Case Name: Hugh H. Senior, Appellant, v. New York City Railway Company, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1906-02-09
Citations: 111 A.D. 39
Docket Number: 
Parties: Hugh H. Senior, Appellant, v. New York City Railway Company, Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 111
Pages: 39–50

Head Matter:
Hugh H. Senior, Appellant, v. New York City Railway Company, Respondent.
First Department,
February 9, 1906.
Street surface railways — ownership by one corporation of maj ority of stock of another corporation not a control thereof under section 101 of the ¡Railroad Law—penalty under section 39 of the Railroad Law—• when action for such penalty does not lie against corporation owning majority of stock of other corporation.
The fact that one street surface railway corporation owns the majority of the stock of a similar corporation having a separate and distinct management, ,and thus might be able indirectly to control the management by the election of directors in such other company,, does not constitute a control of such other corporation within the meaning of section 101 of the Railroad Law (as amd. by Laws of 1897, chap. 688), which prohibits such corporation from charging more than five-cent fares.
Hence, one who has been a passenger on the cars of said corporation owning the majority of the stock in the other .corporation, and has paid a five-cent fare, cannot sue said corporation to recover the penalty for an overcharge in,fares under section 89 of the Railroad Law, because he has heen refused a transfer entitling him to ride on the cars of the other corporation, and has by it heen ■ compelled to pay another five-cent fare.
The “ control” of railroad lines contemplated by said section 101 of the Railroad Law means a control of the operation of the road and not merely a control of the corporation or individuals who operate it by reason of the ownership of a majority of the stock.
O’Brien, P. J., and Clarke, J., dissented, with opinions.
Appeal by the plaintiff, Hugh H. Senior, from, an order of the) Appellate Ter-m of the Supreme Court, entered in the office of the clerk of the county of New York on the 26th day of June, 1905, as resettled by an order entered in said clerk’s office on the 16th day of August, 1905, affirming a judgment of the Municipal Court of the city of New York in favor of the defendant, dismissing the complaint upon the merits,
Hampton D. Ewing, for the appellant.
Adrian H. Joline, for the respondent.

Opinion:
Ingraham, J.:
The plaintiff was a passenger upon the defendant's railroad on Lexington avenue. At Forty-second street he requested a transfer from the Lexington avenub line entitling him to ride upon the Forty-second Street, Man'hattanville and St.. Bichólas Avenue'railway so as to carry the'plain tiff' over that road without the payment of additional fare. This demand was refused. Plaintiff then boarded the Forty-second street car, but was required to pay his fare, and he brings this action to recover/the penalty imposed by • section 39 of the' Railroad Law (Laws of 1890, chap. 565) for a violation of section 101 of said, statute (as amd. by Laws of 1897, chap. 688). . The complaint alleges that the railroad on Forty-second street was operated by the Forty-second Street, Man-, hattanv^lle and S't. Bichólas Avenue Railway Company, and that the conductor thereof was in the .employ' of the said company and one of its servants..; that the Forty-second Street, Manhat-tanville and St. Bichólas Ayenue .Railroad Company is a- street surface . railroad corporation, organized under ttie' laws of the State of Bew York for the purpose of building, maintaining and operating a" road through,..upon and along certain streets, avenues and places in the city of Bew York, and had an authorized capital stock of .$2,500,000, consisting of 25,000 shares of $100 each; that the defendant, the Bew York City Railway Company, was the owner of an amount in excess of ninety per cent of the total -shares of the capital stock of the Forty-second Street, Manhattanville and St. Bichólas Avenue Railroad Company, and that by reason thereof.it controlled- and managed, through the directors and officers of said Forty-second Street, Manhattanville and St.. Bichólas Avenue Railroad Company,, the affairs of' said company and said'railroad of. said company on Forty-second street, and that the refusal of the defendant to give the plaintiff'.a transfer over the said line of .street railway on Forty-second, street and to Carry the plaintiff on said line over Forty-second street without the payment of additional fare ' was in violation of section 101 of the Railroad Law of the State of Bew York, and that by virtue of the provisions of the said section and also of the provisions of section 39 of the said law the defendant has become, and now is, indebted to' the plaintiff in the sum of .fifty dollars.
The answer of the defendant admits that it is the owner of 24,698 shares of the capital stock of the,Forty-second.Street Railroad Company, but that of such -stock 16,711. shares are held by the Morton Trust Company, subject to the authority expressed, in a certain mortgage made by the Third Avenue Railroad Company to the Horton Trust Company, as trustee, bearing date Hay 15, 1900; denies that by reason of such stockholding it controlled or managed through the directors or officers of the Forty-second Street Company, or otherwise, the affairs of said company or said railroad of said company on Forty-second street, but, on the contrary, alleged that the entire control, management and operation of said railroad'was under the power of the board of directors duly elected by the stockholders of the company and of the officers elected and .appointed by such board; further denying that the.said street surface railroad on Forty-second street and the Forty-second Street, Hanhattanville and St. Nicholas Avenue Railroad Company was under the control of the defendant.
