Case Name: The People of the State of New York ex rel. E. P. Bryan and Others, as Trustees of the New York and Long Island Railroad Company, Appellants, v. The State Board of Tax Commissioners of the State of New York, Respondent. (Assessments of 1908 and 1909.)
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1911-02-10
Citations: 142 A.D. 796
Docket Number: 
Parties: The People of the State of New York ex rel. E. P. Bryan and Others, as Trustees of the New York and Long Island Railroad Company, Appellants, v. The State Board of Tax Commissioners of the State of New York, Respondent. (Assessments of 1908 and 1909.)
Judges: 
Reporter: Appellate Division Reports
Volume: 142
Pages: 796–807

Head Matter:
The People of the State of New York ex rel. E. P. Bryan and Others, as Trustees of the New York and Long Island Railroad Company, Appellants, v. The State Board of Tax Commissioners of the State of New York, Respondent. (Assessments of 1908 and 1909.)
First Department,
February 10, 1911.
Real property—grant of right of way to construct tunnel construed — title to lands under water of East river — tax — special franchise tax oh tunnel beneath river.
The grant of a right of way beneath the waters of the East river, made by the State to the New York and Long Island Railroad Company in 1891, did not convey a fee rather than a right of way merely because the grant was made “ together with all and singular the rights, hereditaments and appurtenances to the same belonging or in anywise appertaining to have and to hold the above described premises unto the said The New York and Long.Island Railroad Company, its successors and assigns forever.” - Such words of perpetuity do not transform the precise right of way granted into a fee by implication. Hence, such tunnel When constructed beneath the waters of the East river is not exempt from an assessment for a special franchise tax on the theory that it is built entirely upon the property of the railroad.
The land under water in the East river is held by the State as trustee for the public.
The Legislature in providing for a special franchise tax intended to subject to taxation those making use of public property in the prosecution of their business.
Laugi-ilin, J., dissented, with opinion.
Appeal by the relators, E. P. Bryan and others, as trustees, etc., from- two orders 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 18th day of May, 1910, confirming assessments against the property of the relators for the years 1908 and 1909, respectively, and dismissing proceedings to review the same.
Ralph Norton of counsel [Charles F. Kingsley with him on the brief], James L. Quackenbush, attorney, for the appellants.
William N. Cohen of counsel [Arthur J. Cohen with him on the brief], Edward R. O'Malley, Attorney-General, for the respondent.

Opinion:
Clabke, J. :
The New York and Long Island Railroad Company was duly incorporated on or about the 30th day of July, 1887, and duly acquired the consent of the board of aldermen of -the then city of New York for the construction, operation and maintenance of a' tunnel railroad in, through and under the surface of Forty-second street from its easterly end to a point therein between Tenth and Eleventh avenues in said city, and such tunnel has been actually constructed from the easterly end of Forty-second street to a point at or near its intersection with Park avenue. The tunnel extends beneath the bed of the East river to certain designated points in Long Island City.
The time of the railroad company to complete • the construction of its railroad was extended by various acts of the Legislature until the 1st of January, 1907 (Laws of 1903, chap. 597), when, by reason of the failure of the company to complete its road, its corporate existence expired in accordance with the provisions of section 5 of the Railroad Law (Gen. Laws, chap. 39 [Laws of 1890, chap. 565]; as amd. by Laws of 1901, chap. 508; since amd. by Laws of 1910, chap. 478), which is now section 12 of the Railroad Law (Consol. Laws, chap. 49; Laws of 1910, chap. 481), and all its property, franchises and rights became vested in the individuals who were on that date its directors, as trustees, for the 'benefit of stockholders and creditors of the corporation in accordance with the provisions of section 30 of the General Corporation Law (Gen. Laws, chap. 35 ; Laws of 1892, chap. 687), which is now section 35 of the General Corporation Law (Consol. Laws, chap. 23 ; Laws of 1909, chap. 28). The relators were on the 1st of January, 1907, the directors of said company, and.they became the trustees of its property under the statutory provisions referred to.
