Case ID: ad_72/html/0132-01.html
Source: Caselaw Access Project
Author: {"author": "Hatch, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Augustus D. Shepard, Appellant, v. The Manhattan Railway Company and The Metropolitan Elevated Railway Company, Respondents..
    
      Beservation, in a conveyance of property abutting on an elevated railroad, of all claim to damages f or its construction and operation—right of the grantor in such ■ conveyance, in a judgment recovered by a subsequent grantee of the premises against the railroad company for such'damages—the grantor remitted to an application for an injunction restraining the payment of the recovery to the grantee, on the granting of which a bond would be required to indemnify the grantee against. loss of interest while the injunction should, be operative.
    
    The Western Union Telegraph Company, being the owner of certain property located in the city of New York, conveyed it to George W. Tubbs by a deed which contained the following reservation: “ The party of the first part hereto reserves all claim or right of action against the Metropolitan and Manhattan Elevated Railway Companies, or either of them, for any and all injury or damage done to the aforesaid property, ór to the value or uses thereof in the past, present or future, by reason of the construction and operation of the elevated railroad in front of the said premises, as it is now constructed and operated.” After several mesne conveyances, the property was conveyed to Augustus D. Shepard by a deed which contained the following clause: “Damages to said premises arising by reason of the elevated railroad as now constructed and operated in front of said premises have been reserved to the Western Union Telegraph Company, a former owner.”
    Shepard brought an action against the railroad companies to recover damages .for the appropriation of the easements appurtenant to the property, which resulted in a final judgment, by the terms of which the defendants were required to pay to the plaintiff a sum in excess of $100,000, and the plaintiff, upon such payment, was required to execute and deliver a conveyance of the property rights appropriated by the defendants.
    After the commencement of such action, the Western Union Telegraph Company brought an action against Shepard and the other parties interested in the controversy to impress a trust upon the funds which might be recovered by-Shepard from the railroad companies. The complaint in such action was dismissed by the Trial Term and the judgment was affirmed by the Appellata Division. The Court of Appeals, however, reversed the judgment and ordered a new trial, holding that the effect of the reservation contained in the deed from the Western Union Telegraph Company to Tubbs was to make Shepard a trustee for the company, but it did not assume to determine whether, under the circumstances of the case as they might be developed upon the trial of the action, the Western Union Telegraph Company would necessarily take the whole of the recovery or any part of it.
    Upon an appeal from an order made in the action brought by Shepard against the railroad companies directing the defendants to pay into court the amount of the judgment rendered against them and directing the plaintiff to execute the conveyances required by the terms of such judgment, it was
    
      JETeld, that the Court of Appeals contemplated that the damages recovered by Shepard from the railroad companies might be the subject of apportionment between him and the telegraph company.
    That, in any event, Shepard as trustee was entitled to retain from the recovery a reasonable allowance for costs and expenses incurred in the production of the recovery, and that such right included, the reasonable fees paid or agreed to be paid to his attorney and counsel in the litigation, and that the telegraph company had no beneficial interest in the damages recovered for loss of rent after the conveyance by it;
    That, as it appeared that Shepard and his attorney had a substantial interest in the fund, he should not be obliged to suffer the loss which would result from the reduction in the earning power of the fund when paid into court;
    That the telegraph company could protect itself from any loss by procuring, an injunction in the action brought by it, restraining the payment of the recovery to Shepard, upon which application it would be required to give a bond which would indemnify Shepard against any loss which he might sustain by • reason of "his failure to receive the money under the judgment obtained by " him;-
    That, consequently, the order appealed from should be reversed without prejudice to the right of the "Western Union Telegraph Company to make application for'the injunction indicated.
    Appeal by the plaintiff, Augustus D. Shepard, from an order of the Supreme Court, made at the New York Special Term and entered in the office, of the clerk of the county of New York on the 27th day of February, 1902, directing the defendants to pay into court the amount secured to be paid by virtue of a certain judgment rendei’ed against them in favor of the plaintiff, and that plaintiff make conveyance of his interest in the property, and execute certain releases to the defendants.
    
      William G. Peckham, for the appellant.
    
