City of New York v. N.Y. Central R.R. Co. , 275 N.Y. 287 ( 1937 )

Pursuant to chapter 558 of the Laws of 1909 and for the purpose of enabling the defendant railroad companies to relocate their railroad tracks and to erect a railroad station in the vicinity of Park avenue and One Hundred and Forty-ninth street in accordance with plans and profiles previously prepared and approved, the city of New York entered into an agreement with the railroad companies whereby the city granted to the railroad companies certain real property, easements and subsurface rights. Alleging that by "the foregoing acts and transactions defendants undertook and agreed to construct a passenger station in accordance with the said plans and profiles," the city has brought this action in equity to compel the defendants to carry out this agreement and to erect the station. Incidentally they ask also for the recovery of $55,000 which under the terms of the agreement the defendants concededly are now obligated to pay to the city.

The defendants have pleaded, as an affirmative defense, that the construction of the railroad station would entail an expense of at least five million dollars, which could be raised only by the issue of new securities, and that authorization of the Interstate Commerce Commission for such issue could not be obtained without proof that such issue would be in the public interest. That in fact neither public interest nor convenience now require that such a station should be erected. That it would not be practicable to stop trains at One Hundred and Forty-ninth street without detriment to the efficiency of the service now rendered by the companies. That their revenue has now so shrunk that they cannot assume the added indebtedness which would be required for the erection of the station. The plaintiff has challenged the sufficiency of the defense.

In testing the sufficiency of a defense, the complaint must also be searched. The defense would be an insufficient answer to an action to recover the $55,000 which the defendants are obligated to pay. In this action, however, recovery of that money is asked, as already said, only as an incident to equitable relief. Upon the argument of the appeal, the plaintiff so conceded. If equity cannot compel specific performance of the alleged agreement, the plaintiff does not maintain that it is entitled to a money judgment in this action. (Cf. Pomeroy on Equity Jurisprudence [3d ed.], § 237, pp. 342, 343, n. 3; Sternberger v. McGovern, 56 N.Y. 12, 20.) Both parties seek a determination of the sufficiency of the plea as a defense to the equitable cause of action. If sufficient for that purpose, it may not be sustained because it would be insufficient in a different form of action for minor relief.

Arguments, not without force, might be made that the challenged defense would be insufficient if addressed to a cause of action for specific performance of an ordinary contract between private persons which does not seriously affect public interests. The alleged agreement in this case is of a different character. A railroad company performs a public function subject to public regulation. The State or United States, as the case may be, determines through its officers whether a station shall be constructed and where it may be located. A railroad company cannot by contract with the city assume an obligation, which the courts will specifically enforce, unless or until the proper public authorities have approved. Even then the courts act, not because a person or corporation seeks their aid, but because the State, in the public interest, so demands. The Public Service Commission, as agent of the State, is authorized to issue commands and to take steps to enforce them. The city has no such powers. It is acting here in a private capacity. It asks the courts to compel the railroad company to carry out a private contract, not a public duty.

It is said that chapter 558 of the Laws of 1909, which authorized the railroad companies and the city to enter into an agreement for the acquisition by the companies of franchises and rights required for the relocation of the tracks and the construction of the station, constitutes legislative authority for the assumption of a contractual obligation to construct the station and a legislative determination of necessity and convenience. Assuming, though only arguendo, that such construction is justified, it would not follow that the contractual obligation would be specifically enforced at the suit of the city. In the years which have passed since the making of the contract, a public policy that railroad companies must operate their railroads in accordance with public convenience and necessity and are subject to the supervision and direction of commissions established for that purpose, has become embodied in the statutes of this State. Even if the railroad company has assumed by contract made more than twenty years ago a legal obligation to construct a station, the obligation will not be enforced unless the station will promote the public convenience now. The function of determining such questions has been intrusted, by the State and by the United States, to appropriate commissions. They and not the courts must pass upon such questions in the first instance.

The courts in such case must refuse specific performance not because in the exercise of discretion they deny equitable remedy for legal wrong, nor because the Legislature has limited or withdrawn a jurisdiction which the courts would otherwise have. It is because the Legislature has paramount power, except as limited by the State or Federal Constitutions, to regulate the operation of a railroad within the State, and the courts do not give commands which might conflict with regulatory measures of the State. If a private person attempted to enforce in an action in equity an obligation created for his benefit by contract with the railroad company, though such obligation might conflict with the public convenience, it would be evident that such action would not lie. There is no difference in principle where the city brings a similar action. To such an action the defense pleaded is sufficient, though it might be insufficient to a cause of action with more substance. "A bad answer is good enough for a bad complaint." (Baxter v. McDonnell, 154 N.Y. 432, 436.)

For these reasons I agree that the orders of the courts below should be reversed and the motion denied. Certified question answered in the affirmative.