#### The Western Union Telegraph Co., Plaintiff, *v.*The Manhattan Railway Co. et al., Defendants.

(Supreme Court, New York Special Term,

April, 1899.)

Action to establish a trust implied from circumstances — Mistake of law.

Where the original grantor of abutting premises reserves in its deed all rights of action against elevated railroads of the city of New York for all damages done by them to premises or to their uses, *mesnes*grantees who have knowledge of the reservation, recited in their deeds or contracts of sale, are bound by it although the reservation be ineffectual in law; and where the grantee in posséssion, to whom a deduction in the purchase price has been made because of the reservation, subsequently brings an action against the elevated railroads to recover damages for continuing trespasses to his easements, the original grantor may maintain an action against him, and others who have liens or interests in the premises or who have had title, In order to establish a trust relation, growing out of circumstances, to the end that the original grantor may reap the benefit of the litigation begun by the grantee in possession against the elevated railroads.

The fact that the parties did not understand the legal effect of the reservation affords no reason why equity should not carry out their intentions and enforce their substantial rights.

Action by plaintiff for the purpose of establishing a trust relation between the plaintiff grantor and certain defendants as grantees.

Rush Taggart, for plaintiff.

*102Peckham,. Warner & Strong for defendant Shepard.

William G. Peckham,. for himself as defendant.

E. C. James and W. H. Godden, for the Manhattan Eailway Company.

Michael H. Cardozo, for Messrs. Levy, G.-W. Tubbs and Allen Mitchell.

Mattice, J.

May 4, 1872, the plaintiff, the Western Union Telegraph Company, became the. owner of the premises described in the complaint, situated on Church street, formerly Eos. 30,' 32, 34 and 36 Trinity place in the city of Eéw York.

In the year 1877,. the Metropolitan Eailway Company built an elevated structure in the street in front of said premises, and operated thereon a steam railroad. This elevated railroad and structure, and the operation thereof, obstructed the street and was a damage to the easements appurtenant belonging to abutting owners.

On the 20th day of May, 1879, the Metropolitan Company leased this railroad to-the Manhattan Eailway Company, which last-named company operated the railroad as stich lessee until May 7, 1894, when the property and franchises of the Metropolitan Company became merged in the Manhattan Company by a transfer of the, entire capital stock of the Metropolitan Company, and the Manhattan Company became the owner of the property, rights, privileges . and franchises of the Metropolitan Company, and became liable for and subject to all the debts and liabilities of the Metropolitan Company and all actions then pending against them.

This elevated railroad structure, and the railroad have been maintained and. operated in front of these premises without substantial change from the time of construction in 1879, up to the present., Eo compensation has ever been made "for, nor has any title ever been acquired to easements or property rights appurtenant to these premises.

The plaintiff continued uninterruptedly in the ownership of these premises from May 4, 1872, until June 4, 1888, on which date the property was transferred by deed to the defendant. Tubbs. The following reservation clause was inserted therein: “ The party of the first part hereto reserves all claim or right of action against *103the Metropolitan and Manhattan Elevated Railroad 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, and as they are now constructed and operated.”

Prior to the execution.and delivery of this deed, the parties entered into a contract of sale for the same, bearing date April 16, 1888. This contract is in the usual form and also contained the following agreement of reservation in respect of the rights of action against the elevated railroad companies and the damage accruing from the maintenance and operation of the railroad in front of the property. “ It is further agreed and understood, as a condition of this agreement, that the Western Union Telegraph Company reserves all, claim or- right of action against the Metropolitan and Manhattan Elevated Railroad Companies, or either of them, for any and all injury or damages done to the said property or to the value or uses thereof in the past, present or future, by reason of the construction and operation of the elevated railways in Church street, as they now stand and are now being operated, and the said George W. Tubbs in the purchase of said property, and any and all persons to whom he may convey, accept title, waiving and releasing any and all claims against said railroad company as now constructed and operated, unless more damaging changes shall be made in the structure and operation of said roads.”

June 4, 1888, the day he received the deed, Tubbs transferred the property by deed to the defendants, Messrs. Levy. It seems that Tubbs was simply a medium through which the transfer was made from the plaintiff to the defendants, the Messrs. Levy. Prior' to said transfer the defendant, Jefferson M. Levy, was informed that the Western Union Telegraph Company would reserve in the deed to Tubbs all right or claim for damages growing-out of the use of the street in front of the premises in question by the elevated railways, and the operation thereof. He was also informed that it was the intention to transfer the building and lot upon which the building stood, and reserve to the Western Union Telegraph Company all claims growing out of the use of the street in front thereof by the elevated railroad, the operation thereof, and any damages therefrom.

September 26, 1888, the -Messrs. Levy 'transferred the property by deed to the defendant, Allen Mitchell. January 17, 1889, the *104defendant Mitchell retransferred the property to the.Messrs. Levy by deed of that date..

