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Pennsylvania-Reading Seashore Lines v. Board of Public Utility Commissioners

Decided: June 19, 1950.


On appeal from the Appellate Division of the Superior Court.

For reversal -- Chief Justice Vanderbilt, and Justices Heher, Oliphant, Burling and Ackerson. For affirmance -- Justices Case and Wachenfeld. The opinion of the court was delivered by Vanderbilt, C.J. Case, J. (dissenting). Mr. Justice Wachenfeld concurs in the foregoing dissenting opinion.


[5 NJ Page 116] This is an appeal from a judgment of the Appellate Division of the Superior Court affirming an order of the Board of Public Utility Commissioners directing the appellant railroad to continue to operate its trains Nos. 828 and 829 on its Penns Grove Branch daily except Saturdays and Sundays.

The Penns Grove Branch, 20.3 miles in length, running from Woodbury to Penns Grove, is virtually paralleled by a Public Service bus route. On July 22, 1949, the railroad gave notice to the respondent Board of Public Utility Commissioners that commencing September 25, 1949, it would withdraw all passenger service on the Penns Grove Branch. The Board ordered the railroad to show cause why the proposed discontinuance would not constitute a violation of its obligation to provide passenger service and why such service should not be ordered continued. On September 12, 1949, a public hearing was held by the Board on the order to show cause. At this hearing, of which due notice was given as directed by the Board, no passengers of the railroad appeared to object, the only opposition to the discontinuance of passenger service coming from the representatives of the labor unions, members of which would be affected by the cessation of service.

The uncontroverted evidence at the hearing showed that the daily number of passengers (excluding, of course, Saturdays and Sundays) during the period from January 1 to August 31, 1949, averaged 6.2 on train No. 828 and 8.1 on train No. 829. During this period the total revenue derived from such passenger service was $767.13, while the total out-of-pocket cost of operations was $9,262.28. An exhibit of the financial results of the operations of both passenger and freight service on all of the appellant's rail lines disclosed that, with the exception of the war years 1943-1944, each year from 1934 to 1946 resulted in an operating deficit. The deficit for the first half of 1949 was $3,371,275, and for the year 1948 $4,195,386. The balance sheet of the railroad for December 31, 1948, showed an accumulated deficit of $37,379,107. The Board of Public Utility Commissioners found that:

"In our opinion the evidence wholly fails to support a finding that public convenience and necessity require continuance of passenger train operation on the Penns Grove Branch between Woodbury and Penns Grove. The continuing deficits experienced in the operation of the branch and the entire system of the Pennsylvania-Reading Seashore Lines jeopardize essential services performed by the utility. Continued operation of non-essential service at a substantial continuing

loss, particularly where as here another means of reasonably convenient public transportation is available, is, in our opinion, not justified as in the public interest."

Despite this unequivocal finding the Board, considering itself bound by the decision in O'Connor v. Board of Public Utility Commissioners, 129 N.J.L. 263 (E. & A. 1942), ordered the operation of Trains Nos. 828 and 829 continued. An appeal was taken to the Appellate Division of the Superior Court which affirmed the order below solely on the grounds of the O'Connor case. From the order of affirmance there an appeal has been taken to this Court.

Three questions are presented on the appeal: (1) should the O'Connor case be overruled as being unsound; (2) does the order of the Board of Public Utility Commissioners deprive the railroad of its property in violation of Article I, paragraphs 1 and 20 of the New Jersey Constitution and the Fourteenth Amendment to the Federal Constitution; and (3) does the order of the Board place an undue burden on interstate commerce in violation of Article I, Section 8, clause 3 of the Federal Constitution?

We are of the opinion that all three issues must be resolved in the affirmative.

(1) To answer the first question it is necessary to reexamine the reasoning of the decision in the O'Connor case. There the same railroad applied to the Board of Public Utility Commissioners for permission to discontinue passenger service on three branch lines. After a hearing, at which numerous passengers appeared and objected, the Board granted the application on the ground that public necessity and convenience did not require such service. On certiorari to the former Supreme Court (128 N.J.L. 35; 1942) the power of the Board of Public Utility Commissioners to order a discontinuance of all passenger service when it is reasonably considered unnecessary was unanimously upheld. On appeal to the Court of Errors and Appeals (129 N.J.L. 263; 1942) the judgment of the former Supreme Court was reversed and judgment entered denying the application of the railroad. The rationale of the opinion of the Court of Errors and Appeals was that

"the cessation of the carriage of passengers would be clearly a breach of the contract [the railroad's franchise from the State], and further that no power of the Utility Board to waive this contract obligation and erase it from the contract is conferred by statutes either expressly or by implication." (Idem., p. 268.) A dissenting opinion was filed by Mr. Justice Heher and concurred in by Mr. Justice Colie and Judge Wells, expressing the view that "the Utility Commission has time and again over the years exercised, apparently without question, the authority here challenged; and, with knowledge of this judicial and administrative construction, these provisions were re-enacted without substantial alteration in the revision of our general public laws adopted in 1937. Such judicial and administrative construction must be deemed to have received legislative approval by the re-enactment of the statutory provisions without material change."

The statutory language that the majority of the court in the O'Connor case regarded as placing a contractual duty on a railroad to operate both passenger and freight service and as limiting the regulatory powers of the Board of Public Utility Commissioners is to be found in the Railroad Act, R.S. 48:12-99;

"Every railroad company shall start and run trains for the transportation of persons and property at regular times to be fixed by public notice.

"Every railroad company shall furnish sufficient accommodations for the transportation of all such passengers and property as shall within a reasonable time previous thereto be offered for transportation at the place of starting, the junctions of other railroads and at usual stopping places established for receiving way passengers and freight for that train.

"The company shall take, transport and discharge such passengers and property at and from and to such places, on the due payment of the legal fare or freight and shall be liable to the party aggrieved in an action for damages for any neglect or refusal in the premises."

The majority opinion, however, ignored equally pertinent provisions of the Railroad Act. Thus, R.S. 48:12-14 provides in part:

"Every railroad company, in addition to the powers conferred by its charter or by any act or certificate under which it is or shall be

incorporated, and notwithstanding any limitation expressly or impliedly imposed by any general or special law or by any act or certificate under which it is incorporated, may:

"c. Sell or otherwise dispose of any of its property, franchises, privileges or rights or any part thereof.

"Nothing herein contained shall authorize any railroad company to exercise any of the powers conferred upon it by this section, without the approval of the board of public utility commissioners where such approval is required by law."

and R.S. 48:12-90 further provides:

"No railroad company shall, without first obtaining the approval of the Board of Public Utility Commissioners, abandon any railroad station, stop the sale of passenger tickets or cease to maintain an agent to receive and discharge freight at any station in this state at which passenger tickets are regularly sold or at which such agent is maintained."

Likewise it is important to consider the provisions of the Public Utilities Act setting forth the powers of the Board of Public Utility Commissioners. R.S. 48:2-13 declares:

"The board shall have general supervision and regulation of and jurisdiction and control over all public utilities as hereinafter in this section defined and their property, property rights, equipment, facilities and franchises so far as may be necessary for the purpose of carrying out the provisions of this title.

"The term 'public utility' shall include every * * * steam railroad. * * *"

and R.S. 48:2-23 provides:

"The board may, after hearing, upon notice, by order in writing, require any public utility to furnish safe, adequate and proper service and to maintain its property and equipment in such condition as to enable it to do so."

and R.S. 48:2-24 sets forth:

"If any public utility shall discontinue service and the Board after hearing upon notice shall find and determine that service should be resumed, the board may order that service be ...

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