
    The People of the State of New York ex rel. E. P. Bryan and Others, as Trustees of the New York and Long Island Railroad Company, Appellants, v. The State Board of Tax Commissioners of the State of New York, Respondent. (Assessments of 1908 and 1909.)
    First Department,
    February 10, 1911.
    Real property—grant of right of way to construct tunnel construed — title to lands under water of East river — tax — special franchise tax oh tunnel beneath river.
    The grant of a right of way beneath the waters of the East river, made by the State to the New York and Long Island Railroad Company in 1891, did not convey a fee rather than a right of way merely because the grant was made “ together with all and singular the rights, hereditaments and appurtenances to the same belonging or in anywise 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.” - Such words of perpetuity do not transform the precise right of way granted into a fee by implication. Hence, such tunnel When constructed beneath the waters of the East river is not exempt from an assessment for a special franchise tax on the theory that it is built entirely upon the property of the railroad.
    The land under water in the East river is held by the State as trustee for the public.
    The Legislature in providing for a special franchise tax intended to subject to taxation those making use of public property in the prosecution of their business.
    Laugi-ilin, J., dissented, with opinion.
    Appeal by the relators, E. P. Bryan and others, as trustees, etc., from- two orders of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 18th day of May, 1910, confirming assessments against the property of the relators for the years 1908 and 1909, respectively, and dismissing proceedings to review the same.
    
      Ralph Norton of counsel [Charles F. Kingsley with him on the brief], James L. Quackenbush, attorney, for the appellants.
    
      William N. Cohen of counsel [Arthur J. Cohen with him on the brief], Edward R. O'Malley, Attorney-General, for the respondent.
   Clabke, J. :

The New York and Long Island Railroad Company was duly incorporated on or about the 30th day of July, 1887, and duly acquired the consent of the board of aldermen of -the then city of New York for the construction, operation and maintenance of a' tunnel railroad in, through and under the surface of Forty-second street from its easterly end to a point therein between Tenth and Eleventh avenues in said city, and such tunnel has been actually constructed from the easterly end of Forty-second street to a point at or near its intersection with Park avenue. The tunnel extends beneath the bed of the East river to certain designated points in Long Island City.

The time of the railroad company to complete • the construction of its railroad was extended by various acts of the Legislature until the 1st of January, 1907 (Laws of 1903, chap. 597), when, by reason of the failure of the company to complete its road, its corporate existence expired in accordance with the provisions of section 5 of the Railroad Law (Gen. Laws, chap. 39 [Laws of 1890, chap. 565]; as amd. by Laws of 1901, chap. 508; since amd. by Laws of 1910, chap. 478), which is now section 12 of the Railroad Law (Consol. Laws, chap. 49; Laws of 1910, chap. 481), and all its property, franchises and rights became vested in the individuals who were on that date its directors, as trustees, for the 'benefit of stockholders and creditors of the corporation in accordance with the provisions of section 30 of the General Corporation Law (Gen. Laws, chap. 35 ; Laws of 1892, chap. 687), which is now section 35 of the General Corporation Law (Consol. Laws, chap. 23 ; Laws of 1909, chap. 28). The relators were on the 1st of January, 1907, the directors of said company, and.they became the trustees of its property under the statutory provisions referred to.

The geographical limits of the borough of Manhattan extend to the bulkhead line of the Queens county shore, thus including the bed of the East river. The State Board of Tax Commissioners levied an assessment of $3,175,000 'up'ón the special franchises of the relators in the borough of Manhattan, city of New York, for the year 190.8, and of $3,350,000 upon said franchises for the year 1909, which assessments having been affirmed upon certiorari proceedings by the Special Term (People ex rel. Bryan v. State Tax Comrs., 67 Misc. Rep. 508), from the orders entered thereon this appeal is taken,

It was stipulated between counsel that if the court should hold that the entiré tunnel in the borough of Manhattan was properly assessable by the State Board of Tax Commissioners as a special franchise, then the existing assessments for 1908 and 1909 -respectively might be regarded as the. equalized valuations thereof for the purpose of taxation. Therefore, the sole '.point presented to this court is whether so much of the tunnel beneath the bed of the river as extends from a point 300 feet east of the bulkhead line of the Manhattan shore to the bulkhead line of the Queens shore, is legally subject to taxation.

