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Interborough Rapid Transit Company.-Steinway Tunnel.Proposal that the city of New York should purchase.

Letter of Chairman Willcox.

Report entitled "The Steinway Tunnel."
Report of committee.

Case 1029, resolution.

In February, 1908, the Senate passed a resolution concurred in by the Assembly requesting information as to what steps the Commission has taken towards the speedy operation of the Steinway tunnel. The following reply was sent thereto :

LETTER OF CHAIRMAN WILLCOX.

New York, February 19, 1908. To the Honorable, the Senate of the State of New York:

The Public Service Commission for the First District respectfully submits herewith its reply to the resolution of the Senate, dated February 5, 1908, concurred in by the Assembly February 12, 1908, received by the Commission February 14, 1908, requesting information as to what steps the Commission has taken towards the speedy operation of the Steinway Tunnel, and any other information received by the Commission in connection therewith.

The so-called Steinway Tunnel has been constructed by the New York and Long Island Railroad Company and financed by the Interborough Rapid Transit Company, which controls the tunnel company through stock ownership.

The city of New York and the New York and Long Island Railroad Company have been engaged in litigation since February, 1906, over the right of the company to construct this tunnel. The city claimed that the company was not a legal corporation; that it had no right to construct the tunnel; that even if it ever were a lawful corporation its corporate existence and powers ceased on January 1, 1907; and that its New York City franchises also expired at the same time. In passing upon the claim of the city, Mr. Justice Davis, of the Supreme Court, in an opinion rendered December 9, 1907, said:

"The failure of the defendant to comply with the Railroad Law as to completion and operation of the railroad was ipso facto an extinction of the corporation, and it does not require the bringing of an action to dissolve the corporation (Matter of Brooklyn, Winfield & Newtown R'y, 72 N. Y., 245). And the so-called franchises mentioned in the complaint were immediately cxtinguished (see Brooklyn, Q. Co. & Sub. R. R., 185 N. Y., 185).

"It thus appears from the complaint that the action is brought against a defendant that has no existence. The defendant being dead in the sense referred to above there can be no pleading to the complaint on behalf of that defend

ant.

I do not agree with the demurrant's view that the property rights and franchises mentioned in the complaint survive the extinction of the defendant's corporate existence and pass to the directors as trustees for the benefit of those concerned, and that these trustees are the proper parties defendant. If this were so the trustees might take their own time to build the road and thus defeat the very purpose of the statute to insure a speedy completion of the work for public uses (Matter of B'klyn, Q. Co. & Sub. R. R., 185 N. Y., 171, 185). My conclusion is that the demurrer is not properly interposed and has no standing in the case. The demurrer really admits that there is no defendant here. As a matter of fact there is no action pending, nor was there at the time the demurrer was served. Submit decision and judgment in accordance with these views."

..

An appeal in one of the actions between the city and the company is now on the calendar of the Court of Appeals and may be argued within the next two months. The entire litigation on behalf of the city is in the hands of the Corporation Counsel.

More detailed information in relation to this tunnel and to the matters in controversy will be found in the report herewith transmitted, entitled The Steinway Tunnel."

If the New York and Long Island Railroad Company has forfeited its corporate rights and franchises, the Commission is without present power to compel the operation of the tunnel, and pending the final determination of the rights of the parties to the litigation any attempt to do so would be premature and improper. Respectfully yours,

WM. R. WILCOX,

Chairman.

THE STEINWAY TUNNEL.

The tunnel extending from Manhattan to Queens, along the line of Forty-second street, commonly called the "Steinway Tunnel," has been constructed by a private company, and is not a part of the rapid transit system laid out by the Public Service Commission, or its predecessors. No application has been made to the Commission, under any section of the Public Service Commissions Law, by the owners of the tunnel, and no proposition looking towards the granting of a franchise to operate has been presented to the Commission for consideration. But the present situation is so peculiar and so many inquiries have been made at the office of the Commission that a statement of the facts up to December 31, 1907, may be of interest and value.

