
    The People of the State of New York ex rel. Interborough Rapid Transit Company, Respondent, v. The State Board of Tax Commissioners, Appellant.
    Third Department,
    May 6, 1908.
    Tax—Interborough Rapid Transit Company not liable to franchise tax — statutory exemption not impaired by subsequent legislation — statutory construction — repeals by implication.
    The Interborough Bapid Transit Company, as lessee or operator of subway railroads owned by the city of New York, is not subject to a special franchise tax on account of the rights which it exercises under its contract with the city.
    The express exemption from taxation of the lessee or operator of said subway railroad on property, other than real property owned or employed by it in the construction or operation of the road, was not impaired by the subsequent enactment of the provision of the Tax Law declaring a special franchise to be real estate for the purposes of taxation. '
    
      It seems, moreover, that the Legislature would be powerless to destroy the exemption after a contract is made in reliance thereon.
    The courts, by a doubtful construction, will not impute to the Legislature an intent to violate the promise of exemption by which the city was aided in obtaining a contractor upon favorable terms.
    Where two acts are passed at the same session it is presumed that the Legislature did not intend to repeal the earlier act by implication.
    Appeal by the defendant, The State Board of Tax Commissioners, from a judgment of the Supreme Court in favor of the relator, entered in the office of the clerk of the county of Albany ■ on the 11th day of September, 1907, upon the decision of the court, rendered after a trial at the Albany Special Term, canceling the defendant’s assessment of a special franchise tax against the relator for the year 1905.
    
      William S. Jackson, Attorney-General [George P. Decker, Deputy, of counsel], for the appellant.
    
      Strong & Cadwalader [George W. Wickersham, Edward E. Sprague and Stephen P. Nash of counsel], for the respondent.
   Kellogg, J.:

The original Rapid Transit Law (Laws of 1891, chap. 4) contemplated that the city, by its rapid transit commissioners, should establish routes, obtain the necessary consents of the local authorities and the property owners, make plans and specifications for a subway, and sell to the highest bidder, for the benefit of the city, the privilege and franchise to construct, maintain and operate it. The amendment by section 63, chapter 752 of the Laws of 1894, permitted a vote of the people to determine that the subway should be constructed by and at the expense of the city, and provided that if so constructed it “ shall be and remain the absolute property of the city * * * and shall be and be deemed to be a part of the public streets and highways of said city, to be used and enjoyed by the public upon the payment of such fares and tolls, and subject to such reasonable rules and regulations as may be imposed and provided for by the board of rapid transit railroad commissioners in said city.”

The vote of the people determined that the subway in Hew York should be constructed for and at the expense of the city, and a contract was let to ■ one McDonald for the construction, maintenance and operation of the road. He, as the statute provided, was to pay a certain rental for the use of said road, and furnish the rolling stock and equipment.

Chapter 544 of the Laws of 1902 permitted the contractor to assign his contract, with the consent of the commission, for the construction and the operating or leasing provisions of such contract ” separately, and pursuant thereto the provision of the contract for leasing or operating the road was assigned to the relator.

The right of the relator to exist as a railroad company, and to maintain and operate a railroad, is its general franchise, with which we are not concerned here. A special franchise of a railroad is its right to construct, maintain and operate a railroad in public streets, highways or public places. (People ex rel. Met. St. R. Co. v. Tax Comrs., 174 N. Y. 417, 435, 436.) By the Bapid Transit Law and the acts amendatory and supplemental thereto, the special franchise as well as the road itself is the property of the city,, and is merged in and became a part of the public highway for the public use.

Had this underground highway been constructed for the use of automobiles, or a particular class of vehicles owned by individuals, it would not be considered that the operator of such vehicles thereon was exercising a public franchise in the highway, although he paid a toll each time he used it; and if a vehicle of the class intended charged a fare to those riding therein, the situation would not be changed.

The city itself was not given the power of a railroad corporation, and was, .therefore, incapable, except through the contract which the statute authorized, of making this public work available for public use. For the purposes of this case it is unnecessary to determine whether the relator is technically a lessee, an operator or a separate contractor who performs a public service which J;lie city could perform only through the agency of another, and the performance of which it was its duty to provide. However the matter is viewed, we find a public highway, operated in a manner required by the statute and the commission in charge of it, the operator paying a fixed sum to the city for the use of the property and the balance of the fares are held by it for performing the public service. The statute defines the relator as an “ operator,” or a “ lessee,” speaks of the “ rental for the use of said road ” and provides that the contract may permit “ a renewal or renewals of the lease of said road.”

The only question for decision here is whether the relator is subject to -a special franchise tax on account of the rights which it exercises under said contract.

A special franchise with reference to a railroad is the right to construct, maintain or operate it over, upon or under public streets, highways or public places, including the tangible property of the railroad in use over, upon or under the highway. (Tax Law [Laws of 1896, chap. 908], § 2, subd. 3, as amd. by Laws of 1899, chap. 712.)

Where the railway is located entirely in or under the streets, highways or public places, the special franchise consists of the physical property itself, including the right to use it. Said subdivision 3 provides: “Ho property of a municipal corporation shall be subject to a special franchise tax.” Section 4 of the Tax Law, in declaring what property is exempt from taxation, provides: 3. Property of a municipal corporation of the State held for a public use, except the portion of such property not within the corporation.”