Upon the trial it was proved that on the 25th day of June, 1900, the Third Avenue Railroad Company was the owner of 16,646 shares of the capital stock of the Forty-second Street, Hanhattanville and St. Nicholas Avenue Railroad Company; that on that day this, stock was transferred to the Horton Trust Company, as trustee, arid held by it subject to the provision of a mortgage made by the Third Avenue Railroad Company, and that there was subsequently transferred to the Horton Trust Company, as trustee, 55 additional shares of the stock of the said company, making a total of 16,101. shares which were held by the trust company. There was offered in evidence a lease from the Third Avenue Railroad Company to the Hetropolitan Street Railway Company,, dated April 13, 1900, by which the Third Avenue Railroad Company leased for 999 years its road extending from Park Row and Broadway, through Park Row, the Bowery and Third avenue to the Harlem river, and also a line upon Cne Hundred and Twenty-fifth street, with certain real estate, and also " all easements, fixtures, personalty and property of every .description of the party of the first part," which property included the 16,101 shares of the stock of the Forty-second Street, Hanhattanville and St. Nicholas Avenue Railroad Company held by the trust company, being a majority of the capital stock of the company.
It was also stipulated that in addition to the 16,101 shares held by the Horton Trust Company, as trustee, 1,545 shares of the stock of the Forty-second Street, Manhattanville and St. Nicholas Avenue Railroad Company were on the 16th day of December, 1902, acquired by the. Metropolitan Street. Railway Company and after-wards by the defendant,, and this stock was thus held prior to the commencement of the action. ' ' .
On behalf of the defendant the 'president of the Forty-second Street Company was called as a witness and testified that he had been president of the company since March, 1900, elected each y ear at the annual meeting of the stockholders y that he was operating the road prior to March, 1900, as superintendent; that in ' March, 1900, tile road went into the hands of a receiver and was in 'the possession of a receiver about a year and four .months ; that at the termination -of the receivership the witness was president of the road, and that since then the road has been operated and controlled by the directors and officers of the road; that the proceeds from the. operation of the road were deposited in a bank in the name of the Forty-second Street} Manhattanville and St. Nicholas Avenue Railroad Company ; contracts for supplies are all made by him as president, and the bills are paid by him but of the. receipts from the operation of the road; that there was no physical connection between the two roads. The cars of the defendant line are not run'over the tracks of the Forty-second Street Company and the cars-of the Forty-second- Street Company are not run over any óf tile tracks of the defendant corporation, and ti)e tracks of the two roads were not connected, None of the- -directors of the defendant road were; directors' of the Forty-second- Street Company. From the facts established it would seem that these two corporations are entirely distinct, managed by different officers and.directoi;s and the roads are operated as distinct and independent lines.
There are existing between, the road's no contract relations of any .kind; the plaintiff,, however, claims that the defendant was bound to issue a transfer which would entitle him to a continuous ride over .the defendant's road and .over the Forty-second street road, as; the defendant had the ownership of a .majority of the stock of the Forty-second street road which operated and controlled its own railroad. A majority of the stock of the Forty-second Street Company was held by the Morton Trust Company.as trustee to secure certain • bonds issued by the Third Avenue Railroad Company who, at the time of the issuance of these bonds, was the owner of this stock, but under the mortgage the Third Avenue Railroad Company had reserved the right to vote on this stock at the election of the directors of the company so long as there was no default in the payment of the interest or principal of the bonds to secure which the stock was pledged to the Horton Trust Company. So that at the time of the demand for a transfer by the plaintiff the defendant had the right to vote upon a large majority of the sto'ck of the Forty-second Street Company and thus could, by means of its voting power, elect such persons trustees as it wished. It would seem that the minority stockholders of the Forty-second street road could have objected to the officers of that company carrying passengers over its road because they had paid a fare upon the defendant road. The Forty-second Street roa'd had. secured no advantage because of the acquisition by the defendant of a majority of the stock of the Forty-second street road; nor was the Forty-secpnd street road in any way bound to accej>t a transfer issued by the defendant as fare upon its road if one had been issued by the defendant. There was no contract, lease or arrangement of any kind between the two corporations. The Forty-second Street Company had never accepted a benefit under the Railroad Law by which there was imposed upon it the obligation, to carry a passenger without payment of fare . because such passenger had paid a fare upon the defendant's road. The liability for. this penalty for which the plaintiff sues must depend upon the failure of the defendant corporation to perform some duty imposed upon it by law. The refusal of the officers and employees of the Forty-second street road to permit the plaintiff to ride upon its line without paying the legal fare was not the violation of a duty imposed upon the defendant, unless it in some way was bound to compel the Forty-second street line to transport a passenger without payment of fare because he had paid the legal fare to the defendant for a ride on its road. The only way that the defendant could have controlled the Forty-second street line was that at the next annual, election it could have elected directors who would obey the orders of .the defendant. If orders had been given by the defendant corporation to the Forty-second street road to carry its passengers without payment of fare, the minority "stockholders would have had the right to object and to hold the directors and officers of the Forty-second Street Company to account for failing to perform their duties for the benefit of the Forty-second Street Company.
