
    The People of the State of New York ex rel. Long Island Railroad Company, Respondent, v. The State Board of Tax Commissioners, Appellant. The City of New York, Intervenor, Appellant. (Assessment of 1906.)
    Second Department,
    January 26, 1912.
    Tax— special franchise—right of railroad to enter street.
    Although the right to enter the streets is, under the statute, a special franchise, it seems that it should be limited to a case where the privilege to occupy the street or highway results solely from permission by the proper authorities, and where the railroad company has. no estate or interest in the land itself over which it is operating its road.
    When a railroad is maintaining and operating its road upon its own right of way, and what is done therein is done by virtue of the ownership of the soil or of some interest'therein, even although this right of way may be included within parallel lines upon either, side thereof, constituting • the boundaries of a street or highway, this right is not a special franchise subject to taxation.
    Thus, where a railroad company’s right to use a portion of a street is not by public favor, but because of its ownership of an easement therein, acquired for a valuable consideration, pursuant to contract and legislative act, contemporaneously with the construction of the street itself, •and as a part of the general scheme therefor, it is not taxable as a special -franchise.
    
      Appeal by the defendant, The State Board of Tax Commissioners, and by the intervenor, The City of New York, from an order of the Supreme Court, made at the Kings County Special Term and entered in the office of the clerk of the county of Kings on the 30th day of December, 1910, reversing a determination of the State Board of Tax Commissioners and canceling an assessment.
    
      Curtis A. Peters [Addison B. Scoville and William A. McQuaid with him on the brief], for the appellants.
    
      Alfred A. Gardner [Edgar J. Kohler and Joseph F. Keany with him on the brief], for the respondent.
   Burr, J.:

The question to be determined in this ease is Whether the relator was properly assessed in the year1 1906 for a special franchise, by reason of its occupation for railroad purposes of a strip of land 30 feet in width, lying between the northerly, and the southerly lines óf Atlantic avenue; in the borough of Brooklyn, and extending from a point 252 feet east of Franklin avenue to Stone avenue, which was formerly the easterly boundary line of the city of Brooklyn. The nature of the interest of the relator, and of those through whom it claims, in the said strip of ground, has been the occasion of abundant litigation. It was considered in Matter of Long Island B. B. Co, (189 N. Y. 428), which was an application for the appointment of commissioners to determine whether sidings and turnouts should be constructed in aid of a trolley line which the petitioner therein claimed the right to construct and operate on the surface of Atlantic avenue; in the case of Leffmann v. Long Island Railroad Co. (120 App. Div. 528; affd., 197 N. Y. 513, upon the opinion of Mr. Justice Milled, who wrote for this court), which was an action brought by an abutting property owner to restrain the defendant therein from maintaining, a viaduct, and funning trains thereon, within the confines of said thirty-foot strip; and again in Long Island R. R. Co. v. City of New York (199 N. Y. 288), which Was an action to' restrain the defendant the city of New York from entering upon said strip of ground for the purpose of removing from the surface thereof certain tracks, curbing and other structures laid or erected thereon by the said railroad company after the construction of another road partly above and partly below the surface of said street. It is not necessary in this opinion to set forth at length, as bearing upon the rights of the parties to this proceeding, the history of the development and improvement of Atlantic avenue, the effect of the tripartite agreement entered into on April 10, 1855, between the Brooklyn and Jamaica Railroad Company, the Long Island Railroad Company and the city of Brooklyn, intended to further its accomplishment, the act of the Legislature, passed April thirteenth of the same year (Laws of 1855, chap. 475), intended to ratify and legalize this agreement, the conveyances made subsequently thereto,, the proceedings in connection with the widening and extension of Atlantic avenue instituted in the latter part of 1855, and resulting in a final order confirming the report of the commissioners in 1860, the act of 1897, familiarly known as the Atlantic Avenue Improvement Act (Laws of 1897, chap. 499), or the subsequent act which, although general in form, in fact related to the situation then existing upon said avenue (Laws of 1899, chap. 497). These have been fully considered in the cases above referred to. It must now be deemed to be settled that the interest of relator in said strip is accurately described as “ the exclusive right to use and occupy the thirty-foot strip forever for the purpose of railroad tracks and turnouts and running locomotives and cars thereon without interruption or molestation,” which right is in the nature of an “ easement.” (Long Island R. R. Co. v. City of New York, supra.)

