within which the road should be completed, does not preserve the franchise and corporate rights of the company from forfeiture and defeasance for its failure to finish the road and put it into operation within ten years from the time of its incorporation, as required by section 5 of the Railroad Law (L. 1890, ch. 565), although the company had commenced the construction of the road within five years and expended ten per cent of its capital thereon. The statute provides not only that the corporate existence shall cease but the corporate powers also, and that, in the same contingency, the franchise bestowed on the corporation shall cease.

The legal status of such a franchise and the rights of the parties, claiming to be the owners thereof, to the property and structures created in the execution of the franchise, should be determined only in a litigation between the people of the state, from whom the franchise sprang, and the claimants thereto, so that the determination shall be binding and conclusive on everybody. People v. O'Brien, 111 N. Y. 1, distinguished. City of New York v. Bryan, 130 App. Div. 658, reversed.

(Argued June 7, 1909; decided October 19, 1909.)

APPEAL from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered March 18, 1909, in favor of defendants upon the submission of a controversy under section 1279 of the Code of Civil Procedure.

The New York and Long Island Railroad Company was incorporated on July 30, 1887, under the General Railroad Act of 1850, for the construction, maintenance and operation of a railroad from Long Island City through a tunnel under the East river and under streets and lands in the city of New York to a connection with the New York Central and Hudson River railroad at Ninth avenue and Thirtieth street, with two branches, one extending to the Grand Central Depot and the other to the Hudson river tunnel in the vicinity of Washington Square.

By an ordinance passed by the board of aldermen on December 23, 1890, the city of New York consented to the construction of a double-track railroad by the New York and Long Island Railroad Company through a tunnel under Fortysecond street from its east end to a point therein between Tenth and Eleventh avenues, in accordance with plans and

profiles deposited with the board of aldermen. This assent was given upon certain terms and conditions therein specified. On October 27, 1891, the board of aidermen of Long Island City (of which municipal corporation the city of New York is the successor), by an ordinance approved by the mayor, assented to the construction of a double-track railroad by the same company, beginning at a point in the middle of Fifth street at low-water mark on the east side of East river, and thence running easterly beneath streets and private property to a point on Fourth street, thence along Fourth street to Van Alst avenue, and thence northeast to Meadow street.

On August 13, 1891, the directors of the railroad company changed its profile and route so as to conform to the foregoing consents, and extended its route in New York city from Forty-second street, between Tenth and Eleventh avenues, to Forty-first street and Eleventh avenue, and to Twelfth avenue to the pier line, with a branch in Eleventh avenue from Fortysecond street to Forty-third street. On January 11, 1892, the board passed a resolution accepting the rights, privileges and grants set forth in the resolution of the board of aldermen of the city of New York, adopted December 23, 1890, as already mentioned, and a copy of such resolution was filed with said board of aldermen in the following month.

Fourteen years later, in February, 1906, the New York and Long Island Railroad Company brought an action in the Supreme Court against the city of New York and others, in which the court (on December 26, 1996) duly determined "That said plaintiff had complied with all laws and done all lawful acts to entitle it to construct, maintain and operate its proposed line of railroad as then under construction by it in portions of the routes as to which the assents of the former city of New York and of Long Island City had been given, as hereinbefore stated;" that the company had acquired and then (at the time of the rendition of the judgment) had due legal power and lawful authority to construct and operate its tunnel and railroad; that the time of the company to complete the construction of its tunnel would expire December 31, 1906; and

in that action a judgment was duly entered restraining the city of New York and its officers, employees and agents from molesting or interfering with the plaintiff in the construction of its tunnel and railroad. This determination and judgment still remain in full force and effect.

After the passage of the ordinances by the New York city and Long Island City boards of aldermen which have been mentioned, and the acceptance by the company of the grants and privileges therein contained, the company commenced and prosecuted the construction of a portion of its railroad upon the specified routes as follows: (1) In Fourth street, Long Island City, from Van Alst avenue to West avenue; (2) from Fourth street and West avenue in Long Island City through private property to the East river at the bulkhead line of 1898; (3) in the borough of Manhattan from the pier and bulkhead line of 1857, westerly along Forty-second street to the Grand Central Depot; and under the East river the construction of the line of railroad (tunnel) was upon a strip of land under water duly granted to the company by the state of New York through the commissioners of the land office.

On January 1, 1907, the company had not completed its railroad or tunnel or operated the same on any part of its route, but the same had only been partially constructed or completed.