Origin of the Company. The tunnel was originally begun by the New York and Long Island Railroad Company, which was incorporated July 30, 1887, under chapter 140 of the Laws of 1850, known as the General Railroad Act, and the amendments thereto. The articles of association provided that the company was to continue in existence for ninety-nine (99) years; that the capital stock was to be $100,000, consisting of 1,000 shares, at $100 each, and that a railroad was to be constructed and operated about five miles in length, extending from a point near Borden avenue, Queens, one mile from the East river; thence under the river and under certain streets and lands in Manhattan to a connection with the New York Central and Hudson River Railroad at or near the intersection of Ninth avenue and Thirtieth street, New York city, with a branch northerly to connect with the New York Central and Hudson River Railroad, near the Grand Central depot, and a branch southerly to connect with the Hudson River tunnel in the vicinity of Washington square.

The General Railroad Act of 1850 was amended by chapter 775 of the Laws of 1867, which provided, among other things, that if any corporation organized under the Act of 1850,

"shall not, within five years after its articles of association are filed and recorded in the office of the Secretary of State, begin the construction of its road, and exper thereon ten per cent on the amount of its capital, or shall not finish its road and put it in operation in ten years from the time of filing its articles of of association, as aforesaid, its corporate existence and powers shall cease."

Work not completed. It therefore became incumbent upon the New York and Long Island Railroad Company to have begun construction of the tunnel and to have expended thereon $10,000 by July 30, 1892, and to have finished it and put it in operation by July 30, 1897, under penalty of forfeiture of its corporate existence and powers.

The company's contractor started work in May, 1892, and it is claimed that up to July 30 of that year the sum of $11,718.33 had been expended. Work continued down to December, 1892, when an explosion occurred, and for nearly thirteen years nothing further was accomplished. In resuming operations in 1905, eight years after the charter would have expired, under the Law of 1867, above quoted, the company relied upon a series of acts, the last of which, adopted in 1903, is claimed to have extended until January 1, 1907, the time within which the road should have been finished and put in operation. As a matter of fact, the tunnel was not finished and put in operation by this date.

Incorporation did not of itself confer upon the company the
Consents had still to be obtained from the local authorities

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Franchise Grants.

right to begin work.
and from the State of New York, which are as follows:

"(1) Resolution of the Board of Aldermen of the old City of New York, approved December 31, 1890.

(2) Patent issued by the State of New York, January 5, 1891.

(3) Resolution of the Board of Aldermen of Long Island City, approved October 27, 1891."

By the first resolution the City assented

44

to the construction of a double track railroad by the New York and Long Island Railroad Company, in, by and through a tunnel beneath the surface of Forty-second street, from its easterly end, to a point therein between Tenth and Eleventh avenues, in said City, with such connections, branches, turnouts, sidings and switches, as may be requisite and necessary in accordance with the plans and profiles of such railroad heretofore deposited with this Board, or such modification thereof as shall be approved by the Commissioner of Public Works of said City."

For compensation to the City of New York, the ordinance provided that the company should,

pay annually to the City of New York three per centum of its gross earnings or receipts from transportation of persons and property on its railroad within said City; such payment to be exclusive of all taxes levied by and payable to the City of New York on the real or personal property, capital stock or income of said company, and the books of said company showing the amount of its said gross earnings or receipts shall, at all reasonable times and hours be open to the inspection of the Comptroller of the City of New York (or to his duly authorized agents) for the purpose of verifying the returns thereof of said company."

The consent of the State of New York was granted by the following patent: "The People of the State of New York, by the Grace of God, Free and Independent: To all to whom these Presents shall come, Greeting:

-

"Know Ye, That, pursuant to chapter 140, Laws of 1850, as amended by chapter 601, Laws of 1886, and a resolution of the Commissioners of the Land Office adopted November 25, 1890, we have given and granted, and by these presents do give and grant unto the New York and Long Island Railroad Company, its successors and assigns, a right of way ninety-nine feet in width and fifty feet in height within which to construct a tunnel for the use and operation of the above-named grantees' railroad beneath the waters of the East River upon and along the route of said railroad, between the City of New York and Hunter's Point in Long Island City, as shown in plan and profile, upon the charts filed in the office of our Secretary of State, with the water grant papers of the month of January, 1891.

