Opinion
Argued June 6, 1912
Decided October 1, 1912
William Greenough and Charles F. Mathewson for appellant. Ledyard P. Hale for public service commission, respondent. William L. Rumsey for village of Mamaroneck, respondent.
The decision in this proceeding affirms the obligation of the appellant to carry passengers on a continuous passage between the village of White Plains and the steamboat landing, so called, in the village of Mamaroneck for a single fare of five cents.
As more fully appears in the foregoing statement of facts, its predecessor, the Tarrytown, White Plains and Mamaroneck Railway Company, owned and operated a railroad between said points under franchises granted by said village of Mamaroneck and others under which it was entitled to charge a fare of ten cents. While thus situated it executed a mortgage covering property and franchises then owned and thereafter to be acquired. Later it obtained from the town and village of Mamaroneck, respectively, franchises for an extension beyond the steamboat landing on the condition, amongst others, that it would carry passengers between points on said extension and the village of White Plains, and which included the original section now owned by appellant and involved here, for a single fare of five cents, and by formal instrument it duly accepted said franchises and agreed to all their conditions and entered upon their enjoyment. Thereafter judgment of foreclosure and sale was obtained under said mortgage under which the road of said Tarrytown Company, including said extension, was sold in parcels, the appellant by assignment of bids becoming the owner of the parcel involved here, and some one else of the extension above mentioned.
It will only be necessary in this case to consider the effect of the franchises granted by the village of Mamaroneck and of the acceptance thereof. When the village granted appellant's predecessor an extension of its franchise it had the right as a consideration therefor to exact suitable conditions and agreements from the company in the interest of its inhabitants. There is no doubt that the rate of fare to be charged to and from points in the village was a matter of such municipal and public interest that the municipal authorities might bargain with reference thereto. Therefore the grant of the new franchise on the condition and consideration, amongst others, of a five-cent fare between the points now involved and the acceptance by the company thereof and its agreement to observe all the "conditions, regulations and restrictions" thereof made a valid contract.
It is urged that this did not have the effect to modify the original or ten-cent franchise covering the section of road here involved. I do not know that particular terms are indispensable, but it seems to me that such was the result. The village had granted a prior franchise duly accepted by the company under which the latter was entitled to charge a ten-cent fare. The village then granted an additional franchise on condition of a reduced fare over that portion of the road covered and affected by the first franchise, and the company accepted it and agreed to abide by its conditions and entered on its enjoyment. It seems to me that thereby the old franchise was presently and effectively modified or superseded by the new contract so far as the village authorities were interested in and could contract for a reduced fare. It is not necessary here to determine whether the latter could contract for a reduced fare on a continuous passage between White Plains and some point short of or beyond the village.
I do not understand that there is any serious question that so long as the Tarrytown Company operated its road including the extension, it was bound to afford a continuous passage for five cents as it had agreed. But it is insisted with much earnestness and ability by appellant's counsel that this obligation has been cut off by the foreclosure of the prior mortgage and by the sale of the road in parcels whereunder appellant did not acquire any part of the extension.
There is no doubt that the agreement of the Tarrytown Company to subject part of its original road covered by its mortgage to a reduced fare was subordinate to the lien of the mortgage and might have been rejected by the mortgage trustee or bondholders. I doubt if it would have been necessary for them to take any affirmative action in this direction or do more than ignore the extension in the foreclosure. But they did not by any means assume this attitude. The mortgage by express terms covered property and franchises acquired after its execution and it was provided therein that part of the proceeds of the bond issue should be devoted to development of extensions. Under these circumstances, the trustee in foreclosing its mortgage elected to enforce its lien on the newly acquired property and secured a judgment directing a sale of the extension which was later made for upwards of one hundred thousand dollars. Certainly and too obviously for argument this was not a repudiation by the mortgagee but an affirmance of the act of the mortgagor in procuring the extension and, therefore, of the terms on which it was secured. For again I suppose it will hardly be claimed that the mortgagee could thus get the benefit of the extension and at the same time escape the burdens undertaken in its acquisition. If the bondholders had bid off the entire road I think one would not seriously claim that they could at the same time cling to the extension and push away the obligations which it imposed on the balance of the road. Did the purchaser acquire any greater rights even though it bid off a parcel not included in the extension but subjected to its conditions?
