
    New York Telephone Company, Appellant, v. City School District of the City of Binghamton et al., Respondents.
    Argued March 30, 1966;
    decided May 5, 1966.
    
      
      A. Lawrence Abrams for appellant.
    I. Since the adoption of the City School Law, defendant no longer is nor can it be treated as a department of the City of Binghamton within the intendment of the resolution of 1896, nor is it entitled to the benefits of said resolution. (Matter of Hotel Assn. of N. Y. City v. Weaver, 2 A D 2d 957, 3 N Y 2d 206.) II. Section 49 of chapter 762 of the Laws of 1950 does not give defendant the right to the benefits of the Common Council Resolution of 1896. (Beveridge v. New York El. R. R. Co., 112 N. Y. 1; Moch Co. v. Rensselaer Water Co., 247 N. Y. 160; Matter of Clark v. Allen, 7 A D 2d 144; Matter of City of New York, 228 N. Y. 140.) III. The decision of the Appellate Division constitutes an interpretation of the City School Law which not only creates confusion in the law but results in an impairment of the obligation of contract in violation of section 10 of article I of the Constitution of the United States. (Southern Bell Tel. & Tel. Co. v. City of Meridian, 154 P. Supp. 736; Owensboro v. Cumberland Tel. Co., 230 U. S. 58; Mount Pleasant v. Beckwith, 100 U. S. 514; Graham v. Folsom, 200 U. S. 248; Preston Co. v. Funkhouser, 261 N. Y. 140; Carder Realty Corp. v. State of New York, 260 App. Div. 459; Courtesy Sandwich Shop v. Port of N. Y. Auth., 12 N Y 2d 379.) IV. The decision of the Appellate Division gives defendant special privileges which are forbidden by subdivision 3 of section 92 of the Public Service Law. (Curtis v. Eide, 19 A D 2d 507.) Y. That plaintiff has treated defendant as a department of the City of Binghamton in the past does not work an estoppel against plaintiff now. (New York Tel. Co. v. Board of Educ. of City of Elmira, 270 N. Y. 111; Farmers Loan & Trust Co. v. Park & Tilford, 127 Misc. 59; City of New York v. New York City Ry. Co., 193 N. Y. 543; Faingnaert v. Moss, 295 N. Y. 18.)
    
      Hugh J. Heffern for respondents.
    I. Under the statute creating the city school district, defendant succeeds to all contracts entered into and undertaken by the city prior to July 1, 1951, including the contract with plaintiff. (Gunnison v. Board of Educ. of City of N. Y., 176 N. Y. 11; Matter of Fuhrmann v. Graves, 235 N. Y. 77; Rochester Tel. Co. v. Ross, 195 N. Y. 429.) II. The practical interpretation by the parties during the life of the franchise from its inception in 1896 to January, 1953, confirms the rights of defendant to the continued benefits of it. (Bohl v. City of Schenectady, 128 Misc. 863; Dermott v. State of New York, 99 N. Y. 101; People ex rel. New York Cent. & H. R. R. R. Co. v. Walsh, 211 N. Y. 90; Matter of Emerson v. Buck, 230 N. Y. 380 ; Board of Educ. of City of Syracuse v. King, 280 App. Div. 458; Bush v. Board of Managers of Binghamton City Hosp., 251 App. Div. 601; Town of Pelham v. City of Mt. Vernon, 304 N. Y. 15; New York Tel. Co. v. Board of Educ. of City of Elmira, 270 N. Y. 111; Emergency Fleet Corp. v. Western Union Tel. Co., 275 U. S. 415.) III. This continuance of free and discounted service to defendant is not in violation of the Public Service Law. (Matter of Brown v. Board of Trustees of Town of Hamptonburg School Dist. No. 4, 303 N. Y. 484; Wodetzky v. Board of Educ. of City of N. Y., 173 Misc. 136; Maltby & Sons Co. v. Wade, 131 Misc. 143; Matter of Breen v. Board of Trustees of N. Y. Fire Dept., 299 N. Y. 8.) IV. To deny defendant of its benefits under the franchise is an impairment of the obligations of contract in violation of section 10 of article I of the Constitution of the United States. V. No conflict exists with opinions of the Comptroller.
   Fuld, J.

