Vill. of Phoenix v. Gannon

• Decision Date: 18 June 1909
• Parties: VILLAGE OF PHOENIX v. GANNON et al.
• Court: New York Court of Appeals Court of Appeals

195 N.Y. 471

88 N.E. 1066

VILLAGE OF PHOENIX

v.GANNON et al.

Court of Appeals of New York.

June 18, 1909.

Appeal from Supreme Court, Appellate Division, Fourth Department.

Action by the Village of Phoenix against William P. Gannon and others. From an order of the Appellate Division (123 App. Div. 93,108 N. Y. Supp. 255) reversing a judgment for plaintiff (55 Misc. Rep. 606,106 N. Y. Supp. 927), plaintiff appeals. Order of Appellate Division reversed, and judgment of Trial Court affirmed.

Prior to December 27, 1902, one G. Adolph Manz made application in writing to the board of trustees of the plaintiff, the village of Phoenix, for permission to construct a street surface railroad in the streets of the village. Notice of the application was duly published in two newspapers, as required by section 92 of the railroad law (Laws 1890, p. 1109, c. 565), and on the date mentioned a or franchise was granted to Manz, ‘his assigns and successors (hereafter referred to as the company), to construct, maintain and operate a street surface railroad’ upon certain designated streets and public places of that village. This franchise provided, among other things, that the road should be completed from the city line of the city of Syracuse to and through the village of Phoenix on or before January, 1905. It further provided that, accompanying the acceptance of the franchise, ‘said company’ should give a bond of $1,000 to commence and complete the construction of the road as specified. Manz accepted the franchise; but, instead of organizing a corporation, he assigned it to the defendants Gannon and Connette and two other individuals. Thereupon the defendants Gannon and Connette, as principals, and the defendant company as surety, executed a bond to the village in compliance with the conditions of the franchise, and conditioned in the sum of $1,000 for the commencement and completion of the road. The road was not built, and the conditions of the bond were not complied with. The village thereupon brought this action upon the bond to recover the penalty therein fixed. The only defense urged upon the trial was that the franchise was void because granted to an individual instead of a corporation, and that there was no consideration for the bond. The trial court rendered judgment in favor of the plaintiff. This judgment was reversed by the Appellate Division, which upheld the contention of the defendants, and the plaintiff now appeals to this court, stipulating for judgment absolute in case of affirmance.

O. M. Reilly, for appellant.

Charles E. Spencer, for respondents.

WERNER, J. (after stating the facts as above.

For the purposes of this discussion it may be assumed that this action cannot be maintained if the franchise is void. The bond upon which the suit was brought was given to insure the proper completion of the road in accordance with the terms and conditions of the franchise. If the franchise was invalid, there was no consideration for the bond, and both failed to become effective. In seeking to determine the validity of the bond, it may properly be considered as an integral part of the one transaction, which must stand or fall in its entirety.

The question whether a municipality can grant to an individual a franchise for the construction and operation of a street surface railroad is not free from doubt; but we are inclined to the view that the question must be answered in the affirmative. Primarily the power to grant franchises in the public streets resides in the state. Municipalities have only such power in this regard as has been delegated to them by the Legislature. Beekman v. Third Ave. R. R. Co., 153 N. Y. 144, 152,47 N. E. 277;Fanning v. Osborne, 102 N. Y. 441, 7 N. E. 307. That this sovereign power has been thus delegated is not questioned. The contention of the defendants is that the law delegating this power to the municipalities of the state does not authorize the granting of such franchises to individuals. The statutory regulations on this subject are now incorporated in the railroad law (Laws 1890, p. 1082, c. 565), and the question whether the defendants' contention is well founded or not must be determined in the light of the statute. It cannot be doubted that the railroad law contemplates that railroads are generally to be constructed and operated through the medium of corporations organized for that express purpose. Corporations thus organized are given the right of eminent domain and many other rights and privileges not possessed by natural persons; but this is far from conceding that an individual may not take and own a franchise to operate a railroad. There are a number of sections in the railroad law which indicate in the clearest terms that the right to own and possess such franchises is not confined exclusively to corporations. Pursuant to the first sentence of section 2: ‘Fifteen or more persons may become a corporation, for the purpose of building, maintaining and operating a railroad, or for maintaining and operating a railroad already built, not owned by a railroad corporation, or for both purposes.’ In section 57 it is provided that: ‘Every person or corporation owning, leasing, operating or in possession of a railroad, wholly or partly in this state, shall make an annual report.’ Section 81 declares that any mortgagee of the property and franchises of a railroad corporation may become the purchaser thereof at foreclosure sale. Article 4 of the railroad law relates specially to street surface railroads, and in the provisions of its various sections there are indications of a legislative intent to confine the actual operation of such railroads to corporations duly organized for that purpose....