People v. O'Brien

• Decision Date: 27 November 1888
• Citation: 111 N.Y. 1,18 N.E. 692
• Parties: PEOPLE v. O'BRIEN et al.
• Court: New York Court of Appeals Court of Appeals

111 N.Y. 1

18 N.E. 692

PEOPLE

v.O'BRIEN et al.¹

Court of Appeals of New York.

November 27, 1888.

Appeal from supreme court, general term, Third department.

Action by the people of the state of New York against John O'Brien, as receiver of the Broad way Surface Railroad Company, the city of New York, the Broadway & Seventh Avenue Railroad Company, and others, for the purpose of determining the respective rights and liabilities of said company and its stockholders, mortgagees, creditors, and contractors. Plaintiff and all the defendants except the two railroad companies appeal.

Charles F. Tabor, Denis O'Brien, and William A. Poste, for the People.

Denis O'Brien, for the receiver.

Alexander & Green, ( William C. Gulliver, of counsel,) for defendants McLean, Bird, Selmes, Pentz, and Richmond.

James C. Carter and Elihu Root, for the Broadway & Seventh Avenue Railroad Company.

Edward Winslow Paige, for defendant Palmer.

Nash & Kingsford and Chas. L. Jones, ( S. P. Nash, of counsel,) for bondholders and mortgagee.

RUGER, C. J.

It will not be unprofitable at the outset to recall some of the prominent incidents attending the origin and operation of the Broadway Surface Railroad Company, for the purpose of obtaining a clearer view of the situation of the parties, and their relation to the subject of the action. On May 13, 1884, that company filed articles of association, and became incorporated as a street railroad company, under the provisions of chapter 252 of the Laws of 1884, a general act passed to authorize the formation of street railroad corporations, pursuant to the mode introduced by the amendment to the constitution of 1875. By such incorporation the company became an artificial being, endowed with capacity to acquire and hold such rights and property, both real and personal, as were necessary to enable it to transact the business for which it was created, and allowed to mortgage its franchises as security for loans made to it, but having no present authority to construct or operate a railroad upon the streets of any municipality. This right, under the constitution, could be acquired only from the city authorities, and they could grant or refuse it at their pleasure. The constitution not only made the consent of the municipal authorities indispensable to the creation of such a right, but, by implication, conferred authority upon them to grant the consent, upon such terms and conditions as they chose to impose, and upon the corporation the right to acquire it by purchase. The framers of the constitution, evidently treating the privilege as a valuable one, which should be disposed of for the benefit of the municipality, to those who would pay the highest price for it, gave the municipal authorities the exclusive right to grant the privilege, which had theretofore been exercised by the legislature alone, and authorized its acquisition by contract from such municipality. In re Cable Co., 109 N. Y. 32, 15 N. E. Rep. 882; Mayor, etc., v. Railroad Co., 49 N. Y. 657. The subsequent legislation of the state confirms this view, for at times it has provided that such right might be sold at auction, and by chapters 65 and 642 of the Laws of 1886 makes it obligatory upon the municipalities to dispose of such right by public auction to the highest bidder. Previous to December 5, 1884, this company applied to the municipality of New York for authority to lay tracks and run cars over Broadway from the Battery to Fifteenth street, and on that day, by resolution of the common council, the consent of the city was given, upon the terms and conditions prescribed in the resolution granting it, among which was the annual payment of a considerable sum of money to the municipality. It is conceded that the Broadway Surface Company duly accepted the grant, and fully complied with and performed all of the terms and conditions provided therein to entitle it to acquire, construct, and operate its road. We know, not only from contemporary history, but from cases which have already reached this court, that serious questions have arisen with reference to the propriety of the means by which the corporators of the company obtained this consent from the municipal authorities, but they are not involved in this case, and have no bearing upon the questions presented for discussion by the record. The company subsequently obtained the favorable report of a commission, duly appointed by the supreme court, in lieu of the consent of abutting property owners, and the order of the court confirming the action of the commissioners. After its incorporation, the Broadway Surface Company mortgaged its property and franchises as security for contemplated loans, and authorized its bonds to be put upon the market, for sale to the public generally, and they were largely purchased by investors, without notice of any defect in their origin or execution. It also made contracts with other street railroad companies owning, respectively, lines of road connecting with the contemplated line of the Broadway Surface Company, and diverging therefrom to distant parts of the city, for the use of their several tracks by each other, for which it received a large present pecuniary consideration from each of said companies, besides the exchange of mutual benefits and accommodations. It is not disputed by the plaintiff but that, upon the entry of the order of confirmation referred to, the Broadway Surface Railroad Company became vested with the right of constructing a railroad on Broadway, and running cars thereon, to as full an extent as it had power to acquire, or the state and city authorities had authority to grant. In the spring of 1885 the company caused its track to be constructed over the route authorized, and, from that time to the 4th day of May, 1886, when it was dissolved by an act of the legislature, in connection with connecting railroad companies, ran its cars over such road and the connecting lines. On May 14, 1886, in an action between the people, as plaintiff, and James A. Richmond, the former president of the Broadway Surface Railroad Company, as sole defendant, upon the application of the attorney general, one John O'Brien was appointed receiver of the property formerly belonging to the Broadway Surface Company, be a justice of the supreme court of the Third judicial district, in an ex parte order based upon the summons and complaint in that action, in pursuance of and under the authority alone of the provisions of chapter 310 of the Laws of 1886.