"Together with all and singular the rights, hereditaments and appurtenances to the same belonging, or in any wise appertaining; to have and to hold the above described premises unto the said the New York and Long Island Railroad Company, its successors and assigns forever.”

Long Island City, by the last resolution referred to, assented to the construction of a double track railroad upon and along the following lines and routes:

"Route One Beginning at a point under the ground at or near the westerly end of Fifth street and in the middle line thereof at low water mark, on the east side of the East River in said city; thence running easterly beneath streets and private property to a point at or near the intersection of Fourth street and West avenue; thence along Fourth street to or near Van Alst avenue, with a station hereafter to be located between the easterly shore of the East River and Van Alst avenue; thence northeasterly by a curved line to Meadow street; thence along Meadow street to Beach street;

*

The whole route may be indicated as follows:

A (New York City), B (Dock Property), C (East River), D-E (Long Island City), F.

A is Forty-second street at "a point therein between Tenth and Eleventh avenues," Manhattan.

B is "beneath the surface of Forty-second street from (at) its easterly end," Manhattan.

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C to D is "beneath the waters of the East River upon and along the route of said railroad, between the City of New York and Hunter's Point in Long Island City, as shown in plan and profile, upon the charts filed in the office of our Secretary of State, with the water grant papers of the month of January, 1891."

E is "At or near the westerly end of Fifth street and in the middle line thereof at low water mark," Long Island City.

F is Meadow street at Beach street, Long Island City.

Route as ConstructedIt will be noted that the route above described differs from the route set forth in the articles of association and from the location of the tunnel as actually constructed. The company claims to have obtained the legal right to make such alterations, but the Corporation Counsel of the City has denied this. The route as actually constructed is approximately as follows: From a loop at the intersection of Park avenue and Forty-second street, somewhat below the present subway, the line extends under Forty-second street, under the wharf property of the City at the end of Forty-second street, East River, to the west end of Fifth street, Long Island City; from thence it runs under private property to Fourth street, and under Fourth street to a point between Jackson and Van Alst avenues. The portion from Forty-second street to a point between Tenth and Eleventh avenues has not been constructed. The line is composed of two tracks for its entire length and for most of the distance each track is located in a separate tunnel.

A comparison of the route as actually built with the rights granted by the City of New York, the State of New York and Long Island City, shows how a difference of opinion has arisen as to whether the company has obtained the proper legal authority for the construction of a tunnel under dock property in New York City; that is, the section between "B and "C" in the above diagram. The company claims that the resolution of the board of aldermen covers this section. The legal representatives of the City have claimed that jurisdiction over this strip of land 300 feet in width was vested in the Department of Docks, and that it was necessary to secure the consent of this Department for the construction of the route. The courts have not yet passed upon this point.

City's Efforts to Stop Work When the company resumed work in 1905 it obtained from the Fire Commissioners of The City of New York licenses to use and keep explosives at the four shafts where it was prosecuting its work, and later in the year obtained permission from the Building Department to erect certain temporary structures. About this time there arose considerable discussion regarding the legal right of the company to proceed with the work. Many claim that the company had forfeited its charter because of its failure to complete the tunnel by July 30, 1892, and that it was proceeding illegally.