Keeping-in mind the relation between the two companies, I think that section 101 of 'the' Railroad Law,' under which the plaintiff seeks to recover, does not apply. Section 101 of the Railroad Law is a ¡iart of article 4, relating to street surface railroads. That section, as amended by chapter 688 of the Laws of 1897,- provides: "No corporation constructing and operating a railroad under the 'provisions of this article, or of chapter two hundred and fifty-two of the laws of eighteen hundred and eighty-four, shall charge any passenger more than-five cents for one continuous ride from any point on. its road, or on any road, line or branch. operated by it, or under'its control, .to any other point thereof,.or any connecting branch thereof, within, the limits of any incorporated- city or village." Section 39 of the Railroad Law provides that " any railroad corporation which -shall ask or receive more than the lawful rate of fare shall forfeit fifty dollars, to be recovered with the excess so received by the'party paying the same," and the plaintiff, claims that'the defendant received more than the lawful rate of fare because the Forty-second Street Company required hitn 'to pay - a fare after lie had paid the defendant his fare on the Lexington avenue line, and thereby incurred this penalty.
The defendant was authorized to charge five cents to ride upon its .line of railway. It demanded and received from the plaintiff five cents as his fare upon the Lexington avenue car. "When he got out of that car and got upon the line of the Forty-second Street Company, the employee of" that company demanded and received from him. five cents for a ride upon that line. It would seem - that this defendant has not charged or received more than one fare. There is no evidence that the defendant profited in any way by the fare that was paid to the Forty-second street road, or that it had authorized or directed that company to charge or receive fare from the .plaintiff for using its line. It had directly nothing to do with asking or receiving the fare that was demanded by ike employee of the Forty-second Street Company. It could not carry the plaintiff upon the line of the Forty-second Street Company, for it did not operate that line and had no direct control over its operation, and the defendant did not ask or receive any fare for transporting the plaintiff over the Forty-second street line.
Section 101 of the Railroad Law' (as amd. supra) provides that "Ho corporation constructing and operating a railroad shall charge any passenger more-than five cents for one continuous ride from any point on its road, or on any road, line or branch operated by it, or under its control, to any other point thereof, or any connecting branch thereof, within the limits of any incorporated city or village." Before a street surface railroad company violates this act it must charge a passenger more than five cents for a passage over its road, or a road, line or branch operated by it or under its control,- within the limits of an incorporated city or village. Assuming that the Forty-second Street Company may in a sense be said to be under the control of the defendant because it owns a majority of the stock of the corporation, still the defendant would not be guilty of charging excessive fare unless it charged a passenger for a ride over the connecting road. The evidence is undisputed that the defendant made no such charge, but it seems to me that the operation or control of a road here spoken of necessarily means the control of the operation of the road, and not merely a control of the corporation or individuals who operate it. A person owning a majority of stock in a corporation cannot be said to be in control of the management of the property of the corporation. Lie has a control over the corporation so far as he has the power to elect its directors, but the corporation is itself a person a.nd such corporation actually owns and controls its property. The provision here does not relate to the .control of the corporation-by its stockholders, but to the control of the operation of a railroad by. those charged with that duty, as distinguished from the control of a person who operates the railroad. It would be quite absurd to speak of a person owning a majority of the stock of a corporation as being the owner of the property, or as controlling the use to which the property should be put. He may be said in a sense to control the corporation, but the corporation itself owns its property and controls and manages it; and it seems to me that the word "control," as used in section 101 of the Railroad Law (as amd. supra) in connection with the word "operated," as applying to a corporation which, operatés or controls another road, applies, to the direct operation or control of the operation of the specific railroad sought to be brought within the provisions of the act, and not to'the indirect control 'over a corporation which owns the road by its stockholders.' Each street surface railroad corporation operating or controlling a railroad is entitled to charge five cents for one continuous ride from any point on its road, or on any road, line or branch operated by it, or' under its control, within the limits of an incorporated city or village; and the Forty-second street road was entitled to charge the plaintiff five cents for a ride upon its road, operated and controlled by it, and the , defendant was authorized to charge the plaintiff five cents for a ride on its road, operated or controlled by it, and this is just what these two corporations did. There was, therefore, as I view it, no' excessive fare charged or paid, and tlie Municipal Court was quite right in refusing to award 'the plaintiff a judgment..
It follows that the determination appealed from should be affirmed, with costs.
Laughlin and Houghton, JJ., concurred; O'Brien, P. J., and Clarke, J., dissented.