The Forty-second street spur of the Third Avenue Elevated Railroad, extending from Third *Page 178 avenue to the Grand Central Railway Station, has been taken down by compulsion of law. Protracted litigation has ensued over the amount of money the company should receive for such taking. The mandatory law is chapter 611 of the Laws of 1919, as amended by chapter 635 of the Laws of 1923. Pursuant to its provisions the Public Service Commission determined that the spur was no longer necessary or convenient for the public service and that it constituted an impediment and obstruction to the public use of the street. After this finding the city commenced these proceedings to condemn and remove the property. Title vested December 7, 1923, and the structure was removed in the spring of 1924. The condemnation proceedings have been pending ever since.
The Manhattan Railway Company owns the Elevated roads which it leased in 1903 to the Interborough Rapid Transit Company for 999 years. The Central Union Trust Company and the Equitable Trust Company are trustees under the Manhattan consolidated and second mortgages. William Roberts was appointed receiver of the Manhattan Railway Company September 6, 1932.
The questions involved on this appeal are novel and important. The railroads claim $6,500,000. They have been allowed about one-tenth of that amount. Their claims are large considering that it was their desire to escape the maintenance and operation of the Forty-second street spur.
There are three groups of parties: (a) The railroad interests; (b) the city, and (c) the abutting owners. The decision below satisfies none of them. All appear here as appellants.
The legislation leading up to the judgment herein is fully stated in the opinion of Mr. Justice O'MALLEY on the first hearing (126 Misc. Rep. 879); reversed (229 App. Div. 617) and new hearing ordered. The ultimate question is, How much must the city of New York pay to get the *Page 179 elevated structure out of Forty-second street? The railroads have a State and city street franchise and an elevated structure and the right to interfere with the light, air and access of abutting owners. What is the difference in the total value of such rights in perpetuity and as thus terminated?
The franchise, both from the State and the city, had its origin in the Rapid Transit Act (Laws of 1875, ch. 606). It dates from September 7, 1875, and vests the railway "with an interest in the street in perpetuity" for the purpose of an elevated railroad. Long after the acquisition of the street franchise it was held that private easements of light, air and access, where the city did not own the abutting property, were not the property of the city but of the abutting owners. (Story v. New York ElevatedR.R. Co., 90 N.Y. 122.) The railroad thereafter acquired title to these easements at large expense. The railroad companies now claim that these easements are real estate, separate and distinct from the railroads and that they are entitled to compensation therefor at the market value thereof at the time of the present taking, for the reason that the removal of the elevated structure restores these easements to the abutting owners, greatly enhances the value of such property and thus deprives the railroads of the value of their property therein.
The contention of the city is that these easements are of no value without the railroad. In brief its position is: "The railway company owned at the time title vested in the city in this proceeding (a) a franchise, (b) an elevated railroad structure, (c) and the right to maintain the structure forrailroad purposes without liability to the abutting owners, the three constituting one entire property, — a railroad in a public street."
It was held in substance in Kernochan v. New York ElevatedR.R. Co. (128 N.Y. 559) that the easements were appurtenant to the premises themselves and could *Page 180 not be owned separately and distinctly. Quite apart from the discussion of the cases, it is clear that the railroad merely exhausted the right of the abutting owners to complain because the railroad was in the street and so trespassing on their property. The railroad as such possesses a right to impair the easements by the operation of its road. If it did not have such rights it would be guilty of an injury to the inheritance.
O'MALLEY, J., held that these property rights, whatever they might be called, vested in the railroad, so that it is entitled to be compensated therefor, whether considered as an ownership separate and distinct from the franchise or as considered as a value measured only by the limited railroad use granted by the franchises. He held that the rights as such had no market value but that the value must be found by considering original cost, replacement value and earning capacity. The claimants demand an award for these rights of $3,600,000, the amount that it would cost them to acquire such rights on the date when title vested in the city under the legislation under consideration. O'MALLEY, J., on his theory fixed the value of such rights at $750,000. The Appellate Division held that the rights to impair light, air and access appurtenant to the property abutting on Forty-second street at the time of vesting of title herein should be valued upon the basis of the value judicially determined at the time of the original acquisition of those rights. The Special Term on the new hearing thereupon placed a value on such rights of $539,117.40. This has been affirmed by the Appellate Division and is now before us for review. The judgment of O'MALLEY, J., is not before us for review, as it is not an intermediate order subject to review on this appeal.
The railroads claim here as below that the court erred in failing to award the full market value of the private easements acquired by the railroad company. Such value should be applied only if the railroad is operated as a *Page 181 going concern and it cannot be so operated unless it owns such rights as it acquired in 1877 or thereabouts.
In other words, the property in such easements, strictly speaking, is of no value to the railroads when the railroad ceases to operate and is taken out of the street, but the city should reimburse the railroads for what it cost them to acquire such easements when it terminates the right of use in perpetuity. The decision of the court below awards the railroads fair compensation. The contention of the city, that the railroads are entitled to no compensation, is based on the argument that these rights were of no use to the railroads except as they were compelled to acquire them to operate and of no value except to a going concern, has some logical force, but such rights were obtained in order to permit the roads to exercise their franchise in the street in perpetuity, and when the city terminated such rights it should fairly compensate the roads for the loss of such rights.
The language of the many opinions in the elevated railroad cases is not helpful in dealing with this problem. The decisions are conflicting and deal with a different problem. What is the right which the roads acquired to exercise their street franchise in perpetuity as against the abutting owners worth when the right to operate the elevated road is taken from them? It is as extreme to say "nothing" as to say that their property in the easements is property entirely distinct from the right to maintain the elevated structure, the same as if the abutting owners still owned them. That these easements would be worth $3,600,000 to the abutting owners if they now owned them is beside the point. What is the city taking from the railroads? That is the question. The railroads could not release their rights to the abutting owners and continue to operate their railroads in the street. It, therefore, acquired no real title to these easements apart apart from the operation of its road. They otherwise still attach to the property of the abutting owners. *Page 182
We next come to the value of the street franchise itself. O'MALLEY, J., found that it had a value based on productiveness and that present earning power and reasonable prospective value should be considered. The Appellate Division held: "The franchise to build, maintain and operate the spur is of no value, since the spur can no longer be operated except at an annual loss and the taking by the city is a distinct benefit to the claimants since the Public Service Commission has determined that the spur is no longer necessary and convenient for public service."
It is difficult to see what the railroad has lost by the taking of its street franchise. It has gained relief from the burden of operating the road. What would any one pay for the franchise apart from the right to occupy the street? Should it receive more for its franchise when the spur can be operated only at a large annual loss? Of course it might possibly sometime gain some additional revenue if allowed to operate in perpetuity this spur in connection with the operation of its entire line. The railroad cannot claim a lack of profit, in rate fixing cases, on each part of its road. The whole system was operated at a profit but the finding that the Forty-second street franchise had no value should not be disturbed. While potentially traffic might be driven to the elevated by the congestion of the subways and the spur might have value as a traffic originating line such value is too speculative to be considered.
Next comes the question of the award for the structures in the street. O'MALLEY, J., held that the railroads were entitled to substantial award based on reproduction cost. The Appellate Division held that junk value was all that should be allowed; nuisance value or what the illegal structure was worth when taken down. The right to have the structure in the street was worthless if the street franchise was terminated. The structures had only a nuisance value when the right to have them in the street ended. *Page 183
On the whole, a fair valuation of the property taken is the amount awarded by the Appellate Division.
The order should be affirmed, without costs.