On the 5th of January, 1891,' a patent was issued by the State to the company reading as follows : Know ye, that pursuant to. Chapter Í40, 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 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 Hiinterls Point in Long Island City, as-shown in plan and profile, upon the charts filed in the office of our Seóretary 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 fhe said The New York and Long Island Railroad Company, its successors and assigns forever.” The consideration paid by the New York and Long Island Railroad Company for such grant was $575.

The relators contend that the portion of their tunnel under the river between the points above- indicated is built entirely within their own property, and, therefore, is not subject to an assessment such,as is under review here; in other words, that the patent is an absolute conveyance of real estate.

Subdivision 3 of section 2 of the Tax Law (Gen. Laws, chap. 24 Laws of 1896, chap. 908], as amd. by Laws of 1899, chap. 712 ; revised by Consol. Laws, chap. 60; Laws of 1909, chap. 62) provides: “The terms ‘land,’ ‘real estate’ and ‘real property,’ as used in this chapter, include * * * all surface, underground or elevated railroads, including the value of all franchises, rights or permission to construct, maintain or operate the same in, under, above, on or through, streets, highways or public places; all railroad structures, substructures and superstructures, tracks and the iron thereon; branches, switches and other fixtures permitted or authorized to be made, laid or placed in, upon, above or under any public or private road, street or ground ; * * *. A franchise, right, authority or permission specified in this subdivision shall, for the purpose of taxation, be known as a ‘ special franchise.’ A special franchise shall be deemed to include the value of the tangible1 property of a person, copartnership, association or corporation situated in, upon, under or above any'street, highway, public place or public waters in connection with the special franchise., The tangible property so included shall be taxed as a part of the special franchise.”

It seems to us that thé contention of the relators is unsound. The intention of the Legislature in providing this source of revenue was to subject to taxation those making use of public property in the prosecution of their business. If a railroad be located in, upon or under a public street, in accordance with the necessary permission granted by the proper authorities, it has a property right within the usual and common signification of that word as held'in People v. O'Brien (111 N. Y. 1). The court said : “ The title to streets in New York is vested in the city in trust for the People of the State, but under the Constitution and statutes it had authority to convey such title as was necessary for the purpose, to corporations desiring to acquire the same for use as a street railroad. * * * Grants similar in all material respects to the one in question have heretofore been before the courts of this State for construction, and it has been quite, uniformly held that they vest the grantee with an interest in the street in perpetuity, for the purposes of a street railroad.”

The land under water in the East river is held by the State. The Court of Appeals said, in Matter of City of New York (168 N. Y. 134): “The State holds the title in fee in the tideway and to the lands under water beyond the samé, as trustees for the public in its organized capacity.” It lias granted through this land so liéld in fee a right of way to construct a-tunnel for the use and operation of the grantee’s railroad. While the patent contains words of perpetuity, they do not transform the precise right of way granted into a fee. by implication. No one would contend that the perpetuity held to attach to the permission to construct a railroad .in the public streets constitutes a fee rather than a right of way.

Relators’ road is situated under public waters, and, therefore, comes within the express terms of the Tax Law cited. We have no doubt that the tunnel under the river was properly taken into consideration by the board in assessing the special franchise of relators for purposes of taxation, and it follows, therefore, that the orders appealed from should be affirmed, with costs and disbursements to the respondent.

Ingraham, P. J., Scott and Miller, JJ., concurred ; Laughlin, J., dissented.

Laughlin, J. (dissenting):

The State Board of Tax Commissioners fixed the valuation of special franchises of the relator in the borough of Manhattan, New York, as $3,175,000 for the purposes of taxation .for the year 1908, and as $3,350,000 for like purposes for the year 1909, and this proceeding has been instituted to review those assessments. Both assessments were affirmed as made at Special Term. One special franchise included in the assessments was granted to the New York • and Long Island Railroad Company by the board of aldermen of the city of New York on the 23d day of December, 1890, and approved by the mayor on the thirty-first day of the same month. It conferred the right to construct a" tunnel under the surface of Forty-second street from the East river westerly to a point between Tenth and Eleventh avenues for a double-track railroad in accordance with plans and a profile theretofore presented to said board.