·

Upon January 22, 1906, the Inspector of Combustibles of the Fire Department, New York City, informed the contractors doing the work that four permits for blasting had been revoked by direction of the Corporation Counsel." Two days later the Superintendent of Buildings informed the contractors that certain building permits had been revoked "for the reason that the right to build this tunnel is disputed." No infractions of the permits themselves were alleged. Thereupon the railroad company brought a suit to stay the revocation of the permits, and a preliminary injunction was granted. The main contentions of the Corporation Counsel in opposing an injunction were that the company was not a legal corporation and that it had no right to construct the tunnel. The case came first before Justice Blanchard of the Supreme Court who said:

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"Independent of the foregoing considerations, however, the validity of the plaintiff's franchise, in which a large amount of capital is invested and great public interests are concerned, cannot properly be determined upon affidavits. To solve this question now against the plaintiff would permit such interference with the plaintiff's work as would prevent its completion within the time set therefor, upon which its franchise is conditional. The plaintiff will be irremediably damaged if the doubt were now resolved against it. The defendant, on the other hand, cannot be prejudiced by the postponement. For this reason the Court may well refuse to determine the question upon the present motion, and instead may properly

Vol. II-12

make a restraining order permitting the continuance of the work under the alleged franchise until the question may be tried in court according to the rules of evidence. Upon this ground, as well as upon the merits, the plaintiff's motion for a continuation, pendente lite, of the preliminary injunction, is granted."

The case came on for trial before Mr. Justice Fitzgerald in June, 1906, who concluded that:

1. "The plaintiff had acquired at the time of the beginning of this action, and now has, due legal power and lawful authority to construct and operate its tunnel and railroad."

2. "There was no warrant or authority in law for the attempted revocation of any of said licenses and permits, either for the use of explosives or for temporary buildings; and said licenses and permits were and are of full force and effect."

3. "The time of the plaintiff to complete the construction of its tunnel will expire on the 31st day of December, 1906."

In his opinion Mr. Justice Fitzgerald said:

"The validity of plaintiff's incorporation under the provisions of the General Railroad Act of 1850, as affected by various subsequent statutes, particularly the prohibition of chapter 10, Laws of 1860 applicable only to the city of New York, the constitutionality of the Tunnel Act, chapter 582, Laws of 1880, the alleged failure of defendant in any event to comply with its provisions, the legality of the consents of the local authorities and of the abutting owners, the lapsing by expiration of time of the defendant's franchises and its failure to comply with statutory requirements in the matter of the change of route, were all sharply presented and definitely determined,"

when the matter was before Mr. Justice Blanchard. Accordingly a decision was rendered for the company.

As to the contention of the city that the railroad company had failed to obtain the consent of the dock department for the 300-foot strip referred to above, Mr. Justice Fitzgerald said:

*

"It is claimed that this land under water is within the exclusive control of the dock department, and that no action of the Board of Aldermen can confer any right of way or easement under this portion of the bed of the East river. This is a proposition not affecting the validity of plaintiff's charter, but challenging its right to construct its tunnel upon a portion of its designated route. It does not appear that any application for consent was made and refused, nor was the failure to obtain such consent made a ground for the revocation of the permits. There is some suggestion of acquiescence. If plaintiff becomes a trespasser it does so at its peril, and no adjudication now can deprive the city or the dock department of their remedies, while irreparable loss might result to the plaintiffs if it were, by the revocation of permits, prevented from prosecuting a work the failure to complete which within a short period of time might involve the forfeiture of its charter and the consequent loss of the vast sum of money already expended."

The Case in the Appellate Division. The appeal from this judgment was argued in the Appellate Division in October, 1907, and the Appellate Division, by unanimous opinion, affirmed the judgment of Mr. Justice Fitzgerald. Although the case was not decided until 1907, it was begun in 1906, and therefore the court did not assume to decide these two questions:

1. The effect of the failure of the company to construct and operate its road by the prescribed time, namely, January 1, 1907.

2. The effect of the failure to get the consent of the dock department of the city of New York for a portion of its road as at present constructed. The Appellate Division did say, however:

"The articles of association were filed on the 30th of July, 1887; the company entered into a contract for the construction of its road in June, 1890; work was begun thereunder, and by July 30, 1892, upwards of 10 per cent of the capital had been expended. The time for completion had been extended by chapter 700 of the Laws of 1895; 647 of the Laws of 1901; 487 of the Laws of 1902; 597 of the Laws of 1903; to January 1, 1907. As this case was commenced in February,

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