
    The New York Cement Company, Plaintiff, v. The Consolidated Rosendale Cement Company, J. Graham Rose and Ralph Burger, Defendants.
    (Supreme Court, Ulster Special Term,
    April, 1902.)
    Corporation — Successor how far bound by the legal tolls on a canal affected by the public interest.
    A canal, one hundred and ten miles in length, constructed by a corporation given by statute (L. 1823, ch. 238) power of eminent domain to acquire land for construction, as well as the right to divert for supply waters of the Delaware and of the Hudson rivers and of other streams, and actually using public' waters and also some of the bed of a public stream, is impressed or affected by a public interest and so remains when operated by a successor.
    Where, because the canal had proved unprofitable, the Legislature permits (L. 1899, ch. 469) the corporation to lease, sell or discontinue the use of it or any part of it, and the corporation sells all of it to a steamboat company which accepts the obligations of the corporation in the matter, and under the steamboat company a cement company becomes owner of twelve miles of the canal nearest to and connecting with tidewater, presumably under the same obligations,. and maintains that part, the cement company cannot so long as it maintains the part exact for the use of it from another similar corporation, located on the bank of the canal and which necessarily has used some of that part of the canal for forty years, any greater tolls per mile than were fixed by the original statute (L. 1823, ch. 238, § 12) as collectible for such freight 'by the corporation which conducted the entire canal, or at least, cannot exact tolls that are unreasonable and excessive.
    Motion for a temporary injunction.
    Linson & Van Burén, for plaintiff.
    Kellogg & Bose (A. T. Clearwater, of counsel), for defendants.
   Betts, J".

In the year 1823, by chapter 238, the Legislature of the State of New York incorporated the Delaware & Hudson Canal Company for the purpose of constructing a canal or slack water navigation between the Hudson and Delaware rivers giving to said corporation power of eminent domain for the purpose of acquiring land for the purpose of constructing said canal and necessary to its use and provided among other things, that for the purpose of supplying said canal with water, said corporation might divert the waters of the Delaware and Hudson rivers and of other streams.

The canal was constructed, and among other streams a portion of the waters of which was diverted! was the Bondout creek, for the purpose of supplying the eastern end of said canal.

Section 12 of said act provided among other things that as soon as the said canal and navigation, or any fifteen miles thereof, shall be completed so as to allow of the passage of boats ” collectors might be appointed to collect such tolls and rates as the managers of said corporation might think proper, and continued “ Provided, that the said toll shall not in the whole, exceed the rate of eight cents per mile, for every ton weight of the ascertained burthen or capacity of any boat, ark, craft, or vessel, laden with, or engaged in the transportation of stone coal; andl one-half that sum for every ton weight of the ascertained burthen or capacity of any boat, ark, craft, or vessel, laden with, or engaged in the transportation of any other article of merchandise.”

The act discloses that the business for which this corporation was formed was the mining and transporting of stone coal from mines in Pennsylvania to tide water of the Hudson river and, as incidental thereto, such other commodities might be earned or transported over said canal as .might be offered; the only restriction as to rates being that the maximum should not exceed the rates provided for in said section 12.

It is clear therefore from the law referred to that, prior to 1899, if the Delaware & Hudson Canal Company had sought to charge rates in excess of those fixed by its charter such rates would have been illegal and the court, upon proper application being made, would have issued its restraining order preventing such collection.

In the year 1899, the Legislature by chapter 469 of the Laws of New Y ork provided in effect that whenever it appeared to the managers of said canal company that it was able to fulfill its purpose of opening, mining, and bringing to market a supply of stone coal more economically by rail than by its canal, it should be lawful for said company, and it was thereby authorized and empowered to lease, sell, or discontinue to use said canal, or any parts thereof, which in their judgment was no longer necessary for said purpose.

Acting under the authority of the statute the Delaware & Hudson Canal Company sold the entire canal to the Cornell Steamboat' Company, in June, 1899. The deed for the canal, after referring to the statute of 1899, recites that the grantor in accordance with the provisions of 'said act has resolved to sell its said canal to the Cornell Steamboat Company and by that conveyance it conveys “ all its right, title, interest, claim and possession in and to the Delaware and Hudson • canal * * rights to. divert and use water for canal purposes from the * * * Hondout creek * * * so long as said canal shall be maintained as such ” which is followed by a general description of the property and nature of the interest conveyed and “ also all the franchises owned, possessed, used or enjoyed by the said Delaware Company in connection with the ownership, use and operation of said canal” and the grantee therein assumes thfe obligations imposed upon the grantor by said section 4 of chapter 469 of the Laws of 1899.