Another alleged special franchise included in the assessments is a right of way and tunnel for the use and., operation of the railroad constructed under the East river, from the easterly end of Forty-second streét to the bulkhead line of the shore of Queens county, that being the boundary line of the borough of Manhattan.. This right of way was granted by and the tunnel was constructed under letters patent from the State duly granted on the 5th day of January, 1891, pursuant to the provisions of chapter 140 of the Laws of 1850, as amended by chapter 601 of the'Laws of 1886, and a resolution of the Commissioners of the Land Office adopted on the 25th day of November, 1890. The letters patent contain the recital that the People of the State of New York . “ 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 whicli to construct a tunnel for the use and operation of 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.”

The question presented by the appeal is whether the right of way, tunnel and railroad constructed therein under the letters patent constitute a special franchise within the provisions of section 2 of the Tax Law (Gen. Laws, chap. 24 [Laws of 1896, chap. 908], as amd. by Laws of 1899, chap. 712; revised by Consol. Laws, chap. 60 ; Laws of 1909, chap. 62), which, so far as material to the question presented for review, are as follows:

3. The terms ‘ land,’ real estate,’ and ‘real property,’ as used in this chapter, include the land itself above and under water, all buildings and other articles and'structures, substructures and superstructures, erected' upon, under or above, or affixed to the same; * * * all surface, underground or elevated railroads, including the value of all franchises, rights or permission to construct, maintain or operate the same in, under, above, on or through, streets, highways or public places; all railroad structures, substructures v and superstructures, tracks and the iron thereon; branches, switches and other fixtures permitted or authorized to be made, laid or placed in, upon, above or under any public or private road, street or ground; * * *. A franchise, right, authority or permission specified in this subdivision shall for the purpose of taxation be known as a special franchise.’ A special franchise shall be deemed to include the value of the tangible property of a person, copartnership, association or corporation situated in, upon, .under or above any street, highway, public place or public waters in connection with the special franchise. The tangible property so included shall be taxed as a part of the special franchise.” .

The parties- have stipulated the equalized valuation of the assessable special franchises of the relators for the years 1908 and 1909 in the event that it is decided that the right of-way, tunnel and railroad constructed under the letters patent are assessable as . a special franchise. They have also stipulated the value of the tangible property constructed under the grant from the board of aldermen for those years; but they have not stipulated the value of the intangible franchise granted by the board of aldermen in connection with the tangible property, and, therefore, if it be decided that the right of way, tunnel and railroad constructed under the letters patent cure not assessable as a special franchise, the matter will necessarily have to be remitted to the Special Term for further proceedings.

I am of opinion that the right of way,- tunnel and- railroad constructed under the letters patent are not a special franchise within the contemplation of the provisions of section 2 of the Tax Law herein quoted.

