Admiral Realty Co. v. City of New York

These are taxpayers’ actions brought to restrain the execution in behalf of the city of New York by its officials and the members of .the public service commission for the first district of two contracts, one with the defendant Interborough Rapid' Transit Company and the other with the Brooklyn Union Elevated Railroad Company, or whatever company may take its place, for the construction, equipment and operation of subway and elevated railroads principally to be located in the boroughs of Manhattan and Brooklyn. The complaints do not charge fraud, collusion or actual misconduct in the proposed execution of said contracts, but they attack the latter as fundamentally illegal because violating the provision of the Constitution which declares that “No county, city, town or village shall hereafter give any money or property, or loan its money or credit to or in aid of any individual, association or corporation, * *’ * nor shall any such county, city, town or village be allowed to incur any indebtedness except for county, city, town or village purposes.” (Art. 8, section 10.)

As we shall see hereafter, the only hope for 'success in this attack must be drawn from the first clause of the provision prohibiting a gift or loan of money, property or credit.

It is proposed to execute the contracts under and in accordance with authority conferred by the legislature under the so-called Rapid Transit Act (Laws of 1891, chapter 4), and its various amendments. Originally it was urged that this act was not broad enough to authorize the contracts, but since the commencnment of the actions amendments have been made which concededly meet and destroy this claim, and, therefore, the real question is whether the statute attempts to permit something

The cases were discussed at Special Term by Mr. Justice Blacicmar in an elaborate and carefully considered opinion.

It is to be be borne in mind at the outset and at every point of our discussion that this court has nothing whatever to do with the wisdom of the proposed contracts. If the municipality and the various officials acting in its behalf have the power to make them then the questions whether it is wise to do so and whether their terms are advantageous for the municipality and public are solely for the consideration and decision of those officials. After all the criticisim and discussion which have been directed at the present transit situation in New York it is only just and reasonable to assume that public officials charged with the duty of bettering that situation have entered on then’ task with care, all the wisdom and foresight at their command, and with complete devotion to the public welfare. But even if we should doubt whether they have reached the best possible solution of a great and perplexing problem, our sole and only duty still would be simply to determine whether the Constitution permits the legislation and contracts in question and there again it is to be remembered that our duty is to be so discharged if possible within fixed principles of law as to uphold rather than condemn the legislation and the proposed action of the various state and municipal authorities thereunder.

As stated, the proposed contracts are two in number, and entirely distinct. It is impossible within reasonable limits to state their provisions even with approximate completeness. In the prefixed statement of facts I have attempted only briefly to summarize those more important provisions which are necessarily involved in a discussion of this appeal, and which have been called to our attention by the various counsel. Here I shall only outline their general character.

The contract with the Brooklyn Company provides for the construction and equipment of many miles of municipal subway mainly in the borough of Brooklyn at municipal expense; the extension and betterment of the system of railroads owned by the Brooklyn Company and the expenditure by the latter for that purpose arid for - equipment of $50,000,000; operation of the subways under a lease for forty-nine years or a shorter period by the Brooklyn Company in conjunction with its own railroad as a single system subject to a single five-cent fare; preferential payments to the city and company from earnings of a similar general nature to those in the case of the other contract, and division of the balance of earnings between city and company.

In attacking these contracts much is said about a joint ownership of property, about the speculative partnership' between the municipality and the railroad company and about the obnoxious pooling of the proceeds derived from the joint operation of municipal and privately owned property. While these arguments indirectly are entirely pertinent and legitimate, we must not allow them to obscure the exact and only question presented to us in

The provisions which are especially pointed at by the appellants as obnoxious to the Constitution and as infecting the entire contracts with illegality are those providing for the so-called preferential payments to the operating companies from the joint earnings of the new subways and the roads to he operated with them respectively before the city secures any returns. If those payments do not result in gifts or gratuities by the municipality to the operating companies, then it is safe to say that none are to be found within the provisions of the contracts. It seems to me that on a perfectly fair and just analysis of the contracts they do not effect this result, but are or will be incidents of contracts which the municipality under the authority of the legislature may lawfully make, and I shall proceed as briefly as possible with that analysis, taking up first the contract with the Inter-borough Company.