On'Match "29, 18.89, the Messrs. Levy conveyed the property to the defendant Shepard. This deed specifically referred to the prior-reservation of the easements Or right of action for the en.croachr" ments thereon, contained in the deed to Tubbs for the benefit of the Western Union Company as follows: “ 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,”

When the defendant Shepard purchased the property he knew of the existence* of the .railroad, and the reservation contai-néd in the deed to Tubbs. The Messrs. Levy excluded from the price paid by the defendant Shepard the value of the easements taken by and then used by the defendant, the Manhattan Railway Company.-

November 14, 1890, the defendant .Shepard began an action against the Metropolitan Railroad Company, and the -defendant the Manhattan Railway Company, to enjoin them from maintaining and operating the said elevated railway in front of these premises, to compel said defendant to take down and remove the same, and to recover from them damages to. the use of these ■ premises arising since March. 29, 1889, the date upon which.Shepard acquired title, by reason of the trespass of said railway upon the easements and , property rights appurtenant "to said preniises.

June 4, 1888, the defendant executed and. delivered to the Western Union Telegraph Company a purchase-money mortgage to secure the payment of the sum of $85,000 which "was thereafter assigned to and is now owned by the defendant Russell Sage, and is an existing lien upon the property. .

The defendant Shepard, before the commencement of this action," repudiated and "denied, and now denies, that, any rights exist as against him in the nature of a 'trust relation or otherwise in respect ■ of these transactions, and which in any way preclude him from the prosecution of his action in his individual capacity and as the full legal and equitable owner of the premises ánd the easements-and property-- rights thereto and included within the said reservation-clause. He "claims to be entitled. to such damages and to. all. damages arising by reason of the unlawful occupation of the Street by - the railroad companies since the date of his purchase, and that the plaintiff has no legal or equitable right to any of the avails of that, litigation.

*105This action is brought by the plaintiff for the purpose of establishing a trust relation between the plaintiff as grantor, and certain defendants, including the defendant Shepard, as grantees, to the end that the plaintiff may be enabled to reap the benefit of the litigation between the defendant Shepard and the defendant railroad company, for the injury to such easements caused by such continuing trespasses by the elevated road.

The parties doubtless intended that the plaintiff should have the benefit of the damages to the property, past, present and future, by reason of the operation and maintenance of the elevated railroad in the street, and it was the intention of the grantees to take the land burdened with the elevated road, and which it was expected would be a continuing one.

The parties to the grant intended that the grantee should receive no compensation by reason of such injury, but that the grantor should. The parties intended that the grantees should take the premises the same as though the elevated railroad company had theretofore acquired a dominant right to maintain and operate its road. That was to be the extent of the grantees’ interest by reason of the grant. It seems that the purchase price was adjusted upon that theory.

It was the intention of the parties that the grantor, this plaintiff, should be entitled to receive from the elevated railroad compensation for all damages occasioned to the property, both rental and fee damages, by reason of the operation and maintenance of the elevated road.

The parties supposed that the reservation would be effectual to ’carry out their intent. Lt seems it was not. - The reservation was inoperative because it attempted to reserve a right of action for damages to premises, the title to which Avas vested in the grantee.

Notwithstanding the language of the reservation, the right to . recover the damages resided in the grantee, the same as though no attempted reservation had been made. ■

There was no express agreement .whereby the grantee was made a trustee for the grantor. The reservation being ineffectual, plaintiff cannot enforce any claim against the railroad company, and there was no express agreement whereby the grantee undertook to enforce a claim for the benefit of the plaintiff.

Resulting trusts are created by express agreement or by implication of law, and sometimes by reason of the Avrongful act of a party.

It is not claimed that the trust here attempted to be established arises by reason of the fraudulent, wrongful or unlawful act, or *106acts, of the grantee. If any trust is created in favor of the plaintiff it must he one which the law implies from the circumstances.

The grantee ought not to be permitted to reap-the benefit of that which in good conscience belongs-to'the grantor.

I think a court of equity has power and ought.' under such circumstances to carry out the intent of the parties by declaring a trust in favor of the grantor, and in that way to relieve such grantor from a situation brought about by a failure to understand the legal character of the reservation actually made..-.

That the parties did not know the legal effect of the reservation is no reason why equity should not carry out the real intention of the parties. and enforce their substantial. rights. Thurber v. Chambers, 66 N. Y. 42.

Counsel for plaintiff will prepare decision and judgment, which may be settled before me, at’chambers, on five days’ notice.

The interlocutory judgment must provide the manner in which the costs and expenses of the trustee should be determined and adjusted.

The question óf the costs of this action may be reserved until such settlement. ’ '

Ordered accordingly.