Court Opinion

ID: 8784500
Source: CourtListenerOpinion
Date Created: 2022-11-26 13:29:21.08687+00
Date Added: 2024-06-11T17:03:00.289350
License: Public Domain

On Petition for Rehearing.
PER CURIAM.
The petition for a rehearing must be denied. The decision upon the Crosstown Company’s Appeal was fully considered in its relation to the present appeal, and the conclusion reached that the exceptional facts and circumstances which in that case justified a modification of the rule stated in the Express Company’s Appeal did not exist in this case. As pointed out in our opinion in the Termination of Lease Proceeding, the period of real experimental operation by the City receivers continued but a very short time after the receivership.
VII. Appeal Presenting the Questions (1) Whether Certain Claims of the Metropolitan Company Against the City Company Based upon the Provisions of the Metropolitan-City Lease are Provable Against the City Estate; (2) Whether the Claims, if Provable, can be Enforced Against Such Estate to the Prejudice of its Tort and Contract Creditors: Called the “Validity of Lease Proceeding.”25
The lease of February 14, 1902, from the Metropolitan Company to the City Company, described in the Termination of Lease Proceeding, contained the following provision which has been referred to in the foregoing appeals:
“II. The lessee shall pay, satisfy and discharge all municipal, county or government taxes and assessments, or other charges of any description what*766ever whiqh during the term hereby granted may be imposed upon the property, hereby demised, or any part thereof, or upon any additions thereto and extensions thereof, or upon the lessor or its franchise or business by reason of the property and franchises hereby demised or by reason of any increase thereof or additions thereto or respiting from the use and operation by the lessee of the property hereby demised, or of any extension thereof ■or additions thereto, or from the construction of other lines in connection therewith; the intention of the parties being that the rents hereinafter agreed to be paid by the lessee shall not be in anywise impaired or diminished by any assessment, tax or charge upon the demised property real or personal, or upon any additions thereto, or extensions thereof, or upon the lessor or lessee 'by reason thereof. The lessee shall not, however, be required hereunder to pay any lien, tax, assessment or charge so long as it shall in good faith contest the legality and validity of the same, unless the payment thereof be necessary to protect the demised property or some part thereof from forfeiture or sale.”
The receivers of the Metropolitan Company seek to enforce this provision of the lease against the estate of the City Company and the type of the charge which they t(ave selected and which has received the consideration of the special master and of the court below, is a demand for the repayment of taxes assessed in the years 1904, 1905 and 1906 against the Ninety-Sixth Street power house of the Metropolitan Company. It appears that certiorari proceedings were taken in each year to review each assessment and that these proceedings were pending in September and October, 1907, when the receivers for the City Company and for the Metropolitan Company were appointed. These certiorari proceedings continued until February, 1909, when final judgments were rendered which reduced the assessments to a considerable extent. Thereupon the Metropolitan receivers paid the assessments and now make a claim based thereon against the City estate.
The objections to this claim made in behalf of the City estate are:
(1) That it is a contingent claim and not provable;
(2) That the Metropolitan Company and its receivers are concluded by an agreed statement of accounts from asserting the claim against the City estate; ■
(3) That the Metropolitan Company so conducted itself that its receivers are not in a position to enforce claims based upon said lease against the City estate to the prejudice of its tort and contract creditors.
The special master, whose report was confirmed by the District Court, held that the claim in question was valid and enforceable and then said:
“Nothing herein contained is an adjudication as to the effect of the facts found herein or. established in this proceeding on the question of the marshaling and priority of the claims of creditors of New York City Railway Company; nor shall this determination conclude any creditor of New York City Railway Company from establishing that, or be a determination of any question as to whether they are entitled to priority of payment of • their claims out of the estate of New York City Railway Company over any other claims.”
Appeals have been taken to this court in behalf of the City interests.
B. S. Catchings, for appellants.
Arthur H. Masten, W. M. Chadbourne, and Albert F. Jaeckel, for Joline et al., receivers.
Bronson Winthrop and C. T. Payne, for Farmers’ Loan & Trust Co.
Julien T. Davies, and Brainard Tolies, for Guaranty Trust Co.
R. R. Rogers, for New York Railways Co.
Morgan J. O’Brien, C. E. Rushmore, and G. N. Hamlin, for contract creditors’ committee.
M. C. Fleming, for Ladd, receiver.
Before COXE, WARD, and NOYES, Circuit Judges.