The geographical limits of the borough of Manhattan extend to the bulkhead line of the Queens county shore, thus including the bed of the East river. The State Board of Tax Commissioners levied an assessment of $3,175,000 'up'ón the special franchises of the relators in the borough of Manhattan, city of New York, for the year 190.8, and of $3,350,000 upon said franchises for the year 1909, which assessments having been affirmed upon certiorari proceedings by the Special Term (People ex rel. Bryan v. State Tax Comrs., 67 Misc. Rep. 508), from the orders entered thereon this appeal is taken,
It was stipulated between counsel that if the court should hold that the entiré tunnel in the borough of Manhattan was properly assessable by the State Board of Tax Commissioners as a special franchise, then the existing assessments for 1908 and 1909 -respectively might be regarded as the. equalized valuations thereof for the purpose of taxation. Therefore, the sole '.point presented to this court is whether so much of the tunnel beneath the bed of the river as extends from a point 300 feet east of the bulkhead line of the Manhattan shore to the bulkhead line of the Queens shore, is legally subject to taxation.
On the 5th of January, 1891,' a patent was issued by the State to the company reading as follows : " Know ye, that pursuant to. Chapter Í40, Laws of 1850, as amended by Chapter 601, Laws of 1886, and a resolution of the Commissioners of the Land Office adopted November 25,1890, we have given and granted, and by these Presents do give and grant unto The New York and Long Island Railroad Company, its successors and assigns, a right of way ninety-nine feet in. width and fifty feet in height,, within which to construct a tunnel for the use and operation of above named grantees' railroad beneath the waters of the East River, upon and along the route' of said railroad between the City of New York and Hiinterls Point in Long Island City, as-shown in plan and profile, upon the charts filed in the office of our Seóretary of State, with the water grant papers of the month of January, 1891. Together with all and singular the rights, hereditaments and appurtenances to the same belonging or in any wise appertaining; to have and to hold the above described premises unto fhe said The New York and Long Island Railroad Company, its successors and assigns forever." The consideration paid by the New York and Long Island Railroad Company for such grant was $575.
The relators contend that the portion of their tunnel under the river between the points above- indicated is built entirely within their own property, and, therefore, is not subject to an assessment such,as is under review here; in other words, that the patent is an absolute conveyance of real estate.
Subdivision 3 of section 2 of the Tax Law (Gen. Laws, chap. 24 Laws of 1896, chap. 908], as amd. by Laws of 1899, chap. 712 ; revised by Consol. Laws, chap. 60; Laws of 1909, chap. 62) provides: "The terms 'land,' 'real estate' and 'real property,' as used in this chapter, include all surface, underground or elevated railroads, including the value of all franchises, rights or permission to construct, maintain or operate the same in, under, above, on or through, streets, highways or public places; all railroad structures, substructures and superstructures, tracks and the iron thereon; branches, switches and other fixtures permitted or authorized to be made, laid or placed in, upon, above or under any public or private road, street or ground ; . A franchise, right, authority or permission specified in this subdivision shall, for the purpose of taxation, be known as a ' special franchise.' A special franchise shall be deemed to include the value of the tangible1 property of a person, copartnership, association or corporation situated in, upon, under or above any'street, highway, public place or public waters in connection with the special franchise., The tangible property so included shall be taxed as a part of the special franchise."
It seems to us that thé contention of the relators is unsound. The intention of the Legislature in providing this source of revenue was to subject to taxation those making use of public property in the prosecution of their business. If a railroad be located in, upon or under a public street, in accordance with the necessary permission granted by the proper authorities, it has a property right within the usual and common signification of that word as held'in People v. O'Brien (111 N. Y. 1). The court said : " The title to streets in New York is vested in the city in trust for the People of the State, but under the Constitution and statutes it had authority to convey such title as was necessary for the purpose, to corporations desiring to acquire the same for use as a street railroad. Grants similar in all material respects to the one in question have heretofore been before the courts of this State for construction, and it has been quite, uniformly held that they vest the grantee with an interest in the street in perpetuity, for the purposes of a street railroad."
The land under water in the East river is held by the State. The Court of Appeals said, in Matter of City of New York (168 N. Y. 134): "The State holds the title in fee in the tideway and to the lands under water beyond the samé, as trustees for the public in its organized capacity." It lias granted through this land so liéld in fee a right of way to construct a-tunnel for the use and operation of the grantee's railroad. While the patent contains words of perpetuity, they do not transform the precise right of way granted into a fee. by implication. No one would contend that the perpetuity held to attach to the permission to construct a railroad .in the public streets constitutes a fee rather than a right of way.
Relators' road is situated under public waters, and, therefore, comes within the express terms of the Tax Law cited. We have no doubt that the tunnel under the river was properly taken into consideration by the board in assessing the special franchise of relators for purposes of taxation, and it follows, therefore, that the orders appealed from should be affirmed, with costs and disbursements to the respondent.
Ingraham, P. J., Scott and Miller, JJ., concurred ; Laughlin, J., dissented.