Even if it had not been stated again and again without contradiction on the argument of this appeal, we might probably take judicial notice of the fact that the rapid transit facilities in the cities of New York and Brooklyn have been for a long time inadequate and unsatisfactory. Desiring to remedy this situation and meet the demands

The validity of these provisions of the contract to this point, at least standing by themselves, is established beyond any possibility of debate by the case of Sun Printing & Publishing Assn. v. Mayor, etc., of N. Y. ( 152 N. Y. 257 ). This court there decided, absolutely and conclusively, Judge Haight writing the opinion, that the construction of railroads, in that case as in this subways, by a municipality was a city purpose within the meaning of that provision of the Constitution which has been quoted, and that such construction might be made at municipal expense. It further decided that the municipality need not itself operate such railroads, but might provide for the operation thereof by some one else under a lease not in perpetuity. Therefore, we start with the incontestable proposition that the city may construct and lease new subways to the Interborough Company.

But, of course, if a city may construct subways it must have the right to make a contract for their building and equipment and provide for repayment to one who furnishes construction or contributes money. This is what

Then going a step further with the contract, it appears, at least the state and municipal authorities in the exercise of the judgment and discretion confided to them may say, that while the subways to be constructed under the proposed contract would to some extent relieve the transportation situation, they would not by themselves furnish such a complete system subject to a single five-cent fare as should be afforded to the inhabitants of a great city; that in order to accomplish this and subserve the general public welfare the new subways should be operated with the old ones as an entire and connected system and subject to a single fare for five cents. Have the municipal and other authorities under the legislative sanction the right to effect this purpose in the method proposed in other provisions of the contract ?

The city owns the subways already constructed and which it desires to have operated in connection with the ones to be constructed. If it held them entirely free it could make a lease of old and new subways as a single system as it desires to. It has, however, made a lease of these old subways extending under possible extensions for many years and containing no provisions reserving to the municipality the right to insist upon extensions or that they shall be operated in connection with the new

The question whether the city may make this arrangement with the Interborough Company seems to resolve itself into the fundamental inquiry whether a municipality haying made a contract may subsequently bargain under full legislative authority for a modification of that contract so that it will be adjustable to altered and then existing circumstances, paying an adequate consideration either for what the other party gives up or for what it secures under the modifications. It seems to me obvious that a municipality has such power. It is an ordinary incident to the power to make a contract that one who has made such a contract which through inadvertent provisions or change in conditions becomes undesirable may bargain for a modification or cancellation thereof. The power to make a contract begets the right to procure its amendment or rescission. I can see no reason why this

In addition to mere reasoning there are authorities which affirm this power, to some of which reference will be made.

Tocci v. Mayor, etc., of N. Y. ( 73 Hun, 46 ) was a taxpayer’s action to restrain the city of New York from contributing under legislative authority towards the expenses to be incurred in removal of the tracks of certain railroad companies from various streets in the city of New York so as to permit a fuller enjoyment of the latter by the public. I am unable to see any difference between the principle involved in that case and the one immediately under discussion. By appropriate methods which amounted to a contract the railroads had secured the right to operate their tracks in the streets in question. This arrangement had become inconsistent with the best interests of the city. Nevertheless, it could not be terminated by compulsion. Under these circumstances the suit was dismissed and it was determined that the city by bargain and for a consideration might secure a modification of the rights to which the railroads were entitled under their then existing contracts or franchises.

The case of Brooke v. City of Philadelphia ( 162 Penn. St. 123 ) involved similar questions and principles. There it was held that the city might incur expense in constructing a subway for a railroad company in order to eliminate grade crossings without violation of constitutional provisions quite as broad as here on the subject of gifts by a municipality. (See, also, People ex rel. Murphy v. Kelly, 76 N. Y. 475 .)

Of course, if this reasoning is correct, the payment from

The only remaining provisions which I shall specifically consider are those that there shall be retained for the benefit of the operator from the earnings of the entire system a sum for operating expenses, and that after deduction of all of the sums which have been discussed and certain others for the benefit of the city and which are not criticised, the balance of earnings shall be equally divided between the city and the Interborough Company. If I have been right in my reasoning thus far it follows that these provisions are entirely legal. An owner leasing property may take his compensation or rent in stated sums or by a certain proportion of the net proceeds of the property after deducting legal- and specified charges against those proceeds. There is no difference in legal principle. The owner does not become a partner with the tenant because he adopts the latter- method instead of the first. The time-honored practice of leasing a farm on shares instead of for a fixed annual rental has never been supposed or held to transform a lease into articles of copartnership.

