Case Name: In the Matter of the Application of The Board of Rapid Transit Railroad Commissioners of the City of New York for the Appointment of Three Commissioners to Determine whether a Rapid Transit Railway or Railways for the Transportation of Persons and Property, as Determined by said Board, ought to be Constructed and Operated
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1897-12
Citations: 23 A.D. 472
Docket Number: 
Parties: In the Matter of the Application of The Board of Rapid Transit Railroad Commissioners of the City of New York for the Appointment of Three Commissioners to Determine whether a Rapid Transit Railway or Railways for the Transportation of Persons and Property, as Determined by said Board, ought to be Constructed and Operated.
Judges: 
Reporter: Appellate Division Reports
Volume: 23
Pages: 472–498

Head Matter:
In the Matter of the Application of The Board of Rapid Transit Railroad Commissioners of the City of New York for the Appointment of Three Commissioners to Determine whether a Rapid Transit Railway or Railways for the Transportation of Persons and Property, as Determined by said Board, ought to be Constructed and Operated.
Sapid transit in New York city — confirmation of the report of the Supreme 'Court commissioners — the question of city indebtedness.
In view of the imperious necessity of improved means of rapid! transit in the city of New York, and the popular decision that it should he secured even though its accomplishment might demand a pledge of the city’s credit in its support, the Appellate Division considered that it should confirm the- report of the Supreme Court commissioners appointed to devise a plan therefor, the cost of the execution of which was established with reasonable accuracy, although such action on its part would seriously cripple the city in its power to carry on . other contemplated improvements except by means of money raised by direct taxation-—the Appellate Division not determining upon this application the question arising under section 10 of article 8 -of the State Constitution whether the total cost of the building of the proposed rapid transit road was to be deemed as incurred1 by the city at the time of making the contract, and was to be added to the indebtedness of the city of New York then existing (whether funded or contingent), increased by the indebtedness, to be assumed on January 1, 1898, of the adjacent cities and counties constituting part of the municipality embraced within the hew charter taking effect at that date.
Nor did it decide whether various city bonds, which might be finally paid by means of assessment receipts or in other ways, might be excluded from con- ■ sideration in determining the amount of the city debt.
iNURAHAMj J., dissented.
It further considered that, inasmuch as the constructing contractor was required to equip- the road, the contract initiating, the work should also provide for its completion and final operation, and in view of its magnitude and the importance to the city of its prompt execution and the advances to be made by the city during the progress of the work, a bond in the sum of §15,000,000 for the faithful performance of its conditions should be required.'
Semble, that if it should be finally decided that the limit of indebtedness imposed by the Constitution upon the city was exceeded by any contract which the commissioners might make, no liability would be imposed upon the city thereby.
Motion by The Board of Rapid Transit- Railroad Commissioners1 of the city of New York to confirm their -report.
Albert B. Boardman and Edward, EL Bliepard, for the motion.
George ZdbrisMe and Cephas Bravnerd, Jr., opposed.

Opinion:
Van Brunt, P. J.:
The imperious necessity of improved means of transit in the city of New York has long been recognized. It had become so evident that in the year 1892 the people determined that, as there seemed to be no other means for its accomplishment, it should be brought into existence even by the pledge of the credit of the city. This necessity seems to have addressed itself so strongly to the people that they considered that the accomplishment of this end should be attained though the ability of the city to carry on contemplated improvements might be thereby curtailed.
It has been said that the people have not by their vote approved of the plan now presented to the court, but another scheme, which differed in many of its characteristics from the plan now under consideration. I think, however, that a reference to the history of the rapid transit enterprise will show that the people did not give their vote to any particular detail by which rapid transit was to be obtained, but rather in favor of a result to be reached in any manner which might be found to be practicable.
The presentation of the plan now before the court, and the proofs and developments surrounding it, constitute striking evidence of the correctness of the conclusion of this court in condemnation of . the previous scheme which was submitted to it. This plan, however, calling as it does for an expenditure of from $20,000,000 to $40,000,000 less than the scheme presented to the court before, still involves grave questions of law as to the possibility of its completion.
The report of the Supreme Court commissioners concedes, and the arguments of counsel in favor of the application seem to admit, that if the total cost of the building of the proposed rapid transit road is to be deemed as incurred by the city at the time of the making of the contract, and there is added to this all the indebtedness of the city of New York then existing, whether funded or contingent, and its .obligation to assume, on the first day of January of the coming year, the indebtedness of the adjacent cities and counties, as provided by the new charter, the limit of indebtedness' will be exceeded. Whether any' of these elements can be excluded in determining as tp the legality of any contract which the'rapid transit commissioners might make or propose to make for the building of this road, presents serious- questions of law which in. my judgment ought not to be determined upon this application, for the reason that if the court on this application should come to a conclusion upon these questions adverse to the legality of such proposed contract, no-review could be had of its 'determination, although involving only questions of law. - .