The Tax Law, as it was when this assessment was made, provided as follows: “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 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. ’ ” (Tax Law [Gen. Laws, chap. 24; Laws of 1896, chap. 908], § 2, subd. 3, as amd. by Laws of 1899, chap. 712.) We think that the right which relator has to construct, maintain or operate its road on said strip of land is not such a right as was contemplated by the amendment to the Tax Law providing for the taxation of a special franchise. (Laws of 1899, chap. 712.) The object of this amendment was to reach and subject to taxation “ property scattered all over the State worth nearly two hundred millions of dollars, which was not taxed at all and had never been taxed.” (People ex rel. Met. St. R. Co. v. Tax Comrs., 174 N. Y. 417, 437.) An example of the existing evil which this amendment sought to remedy is to be found in a case arising in this department in 1897- (People ex rel. Brooklyn R. R. Co. v. Neff, 19 App. Div. 590; affd. on opinion below, 154 N. Y. 763.) It appeared in that case that the capital Stock of relator, a street surface railroad company, was of the par value-of $12,000,000. Its actual value, determined by the selling price of the stock in. the market, was over $21,000,000. Its bonded and other indebtedness was a' little less than $7,000,000, and the assessed value of its real estate, including its tracks, was a little more- than $5,000,000. The actual value of its tangible assets was a little in excess of $8,000,000. Although its capital stock was selling at 180, and, although it had leased its road and all its property to another corporation, which had agreed to pay as rental, over the taxes, etc., ten per cent of the capital stock of the company and also the interest on its bonds, under the system of assessment then prescribed and permitted by law, this highly prosperous road stood-more than $4,000,000 below the point at which it would be liable for .any assessment upon its personalty. The gross injustice of such a result led to an earnest effort to devise some method by Which suchan assessment for the purposes of a general tax could be successfully made. The effort failed. The opinion in this court was written by Mr. Justice Cullen, then a member of this court and now the chief judge of the Court of Appeals. He said: “It is insisted that the statement that the company has only. $1,150,000 assets in excess of its liabilities is not to be credited in the face of the fact that the market value of the whole stock exceeds $21,000,000. * * * There is undoubtedly great force in this argument, and it would be unanswerable were there not borne in mind the distinction between the two kinds of assets. If all the assets of this company were only $1,150,000 it would be incredible that any amount of business skill, or any peculiar use of those assets, would make the stock of the company worth in excess of $20,000,000. But there is another asset of the company which it has not returned to the assessors, and which, as we have already seen under the authorities, the law does not require it to return; that is, the franchise of maintaining and operating railroads on some sixty miles of the streets of the city of Brooklyn. This asset may he of sufficient value to warrant even a greater market price for the stock of the relator than that which now obtains.” Shortly thereafter the amendment to the Tax Law, above referred to, was enacted. The language of the tax statute, strictly and literally construed, as well as isolated expressions in the various opinions which have been written upon the subject of the special franchise' tax, might seem to justify the - action of the State Board of Tax Commissioners in the case at bar. Thus in People ex rel. Met. St. R. Co. v. Tax Comrs. (supra) the court say (p. 435): “ When a right of way over a public street is granted to such a corporation, with leave to construct and operate a street railroad thereon, the privilege is known as a special franchise, or the right to do something in the public highway which, except for the grant, would he a trespass.” And again (p. 440): “It ■ is a mere privilege to do something in public streets and places not permitted to citizens genérally,” and again (p. 441), “a railroad cannot occupy a street without a special franchise,” and again (p. 443), “ The franchise is the right to put something in the highway and use it there.” In People ex rel. Hudson & Manhattan R. R. Co. v. Tax Comrs. (203 N. Y. 119) the court say: “ The right to enter the streets is, -under the statute, unquestionably- a special franchise.” But this language must be construed with reference to the facts existing in the cases then under consideration. We think that it should be limited to a case where the privilege to occupy the street or highway results solely from permission by the proper authorities, and where the railroad company has no estate or interest in the land itself over which it is operating its road. There maybe a right of way” owned by a railroad corporation and by reason thereof it may be authorized to construct and operate a railroad over land which subsequently becomes a public street, which right will not necessarily be a special franchise within the meaning of the Tax Law. A railroad company may possibly occupy land which is within the boundaries of an existing public street, and do so by virtue of a right, therein independent of mere permission to use the street. In such case it may not be liable to be assessed as for a special franchise. Asi was said in People ex rel. Met. St. R. Co. v. Tax Comrs. (supra): “The statute should be considered in the light of the circumstances existing when it was passed, which were extraordinary and unprecedented.” When a railroad is ■ maintaining and operating its road upon its own right of way, and what is done therein is done by virtue of the ownership of the soil or of some interest therein, even although this right of way may be included within parallel lines upon either side thereof,. constituting' the boundaries of a street or highway, this right is not a special franchise, subject to taxation. This seems to be clearly within the principle established in People ex rel. Hudson & Manhattan R. R. Co. v. Tax Comrs. (supra) and People ex rel, N. Y. C. & H. R. R. R. Co. v. Woodbury (203 N. Y. 167). In the latter case it was said: A street crossing franchise consists of the right to lay tracks across a street and use them, when but for a grant of the right to do so from competent public authority it would be a trespass.” But “ if, after they have their rights of way secured over private land, a public highway is laid across the tracks, while there is- a crossing it is not a crossing made by the railroad or through public favor so far as the railroad is concerned.” If it possesses its right of way by purchase or as matter of right, it does not hold it as matter of “ public favor,”