In short, if I have viewed the contract from the proper standpoint, ^there is nowhere any partnership or joint

Most of the features of the proposed contract with the Brooklyn Company are so similar to those of the contract with the Interborough Company that they need not be considered in detail. The most important feature differentiating the two contracts is that while the Interborough one contemplates the operation as a single system of various subways which are all owned by the city, the Brooklyn contract contemplates the operation of subways to be constructed and owned by the city in connection with a privately-owned transit system, and. the only question which need be discussed at any length is whether this feature demands condemnation of the latter contract.

For the purposes of discussion the Brooklyn territory which the city of New York desires to supply with adequate transportation facilities may be regarded as consisting of two parts. Under the contract in question the city proposes to supply one of these parts with a system of subways constructed at a municipal expense of about $100,000,000, and equipped at an expenditure of

The power to build and own railroads because effecting a proper municipal purpose must include the lesser power to perfect an incomplete municipal system by leasing for a limited term a privately-owned system to be operated in connection with it. The general rule is that a municipality may acquire property for proper purposes by lease as well as purchase. (Alter v. City of Cincinnati, 56 Ohio St. 47 .)

The power thus to lease outright a privately-owned road again must include the lesser and fairly incidental power on the part of the municipality to make a traffic or transportation contract with the owner of a private road whereby the latter will be operated in connection with the former’s road under such a.system of transfers between and fares over the two systems as the municipal representatives deem for the best interest of the public.

If this reasoning is correct it covers the present case,

Furthermore, if the municipality has a right to contract with the lessee of its roads that such lessee shall subject its own system to a single fare it has a right to bargain for proper compensation to be given for the privilege thus secured and for the rental which it is to receive for its own property when operated under conditions of a single fare. This covers and justifies the provision for a preferential payment from the proceeds of the entire system of an annual sum equal to the earnings now derived from the Brooklyn Company’s system under its own method of operation, and fit also covers and justifies the equal division between the municipality and the operating company of the balance of the proceeds from the operation of the entire system after making the various payments provided for. It is vigorously urged in the case of the Brooklyn contract as in the case of the Interborough one that the yearly preferential sum to be paid from earnings to the privately-owned company is excessive. That may be so. I do not pretend to know. But even if it should be believed that it is, that consideration is not within our jurisdiction. The Brooklyn Company proposes to spend at least $26,000,000 in bettering and extending its system and then subject that system to a much lower fare than it now receives.. The city requires this in the public interest. For this and other considerations, the company exacts the payment in question. It may prove so large as to be very profitable, but no one claims that in agreeing

. I do not think that the provisions of the Brooklyn contract bring the municipality any nearer in principle to a prohibited partnership of municipality and private individual than do the provisions of the Interborough contract, and I fail to see any gift or loan of money, property or credit by the municipality to the company within the words or spirit of the Constitution as interpreted-by Judge Haight in the Sun Printing & Publishing Association case for application to such a case as this.

The city constructs arid leases its subways to the company for a consideration or rental to be paid from the net earnings and it affords to its lessee an opportunity to derive profit from the lease by receipt of a like share of such earnings. There is no gift or loan in this, but an ordinary contract for a consideration just as valid in the case of a municipality as in the case of an individual.

It exacts from the lessee that it shall expend large sums for bettering its .system and that it shall operate such system in connection with or in subordination to the municipal road under a reduced fare, and for these rights, in the interest of the public, over the private road, it pays a consideration. The question whether the municipality has the power to make this agreement may be the subject of debate. I have attempted to cover that. But however that may be I look in vain for what seems to me to be a gift or loan.