By the common law of England the title to land under the public navigable waters was vested- in the Crown, and it was regarded as jus privatum and was alienable .by the Grown subject to--the dominion' and control of Parliament over the land and water in the interests of navigation and commerce which was deemed jus publicum; and the State of New York succeeded to all the rights, of both the Grown and Parliament, subject to. the authority.delegated to Congress by the- Federal Constitution, to regulate, and control .- navigation in the' interests of commerce With foreign nations and between the States. (Langdon v. Mayor, etc., N. Y. 129, 154 et seq.; Illinois Central Railroad v. Illinois, 146 U. S. 387; Saunders v. N. Y. C. & H. R. R. R. Co., 144 N. Y. 75.) It was competent for the Legislature to grant to an individual or to a corporation “ for public, or such other purposes as it may determine to be for the best interests of the State ” the title of the People of the State to lands under navigable waters or to an irrevocable easement therein, and when once duly granted the land or easement therein cannot be appropriated for public use without just compensation. (Saunders v. N. Y. C. & H. R. R. R. Co., supra; Langdon v. Mayor, etc., supra; New York Central & H. R. R. R. Co. v. Aldridge, 135 N. Y. 83.) It was likewise competent for the Legislature to authorize a railroad corporation to acquire by eminent domain proceedings, lands owned by the State or by others even though devoted to or held for other public purposes. (Matter of Mayor, etc., 135 N. Y. 253.) The Legislature determined that it was for the public interests to authorize domestic railroad corporations to acquire such lands, and it accordingly conferred authority upon the Commissioners of the Land Office to make grants thereof to railroads upon such terms as might- be agreed upon; and it also empowered the railroad companies to acquire lands owned by the State by condemnation proceedings the same as they were authorized t'o acquire the lands of individuals necessary for the purposes of their incorporation, and it further empowered the officers of counties and of towns having charge of lands owned by counties and towns which were required by railroads, to grant the same to railroads for such compensation as might be, agreed upon. (Laws of 1850, chap. 140, §§ 25, 49, as amd. by Laws of 1886, chap. 601; revised by Railroad Law [Gen. Laws, chap. 39 ; Laws of 1890, chap. 565], § 8, as amd. by Laws of 1904, chap. 313; now Railroad Law [Consol. Laws, chap. 49; Laws of 1910, chap. 481], § 18; Saunders v. N. Y. C. & H. R. R. R. Co., supra.) The Commissioners of the Land Office were, therefore, expressly authorized to grant to the relator, and in the event of the failure of negotiations with said board, the relator was authorized to acquire by condemnation, the same interest in the land under the East river owned by. the State as it might have acquired by purchase or condemnation from an individual. (Rumsey v. N. Y. & N. E. R. R. Co., 130 N. Y. 88.) The terms of the letters patent are sufficiently broad to convey a fee limited to the use specified and there is no apparent reason for an intention on the part of the Land Board not to convey the entire right, title and interest of the State in the premises described, leaving only, at most, a reversionary interest in the State in the event of the abandonment of the use of the premises for railroad purposes. The title which the-Legislature authorizes to be granted or acquired depends upon the legislative intent as shown by the statute. (Sweet v. Buffalo, N. Y. & Phil. R. Co., 79 N. Y. 293 ; Beal v. N. Y. C. & H. R. R. R. Co., 41 Hun, 172; affd., 119 N. Y. 635.) It appears by the adjudicated cases (See Saunders v. N. Y. C. & H. R. R. R. Co., supra; New York Central & H. R. R. R. Co. v. Aldridge, supra, and Sage v. Mayor, 154 N. Y. 61) and by the various' special acts of the Legislature that the fee to such public lands has frequently been granted to railroads and to municipal corporations and to owners of the uplands. The use of the words “ right of way ” in the letters patent do not show an intent to grant merely an easement. The lands acquired by a railroad company by purchase or condemnation for the construction of its railroad are commonly designated as its right of way and they are so referred to in the Railroad Law. (Railroad Law of 1890, § 7, subd. 4, as amd. by Laws of 1892, chap. 676; Railroad Law of 1910, § 17, subd. 4; Western Union Tel. Co. v. Penn. R. R. Co., 195 U. S. 540, 570; Joy v. St. Louis, 138 id. 1.) The railroad company was authorized to acquire by private grant or purchase the fee to lands necessary for its use. (Nicoll v. N. Y. & Erie R. R. Co., 12 N. Y. 121.) The title usually acquired by condemnation proceedings, although not a fee simple absolute, is technically designated and described as a base or terminable fee. (Saunders Case, supra; Beal Case, supra ; People, ex rel. W. U. Tel. Co, v. Dolan, 126 N. Y. 166, 178, 179. See Railroad Law of 1890, § 4, subd. 2, § 7, as amd. by Laws of 1892, chap. 676, and Laws of 1905, chap. 727; Railroad Law of 1910, § 8, subd. 2, § 17.) The interest acquired is greater than a right of passage, is more than an easement, is special and exclusive and has the substantiality of a fee, and becomes the private property of the railroad corporation. (Western Union Tel. Co. v. Penn. R. R. Co., supra.) The reversionary interest remaining in the former owner, if any, is never taxed or deemed of any substantial present market value, and ordinarily, at least, the full value of the land is awarded. (South Buffalo R. Co. v. Kirkover, 176 N. Y. 301.) The title acquired by a city for street purposes, although subject to private easements and limited to public use for that particular purpose, is commonly designated a fee. (See Story v. New York Elevated R. R. Co., 90 N. Y. 122.) The title acquired under the letters patent is not affected by the fact that the grant was of land below the surface of the earth. . (New Jersey Zinc Co. v. New Jersey, 13 N. J. Eq. 332; Virginia Coal & Iron Co. v. Kelly, 93 Va. 332; Ryckman v. Gillis, 57 N. Y. 68 ; 20 Am. & Eng. Ency. of Law [2d ed.], 771. See, also, Railroad Law of 1890, § 16, as amd. by Laws of 1893, chap. 316; Railroad Law of 1910, §28.)