If the city had been given power to operate this road, it is clear that no franchise tax could be charged against it. As the city can only operate it through another, it would seem to follow that the operator for the city is also exempt from taxation. The general scheme of the statute under which this subway was built was: The city bonded itself to pay for the construction of the road, which bonds, with interest thereon, are to be paid by the operation of the road, so that at the end of the lease or contract for operation, the city will own the road free of cost. It was, therefore, necessary, in order to make the scheme available, to find a contractor who would agree to construct, maintain and operate the road upon terms which the statute permitted the city to make. A statute declaring the property of a municipality free from taxation, which property it can only use through the services of a special contractor or lessee, confers no benefit upon the city if the contractor or lessee is to be taxed for using the property, as the amount of the tax would necessarily affect the rental which the city may receive. The statutory exception, therefore, is meaningless unless it exempts the property from taxation when applied to the only use and in the only manner in which the city could use it.

A special franchise, as we have seen, is only taxable as real estate, and section 9 of the Tax Law provides, among other things, “ when real property is owned by a resident of a tax district in which it is situated, it shall be assessed to him.” It can only be assessed to a tenant or an occupant when the owner does not reside within the tax district. If taxable, therefore, this subway, or the franchise relating to it, is taxable to the owner and not to the tenant or operator, and it would seem necessarily to follow that if the owner is exempt from taxation the tenant or occupant must also be exempt.

■ The Legislature, however, has not left the question open as one of construction or inference, but has by express provision extended the exemption to the operator or lessee of the city. This latter exemption was first contained in the amendment of 1894, which permitted the city to construct and own the subway and contract for its operation, and that statute in its present form is found at section 35, chapter 616, Laws of 1900, and provides that “ the person, firm or corporation operating such road shall be exempt from taxation in respect to his, their or its interest therein under said contract and in respect to the rolling stock and other equipment of said road, but this exemption shall not extend to any real property which may be owned and employed by said person, firm or corporation in connection with the construction or operation of said road.” This exemption was undoubtedly intended to make the proposed contract for operation or the lease attractive, and to aid the city in securing a proper contract for the operation of the road at a profit to it. So far as the road and the franchise of the road itself are concerned, I think they were exempt by the provision - of the statute exempting the municipality from a special franchise tax. This statute not only confirms that exemption, but also makes exempt the rolling stock and equipment.

In operating the subway the relator (1) exercises its general franchise, which cannot be considered here for taxation; (2) uses certain real estate actually owned by it, which is taxable as real estate and cannot be considered here; (3) exercises rights which it acquires under contract with the city and for which it pays the city a rental, which rights, as we have seen, are specially exempt from taxation by the provision of the Tax Law and the Eapid Transit Law; (4) uses equipment and rolling stock belonging to it, which are exempt from taxation under the Eapid Transit Law, but which if taxable are taxable as personal property and cannot be considered here. It, therefore, is not subject to any special franchise tax. '

The contention that the subsequent statute declaring a special franchise real estate for the purpose of taxation deprives the relator of the exemption provided for it under the Eapid Transit Law, is not well taken. The exemption relates to all interests the relator acquired under the contract, whether such interests relate to real estate or personal property. The taxation provided for is upon the real estate actually owned by the operator. The statute draws the proper distinction between the real estate owned by the operator and the property, real or personal, not owned by him b.ut operated under the contract with the city. It may well be questioned whether the Legislature, if disposed so to do, could destroy the promised exemption after the contract was made relying upon it. The courts, by a doubtful construction, will not impute to it an intent to violate the promise by which the city was aided in obtaining a contractor.

It is urged that the Tax Law (General Laws, chap. 24 ; Laws of 189.6, chap. 908) repeals by implication section 35 of the Eapid Transit Law which contains the exemption from taxation. Section 35 of the Eapid Transit Law'was amended May nineteenth by chapter 729 of the Laws of 1896, and the Tax Law was enacted May twenty-seventh at the same session of the Legislature. Where two acts are passed at the same session, it is presumed that the Legislature did not intend to repeal by implication the earlier act, and such is the provision of the Statutory Construction Law (Laws of 1892, chap. 677, § 33). We have seen that section 35 of the Eapid Transit Law was again substantially re-enacted in the year 1900. The exemption provided by section 35 of the Eapid Transit Law was omitted from the amendment of that law made by section 2 of chapter 599 of the Laws of 1905 ; but that chapter provided that nothing in it should repeal, modify or alter any provision of the act amended with respect to any road constructed, constructing or contracted for before the act took effect, and as to existing roads the act amended was to continue and remain in full force. Here the Legislature does not permit its good faith to be questioned, but provides that the former law shall remain in full force so far as it has been acted upon. The entire legislation upon the subject seems to be consistent only with the theory that the operator is not liable for any tax on account of the rights it holds under the contract. It is not, therefore, liable for any special franchise tax. The judgment appealed from should, therefore, be affirmed.

Judgment unanimously affirmed, with costs. 
      
       Section was added by act of 1894. See, also, Laws of 1895, chap. 519, § 30.— [Rep.
     
      
       Sec § 34, added by Laws of 1894, chap. 753, and amd. by Laws of 1896, chap. 739, and subsequent amendments.— [Rep.
     
      
      
         Amending § 34, added by Laws of 1894, chap. 753.— [Rep.
     
      
       See Laws of 1891, chap. 4, § 35, added by Laws of 1894, chap. 752. Amd. by Laws of 1896, chap. 729, and Laws of 1900, chap. 616.— [Rep.
     
      
       See § 3.— [Rep.
     