It is not possible to review at length the authorities cited by the appellants to establish the illegality of the' proposed contracts. They are mainly made by the courts of Ohio, and in most of them the basis of condemnation is the embarkation by the municipality on some scheme clearly transcending the limits of municipal purposes or an unlawful -union of municipal and private property rights. When we keep in mind that under the Brooklyn

In that case the court had before it for consideration a constitutional provision not unlike that now before us as affecting the validity of a statute for the construction and extension of water works by municipalities. In brief this statute provided that a municipality and a private owner might become the joint owners of indivisible interests in a single water system, and this was condemned by the court. The court said: “ When the enlargements, extensions, improvements and additions shall be thus made, completed and connected with the existing water works so owned by the city, the enlargements, extensions, improvements and additions together with the existing works, all taken together, will constitute one completed whole — one water works system, one water works — owned in part by the city and in part by the individual or corporation, and thereby the union of public and private capital and funds in one enterprise will become complete. The provision that the works shall be operated, managed and conducted by the city does not relieve the matter, because, before the city can operate the works it must first obtain a lease upon such terms as may be agreed upon, and that puts it beyond the power of the city to operate and control the works as sole proprietor. It would be a joining of two properties owned by different parties together to make one property, the parts owned by each being necessary to the successful operation of the whole, and each owner having his say as to the terms and conditions upon which the whole should be operated. The existing water

It remains to consider the only other objections to the contracts, one constitutional and the other statutory.

• First, it is said that the Rapid Transit Act violates that section of the constitution which provides, “ The Legislature shall not pass a private or local bill in any of the following cases: * * *

■ “ Granting to any corporation, association or individual the right to lay down railroad tracks. * * *

“The Legislature shall pass general laws providing for the cases enumerated in this section, and for all other cases which in its judgment, may be provided for by general laws.” (Art. 3, section 18.)

The reasoning by which appellants seek to establish a violation by the statute of these provisions is as follows:

The Rapid Transit Act by its terms affects only cities having a population of over one million. It depends for its execution upon the acts of the public service commission of the first district. That district includes only the counties of New York, Kings, Queens and Richmond.

This argument, even if well founded, would not apply to those provisions of the statute and contracts providing for the construction by the municipality of subways, it having been held in the Sun Printing & Publishing Association case that such subways were not of the character of railways referred to in the constitutional provision which has been quoted. The argument, however, would, if well founded, apply to those provisions of the act providing for the grant of franchises to corporations for the construction and operation of railroads in the rapid transit system.

I think, however, that the statute does not come within any constitutional prohibitions of the character urged. While it is true that if we should go outside of the statute we should ascertain that at the present time it affects only the city of New York, it would also appear that even at the present time except for the Consolidation Act affecting the cities of New York and Brooklyn and passed after the Rapid Transit Act was passed, the latter would apply to two cities, and there is no conclusive presumption that it will not apply to other cities in the future. The act is general in its terms as applicable to cities of a certain size, and in that respect, subject to the consideration of another constitutional provision, is valid and not a case of local legislation. (Matter of N. Y. Elev. R. R. Co., 70 N. Y. 327 ; Matter of Church, 92 N. Y. 1 ; People ex rel. N. Y. El. Lines Co. v. Squire, 107 N. Y. 593 ; Matter of Henneberger, 155 N. Y. 420 .)

It is, however, urged that the' principles settled by the foregoing and other decisions are not applicable because of the further constitutional provision which was adopted in 1894, providing as follows:

■ “Classification of cities; general and special city laws;

It is said that because the Rapid Transit Act does not relate to all cities of the first class, it is a special city law which can only be passed as by the Constitution provided.

Again, I disagree with the contention of the appellants. In the first place the Rapid Transit Act was passed before this constitutional provision went into effect. In the second place, the act is not one of those contemplated by the provision in question. The latter contemplates laws which relate to municipal property and affairs and which may be described, as the provision does describe them, as “ city ” laws. To come within the precise provision which is invoked here it would be necessary to hold that the Rapid Transit Act was “a special city law.” It seems to me that this term could not be regarded as a reasonable description of the statute before us. It was adopted not only for the benefit of the cities which, of course, would be affected, but of the public at large, and it confers broad powers, including that of the granting of franchises. It is a much more general law than is contemplated by the provision in question. (People ex rel. Einsfeld v. Murray, 149 N. Y. 367 ; Matter of Henneberger, 155 N. Y. 420 .)