"By reason of the failure of the said New York and Long Island Railroad Company to construct its tunnel and railroad before the 1st day of January, 1907, the corporate existence of the said railroad company lapsed and by virtue of the provisions of section 30 of the General Corporation Law the then directors of said railroad became trustees of the creditors, stockholders and members of the said New York and Long Island Railroad Company." The, defendants were such directors on January 1st, 1907.

Upon the foregoing facts the present controversy was submitted to the Appellate Division of the Supreme Court. It was asked to decide whether the franchises, rights and privileges granted by the boards of aldermen of the city of

New York and Long Island City to the New York and Long Island Railroad Company did cease and determine on January 1, 1907, and whether such franchises, rights and privileges passed to the defendants as trustees, as aforesaid; and the parties agreed that the court should render such judgment as should be proper upon the facts which have been stated. The Appellate Division rendered judgment that the franchises, rights and privileges aforesaid did not cease and determine, but passed to the defendants as trustees under section 30 of the General Corporation Law; that the occupation by the defendants of the tunnel, tracks, structure and property of the New York and Long Island Railroad Company on and after Jannary 1, 1907, was and is lawful; and that the city of New York be enjoined from interfering therewith.

The judgment of the Appellate Division is now brought by the city before the Court of Appeals for review.

Francis K. Pendleton, Corporation Counsel (Theodore Connoly and Clarence L. Barber of counsel), for appellant. On January 1, 1907, the franchises, rights and privileges granted to the railroad company by the aldermen of Long Island City and by the mayor, aldermen and commonalty of the city of New York ceased and determined. (L. 1890, ch. 565, § 5; Matter of B. R. Co., 72 N. Y. 245; Matter of B., Q. C. & S. R. R. Co., 185 N. Y. 171.) Neither the primary franchise to exist, nor the secondary franchise to act in a specified business has any of the attributes of property. Both of these franchises cease to exist at the dissolution of the corporation. (Lord v. E. L. A. Society, 109 App. Div. 262; People v. O'Brien, 111 N. Y. 34; White v. Met. Ry. Co., 139 N. Y. 26; Paige v. Schenectady, 178 N. Y. 112; City of Rochester v. R. Ry. Co., 182 N. Y. 122, 124; Matter of L. A. E. L. & P. Co., 51 Misc. Rep. 407; 117 App. Div. 80; 188 N. Y. 361; Potter v. Collis, 19 App. Div. 392; 156 N. Y. 16.)

Morgan J. O'Brien and II. W. Alden for respondents. The consent of the municipal authorities to the construction

Opinion of the Court, per CULLEN, Ch. J.

N. Y. Rep.] of the railroad, when acted upon, ceased to be a power, and became property, which like other property, is not lost upon the termination of the corporate existence of the railroad, but is preserved and vested in the directors, as trustees. (People v. O'Brien, 111 N. Y. 1; Milhau v. Sharp, 27 N. Y. 611.) A legal distinction exists between the franchise of the New York and Long Island Railroad Company to do business as a railroad corporation, and the special or secondary franchise permitting the use of public streets for the operation of a railroad. (People v. O'Brien, 111 N. Y. 1; People v. B., F. & C. I. R. R. Co., 89 N. Y. 84; People v. Metz, 50 N. Y. 61.)

CULLEN, Ch. J. The learned Appellate Division seems to have disposed of the case on the theory that what it terms the secondary franchise, that is to say, the consent or permission of the municipal authorities to the railroad company to construct its tunnel and railroad in the city streets, not having prescribed any limit of time within which the road should be constructed, was, when acted upon to some extent, a property right not subject to defeasance or forfeiture by the failure of the company to comply with the terms of the General Railroad Act under which it was incorporated, which prescribes that on the failure of the company to finish its road and put it in operation within ten years from the time of filing its articles of incorporation, its corporate existence and powers shall cease. (Railroad Law of 1855, § 47, as amended by L. 1867, ch. 775; R. R. Law of 1890, § 5.) In other words, it treated such consent as if it were a grant of a franchise wholly disconnected from the legislation of the state which authorized the incorporation of the railroad company, and, therefore, held that it passed to the directors of the corporation at the time of its dissolution with the other property which the company might have had at that time, to be administered for the benefit of its creditors and stockholders. It is unquestionably true that the franchise to construct and operate a railroad is different from the franchise to be a corporation. As pointed