People Ex Rel. Grand Trunk Railway Co. of Canada v. Gilchrist

*99 Lehman, J. The relator, Grand Trunk Railway Company of Canada, is a railroad corporation organized under the laws of the Dominion of Canada. It maintains and operates a railroad which crosses the Niagara river upon a bridge which was constructed by Niagara Falls Suspension Bridge Company, a Canadian corporation, and Niagara Falls International Bridge Company, a New York corporation. The Niagara river is a navigable stream forming part of the boundary between the United States and Canada. The State of New York might grant or withhold the privilege or right to construct, maintain and operate a bridge or other crossing above a navigable stream within its own territory. The right to construct a bridge across a navigable boundary stream could be granted only by the action of both abutting sovereignties. The State of New York, by the law which created the Niagara Falls International Bridge Company (Laws of 1846, chap. 104), granted to that corporation the right to construct and operate a bridge across the Niagara river. In association with the Canadian corporation, which had received similar powers in its domicile, Niagara Falls International Bridge Company constructed the bridge. The upper floor of the bridge was designed to pass railroad trains with locomotives, and the lower floor was designed for carriages, for pedestrians and for animals. *100 The two bridge companies had no power to maintain or operate a railroad across the bridge, or that part of it lying within the State of New York; but by chapter 622 of the Laws of 1853 the Niagara Falls International Bridge Company was given full power and authority, by itself or in union with the Niagara Falls Suspension Bridge Company of Canada West, to enter into any contract or agreement with any individual, railroad company or railroad companies, with reference to the terms of crossing locomotives and cars, passengers and freight over said railroad bridge, and the construction, repairs, insurance and maintenance of the same, upon such terms and conditions, and for such time or times, as may be agreed upon by and between the parties. Accordingly in October, 1853, the two bridge companies jointly agreed with the Great Western Railway Company in Canada West, the predecessor in title and interest of the relator, to lease to said company the railroad floor and structure. Since that time the bridge has from time to time been altered and reconstructed, and other agreements have been made between the bridge companies and the relator or its predecessor in title. The relator still occupies the railroad floor of the bridge under lease from the bridge companies. Under the terms of the contract it is provided that the “ Grand Trunk shall be entitled to all rails, guard rails, ties, tie plates, spacers, expansion joints, tracks and other track equipment now or hereafter placed upon the upper floor of the said bridge and approaches, and the same shall remain the property of the Grand Trunk.” The relator operates its railroad within the State of New York from a point on the bridge, above the boundary line of the State, to the Lehigh Valley railroad passenger station located about three hundred yards easterly from the easterly end of the bridge structure. A special franchise tax assessment, which the relator now attacks, has been placed upon the “ franchise right *101 or permission of the relator to construct, maintain or operate its railroad above the Niagara Biver.” A right derived from the State to operate a railroad above a navigable stream is unquestionably a special franchise. The State in such case has granted a special privilege in a highway or public place which is not enjoyed by all the people of the State. Such a right, permission or privilege may be taxed. (Tax Law [Cons. Laws, ch. 60], section 2; People ex rel. H. R. & P. C. R. R. Co. v. Tax Commissioners, 215 N. Y. 507; People ex rel. Metropolitan Street Railway Co. v. Tax Commissioners, 174 N. Y. 417.) The relator in this case operates its railroad on a bridge over the Niagara river, not under a permission or authority granted by the State to it, but under a right or permission granted to it by the bridge companies acting under authority derived from the State. The question is whether right or permission so derived is a special franchise within the meaning of the Tax Law. A railroad corporation may not exercise its corporate powers within this State, except by permission or authority of the State. The lease by the bridge companies to the relator of the railroad floor of the bridge could not confer upon the relator any corporate power to operate its railroad within the State. It is said that the railroad company may not claim that its right to operate a railroad on the bridge is not derived from permission of the State, since without such permission its operation would be illegal. That argument disregards the distinction between a general franchise and a special franchise. “ The general franchise of a corporation is its right to live and do business by the exercise of the corporate powers granted by the state. When a right of way over a public street is granted to such