The second objection calls for an interpretation of certain provisions of the Rapid Transit Act. It is argued that there should be a referendum before execution of the contracts. It is very doubtful whether that objection is

The original act of 1891 did not contain any provisions for municipal construction. The municipal construction and referendum provisions were added by chapter 752 of the Laws of 1894. By this statute section 34 of the Rapid Transit Act, as amended, provided for municipal construction in case the people should so determine under the referendum provisions contained in sections 12 and 13 of the amendatory act, and section 7 of the act as thus amended provided for public sale of franchises in case the vote on referendum should be against municipal construction. The municipal construction section was frequently amended prior to 1909, but so far as I have examined these amendments they all continue the provision whereby municipal construction was made dependent on the result of the referendum. But by chapter 498 of the Laws of 1909 the Rapid Transit Act was revised. The private construction section, as amended in 1894 making private construction dependent upon a vote of the people adverse to municipal construction, was expressly repealed and a new section (section 22) was added authorizing private construction without reference to the results of referendum. The municipal construction section (theretofore section 34), as amended from time to time, was renumbered as section 26 and was further amended by the elimination of all limitation by or reference to the results of referendum. By the re-arrangement of section 65 all acts and parts of acts local or general inconsistent with the act as amended by the amendments of 1909 were expressly repealed.

Under these circumstances it seems to be clear that the argument for the necessity of a referendum before execution of the proposed contracts is without foundation.

The judgment in each case should be affirmed, with costs.

I vote to reverse the orders below and to grant the injunctions asked. In my opinion the contracts about to be entered into by the city of New York, the execution of which' it is the object of these actions to restrain, plainly violate the constitutional provisions restraining’ the power of the city to incur, debt or dispose of its money, property or credit. These provisions, as found in article 8, section 10, of the present Constitution, are: “No county, city, town or village shall hereafter give any money or property, or loan its money or credit to or in aid of any individual, association or corporation, or become directly or indirectly the owner of stock in, or bonds of, any association or corporation; nor shall any such county, city, town or village be allowed to incur. any indebtedness except for county, city, town or village purposes. This section shall not prevent such county, city, town or village from making such provision for the aid or support of its poor as may be authorized by law.” It will be observed that here are enacted two separate and distinct prohibitions, each absolute and unqualified. Stated tersely, the first was intended to prevent the contribution of municipal capital or credit to or in connection with private capital in any scheme of public improvement; the second, to limit the devotion of municipal capital or credit to a municipal purpose of the municipality. These provisions' were first incorporated into the Constitution by the amendments adopted in 1874. They were not adopted for the purpose of prohibiting the employment of public funds or credit for a private purpose, for it was the law of the state before the adoption of the amendment that municipal funds should not be applied in aid of private enterprises. In Weismer v. Village of Douglas ( 64 N. Y. 91 ) it was held that a statute authorizing a village to subscribe for the stock of a manufacturing corporation to be located in the village and to improve a water power there situated was unconstitutional and void, because the enterprise was of a pri

Thus far the second constitutional limitation alone has been involved. But if, instead of the city owning and constructing the municipal railroad, the plan was that it should be constructed and owned by a private corporation, though the purpose in such case would be just as public and just as municipal as when the road was to be owned and operated by the municipality, and though the exigency for the public work might be most urgent, the city by the express provision of the Constitution would be • forbidden to give or lend a dollar or a dollar’s worth of property to or in aid of the corporation, or to buy a share of its stock or one of its bonds. The only question I shall

Before detailing the provisions of the contracts it may be well to consider two arguments made in support of their validity. They are general in their character and not dependent on the specific details of the contracts. First, it is urged that the contracts are merely leases of the property, and that the power of the city to lease the subway was distinctly declared in the case of Sun Printing & Publishing Assn. v. Mayor, etc., of N. Y. (supra). It is asked whether the lease by the city of one of its piers to a steamship company is a gift or loan of the money, property or credit of the city and, therefore, illegal. The illustration will be accepted and the answer seems plain. The legality depends on the terms of the lease. If the pier is rented for its fair rental value. or in an honest effort to obtain such value, whether the rent reserved be too high or too low, of course the lease is good. But if the lease should provide that in consideration of the company’s agreement to carry residents of the city of New York at half the regular rates of passage, the rent should be only one dollar a year, manifestly it would violate the constitutional provision, because giving -the use of the property of the city without its marketable return is a gift of the city property. So, also, if the lease in consideration of such an agreement should provide that the company pay a reduced rental, it would be a gift of the city property pro tanto and equally illegal, for if part of the consideration of a contract be illegal, the whole contract is void. (Saratoga County Bank v. King, 44 N. Y. 87 ; Foley v. Speir, 100 id. 552; Trist v. Child, 21 Wall. 441 ; Meguire v. Corwine, 101 U. S. 108 .)