The franchise which the railroad acquired by its charter and' by filing the maps and profiles of its route gave it, so far as.- concerned the public, a license to construct and operate its Railroad on the route in question along or over the public lands <' of the State; and it could have crossed the East river without obtaining the consent even of the Commissioners of the Land Office. (Railroad Law of 1890, § 4, subd. 4, §§ 6, 11, 16, as amd. by Laws of 1892, chap. 676, and Laws of 1893, chap. 316; Railroad Law of 1910, § 8, subd. 4, §§ 16, 21, 28; New York Central & H. R. R. R. Co. v. Aldridge, supra) With respect to those portions of this route which were upon, over and under public streets, highways and places under the jurisdiction and control of local authorities, its franchise was not complete without the consent of such local authorities which was required by the Legislature (Railroad Law of 1890, §§ 11, 16, as amd. by Laws of 1893, chap. 316; Railroad Law of 1910, §§ 21, 28); but with respect to the private lands of the State, not in use for public purposes, it needed no further franchise from the State (New York Central & H. R. R. R. Co. v. Aldridge, supra), and the Land Board was not authorized to grant it afranchise. If the lands under the river had been previously conveyed by the State and were owned by individual owners of the upland, the relator might have acquired the same by private grant or by condemnation, and in such case it could not be maintained that it thus acquired a franchise of any nature. Moreover, the Commissioners of the Land Office were only authorized tó represent the State with respect to its proprietary ownership of lands and were not clothed with .any ,of the sovereign power to grant franchises. The Special Franchise Tax Law relates to licenses, permits and grants of public property rights as distinguished from rights in private property even though owned by the State. The “ public franchises ” to which the Special Franchise Tax' Law relates are. subject to control and regulation in the interests of the public (People ex rel. N. Y. C., etc., Co. v. Gourley, 198 N. Y. 486, 492); and in granting the same compensation may be exacted and conditions may be imposed with respect to regulations in .the interests'of the public. (Binninger v. City of New York, 177 N. Y. 199; City of Buffalo v. D., L. & W. R. R. Co., No. 2, 136 App. Div. 274, and cases cited.) Here I think there remained no right to invade or to interfere with this tunnel without making just compensation. The .earth and minerals found in the premises described in and covered by the grant became, I think, the property of the' relator. If thereafter it should be desired ip the interest of some public improvement to change the location or^ this tunnel or to otherwise use the place occupied by it, I think that \ could not be compelled without making just compensation to the ^ relator. A street or steam railroad may be required at its own expense at any time in the interest of the public to change the location of its track in, upon, over or under a public street or highway or crossing. That makes an important distinction between the character of rights or grants that the Legislature intended to desig- . nate special franchises and private grants of part of the right of way even though through public lands not held or needed for public Use. In the one case the use is of public grounds together with the public, and in the other of private premises exclusive of the public: The Special Franchise Tax Law was grafted onto the General Tax Law by chapter 712 of the Laws of 1899, which was entitled An Act to amend the Tax Law, in relation to the taxation of public franchises as real property.” The object of the Legislature was to extend taxation to public franchises which theretofore escaped taxation. (People ex rel. Met. St. R. Co. v. Tax Comrs., 174 N. Y. 417.) The word franchises was used in'the ordinary signification of that word, and has reference to a grant made by the Legislature itself or by some official body, board or officer clothed with authority by delegation from the Legislature to represent the People in granting or completing the grant of a public franchise.

(See People ex rel. Retsof Mining Co. v. Priest, 75 App. Div. 131; affd., 175 N. Y. 511; People ex rel. N. Y. C., etc., Co. v. Gourley, supra.)

I am of opinion, therefore, that the right of way and the tunnel and railroad constructed therein pursuant to' the patent from the State did not constitute a special franchise, and are not taxable by the State Board of Tax Commissioners, but by the commissioners of taxes and assessments of the city of ííew York as ordinary real property held and used by a railroad company for the purposes of its incorporation, as before the enactment of the Special Franchise Tax Law. (Tax Law of 1896, § 2, subd. 3, §§ 3, 9, 47, as amd. by Laws of 1899, chap. 712, and Laws of 1902, chap. 171; Tax Law of 1909, § 2, subd. 3, §§ 3, 9, 49; Buffalo & State Line R. R. Co. v. Supervisors of Erie County, 48 N. Y. 93.)

I, therefore, vote to reverse the order and to remit the proceeding to the Special Term for a further hearing.

Order affirmed, with costs and disbursements.  