corporation, with leave to construct and operate a street railroad thereon, the privilege is known as a special franchise, or the right to do something * * * which, except for the grant, would be a trespass.” (People ex rel. H. R. & P. C. R. R. Co. v. *102 Tax Commissioners, 215 N. Y. 507.) A mere permission of the State to the relator to operate its railroad within the State in itself confers upon the relator no special right or privilege to encroach upon the rights of the public in a highway or public place. At most it is equivalent to a general franchise. Without lease or permission from the bridge companies, the relator’s operation of its railroad on the bridge over the Niagara river would constitute a trespass even though the State had expressly conferred a corporate power upon the relator to construct a railroad across public places and waters. After the relator acquired from the bridge companies the right or privilege to place its tracks upon the bridge, the operation by the relator was legal without further grant or authority from the State, except permission to exercise its general corporate powers within the State. Unless we find, therefore, that the permission or privilege derived from the contract made with the bridge companies constitutes a special franchise within the definition of the Tax Law, the assessment must be set aside. If the exercise by the relator of its corporate franchises in a public place is not based upon authority granted by the State; if it does not rest upon public favor rather than private right, the relator enjoys no special franchise. (People ex rel. N. Y. Central R. R. Company v. Woodbury, 203 N. Y. 167; People ex rel. N. Y. C. & H. R. R. R. Company v. Priest, 206 N. Y. 274; People ex rel. Hudson & M. R. R. v. Tax Comrs., 203 N. Y. 119; People ex rel. Long Island R. R. v. Tax Comrs., 148 App. Div. 751; affd., on opinion below, 207 N. Y. 683.) The State granted to the Niagara Falls International Bridge Company the authority to construct a bridge across the Niagara river and to enter into a contract with a railroad company or companies for the operation of a railroad. The bridge company was not authorized to operate a railroad across its bridge, but it was given the right to grant such privilege to another for its own profit. The *103 right of the bridge company to construct a bridge over a navigable river and to contract for its own profit with a railroad company for the operation of a railroad across the bridge, is a special privilege or right granted by the State to do an act on public property which would otherwise be illegal, even though it may be that the right or privilege granted to the bridge company is not taxable at the present time as a special franchise because it does not fall strictly within the legislative definition of section 2 of the Tax Law. The question is not here presented whether the Legislature might not amend its definition of a taxable special franchise so as to include all the rights conferred upon the bridge company. If the State taxed as a special franchise the rights granted by it to the bridge company, it would hardly be claimed that the right of the railroad company to operate a railroad on the bridge constituted another special franchise. By statute, the Legislature has fixed the conditions trader which the bridge might be constructed and the purposes for which it might be used. The operation of the railroad over the bridge is in accordance with the authority granted by the State to the bridge company. From such operation the bridge company realizes some of the profits derived from the privilege created by the State. After the bridge was constructed upon the conditions fixed by the State, the bridge company, and not the State, could grant or withhold permission to use the bridge for railroad operation. The' State did not and could not thereafter grant to another a special franchise which involved a use of the bridge. The State did not intrust to the bridge company power in its discretion to confer upon a railroad company the consent of the State to the operation of a railroad across the Niagara river. It conferred upon the bridge company the right to build the bridge and to grant the use of it for railroad purposes to a railroad corporation. The bridge company’s privileges are derived from the State. It is *104 entitled to the benefit from the authorized use of a public place. The railroad’s rights are derived from grant of the bridge company upon stipulated payment to that company. Though the State has consented to the use of the bridge for operation of a railroad, that consent is part of the privilege granted to the bridge company for the construction of a bridge to be used for that purpose. The railroad company has received no rights from the State except the right to exercise its corporate powers. Since it has received no per ission from the State to operate a railroad over the Niagara river, its rights, derived from the bridge company by virtue of the privilege granted to the bridge company, constitute no special franchise. The order of the Appellate Division should be reversed and that of the Special Term affirmed, with costs in the Appellate Division and in this court.