' The second argument presented to us, apparently seriously, seems to me very curious. It is to the effect that there can be no gift or loan of the city property by these contracts, because the title remains in the city. Under ,

This brings us to a consideration of the terms of the proposed contracts, the details of which are set forth hi the opinion of my brother Hiscock. In this opinion I shall discuss only the contract of the Brooklyn Union Elevated Railroad Company. The questions involved in

The salient and controlling terms of the proposed lease to the Brooklyn Company are as follows: That company either as owner or lessee controls about 105 miles of elevated or steam railroads in the borough of Brooklyn. The city is at present engaged in the construction of two subways, one in the borough of Brooklyn, on Fourth avenue, and the other in the borough of Manhattan, connecting the termini of the bridges across the East river, aggregating in length seven and two-tenths miles, which will cost when completed, according to the estimate of the public service commission, $27,800,000. Under the contract there is to be built at the city’s charge fourteen and six-tenths miles of additional subway at an estimated cost of $58,400,000. . The railroad company is to construct a connecting subway of a mile and one-tenth at an estimated cost of $3,200,000. It is to extend and improve its own lines at an expense of $23,400,000, and to equip both at an estimated cost of $24,000,000. These figures of the public service commission are the lowest given in the negotiations between the parties — the railroad company estimating the cost of the improvement to be defrayed by it at $50,000,000, and the city’s expenditure at over $90,000,000. When completed the city roads are to be leased (?) to the railroad company for the period of forty-nine years and both roads are to be operated by the railroad company, the receipts from all being pooled in a common fund, out of which is to be disbursed annually in the following order: 1. Operating expenses, taxes, rentals, etc. ,2. Depreciation, etc. 3. To the operating company $3,500,000 annually to cover net earnings of existing elevated lines. 4. Interest on cost of extensions and equipment incurred by the company. 5. Sinking

That this contract creates a partnership, and a very one-sided partnership at that, between the city and the railroad company seems to me entirely clear. Indeed, it is so denominated by the railroad company in its proposals to the city. That if the agreement was between private individuals or corporations it would create a partnership is settled law, because the parties are entitled to share in the profits as such (Manhattan Brass & Manfg. Co. v. Sears, 45 N. Y. 797 ; Burnett v. Snyder, 81 id. 500, 555; Leggett v. Hyde, 58 id. 272), though it must be conceded that the city’s chance of sharing is somewhat remote. But it is contended, assuming that a partnership is created, that there is no violation of the constitutional provision. The learned judge who decided the case at Special Term has written: “ The city does not give its property, it leases it; the city does not guarantee the yearly $6,335,000, for it does not pledge its credit that this amount will be realized; leasing property, even if the lease be so valuable as to enable the lessee to borrow on it, is not lending the lessor’s credit to the lessee, and finally, there is no express prohibition in the Constitution against mingling public and private property, or against a partnership.” I am constrained to differ with the court on each of these propositions. I have already shown that a gift of property may be as easily made by a lease as by a conveyance of a fee. It seems that there are in this state leases for 990 years at an annual rent of three peppercorns. (Trustees of Elmira v. Dunn, 22 Barb. 402 .) Who is the real owner

The Constitution of the State of Ohio prescribed that: “The general assembly shall never authorize any county, city, town or township, by vote of its citizens or otherwise, to become a stockholder in any joint stock company, corporation or association whatever, or to raise money for, or loan its credit to, or in aid of any such company, corporation or association.” The provision is so similar to that now found at a later time in our Constitution that doubtless our provision was borrowed from it. Certainly ours is no less broad. The effect of the Ohio constitutional provision has been several times before the court of last resort in that state. The first case was that of