It appears by the papers used on this motion that by direct or mesne conveyances the defendant cement company now owns that portion of said canal extending from tide water in the village of Eddyville to the Marbletown line in Ulster county, a distance of about twelve miles, and the portion desired to be used by the plaintiff is the extreme éastem portion, a distance of about five miles in length.

Since the year 1861 this plaintiff has used said canal for the purpose of transporting its manufactured, cement from its mills at LeEever Falls to tidewater at Eddyville. Its mill for manufacturing said cement is situated upon the banks of said canal. This use has been continuous under the Delaware & Hudson Canal Company and under the Cornell Steamboat Company. The toll paid by the plaintiff for such use.has uniformly been at the rate of about four cents per ton per mile, being the maximum rate fixed under the statute of 1823 and being three and one-fifth cents per barrel of cement. Its business has been large and a great amount of cement has been thus shipped annually. Upon the opening of navigation, or about the time, in this year, (1902) the plaintiff was notified by the defendant, Ralph Burger, the toll collector for many years stationed at Eddyville under the Delaware & Hudson Canal Comp'any, and later under the Cornell Steamboat Company and now employed by defendant cement company, that the officers of the defendant cement company had advanced the rate of toll from three and one-fifth cents per barrel of cement to sixteen cents per barrel (being a fivefold increase), and that such toll or charge must be paid before the boat containing cement could pass through the lock. A boat load of cement was sent to the lock at which said Ralph Burger was and for many years had been stationed, and a tender in gold was made of a sum of money sufficient to pay the maximum rate of toll provided for by the statute of 1823 and the uniform price previously paid. This sum was refused and the boat was not permitted to pass through the lock into the tide waters of the Hudson river; whereupon this action was brought for the purpose of obtaining an injunction against the defendants to prevent them from collecting said proposed rates of toll claimed to be excessive, "unreasonable and illegal for the transportation or conveyance of plaintiff’s merchandise over and through said canal, and this application is made to me sitting at chambers for a temporary injunction for the same relief.

The plaintiff claims that it cannot pay the rate attempted to be charged of sixteen cents per barrel and manufacture cement at a profit; that if this rate be maintained it will have to cease business and close its works, and that, taking into consideration the expense connected with the manufacture and transportation of cement to the New York and other markets, the route along or through this canal is the only practicable way for it to carry on its business.

On the part of the defendant cement company it is urged that several of the large manufacturers of cement in the town of Rosendale have sold their said manufacturing plants to the defendant cement company for the purpose of lessening the cost of production of said cement; that said cement industry is threatened seriously by the Portland cement now being manufactured in this country, and that for the purpose of reducing the expense of manufacturing and marketing said Rosendale cement this defendant cement company, owning the greater portion of the mines from which this cement is manufactured in the town of Rosendale, and the necessary plants for manufacturing the same, has purchased this twelve miles of the canal and is operating it not as a canal, in the ordinary acceptation of the term, but as a private way of its own to carry its manufactured product to tide water, and as an incident to its cement business, for the purpose of reducing the price of the manufactured article and producing the same at a lessened cost. That it is not a common carrier, does not desire business of plaintiff or of any other person, but that simply as a matter of accommodation to the plaintiff and others doing business along said canal it has expressed a willingness to transport the goods manufactured or purchased by them, provided said parties would compensate the defendant cement company to some extent for its expense in the maintenance of the portion of the canal now owned by it. It also claims that the rates fixed by the original charter were for the whole 110 miles of the canal and that it is unreasonable to suppose that the Legislature should intend, if the Delaware & Hudson Canal Company sold its canal and a portion thereof was continued as a canal, that the same low rate should be charged and received for twelve miles as were fixed as sufficient for the 110 miles, and it alleges that the reason why the Legislature gave the Delaware & Hudson Canal Company permission to discontinue the canal was. because transportation by canal had become obsolete and the property was not a paying one. It also claims that it costs to maintain the canal about $40,000 per year, while judging by previous years the entire traffic of the plaintiff would not exceed $9,000; at the rate allowed by the charter, and that it should not be required to do business at a loss for the benefit of plaintiff. These are some of the principal reasons advanced by the defendant cement company why the temporary injunction should not now be granted.

This twelve miles of the canal has never been abandoned or discontinued. The Delaware & Hudson Canal Company was authorized to sell and did. Its property and its franchises were conveyed to the Cornell Steamboat Company, and, as a matter of law, its obligations connected with the use thereof while the canal was being conducted were assumed by that company.