      Push Taggart, for the respondents. •
   Hatch, J.:

The record in this case discloses a peculiar and novel condition. The plaintiff in the action was the owner of abutting property on the street in which the defendants constructed, maintained and operated their elevated railroad. The plaintiff brought his action to recover damages for the appropriation by the railroad of his property rights in the street and succeeded in recovering therefor, as rental and fee damages, a sum in excess of $100,000. This judgment was carried, through all the courts and was finally affirmed in the Court of Appeals, by which affirmance the defendants were required to pay the sum of money secured to be paid by the judgment of affirmance, and the plaintiff upon such payment was required to execute and deliver a conveyance of the property rights appropriated by the defendants. This was a final judgment of the court of last resort and, as between these parties, it finally and conclusively fixed their respective rights, which were that the defendants must pay the sum secured to be paid within a specified time or be enjoined from the maintenance and operation of their railroad, and the plaintiff was required, upon tender of the sum awarded as his damages, to execute the conveyance. It'is evident, therefore, that extraordinary conditions must exist in order to justify the Supreme Court in interfering with the enforcement by the plaintiff of his judgment, as, by such result, the plaintiff is deprived of the fruits of a protracted and hotly contested litigation made necessary by the defendants’ trespass. The alleged extraordinary circumstances, out of which proceeds this exercise of power now invoked are found in the following facts :

The property, which was the subject of the action was originally owned by the Western Union Telegraph Company. On June 4, 1888, this company transferred the property by deed to George W. Tubbs, and by a clause contained therein reserved certain rights in the following language: “ The party of the first part hereto reserves all claim or right of action against the Metropolitan and Manhattan Elevated Railway Companies, or either of them, for any and all injury or damage done to the aforesaid property, or to the value or uses thereof in the past, present or future, by reason of the construction and operation of the elevated railroad in front of the said premises, as it is now constructed and operated.”

Through several mesne conveyances the title to the property became vested in J. N. and L. N. Levy, who conveyed the same to the plaintiff in this action. In the deed to the plaintiff was contained a reservation in these words: “ Damages to said premises arising by reason of the elevated railroad as now constructed and operated in front of said premises have been reserved to the Western Union Telegraph Company, a former owner.”

Upon the trial of this action the railroad company moved to dismiss the complaint upon the ground that the cause of action, if any, was not vested in the plaintiff therein, but was owned by the Western Union Telegraph Company, by whom alone the claim could be enforced. The trial court, as have all the other tribunals who have examined this question, rejected such claim, holding that the easements were appurtenant to the property and passed with the fee; that they could not be severed therefrom; and that the right to recover for an invasion thereof became vested in the owner of the. fee and could only be enforced by him. (Shepard v. Manhattan R. Co., 169 N. Y. 160.) Subsequent to the bringing of this action the Western Union Telegraph Company brought an action against the plaintiff, making parties thereto the grantee Tubbs, all other mesne holders of the title after conveyance to him, and the. defendant, the Manhattan Railway Company. By the complaint in that action the Western Union Telegraph Company sought to impress a trust upon the funds which might be recovered in the plaintiff’s action against the railway company.