The effect of this constitutional prohibition came before the Supreme Court of the United States in Pleasant Township v. Ætna Life Ins. Co. ( 138 U. S. 67 ), where a suit had been brought in the Federal courts against a town to recover on bonds issued under the statute which was condemned in the cases cited from 37th and 38th Ohio reports. That court held that as the bonds were issued before the Supreme Court of the state of Ohio had decided their invalidity, the Federal courts were not constrained to follow those decisions, but required to determine the controversy on their own judgments. Nevertheless, the Supreme Court, reversing the lower court, held the statute void, agreeing with the Supreme Court of Ohio and quoting with approval the excerpts which I have already given. Thus, there is very respectable authority that the contracts before us are bad.

But even if we were to assume that a business partnership between a municipality and a private corporation would not in all cases conflict with the Constitution, the terms of this agreement are such as necessarily condemn it. The city is to contribute over $90,000,000 of its capital. Out of the net income realized from the joint operation of the city roads and the company roads there is first to be paid to the railroad company $3,500,000, or, as stated in its letter, about 6% on the capital represented by such roads. For forty-nine years the income realized from the city’s investment of $90,000,000 is pledged to secure an annual return of $3,500,000 to the railroad company. It may possibly be that the earnings from the existing lines of the railroad company, if it were practical to separate them from the common fund, will equal that amount. That, however, is immaterial. The property of the city is nevertheless pledged to secure the company that return.

The difference between the views of the majority of the court and myself lies here: They think that because a municipality may acquire property for a municipal

I do not discuss the question whether the terms of the proposed contract are fair or unfair. The sole question is, do they violate the constitutional provision. Equally aside of the mark is all discussion of the necessity of the city for new means of transit or of the sacrifice which the contract requires the company to make, and the consideration which, .under its terms, the company is to advance. As already said, the Constitution does not forbid the city doing certain things without consideration, but doing them at all with or without consideration. It may not

The decision of this court in the case of Sun Printing & Publishing Assn. v. Mayor, etc., of N. Y. (supra) does not in any degree sustain the validity of the proposed contracts. There, it was held that the city might build a subway and lease it to a company for a term of years for a fixed annual rental payable in money equal to the interest on the city’s outlay and also sufficient to amortize the principal invested at the expiration of the lease. In other words, what was done in that case is exactly the same as is done with piers. The city builds them; the companies hire them and pay rent, the rent being no way dependent on the profits of the steamship companies. It is the method in which the income derived from the use of the city’s property is to be applied that occasions the whole controversy in these cases, with which the decision in the Sun case in no way deals.

It has been suggested that possibly a dissent in these cases may be of value, as it will check the further extension of schemes for loaning the city’s money, property or credit. Those who indulge in this belief but “Listen with credulity to the whispers of fancy.” It would be ungracious not to make recognition of the great skill and ability displayed by the lawyers and financiers who have formulated these contracts in their efforts to make the evasion of constitutional restrictions practicable. But their successors may be found, and even their own services may again he brought into requisition. The corporations controlling the Brooklyn and the New York railroads each holds and operates many miles of street surface railroads. After their present success they may deem it wise to obtain a guarantee of the income of such property through a pledge of city property by a scheme similar to the present one. Of course, if subway roads can be com

(dissenting). The appeals are from three judgments sustaining demurrers to complaints in taxpayers’ actions brought to test the validity of two contracts under which it is proposed to extend and unify the rapid transit railways in the city of New York. The complaints attack these, proposed contracts on the ground, inter alia, that they violate the provisions of article 8, section 10, of our State Constitution, which declares: “ No county, city, town or village shall hereafter give any money or property, or loan its money or credit to or in aid of any individual, association or corporation, or become directly or indirectly the owner of stock in, or bonds of, any association or corporation. ” Thus far the courts have held that these proposed contracts are not in contravention of this constitutional mandate, and a majority of this court are about to concur in this conclusion. Although I do not favor the writing and publication of dissenting opinions when they serve no purpose save to emphasize divergence of judicial views, this is one of

The contract with the Brooklyn Company, stripped of unnecessary details, provides that the city shall construct an addition to the Fourth avenue line in Brooklyn, now in course of construction; a fine under the East river to the Battery, in Manhattan; a line from the Battery by way of Church and Vesey streets, to Broadway; a line through Broadway to 42nd street and through Seventh avenue to 59th street easterly to and over the Queens-borough bridge, there to connect with the elevated lines of the Brooklyn Company. The Brooklyn Company shall construct, at its own expense, an elevated extension from the old city line easterly in the borough of Queens to Jamaica; an elevated extension from the Williamsburg bridge northerly to the Queensborough bridge; an elevated extension from the present terminus of its Third avenue line to Bay Ridge and otherwise;- and shall third track its lines on Fulton street, Myrtle avenue, Broadway .and other streets.