It is stated in the report of the Supreme" Court commissioners that the suggestion that no contract for the construction of the road can be made without ipso facto creating a debt to the full extent of its estimated cost is not reasonable. The question of the reasonableness, of a constitutional inhibition is no* open to "discussion, and an examination of the authorities in this State upon the question of wha.t constitutes indebtedness "or debts due may show that this-unreasonable proposition has very respectable authority, viz., our Court of Appeals.
It cannot for a moment be assumed in considering these questions-that independent and separate contracts of construction with different contractors could, from time to -time, be entered into,, for the reason that every contract of construction must necessarily embrace a-contract for the operation of the line by the constructing contractor, and to have the operation of the rapid transit .system controlled by divers and various operators would of itself necessarily absolutely condemn the scheme, It would seem, therefore, that ¡the contract initiating the work" must also contain provisions for its completion and final operation. It is proposed by..deferring construction and payment to throw (as it is stated) the indebtedness into-future years, and thus obviate the constitutional objection.
It is further urged that a considerable amount of the apparent, indebtedness of the city of New York is only imaginary and hot real; that, for example, assessment bonds are outstanding which it is anticipated will, in the future, be paid by the receipt of assessments for the benefit levied upon neighboring property ; that lands-acquired for Croton Aqueduct purposes, which are to be used only for sub-surface constructions, may be sold for nearly what was paid for.them, and that indebtedness thus reduced, and that the excess of indebtedness of the adjacent cities and counties over the limit provided by the Constitution is not to be charged against the city at this time, because the actual assumption has not taken place, although the obligation to assume at present exists. "Whether these devices in respect to the contract, and these theories as to the existing indebtedness of the city, will finally obtain, ought to depend upon the decision of our court of last resort, and should not be determined, as has been already stated in this proceeding, where they cannot be reviewed.
There are other questions in regard to other species of indebtedness. We know, for instance, little, if anything, from the evidence before us, of the floating indebtedness of the territory which the city of New York is bound to assume on the first of January next. These uncertainties may, upon some application in reference to the contract, be cleared up, so that the exact truth in respect thereto may be known.
Upon the whole, although it is evident that beyond peradventure the entrance by the city into this enterprise will materially cripple its power to carry on other contemplated improvements (unless the money therefor is produced by immediate taxation), and although weighty questions of law must necessarily arise as to the legality of any contract which may be entered into for the construction of this road, I think that as the cost of construction is established with reasonable accuracy, and the ability to meet such cost is shown, provided the position of the Supreme Court commissioners and the rapid transit commissioners in respect to what constitutes the indebtedness of the city under the Constitution finally prevails, whatever may be-our opinion upon those subjects, we should confirm the report of the Supreme Court commissioners and allow these legal questions-to be settled in the future, particularly.as, if it should be determined that the debt limit was exceeded by any contract which the commissioners might make, no liability could possibly be imposed upon the city. Litchfield v. Ballou, 114 U. S. 190.)
In view of the magnitude of the undertaking which we are asked to approve, and the vital interest which the city has in the prompt completion of the contract, for the building of the road when entered into and its effective equipment, maintenance and operation, we think that we should, before consummating our confirmation of the report of the Supreme Court commissioners by the entry of an order to that • effect, have some assurance that the powers of the rapid transit commissioners in respect to security provided by section 34 of the Rapid Transit Act (Laws of 1391, chap. 4, as amended by Laws of 1895, chap. 519) to be taken by them for the payment of the rental specified in the contract and for the faithful performance - of all the conditions, covenants and requirements provided for in the contract, should be exercised so as to protect the interests of the city in a substantial manner; and to that end a stipulation should be filed by the rapid transit commissioners that the penality of the bond specified in section 34 of the Rapid Transit Act will be fixed at not less than $15,000,00®. This amount, in view- of the large interests of the city involved in its advances of credit for the work as it progresses, is not more than sufficient security to the city in the event of the failure of the contractor to perform his or its contract, and to enable it to carry the road to completion and equip the same in case the enterprise is thrown on its hands by the default or forfeiture of the con trac ton
Upon the filing of the stipulation referred to in the foregoing opinion, an order will be entered upon the usual notice confirming the report of the Supreme Court commissioners.
Rumsey, Williams and Patterson, JJ., concurred; Ingraham, J., dissented.