The complaint stated all the facts connected with the transaction and demanded relief, among other things, that the plaintiff and the defendant railroad be enjoined from making any settlement of such action or of paying the money, or in any manner compromising the same; that the defendant Shepard be declared to be a trustee for the plaintiff in the action, and that he be compelled to pay to it all money which he i~ight recover in lus action. The Western Union Telegraph Company by petition sought to intervene as a party in the action of Shepard against the Manhattan Railway Company before the trial of the same, but the motion was denied (Shepard v. Met. El. R. Co., 82 Hun, 527; affd. on appeal, 147 N. Y. 685), and motion for reargument of the same was thereafter denied. (Id. 713.) Thereafter the Western Union Telegraph Company brought its action to trial, when the complaint .was dismissed, and upon appeal to the Appellate Division the same was affirmed. (Western Union Telegraph Co. v. Shepard, 49 App. Div. 345.) On appeal to the Court of Appeals the judgment entered thereon was reversed. (169 N. Y. 170.) By this last decision it was determined that, while a grant of land carries with it all the easements and the right to recover damages for an invasion of the same, yet, where there has been a reservation of the damages for the invasion of such easements by a former grantor, the owner of the fee as to such grantor occupies the position of a trustee and that equity will decree a recovery against him, as trustee, for the~ reserving grautor. As ~e nnderstand thi~ case, it clearly determines that the effect of such a reserve tion as w~s contained in the deed of the Western union Telegraph Company in the absence of all other considerations, was to vest in it the equitable right to the~ moneys recovered; and that Shepard, as owner, became, by operation of~ law and the effect of the reservation, a trustee f~r suëh company. It is noticeable, however, that the Court of Appeals, while laying down this rule as a general proposition, did not assume to determine as an absolute rule of law, under the circumstances of this case, as they might be developed upon the trial of the action, that the Western Union Telegraph Company would necessarily take the whole of the recovery or any part of it. On the contrary, it was expressly recognized that the damages recovered by Shepard might be the subject of apportionment between the Western Union Telegraph Company and Shepard, and it was for that reason that the court granted a new trial. It is plain, therefore, that the court contemplated that a state of facts might be developed whereby it would be shown that the Western Union Telegraph Company ought not to have or take anything upon the fair application of equitable rules. In any event, Shepard, as trustee, is entitled to retain from the recovery a reasonable allowance for costs and expenses incurred in its production, and such right includes the reasonable fees paid or agreed to be paid to attorney and counsel in the litigation which has resulted in producing the fund. ( Woodruff v. N. Y., L. E. & W. R. R. Co., 129 N. Y. 27.)

The Court of Appeals had under consideration only the averments in the complaint and the reservations contained in the respective deeds set out therein. The court held that the averments of the complaint were to be so construed as to equitably secure to the telegraph company some of the moneys at least which might be recovered in Shepard’s action.. It is clear, however, that after the telegraph company parted with its title to the premises it could not be damnified for any loss of rents which was thereafter suffered as it was not the owner nor entitled to the occupancy of the premises, nor of any rents which might be produced therefrom. The owner of the property became legally entitled thereto and they could not be severed from his beneficial ownership by any reservation which might be made. The Court of Appeals in its decision construing the complaint of the telegraph company has not passed upon such question and we are at a loss now to see how the telegraph company has any beneficial interest in the damages which have been recovered for loss of rents after such company conveyed away its title to the premises. It is noticeable also that the telegraph company nowhere in its complaint avers in terms that the reservation was based upon any consideration, or that there was deducted from the purchase price of the property any sum on account thereof. On the contrary, it stands squarely on the language of the reservation itself and the inferences that arise therefrom. In the answers of the subsequent grantees of the property, who conveyed to Shepard, it is averred that the value of the easements was excluded from the purchase price paid by Shepard for the property, but these grantees have no interest in such question as they have not reserved to themselves any rights in the property of any - description. The contest over the fund is between the telegraph company and Shepard and those interested therein with him. How far and to what extent these subjects may be considered' in apportioning the funds according to the respective rights of the parties, it is not now necessary for us to determine as all the facts necessary to settle the respective rights are not now before us. Consequently we express, no opinion thereon.

In Shepard’s action against the railroad, judgment'was entered' upon the remittitur on the 24th day of December, 1901, and the time within which the defendant railroad company was required to make a tender of the sum required to be paid thereunder for the conveyance expired on the 13th day of January, 1902. On December 27,1901, the Western Hnion Telegraph Company obtained an order to show cause why the moneys which were collectible from the railroad company should not be paid into court in its action to abide the further action and decree of the court with respect thereto. Such order also contained an injunction restraining Shepard, his agents, attorneys and employees, from taking steps to enforce the judgment or to receive the money thereon and also restraining the defendant’railroad, its agents and employees, from paying the same or taking other steps to procure a satisfaction thereof.