The deed to the Cornell Steamboat Company is used on this application. The deed to this defendant cement company is not produced. The plaintiff did not produce it and perhaps could not. The defendant cement company could but did not, so that while I have before me the facts relating to the transfer from the canal company I have not the instrument by which the defendant cement company took title. Since this deed could have been produced by the defendant cement company, and was not, it may fairly be assumed that nothing is contained in that instrument that would strengthen the position assumed by the defendant cement company before me on this question. The Cornell Steamboat Company certainly could not convey any greater interest or rights in this property than it acquired from the canal company, and it does not appear that it conveyed any less.

This property has been, from its original acquirement by the Delaware & Hudson Canal Company, affected or impressed with a public interest. Selden v. Del. & Hud. Canal Co., 29 N. Y. 634. This was evidenced very plainly by giving to the corporation the power of eminent domain to acquire lands, which is never given without being for a public purpose, and from the fact that the company was given authority to and did divert water from many streams; among others the Eondout creek, a public stream, the title of the adjacent owners being merely to the banks thereof. This land is still held by the same title by this defendant cement company so far as appears, and the waters of the Bondout creek are still being diverted for the purpose of filling and using said canal under the same authority originally granted to the canal company and its rights acquired under its charter. For two miles or over, near Eddyville, this defendant cement company uses this Bondout creek as a waterway or canal — no ditch or prism being constructed and the boats being floated therein drawn by horses on the towpath along the bank of said creek.

Even the nature of the business proposed by this defendant cement company is very like the business originally proposed for the entire canal by the Delaware & Hudson Canal Company. The Delaware & Hudson Canal Company proposed mining and transporting stone coal, principally from Pennsylvania to tide water in New York, and its other transportation business was incidental to its main business, and the Legislature fixed a low toll rate for this additional business. The defendant cement company proposes mining, manufacturing and transporting its own cement principally over this portion of the canal and such other traffic as it takes is incidental to this main business and is alleged to be simply as an accommodation for those parties desiring to use it.

The ownership and operation of the canal is admitted' by the answer. The contention that the Legislature had only in mind the whole 110 miles of traffic in fixing this rate is disposed of by reference to the statute which allows this rate to be fixed and maintained as soon as any fifteen miles is completed, and the entire cement business, apparently, of the town of Bosendale, using the canal has been carried at that rate ever since cement was manufactured there, and it may perhaps be fairly assumed that this cement business was the most profitable for the canal of any local business i't had, aside from its regular business of transporting coal.

The figures produced by the defendant cement company as to the cost of maintenance of the canal, and the revenue to -be derived from the traffic of the plaintiff, do not state the position of the plaintiff as disclosed by the papers submitted. The plaintiff does not ask in this action that the defendant cement company should maintain a canal for its benefit. It simply asks that the canal being maintained it should have the right to use it by paying a reasonable toll or compensation therefor. The defendant cement company does not place any value in its figures submitted for its own use of the canal which, from its own showing, must amount to many hundreds of thousands of barrels of cement transported. through its canal during the season of navigation. Besides if the traffic of the plaintiff would amount to $9,000 per year at the rate fixed by the charter and proposed by the plaintiff, at the rate proposed to he charged by the defendant cement company it would amount to $45,000 per year, thus giving the defendant cement company the entire use of the canal, aside from the small portion of the time occupied by the plaintiff in sending its boats through, at no cost to said defendant cement company, and would put in its treasury $5,000 per year additional. The figures produced are a strong argument against the reasonableness of the charge proposed by the defendant cement company for the comparatively small use which the plaintiff would make of this waterway, being an average of two boat loads of cement and two empty boats through the canal each day.

I hold that this canal property, operated by the defendant cement company, is affected with a public interest, and that the said defendant cement company, hy whatever name it calls its transportation business whether as an accommodation to plaintiff and others desiring to use it for the purposes of transportation or otherwise, operates it subject to that interest. Thus holding it follows that it cannot charge illegal, exorbitant or unreasonable rates.

The plaintiff is, therefore, entitled under the decisions to the temporary injunction asked for by showing either:

That the defendant cement company is the successor in interest of the Delaware & Hudson Canal Company and controlled by the rates of toll fixed by the charter of that company (People v. Budd, 117 N. Y. 16; Munn v. Illinois, 94 U. S. 113), or that the rates of toll proposed to be charged if not regulated by law are still unreasonable and excessive. Sterne v. Metropolitan Telephone & Telegraph Co., opinion of Justice Ingraham, not reported, 19 App. Div. 316; McEntee v. Kingston Water Co., 165 N. Y. 27; Friedman v. Gold & Stock Telegraph Co., 32 Hun, 4.

The temporary Injunction prayed for may issue upon plaintiff giving a bond sufficient to indemnify the defendant cement company for its costs for all toll charges at the rates proposed to be charged hy the defendant cement company pending the litigation.

Ordered accordingly.  