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Baird v. Erie Railroad Co.

Supreme Court of New York, Appellate Division

December 29, 1911

FRANK B. BAIRD, Respondent,

Page 453

APPEAL by the defendant, Erie Railroad Company, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Erie on the 8th day of May, 1911, upon the decision of the court rendered after a trial at the Erie Special Term, and also from an order entered in said clerk's office on the 4th day of May, 1911, granting the plaintiff an extra allowance.


Adelbert Moot [Helen Z. M. Rodgers with him on the brief], for the appellant.

Simon Fleischmann and George C. Riley, for the respondent.

Page 454


Plaintiff's recovery represents the amount of overcharge paid by the Union Iron Works, Buffalo, N.Y. , a corporation, to the defendant Erie Railroad Company for switching service between the 13th day of September, 1899, and the 10th day of October, 1900. This claim was assigned by the receiver of the former company to plaintiff. The action is brought by plaintiff as such assignee and also as assignee of the rights and claims of the Union Iron Company of Buffalo under the contract hereinafter referred to. If a recovery of any sum is warranted, the amount is not in controversy.

The defendant Union Iron Company is an old company, which as far back as 1870 owned and still owns a large tract of land in the southeastern part of Buffalo, which has long been known, and is now known, as the Union Iron Works. This land lies south of and adjoining the Erie tracks and south of and adjoining this parcel is the Farmers Point parcel owned by the Erie Railroad Company. The Union Iron Company in about 1892 leased to plaintiff the southerly portion of its lands. Plaintiff for some time before that had actively interested himself with the purpose of developing, or rather reviving, active business on the whole parcel, which had then reached a low ebb under the management of the owner and others formerly interested in the various enterprises there represented. Largely through his active instrumentality a blast furnace was erected on the leased premises and put in operation, the company taking and conducting that business being the Buffalo Furnace Company, to which plaintiff assigned his lease. This company began operations early in 1893. He was an officer of the company. We do not deem it necessary to detail the various relations which the witness Thomas bore to the present defendant, Erie Railroad Company, and its predecessor, the New York, Lake Erie and Western Railroad Company, either as receiver and president of the latter, or as president of the former. It is sufficient to say that he was at all times fully authorized by his position to act for the interests now owned by the Erie Railroad Company. The company he represented will hereafter be referred to as the Erie, whatever may have been its actual name at the time.

Page 455

The Erie had at the time plaintiff began his operations on these premises no access by its lines to its Farmers Point property. It was desirous of securing such access. Plaintiff was desirous of obtaining favorable switching rates for the furnace company. Negotiations looking to those results culminated in a proposed switching rate contract in form between the Erie and the Buffalo Furnace Company. This was only a tentative agreement; and was never executed, though it had the approval of plaintiff and Brunn, the local division superintendent of the Erie. A tentative right of way agreement giving to the Erie a right of way to the Farmers Point property across these premises of the Union Iron Company was also prepared, but never executed. Troubles came thickly upon both the Buffalo Furnace Company and the Erie in that year; and negotiations were suspended until late in 1894, or early in 1895. Meanwhile plaintiff had in contemplation the erection of another furnace on another parcel of these premises, referred to as parcel B, distinct and separate from the Buffalo Furnace property. He had several interviews with Thomas in which, as he testifies, he told Thomas of his plans for building the B furnace, showed him blue prints of the proposed location and Thomas made suggestions as to an advantageous change in the location of some of the proposed structures. He also testifies that he then told Thomas that the new furnace was not to be controlled by the Buffalo Furnace Company; that it was to be entirely separate from the Buffalo Furnace plant; and that the Union Iron Company, the owner of the land, was to be interested financially to a large amount in the proposed furnace. If Thomas was so advised at that time, and the court upon satisfactory evidence has so found, it is important in determining the question as to what furnaces the actual agreement as to the switching rates thereafter determined upon, it was agreed the rates should apply. Plaintiff testifies that the agreement was that these rates should apply to two furnaces on the premises by whomsoever they might be operated. This is not directly disputed. His purpose in obtaining these rates was manifestly to have them apply to two furnaces, one, that already built and then operated by the Buffalo Furnace Company, and the

Page 456

other, the one he was then contemplating building on parcel B. It does not appear that the Buffalo Furnace Company then or thereafter contemplated building another furnace on the parcel it held under its lease. The switching rate would benefit the Buffalo Furnace Company so far as its plant was concerned, and be of equal advantage to the operators of the proposed plant and incidentally to the landlord, the Union Iron Company, in the increased rental value of its land and the increase in the profits presumably to accrue from its intended investment in the proposed enterprise. Plaintiff for the Union Iron Company at the suggestion of Wilbur, its president, asked for the rate to apply to three furnaces and a steel plant on the property in return for the grant of the desired right of way to the Erie. To this Thomas would not agree. He says, however: 'We were willing to make a switching contract to the Buffalo Furnace and to another one to be built there, but to extend that indefinitely would be to extend that to a cost which we could not estimate and possibly far beyond its value.' This is at least some corroboration of plaintiff's claim that Thomas then knew that it was proposed to erect another furnace on the premises. Thomas also testifies that the switching privilege, whatever it was that was given to the two furnaces, was the consideration of the granting of the right of way. Shortly afterwards the right of way agreement was made and duly executed. It will be observed that the party who conveyed this right, thus furnishing the large proportion of the consideration for the switching agreement, was the owner of the land, the Union Iron Company. The Buffalo Furnace Company, the lessee, as a party to this contract consented to the granting of the right of way; but its right in the premises, being limited by the six or seven years then remaining of its lease, its surrender of right was in value inconsiderable in comparison with that conveyed by the Union Iron Company. It is conceded that the term ultimately agreed upon during which the Erie should do the switching for the two furnaces, one erected and the other to be erected, as we have seen was fifteen years. But the Buffalo Furnace Company's interest in the premises would expire long before the termination of that period. It does not seem probable that either party to the agreement understood that the switching

Page 457

agreement should apply to and be for the benefit only of the Buffalo Furnace Company and its successors and assigns. This brings us to the decisive question of fact in the case, did the agreement as made apply only to two furnaces on the premises which were in fact operated by the Buffalo Furnace Company, its successors or assigns, or did it apply to two furnaces on the premises by whomsoever the same might be operated? Though the right of way agreement and the switching contract were unquestionably in effect a single transaction, the one supplying the consideration for the other, the latter was not prepared and finally executed until some three months after the execution of the former. But the fact that some contract for favorable switching rates was to be given by the Erie was never questioned. Several drafts of such an agreement were prepared by the Erie and submitted for examination. It is noticeable that one of the earlier, possibly the earliest, of these drafts which it prepared was in form between the Erie and the Union Iron Company; and except for some omissions, intentional or mistaken, not affecting the contract in determining what parties should be benefited thereby, this proposed agreement was in form as plaintiff claims Thomas agreed it should be. This in itself tends to corroborate plaintiff's version of the agreement actually made by the Erie in return for the right of way agreement. But this, or a similar draft of the contract, was forwarded by defendant to Brunn, its division superintendent, at Buffalo; and he at once suggested that the contract should be with the Buffalo Furnace Company, and not the Union Iron Company. It is apparent from the evidence that Brunn was not then aware of the result of the negotiations following those he had himself in part conducted in 1892-3, nor that an actual agreement had been made, even as to the right of way. Yet ...

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