Court Opinion

ID: 8831612
Source: CourtListenerOpinion
Date Created: 2022-11-26 16:05:37.177203+00
Date Added: 2024-06-11T17:04:56.279816
License: Public Domain

MAYER, Circuit Judge.
The motion is to confirm the special master’s report, a copy of which is set forth above. After consideration of arguments fully presented and briefed, it is interesting to observe how completely the special master has dealt with the essential questions in a report which, in the circumstances, is both succinct and comprehensive. It is necessairy only to refer to some features by way, in a sense, of supplement.
The Case of the Lessor Companies.—As against the lessor companies, the receiver was entitled to the refund independently of any statute. No conduct of the municipal authorities could in any manner affect the rights which existed originally between the lessor companies and the receiver. If, therefore, the New York Railways was entitled to recover back as its own the money expended for taxes illegally exacted by the public authorities, neither the action of those authorities nor any statute could transfer that money to someone not entitled thereto.
[1] The statute (Paws of 1909, c. 62) is, in fundamental essence, merely a mode of procedure. The sovereign (in this instance, the state of New York), realizing that sound governmental policy required that there should be a refund of a tax collected upon an illegal, erroneous, or unequal assessment, provided the procedure by which the wrongful tax could be collected back. This procedure is set forth in article 13 of the statute; sections 293 and 296, quoted in the opinion of the special master, being important in this connection. Under these provisions, the proper authorities were directed to audit and allow to “the petitioner or other person who shall have paid such tax, * * * and cause to be paid to such petitioner or other person paying such tax * * * the amount paid by him. * * * ” The application was to be made to the proper officer by the “petitioner or other person paying such tax.” Obviously the test is: “Who has paid the tax?” All the rest is procedure. The purpose and object of the statute was to cause the illegally exacted amount to be paid back to the person who had really paid the amount in the first instance in.response to a collection by the public authorities based upon an illegal, erroneous, or unequal assessment.
[2] The lessor companies plainly cannot now have any greater rights than prior to the receivership, and any inaccurate language or surplus-age contained in the order of the Supreme Court (as the result, doubtless, of the draft of the order by counsel) cannot, in any manner, affect *126the rights of the parties. As properly said by the master, the order might well have stopped before it contained the additional clause to which he refers, containing, inter alia, the words “shall be ordered and allowed to the relator.”
[3] Much is made of the physical situation imaginatively pictured at the office of the comptroller with Hedges, as receiver of the railway company, tugging at one end of the check, while Hedges, as receiver of the Broadway & Seventh Avenue Railroad Company, is tugging at the other end, and similarly Hedges, receiver, engaged in the same kind of contest with the Sixth Avenue Railroad Company, as lessor, and the Christopher & Tenth Street Railroad Company, as lessor, at the other end of their respective checks. The precedent set by Judge Lacombe in the management of the Metropolitan Street Railway receivership has been followed by this court and is in accordance with familiar practice. Here is a large and complicated system of surface railways, necessarily operated as a unit, with the same overhead, and with interchange of cars and other facilities and other common administrative interests, all to be adjusted in due course on a proper basis, legal or equitable or both, as the case may be.,
Franchise rights, in most instances, are not the same as operated routes. A line with a particular name for convenient designation, such as the Broadway line, in actual operation, may be and is run oyer tracks and along routes covered by different franchises. To appoint one receiver under a general creditors’ bill and another receiver under a foreclosure bill would necessarily have resulted in additional expense, and possibly in conflict in respect of the great number of administrative problems dealt with almost daily. When any question of law arises, as in the case at bar (and this is an important point), it is not the receiver who decides the question, but the court, and it makes no difference in such'a situation whether the receiver of the railways under the general creditors’ bill and the receiver of the Broadway & Seventh R. R. Company under the foreclosure bill is the same person. Had the receivers been two persons, instead of one, the court, of course, would have said, as occurred in this case:
“You must eacli assert your rights in the interest of the estate you represent and the court will determine your rights.”
[4] The obvious and sensible method of dealing with a situation of this kind is to do what was done; i. e., to get the money in hand and then let the contest for it go forward. Unless the checks had been obtained in the manner and in the circumstances which occurred in this case, they might very well be still in the possession of the comptroller, who. was acting presumably in accordance with what he deemed to be his legal duty.
It would be substituting fine and unsubstantial technical distinctions for sound administrative common sense to determine the rights of the' parties by any theory as to who was entitled successfully physically to carry the checks from the comptroller’s' office in the circumstances above referred to. These checks are now in a special fund, subject to an order of the court which had for its purpose the preservation of the rights of all concerned.
*127As between the contending parties, there was an impasse, and none of the parties is entitled to any advantage over the other by any assumption as to who ultimately might have physically carried the checks away from the comptroller’s office, if the very sensible arrangement which was made had not been made. Further, in order to assure full presentation, the case for the respective roads has been presented by highly competent counsel independent of the counsel for the receiver, that of the Broadway & Seventh Avenue Railroad Company by counsel for the majority bondholders and counsel for the minority stockholders, that of the Sixth Avenue Railroad Company by the counsel for that company, and that of the Christopher & Tenth Street Railroad Company by the counsel for that company.