It is claimed by the telegraph company that it is entitled to impound this money, as the equitable owner thereof, and to restrain payment of the same to its trustee Shepard. It is claimed by the latter that, notwithstanding the decision of the Court of Appeals, he is not only the legal but the equitable owner of the fund in question, and is entitled to have and receive the same, and that even-if he be treated as a- trustee, yet he is a man of large, means and financially able to respond to the telegraph company for any interest it may have in the fund, and that, as it is admitted that he is legally entitled to-, the custody of the money and has a judgment directing its payment to him,, the court not only ought not to impound it, but -has no -power .so to do. The defendant railroad company is ready, willing and desirous of paying the judgment to whomsoever the court shall adjudge that it shall be paid, and it is anxious to make such payment in order to stop accumulation of interest. As at present situated, however, it is liable to an injunction restraining the operation of its railroad by virtue of the judgment if it does not satisfy the same, and if it does, is subject to punishment for contempt in violating the injunction order of the court restraining it from paying. It is manifest, therefore, that the railroad company should have some measure of relief from the upper and nether millstone of judgment and orders. We do not think, however, in view of these facts and the attitude of the respective parties, that the present order should be sustained.

The discussion already had is sufficient to show that Shepard has a substantial interest in this fund, as has also his attorney, even though it be finally adjudicated that the recovery belongs to the telegraph company, or it may be that he will eventually establish his right and title to the whole thereof. Under such circumstances, we think he ought not to be placed in a position where he.will suffer loss. If the money be paid into court it is in defiance of the terms of the judgment which directs its payment to him, and whether he. be a trustee or not, it is undisputed from the record in this case ; nor is any claim otherwise made, so far as we are aware, that he is not abundantly responsible .to answer to the telegraph company for the amount to which it shall show itself entitled. If the money be paid into court it amounts to a very great reduction of its earning power, and Shepard is entitled by his judgment to receive this money or have it so placed that there will be no diminution of earning power to the extent that he has interest therein. It is clear that the telegraph company can easily protect itself from any loss by procuring an injunction in its action restraining the payment of the money over to Shepard. Under such an application it will be required to give a bond which would indemnify Shepard for any losses which he might sustain by reason of his failure to receive the money under the judgment which he has obtained. The telegraph company ought equitably to assume this burden of indemnity. It runs no risk. If it be entitled to the fund, which is the only basis upon which its action can be maintained, it will’ suffer no loss by reason of its bond of indemnity. If it be not so entitled, then it should indemnify Shepard from loss. Such rule will equitably distribute the burdens between the telegraph company and Shepard. As to the railroad company, it should be permitted, in that action to pay the money into court and thus relieve itself from the further accumulation of interest ■ and thereby become entitled to receive the conveyance. It is to be borne in mind in reaching this conclusion that Shepard has a final judgment entitling him to receive this money. The telegraph company has no judgment. It simply asserts a claim to the fund, and the adjudication which has been had does not conclusively establish that it is entitled to judgment or can enforce its claim. The most that can be said is, that it has procured an adjudication showing that it may be entitled to a part of the fund. 'It is clear that it cannot be entitled to the whole, as it is subject to the charges as we have already pointed out. Under such circumstances, we think it is the party litigant who should furnish the indemnity for the protection of all the parties before the court should lay hold of this fund.

We do not doubt the power of the court to impound the money for the protection of all the parties, but the power ought not to be exercised unless the claimant furnish ample indemnity. It is clear that when Shepard executes the usual conveyance as owner of the property, the railroad company will have acquired all that.it is entitled to demand. No other parties have any interest therein nor is any release required from the telegraph company under the decision of the Court of Appeals. Shepard has the legal title and can convey the same to the railroad as fully and completely as though there were no claimants of the fund aside from him.

It follows from these views that the order should be reversed, with ten dollars costs and disbursements, and the motion denied, with ten dollars costs, but without prejudice to the right of the Western Union Telegraph Company to make application for an injunction in the form and manner prescribed by law. The stay, however, which has been granted will be continued for ten days from the entry of the order herein to allow the telegraph company to make its application, if it be so advised.

Yak Brunt, P. J., Patterson and Ingraham, JJ., concurred; McLaughlin, J., concurred in result.

Order reversed, with ten dollars costs and disbursements, and motion denied, with ten dollars costs, without prejudice to the right of the Western Union Telegraph Company to make application for injunction. Stay continued for ten days from entry of order hereon to allow telegraph company to make its application if so advised.