The plaintiff telephone company seeks a judgment declaring that the defendants — the City School District of the City of Binghamton and the Board of Education of the City School District—are no longer entitled to telephone service at the reduced rates which they had previously been charged. The Appellate Division, which heard the case in the first instance on submitted facts (see CPLR 3222 [formerly Civ. Prac. Act, § 546]), granted judgment for the defendants dismissing the complaint and the appeal is here by our permission.

In 1896, one of the plaintiff’s predecessors, the New York and Pennsylvania Telephone and Telegraph Company, agreed to provide “ Departments ” of the City of Binghamton with telephone service at half rates in return for the right to construct subways ” for communications equipment under the city’s streets. Defendant Board of Education, as a city department ”, received such service without question until 1953, when the plaintiff gave notice of its intention to discontinue granting reduced rates to the school system. It is contended that the defendant is no longer a “ city department” and, hence, can derive no benefits from the 1896 agreement.

Up to 1951, although the Board of Education was vested with the authority to expend public funds for educational purposes, the city actually levied the taxes and made the necessary appropriations. However, in 1951, pursuant to the new City School' Law (L. 1950, ch. 762, as amd.; L. 1950, chs. 763, 764), a fiscally autonomous school district was created for the City of Binghamton and the Board of Education, acting independently of the city, thereafter levied the taxes required to run the city’s schools. Title to real and personal property used for educational purposes was vested in the City School District instead of in the city and the Legislature additionally provided that the school district was to ‘ ‘ succeed to and assume all contracts, condemnation proceedings or other proceedings * * * for educational purposes entered into or undertaken by the city prior to such date * * * it being the intention that the city school district be substituted in the place and stead of such city in all actions, contracts or other matters, growing out of or relating to the possession, ownership, operation, extension and management of schools in such city school district ” (L. 1950, ch. 762, § 49).

Within the sense of the agreement under consideration, the defendant is certainly no more and no less a city department than it was before the new statute was enacted; this status did not change just because the city ceased collecting school taxes. Prior to 1951, the city was nothing more than a " custodian and depository of school funds” which were actually “under the care, control and administration of the board of education”. (Gunnison v. Board of Educ., 176 N. Y. 11, 17.) Even at that time, the boards of education were “ not subject to or controlled by the city authorities * * * [but were] clothed with authority to act independently ” of them. (Matter of Fuhrmann v. Graves, 235 N. Y. 77, 82.)

It follows, therefore, that, if the Board of Education was previously a “ city department ” entitled to discounted telephone service, the defendant is likewise a “ city department ” entitled to the same privileges. And this conclusion is confirmed by the provisions of section 49 of chapter 762 of the Laws of 1950, pursuant to which the defendant succeeded to all the rights and obligations under the contracts which the city had previously entered into for educational purposes. Since telephone service at reduced rates for the school system was part of the city’s contract with the plaintiff,, this contract is among those to which the defendant “ succeeded ”.

The plaintiff’s argument that education is not a “ city purpose ” must likewise fail. If education was, in effect, a “ city purpose ” between the years 1896 and 1951, it did not cease to be so simply because of a change in fiscal arrangements between the city and the Board of Education. Indeed, in New York Tel. Co. v. Board of Educ. (270 N. Y. 111, 116), we held that a grant of discounted telephone service- to “ city departments ” was “ equivalent to providing half rates for ' city purposes.’ ” Not only was the Board of Education regarded as a “ city department,” but “ city purposes,” we noted, quoting from Board of Educ. of City of Rochester v. Van Zandt (119 Misc. 124, 126, affd. 204 App. Div. 856, affd. 234 N. Y. 644), included “ ' educational as well as other state [and municipal] functions ’ ” (270 N. Y., at pp. 116-117).

We have considered the plaintiff’s other contentions and find them without merit.

The judgment of the Appellate Division should be affirmed, with costs.

Chief Judge Desmond and Judges Van Voorhis, Burke, Scileppi and Keating concur; Judge Bergan taking no part.

Judgment affirmed. 
      
      . It having been stipulated that the two named defendants constitute a “ single body corporate ”, they are hereinafter referred to as a single “ defendant ”.
     