The present action was brought July 8, 1886, by the attorney general, in the name of the people of the state, against the city of New York, the receiver of the Broadway Surface Railroad Company, and numerous other corporations and persons alleged to have had dealings with such company, either as stockholders, mortgagees, creditors, or contractors, for the purpose of obtaining a judgment declaratory of the rights and liabilities of the several parties as affected by the dissolution of the corporation, determining the fact as to what were assets of the company and the extent of the interests of the several parties therein, and restraining the mortgagees, contractors, and others from taking legal proceedings to enforce their rights in and liens upon the property of the corporation. It is not claimed that the state has any legal interest in the determination of these questions, or that the receiver has not ample power at law to obtain possession of such assets as he may be entitled to, or to protect the property of the corporation from unlawful claims. It is claimed that the action is maintainable under the provisions of section 1 of chapter 310 of the Laws of 1886, by virtue of the provision making it the duty of the attorney general, upon the dissolution of a corporation by legislative action, ‘immediately thereafter to bring a suit to wind up and finally settle and adjust the affairs of such annulled and dissolved corporation.’ The mode by which such settlement and adjustment of affairs shall be made is prescribed particularly in the act, and contemplates the appointment of a receiver, and proceedings by him to take possession of the property and convert it into money, to ascertain and determine the liabilities of the corporation to its creditors, and to distribute its assets among those entitled to them. The complaint shows that, previous to the commencement of this action, the attorney general had brought a suit, in accordance with the statute, to wind up the affairs of the corporation; that a receiver had been appointed therein, and that such action was still pending, undetermined. It then proceeds to allege that, in consequence of various enumerated difficulties in obtaining possession of the property by the receiver, this action was brought ‘in aid of the former action, to prevent a multiplicity of suit, and to carry out the provisions of chapter 310 of the Laws of 1886.’

It is not easy to see on what theory such an action can be maintained. The state has no interest entitling it to intervene to prevent a multiplicity of actions between other parties. Neither does the action seem necessary or proper, in aid of the former action. The mode by which the provisions, of chapter 310 are to be carried out are specially provided by that act to be through the instrumentality of a receiver, and it is not claimed that the receiver lacked power to litigate and settle any of the questions presented by this complaint. The receiver might, perhaps, have brought an action similar in character to this, and would have had a legal interest, if any, in the property to be affected by it; but the state has no such interest, and has no greater authority to intervene in the litigation of controversies between individuals and corporations than any other indifferent party. People v. Booth, 32 N. Y. 397;People v. Ingersoll, 58 N. Y. 13,In re Railroad Co., 70 N. Y. 339;People v. Railroad Co., 89 N. Y. 93;People v. Railroad...