The appellant is in no position to claim that the trustee acted improvidently or in violation of the rights of the bondholders in affirming the action of the mortgagor in subjecting the mortgaged property to an undesirable burden. That is a question between the trustee and the bondholders with which the appellant has no concern. It is bound by the sale as it took place and the only question is as to what it secured thereunder. Its assignor and it were chargeable with notice and knowledge of the franchises and terms under which the mortgagor operated its road, both the original part and the extension. They of course knew that franchises from the village were necessary, and those franchises and the consents of the company thereto were public records in the proper office. In addition the road being sold had been operated in accordance with the fare provision for years. This appellant and its assignor, therefore, were chargeable with knowledge that the parcel which it was procuring was subjected to certain obligations or burdens in consideration of the extension franchise. It was likewise chargeable with knowledge of the provisions of the judgment of foreclosure under which its assignor purchased, and that judgment told it that the mortgagee had ratified and proposed to take advantage of the action of its mortgagor in procuring the extension and imposing obligations on the parcel which it was obtaining. Thus it seems clear that the mortgagor and mortgagee united in a modification of the original franchise or right to operate the parcel of road which appellant has purchased, and that the latter bought with full knowledge thereof and subject thereto. In this respect the case differs from the one of Caccia v. Brooklyn Union Elevated R.R. Co. ( 98 App. Div. 294), cited by appellant, where it was held that a purchaser at a foreclosure sale was not affected by the release of certain rights from the lien of the mortgage of which he had no notice.
The remaining question in this connection is as to the manner of enforcement of the conditions of the five-cent franchise, because if appellant's counsel is right in his views upon this his client is saved anyway.
It is argued that the franchise for the extension was granted on a condition as to fares and on failure to comply with the condition the remedy is simply a forfeiture of the franchise which rested on it, namely, for the extension. This, of course, would not hurt appellant. It will be assumed that this remedy is open, but if I have been right in my prior reasoning it is not the only remedy. If the later franchise and the acceptance thereof and agreement thereto by the appellant's predecessor then effected a modification of its prior franchise and rights so that only a lower fare could be charged between the points here involved, that modification necessarily controls the operation of the road in the possession of one taking under the circumstances detailed. The road cannot be operated without a franchise and the franchise consists in part of the modification. If the appellant is operating its road in violation of its franchise and obligation there is no doubt that it can be stopped by a proper proceeding at the instigation of a proper party, and such I think are the present ones. (Public Service Law, § 57.)
The only substantial objection to the present proceeding, assuming that the petitioners are correct in their claims respecting the legal rights of the parties, is that it appears that the appellant cannot carry passengers between the points in question for five cents and that, therefore, this application should be denied as a matter of equity.
If we regard this proceeding as the equivalent of an action for specific performance, the rule undoubtedly is that courts may refuse the prayer for such relief when because of special circumstances it would be inequitable to grant it. But the statute expressly authorizes this form of proceeding, and I am not aware of any principle or authority which compelled the court to refuse to enforce the obligations imposed by the contract involved simply because one of the parties had ill advisedly agreed to unprofitable terms.
There may be considerable force in the appellant's argument that sound public policy is not best subserved by compelling a public service corporation to furnish service at a loss. But even if that be the fact here we see no opportunity to give relief from it in this proceeding.
The order appealed from should be affirmed, with costs.
CULLEN, Ch. J., GRAY, WERNER, WILLARD BARTLETT, CHASE and COLLIN, JJ, concur.
Order affirmed.