leasing or obtaining permission to use existing poles and wires of another company. The illuminating company was controlled by one William H. Kelly, who also owned another electric light company, known as the East River Electric Light Company. Both companies were carrying on business on Twenty-fourth street in the borough of Manhattan. In order to operate both secondary franchises, and . not violate the statute, Kelly divided the territory so as to permit the East River Company to operate on the west side of the city, and the Illuminating Company to operate on the east side of the city from Twenty-fourth street, through First avenue, Avenue A and Avenue B, and east through Houston street to Avenue C. In this territory, assigned to the Illuminating Company, every customer furnished with light was the customer of the Illuminating Company. This company had its own offices; its separate set of books, bills, bank accounts, sign on the building, and its own electricians, bookkeepers, cashier and officers. It made annual reports and was kept absolutely distinct from the East River Company, both in respect of all its business and of the territory in which it operated the secondary franchise. The Illuminating Company had two dynamos, known as American machines, and its own lamps, which it affixed to the poles and wires of the East River Company in this territory. Its lamps were distinguishable from those used by the East River Company in its territory, the former being of the American, the latter of the Thompson-Houston type. The electricity was manufactured and generated by the Eluminating Company with its own dynamos, the steam power, being furnished by the East Biver Company. For this steam power and the use of the poles and wires, the Illuminating Company paid the East Biver Company an agreed sum. The bills for electricity sold by the Illuminating Company to its customers were collected by it, after rendering its accounts on its own billheads. It furnished to the city at least six free lamps in accordance with the terms of the franchises, and carried on its business of manufacturing and selling electricity to its customers as though it owned the poles and wires. This continued- for a period of fifteen months when all poles and .wires were cut down, pursuant to the policy of the city, which brought on financial . embarrassment for the company, necessitating a sale of its franchise, subsequently acquired, through mesne assignments, by the respondent. .The learned counsel for the relator contends that the secondary franchise was not operated because the poles and wires did not belong to the respondent, and that manufacturing and generating electricity on the premises on Twenty-fourth street, with its own dynamos, and the sale of electricity to its customers in the manner indicated was not an operation by the respondent of the secondary franchise. With this view I cannot agree. The franchise was operated in the only way possible at that time. Poles and wires could not be erected overhead, and there were no subway ducts through which cables could be carried. There was, therefore, only one method open for the Illuminating Company, and that was to hire, or secure the right to use ■ other and existing poles and wires of another company. The Illuminating Company had no right to carry its electricity through or over the streets or highways of New York unless it possessed a secondary franchise. To exercise that franchise it was not essential that it erect poles and wires. It could be done, as in this case, by renting or hiring the use of another company’s poles and wires. It is not new in the law of railroads to have a franchise operated under trackage agreements or leases over the lines and with the cars of another company. The public is not concerned in the question of ownership of the. rolling stock. All that the public is interested' in is in having the service furnished it, which the owner of the franchise undertook to do when it applied for and accepted the franchise. So long as electricity was furnished to applicants or customers of the Illuminating Company by that corporation, it mattered not whether it was carried from the dynamos of the Illuminating Company to the premises of the consumer over its own poles and wires, or those leased by it. The franchise included the right to “use wires * * * for electrical purposes in the City of New York * * * over * * * the streets * * * therein * * When respondent “ used the wires ” of the East River Company for its own “electrical purposes” to sell to its own customers the electricity it manufactured, it was operating within the letter and spirit of its franchise. The exercise of one or more of the rights ■ accorded to it by the franchise was an operation which saved it from forfeiture for non-user. It did not require the exercise of all of its rights and privileges. “ No corporation is required to exercise all the powers granted to it by its organic law as a condition of the exercise of some of them, unless that requirement is expressly made by some statute or ordinance under which it derives some of its powers or privileges, or the powers are inseparably connected with each other.” (Illinois Trust & Savings Bank v. Doud, 105 Fed. Rep. 123, 129.) Poles and wires were only a means used in those days for carrying electricity from the dynamos to the lamp of the consumer. They were not the primary objects of a franchise; at that time no other method was known of carrying the electric current to the consumer, and no one had a right to use the streets, of New York to bring the current from the dynamo to the lamp, without a franchise for that purpose. The present method of conveying electricity is by means of the subway conduits, but those ducts are not owned by the electric companies selling their electricity to consumers. They are owned by the Consolidated Telegraph and Electrical Subway Company, and space must be leased or hired by the electrical companies. No space can be assigned to such company, however, unless it has a secondary franchise. I can see no difference in law between the process adopted in 1889 of hiring or renting the use of overhead poles and wires for the purpose of carrying electricity and the present, method, of leas ing or hiring space from the subway company for the same purpose. The one was the overhead conduit and the other is the underground duct; but it was as much the operation of a secondary franchise in 1889 to send the electricity by means of leased overhead- structures as it is to-day by renting space in the subway conduits.

If carrying electricity over the streets of New York for general sale to customers for light, heat and power, by means of leased poles and wires is not operation of a secondary franchise and does not require a franchise, then it leads to this situation: A company which in 1889 owned poles and wires in the streets of New York or which now owns ducts or subways could parcel out rights equivalent to a secondary franchise to any person, firm or company applying therefor by simply licensing or granting consent to use the wires or ducts for conduit purposes and without limit as to the number who might be permitted to use those wires. Thus, any person by erecting an electrical plant ■upon his premises could engage in the business of supplying current for lighting purposes throughout the city with the consent, not of the municipal authorities, but of the company owning the former poles and wires or present ducts and; create secondary franchises indefinitely. It, therefore, seems quite manifest that even if we were not bound by our former determination which limited the powers and duties of the commission, and, even though we held the amendmént of 1910 applicable to this proceeding, we would still be obliged to say, as we did before, that the franchise under which respondent operates its business does not fall within the class of franchises “not heretofore actually exercised.”

I am of opinion, therefore, that the writ of certiorari should be dismissed, with costs, and the order of the Public Service Commission be affirmed.

Clarke, J., concurred; Ingraham, P. J., and Miller, J., dissented.

Laughlin, J.:

A certificate of necessity and convenience not being required, the relator was not entitled to introduce evidence on the question as to whether the respondent had actually exercised the secondary franchise, so called; but I am of opinion that the rehearing ordered by this court was not necessarily confined to the nature and amount of the securities to be issued, and that it was competent for the commission to reconsider the other questions which had been originally determined favorably to the respondent and to receive further evidence thereon. On all other points I fully concur in the views expressed by Mr. Justice Dowling,- and they require that the proceedings of the commission be confirmed and the writ dismissed.