The Brooklyn Company is to equip and operate all these lines as a 'single system for a uniform fare of five cents per passenger. The city lines are to he leased to the operating’ company for a period of forty-nine years subject to- the city’s right to take over the new lines after the lapse of ten years. The estimated expenditure of the city in the completion of lines now under construction and the new lines to be built will he over $86,000,000 and may be much more, and the Brooklyn Company is to ' invest over $50,000,000 in construction and equipment. These bare outlines of the proposed compact between the

. The proposed contract with the Interborough Company is somewhat different in detail, but not essentially different in kind. The city is. to contribute the present subways, which were built at the city’s expense and are operated by the Interborough Company under lease, with

That these two arrangements constitute two partnerships between the city and two private corporations does not admit of a doubt. In the case of the Brooklyn Company the point is frankly conceded. By whatever name these plans may be called they are joint enterprises in which the essential fact is that the city is lending its credit to two private corporations to the extent of their participation therein. In every partnership or joint venture each participant lends his credit to every other. In this case the legal status of the city, no less than the character of the arrangement, invests the two private corporations with a credit which they could not have without the city’s participation. By the city’s concessions these two private corporations are given a borrowing’ power without which the enterprise would be doomed from the beginning to certain disaster. It matters not whether the proposed arrangement is one which is apparently for the public good, or whether it may ultimately prove financially beneficial to the city. If the substance and effect of the transaction will be to commit the credit of the city to a venture in which private corporations are to be beneficiaries, it is a lending of the city’s credit for purposes forbidden by the Constitution. It is true that the capital of the city is not to be pledged for the large underlying loans which must be secured by the two corporations in order to float the enterprise, but the income is to be pledged to secure these loans, and this is really the only tangible security, for without income the subways and other structures will be worthless. Very succinctly has one of the counsel for appellants stated the situation when he says: “ To pledge the income is to pledge the capital, and this income the city proposes to pledge for forty-nine years,

I do not think we are foreclosed or embarrassed by our decision in the case of Sun Printing & Publishing Assn. v. Mayor, etc., of N. Y. ( 152 N. Y. 257 ). It was there held that the building of a subway is the building of a highway which is concededly a city purpose. It was also held that the Constitution does not prohibit municipalities from constructing their own.roads and paying therefor when authorized by proper legislation. ■ There the city built its own subways, and made a lease for their operation upon a fixed rental to be paid by the lessee. A majority of the court, speaking through Judge Haight, united in an opinion in which the author, recognizing the narrow limits within which the case was to be decided, was very careful to limit his expressions to the precise facts then before the court. The opinion will be scanned in vain for even a single utterance which lends support to the contention, now'before the court, that a railroad to be built with the combined capital of a city and private corporations, and operated by the private corporations for the benefit of all, is not in contravention of the Constitution.

With the merits of the proposed attempt to give the city a much needed improvement in its rapid transit facilities, the courts have no more concern than they have with the wisdom of the constitutional provision which is invoked by the appellants. It is clearly apparent that the city and the railroad companies are confronted with a problem which taxes human ingenuity and it may readily be assumed that it is being worked out with such degree of skill, wisdom and public spirit as befits so great an undertaking. Conceding all this, and much more, the plain duty of the .courts is to uphold the Constitution as it is written even though it may be, for the time being, a hin.drance to beneficent results. In the language of Chief Justice Marshall in Marbury v. Madison ( 1 Cranch, 137 ): The Constitution is either a superior paramount

Haight, Vann and Collin, JJ., concur with IIiscock, J.; Cullen, Ch. J., and Werner, J., read dissenting opinions; Q-ray, J., takes no part.

Judgment affirmed.