It may be an anomalous situation that a railroad corporation should hold a private and exclusive right of way through a public thoroughfare, but the situation with regard to Atlantic avenue and the improvement thereof is an anomalous one, and must be dealt with accordingly. It is doubtful if it has a parallel anywhere within the State. Prior to 1855 we find relator or its predecessors in interest owning a private right of way to the north of the then existing line of a projected street as laid down on the map, but not actually opened. We find it entering into an agreement with the city of Brooklyn, by means of which, in order to enable the latter to construct “a noble avenue 120 feet wide ” (Matter of Long Island R. R. Co., supra), it ceded to the city the land which- it owned in fee, receiving as a consideration therefor “forever * * the exclusive right to use and occupy a strip or space of the width of thirty feet ” in the center of said avenue as widened and extended. The avenue from the very moment of its construction was “ subject to an easement for railroad purposes over the central portion.” (Matter of Long Island R. R. Co., supra.) Relator’s right to the use of this portion of the street was not by public favor, but because of its ownership of an easement therein, acquired for a valuable consideration, pursuant to contract and legislative act, contemporaneously with the construction of the street itself, and as a part of the general scheme therefor. It was a right founded upon an interest in the land itself. If this is not the case of a street coming to a railroad, as in People ex rel. N. Y. C. & H. R. R. R. Co. v. Woodbury (supra), neither is it the case of a railroad coming to an existing street. Both the street and the railroad easement came into existence together. No additional right was conferred upon the railroad by the construction of the street. On the contrary, in connection with such construction, it acquired a right of way therein only by way of easement, while surrendering and ceding a right of way in fee. Nor is-this a case where relator is seeking to evade its just liability to taxation. Previous to the passage of the special franchise amendment, for a long period of years it had been taxed upon its property rights in this strip and had discharged its obligations in connection therewith.

We deem the action of the State Board of Tax Commissioners erroneous, and the' order vacating and setting aside the assessment of the- relator as for a special franchise should he affirmed, with ten dollars costs and disbursements.

Jenks, P. J., Hirschberg, Woodward and Rioh, JJ., concurred.

Pinal order affirmed, with ten dollars costs and disbursements.  