NOYES, Circuit Judge (after stating the facts as above). The objection to the claim for the amount paid for taxes that it is contingent, is disposed of by the decision in the Crosstown Company’s Appeal. Indeed it is not necessary to go so far as in that case, for the present claim comes squarely within the rule laid down in the Express Company’s Appeal. The taxes were assessed while the City Company was operating the leased property and it was bound to pay them. Assuming that the certiorari proceedings suspended the enforcement of the demand of the municipality and assuming that the amount of the demand was uncertain until the termination of those proceedings, still it was made certain upon their termination. Then, at least, the demand became fixed and it does not appear that at that time any order had been made shutting off the presentation of claims of this nature.26
The claim in question is a valid one and if enforceable should be allowed against the City estate. Whether it is enforceable and if so whether it has priority over other demands are questions now to be examined.
[19] With respect to the question of enforceability it is contended in the first place that the receivers of the Metropolitan Company are estopped from urging that the City estate is indebted to them on account of the taxes paid because after the assessment thereof, in May, 1907, the two corporations settled their mutual accounts and the Metropolitan Company, .by a vote of its directors, acknowledged that it had “no indebtedness for which the New York City Company is responsible.”
In respect of this contention it is sufficient to say that we are satisfied that the finding of the special master is correct that the settlement in question had no relation to demands of the nature of these taxes, and that the vote regarding the existence of indebtedness referred to the heavy payments required by the lease for the floating debt and improvements, and had no reference to current charges.
In the second place, while the validity of the lease is not assailed and while no facts are presented upon which a court could hold it invalid, it is urged in behalf of the contract creditors of the City Company that while the lease at its inception may have been en*768forceable, yet that the Metropolitan Company and its stockholders soon obtained control over the City Company and used its earnings and assets to continue the payment of Metropolitan dividend rental and bond interest notwithstanding that the railway system was operated at a constantly increasing loss, that deficits were created, and that charges of the nature of these taxes were left unpaid and unprovided for. And it is contended that, in such circumstances, an}' claim of the receivers of the Metropolitan Company under the lease for such charges ought equitably to be subordinated to the payment of the claims of material, labor and supply creditors of the City Company. The contentions made in behalf of the tort creditors are broader than those of the contract creditors, but we perceive no reasons urged in their behalf upon which the court could declare the lease non-enforceable nor the claims based thereon illegitimate, and must regard such contentions as being in effect that equity requires that the Metropolitan receivers should not be permitted to recover any demands based upon the lease until the claims of the tort creditors are satisfied.
The contentions, then, in behalf of the City tort and contract creditors are for priority in payment over the Metropolitan claims in the distribution of the assets of the City Company. Were this question presented upon this appeal, we should be required to enter into an extended examination of the facts discussed upon the briefs. But we do not see that the question is presented. On the contrary, as shown in the statement of facts, the special master expressly found that all questions of priority of payments out of the estate of the City Company were outside this proceeding and the court confirmed his report. It is not for us to enter into the consideration of questions not before the court below, especially in view of the fact that the reservation in the report fully protects the creditors of the City Company in raising the question of priority in other proceedings. ’
The decree appealed from is affirmed.

While the name will be retained for convenience it is a misnomer to designate this case in its present state the “Validity of Lease Proceeding.” The validity, at its inception, of the lease from the Metropolitan Company to the City Company is admitted by the appellants and there is nothing in the record to show that it became invalid afterwards. The contention is that the Metropolitan Company after the execution of the lease so controlled the City Company as to make it inequitable that the Metropolitan receivers should enforce demands based upon the lease to the prejudice of the general creditors of the City Company. But, as will appear in the opinion, this is a question of priority among creditors and not of the validity of the lease.

 There is nothing in the record to indicate that the early general order requiring the presentation of claims had any relation to demands between the parties to the receivership cause. Indeed the order of February 11, 1911, referring the subject matter of the present claim to the special master was in effect an order allowing the presentation of the claim at that time.