Court Opinion

ID: 3614942
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:58:21.301869+00
Date Added: 2024-06-11T07:45:34.655313
License: Public Domain

It appears, from the order reversing the judgment and ordering a new trial, made by the General Term of the Supreme Court, that it was made upon questions both of fact and law. The Code, section 268, makes it the duty of this court, upon appeal therefrom, to determine whether it was correctly made upon either ground. In 1852, when the grant was made to the plaintiffs and their assignors, the mayor and common council of the city of New York had no power to make the grant in question. (Milbau v.Sharp, 27 N.Y. 611, and cases cited.) The grant or license was, therefore, void, and of no value. The railroad was constructed, not by the grantees, but by the corporation (defendant). Section three of the act, relative to the construction of railroads in cities (Laws of 1864, chap. 140) makes valid such grants, only in favor of such parties and their assigns, as have constructed the road in whole or part, and such parties only and their assigns are authorized to continue the use of the road upon the route specified in the grant. The plaintiffs and their assignors, not having constructed any part of the railroad, *Page 203 
it is difficult to see how this legislative confirmation of the grant could inure to their benefit. The grant not having been made to the corporation by which the road had been constructed, the confirmation would not inure to its benefit, unless they had become the assignors of the city grantees prior to the passage of the act. From the evidence it would appear, that this was probably the case, but this question is not necessarily involved in the decision of this case, and I shall not examine or determine it. The question in this case is, simply whether the plaintiffs are entitled to recover of the defendants the $200,000, and the interest thereon, for which the referee gave judgment in their favor. We commence this inquiry with the fact appearing, that, at the time the defendant was incorporated and commenced the construction of the road, the plaintiffs and their assignors had not any grant, license or franchise of any validity or value. The defendant was incorporated for the express purpose of constructing and operating this road upon the route specified in the grant by the city, upon the terms, and according to the conditions required by the city upon making the grant, and to which the grantees agreed, and with which they were bound to comply. The grantees all became corporators, and a majority of the directors at the time of the incorporation of the company were grantees, and these constituted such majority until 1856. The grant from the city was, at the time, undoubtedly considered valid. Money was necessary to construct and equip the road, and for this purpose subscriptions were made for stock by the grantees and others. That others should subscribe for stock in a company formed to construct and operate this road, with a belief that the grantees, as individuals, had the sole right to do either, and that these grantees could exclude the company from all use of the road, except upon terms thereafter to be prescribed by them, is possible, but hardly supposable. That the grantees, directors, acting as directors and composing a majority of the board, could not make a bargain with themselves as individuals, binding upon the company, to purchase their grant upon the terms fixed by them as directors, is a point already determined by *Page 204 
this court in Butts v. Wood (37 N.Y. 317.) If they could not as directors make such a contract obligatory upon the company, they could not by their acts as a board bind the company to pay them any specific sum for their grant. If right in this, it follows, that the Supreme Court was right in reversing the judgment of the referee, for that judgment can only be sustained upon the ground, that this majority of directors, being grantees, had bound the company to them and their associate grantees, to pay $200,000, as the purchase price of their grant.
I also think, the statute of limitations was a bar to the plaintiffs' action. The grantees made a conveyance of the grant to the company more than six years before the commencement of this action. That conveyance was by an instrument under seal, and it is claimed by the counsel for the plaintiffs, that this brings the case within the limitation of twenty years, the time prescribed for the commencement of actions upon sealed instruments. But the action is not upon the instrument. That contains no covenant on the part of the company to pay the plaintiffs or their assignors any thing. The action is upon the promise of the company, express or implied, to pay in consideration of the conveyance. This clearly falls within the six years' limitation. It is also claimed, that the resolution passed by the board within six years before the commencement of the suit, acknowledging a debt to the plaintiffs and their assignors of $200,000 for the grant, takes the case out of the statute. The answer to this is, that a majority of the board passing the resolution were grantees, and, that, if they could not as directors buy the grant of themselves for the company, they cannot create, revive or continue a debt against the company to themselves, by passing resolutions as directors.
Again, it is claimed, that, if the company repudiate the acts of the directors in purchasing the grant of themselves for the company, they must restore the grant. The answer to this is, that the plaintiffs have not asked any such judgment. Their claim to recover was based entirely upon the validity of the acts of the grantees as directors, and the judgment of *Page 205 
the referee was based upon that only. These acts being invalid, that judgment was rightly reversed, and the order appealed from must be affirmed with costs, and judgment final given against the plaintiffs.
Judgment affirmed. *Page 206