The fundamental question in the case is: Who was entitled to receive the money in April, 1920? As to the Broadway & Seventh Avenue Railroad Company: In the lease of the Broadway & Seventh Avenue to the Houston, West Street & Pavonia Ferry (Exhibit 1), after letting and demising all the property and franchises of the lessor, the lessor covenanted that the lessee should have “the exclusive right to manage, use, and control said demised property, * * * and shall have, use, exercise and enjoy all the rights, powers,- and authority of the party of the first part in that behalf” necessary, useful, or proper. The lessor further covenanted that it would “perform any and every corporate act which may be necessary, useful, or appropriate to secure to the party of the second part the full enjoyment of the demised premises.” Then the lease specifically provided:
“And to enable tbe party of the second part [the lessee] to beneficially enjoy said rights and privileges and benefits hereunder demised, the party of the first part hereby appoints the party of the second part, its successors and assign?, its attorneys, irrevocable, with full power and right at the expense of the party of the second part to use the name of the party of the first part in and about the business and property and use of the said demised railroad, * * * and at the expense of the party of the second part to use the name and seal of the party of the first part in and about any legal proceedings and suits at law or in equity as to the party of the second part may seem necessary and requisite in carrying out the objects and Intent of this identure.”
[5] Thus the New York Railways had the right itself to bring the certiorari proceeding, and, if it chose to do so, to bring it in the name of the Broadway & Seventh Avenue. This it did. The New York Railways Company was the party plaintiff, using the name of the Broadway & Seventh Avenue as it had the right to do. If the proceeding had actually resulted in a money judgment for the nominal plaintiff, the New York Railways had the right to collect it and satisfy the judgment and sign the name of the Broadway & Seventh Avenue to the satisfaction piece. Similarly it would have had the right, exhibiting its lease to the comptroller, and pointing to the power of attorney, to demand to be recognized as the true plaintiff in the suit, while using the name of the Broadway & Seventh Avenue. Furthermore, it had the right, having received the check'from the comptroller, to place upon the back of the check the name of the Broadway & Seventh Avenue Company. Therefore, when Receiver Hedges placed or caused to be placed upon the back of the check the indorsement:
*128“Pay to the American Exchange National Bank. Broadway & Seventh Avenue Railroad Company. Job E. Hedges. New York Railways Company, by J. C. Campbell, Treasurer, for Receiver”
—he exercised his right under the lease to act for and in the name of the lessor. As contended by his counsel, if Hedges, as receiver of the New York Railways Company, had desired to pursue his strict rights, he could have gone to the city, received the check, receipted for it in the name of the Broadway & Seventh Avenue, indorsed it, and collected it, and passed it to the credit of the New York Railways, all under the provisions of the lease.
[6] It is contended, however, that the above-described power, being part of the lease, is no longer in force as regards the receiver, inasmuch as he has not affirmed the lease. But this power was given the lessee for the very purpose of protecting it in carrying out the objects and intent of this indenture. It was a power coupled with an interest, and is not revocable, and must be in the New York Railway Company, no matter what the situation is as to the lease itself, until it has fulfilled its purpose. Hutchins v. Hebbard, 34 N. Y. 24; Pacific Coast Co. v. Anderson, 107 Fed. 973, 47 C. C. A. 106.
[7] As to the Sixth Avenue Company and the Christopher & Tenth Street Railroad Company refunds: The effect of the stipulations is to give this fund the same status as if paid by the city to this court. No rights have been changed. What has occurred is a sort of informal interpleader, with the fund deposited in court to await the result of the interpleader. 4 Pomeroy, Equity Jurisprudence (4th Ed.) § 1323; Chamberlain v. Almy, 3 Misc. Rep. 555, 23 N. Y. Supp. 316; Sherman v. Partridge, 4 Duer (N. Y.) 646; Dyas v. Dyas, 231 Ill. 367, 83 N. E. 229. If the receiver of the New York Railways Company was entitled to collect the refunds from the city, the rights of the lessor companies would not have been enlarged, if they have obtained actual possession of the checks. Horn v. Pere Marquette R. R. Co. (C. C.) 151 Fed. 626.
[8] There remains but one further question necessary to mention.' Since the appointment the receiver has continued to operate the lines of these lessor companies, but the court has extended the time for the receiver to elect whether or not to adopt the leases of the lessor companies. See order dated October 28, 1921. No request has been made by any of the above-mentioned lessor companies for a return of their property. The result is that the operation by the receiver of the lines of the lessor companies is for the account of the lessor companies or as the court may find, according as the equities may appear. See opinion of District Court, per Mayer, J., In re Claims of the Eighth and Ninth Avenue Companies for Rent, 282 Fed. 293, filed June 7, 1920.
What the lessor companies have is a claim for rent against the New York Railways Company. This cannot be determined nor enforced in this way; i. e., by collecting it out of a chose in action of the New York Railways Company. Such an effort would have been futile prior to the receivership. It is, if anything, less possible now. What the proposition comes down to is that it is sought to obtain a specific fund on account of the payment in whole or in part of a general claim. In brief, there is no basis as matter of law for a counterclaim."
*129[9] The Claim of the Farmers’ Loan & Trust Company as Trustee. —It will not be profitable to extract for quotation the details of the mortgage or of the written data necessarily referred to in considering the “note,” quoted fully in the master’s report. With all that the master says I fully agree: but, when all the arguments have been advanced and considered, the principle of Noyes v. First National Bank of New York, 180 App. Div. 162, 167 N. Y. Supp. 288, affirmed on opinion below 224 N. Y. 542, 120 N. E. 870, stands as an insuperable barrier against the claim of the trustee. See, also, In the Matter of Inter-borough Consolidated Corporation, 277 Fed. 455, opinion of District Court for the Southern District of New York, filed December 23, 1921.
The master’s report is in all respects confirmed, and the various exceptions overruled.

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