Erie Railroad Company, Appellant, v. City of Buffalo and Others, Respondents

Erie Railroad Company, Appellant, v. City of Buffalo and Others, Respondents. Buffalo grade crossing—taxpayer’s action to restrain the commissioners from proceeding with certain work, not sustained—adequate remedy at law. The Buffalo Grade Crossing Act (Laws of 1888, chap. 345, as amd. by Laws of 1892, chap. 353) commits to the discretion of the grade crossing commissioners the determination of the proper time to prosecute any of the work essential or proper to the development of the grade crossing plan. They may act unwisely, their judgment may be ill-advised and their expenditures improvident or extravagant, but if they keep within the purview of their authority, and are clear of the imputation of bad faith or collusion or fraud, their proceedings are not subject to review by a taxpayer’s action. Pursuant to the Grade Crossing Act, the grade crossing commissioners entered into a written agreement with the Erie Railroad Company pertaining to the several streets crossed by. the tracks of that company. Such agreement provided that the work on Perry street “ shall not be undertaken by the City or Company for the present, but that the consideration thereof shall be deferred until the work on the other streets is finished * * and until it shall be determined by two-thirds of the commissioners that the construction of said work is necessary.” The agreement also provided that the cost of the improvement was to be apportioned between the city and the railroad company. Such cost was to be paid in the first instance out of the proceeds of bonds issued by the city, and the railroad company was to receive its proportionate share of the premiums received on the sale of the bonds. Prior to the time that the “ work on the other streets ” was finished, and contrary to the provisions of the agreement, the grade crossing commissioners let the contract for the Perry street work. The bonds were sold at an unusually small premium, and at the time the contract was let the cost of the material and labor was unusually high, and the work could have been done at a later period at a considerable reduction in price. Mo fraud or bad faith wad imputed to the grade crossing commissioners. Held, that the railroad company could not maintain a taxpayer’s action under section 1935 of the Code of Civil Procedure to restrain the grade crossing commissioners from proceeding with the Perry street work, as the statute authorizing the maintenance of a taxpayer’s action was not intended to apply to a case where public officers have unwisely, although fairly, exercised the discretion conferred upon them, or where they have been guilty of a breach of an executory contract. Semble, that the action could not be maintained for the further reason that the railroad company had an adequate remedy at law, in that it might assert any defense available to it when an attempt was made to enforce payment pursuant to the agreement of its proportion of the cost of the work. Williams, J., dissented. Appeal by the plaintiff, the Erie Railroad Company, from a judgment of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of Erie on the 2d day of Hay, 1904, upon the decision of the court rendered after a trial at the Erie Special Term dismissing the plaintiff’s complaint in this action brought by a taxpayer to restrain the defendants from letting a contract to do away with a grade crossing. The appointment of the grade crossing, commissioners and the general plan for the elimination of crossings at grade over the railroads in the streets of the city of Buffalo are contained and mentioned. in. chapter 345 of the Laws of 1888, as amended. By sections 1 and 6 of said act (as amd. by Laws of 1892, chap. 353) the commissioners were authorized to enter into a contract with any railroad company to abolish these obstructions, in accordance with a comprehensive plan already devised and agreed upon, or to be adopted by the commissioners as provided by said act, and section 9 of said act (as amd. by Laws of 1892, chap. 353) provided for the apportionment of the cost of any proposed improvement between the city and the contracting railroad company. The grade crossing commissioners are vested with plenary power to carry out the scheme contemplated by the act. “ They shall enforce the execution of the plans adopted by them, by the railroad companies affected by them and by the city, and shall have power from time to time to determine at what time and in what order the different portions of the work shall be done.” And again, “ They may make contracts on behalf of the city with any railroad company or companies to carry out the purpose of this act.” (§ 6, as amd., sufra.) In fact the whole performance of the work, including the determination of the character of the proposed improvement, is given to these commissioners. The plaintiff is a steam railroad company operating its lines in said city, owning valuable property therein and contributing to the tax levies annually about $80,000. ,On the 8th day of February, 1896, the said grade crossing commissioners, in the execution of the plan for regulating crossings- at grade, entered into a written agreement with the plaintiff pertaining to the several streets of the city crossed by its tracks. The 11th paragraph of said agreement, so far as pertinent, is as follows: “It is agreed that all the work described in the Section of the General Plan under the heading ‘ Perry -Street—Erie R. R.,’ as. shown on Detail Plan No. 8, shall not be undertaken by the City or Company for the present, but that the consideration thereof shall be deferred until the work on the other streets is finished * * * and until it shall be determined by two-thirds of the commissioners that the construction of said work is necessary.” At the time of the commencement of this action the subway at William street and the footbridge at Fulton street, each of which was “ work on the other streets,” referred to in said 11th paragraph, had not been commenced. The viaduct at Van Rensselaer street also referred to was unfinished at the time of the commencement of the action, but was completed before the decision was rendered. The contract mentioned apportioned the cost of the improvement between the city and the plaintiff. Such cost was first to be borne by the- city and its bonds were to be sold at public auction, after a stipulated manner and time' of advertising, to the highest bidder therefor, to provide a fund to meet such obligations. The plaintiff was to be credited for its share of whatever premium was received on any sale of said bonds. The company was to pay its portion of the cost of the improvement to the city in twenty equal annual installments with the same rate of interest as said bonds bore. “ Contrary to the provisions of said grade crossing contract” in 1902 the said commissioners advertised for bids for the construction of a viaduct over the plaintiff’s tracks in Perry street, and in March, 1903, a resolution was duly passed directing “ that the work should now be done.” Bids were received and the contract let to the lowest bidder for $150,203,50. The aliquot portion which was ultimately chargeable to the plaintiff by its agreement was $109,806.57, and the bonds were subsequently sold at a premium of .00113 which was an “ unusually low ” price. The cost of the material and labor at the time of such bidding was, “ unusually high,” and later said viaduct could have been built “ for a considerable reduction.” This action was commenced by the plaintiff as a taxpayer pursuant to section 1925 of the Code of Civil Procedure to restrain the defendants from taking any steps toward the letting of any contract for the carrying on of said work and from raising any funds to pay therefor. The facts above mentioned are fully set out in the complaint and have been found by the trial court in its decision, but the complaint was dismissed upon the ground that the acts of the defendants “ will not constitute and work a fraudulent waste of public funds ” and that the plaintiff has an adequate remedy at law. William L. Marcy, for the appellant. Spencer Clinton, for the respondents. [MAJORITY — Spring, J.:] Spring, J.: Section 1925 of the Code of Civil Procedure permits an action to be maintained against a municipal body or its agent by a taxpayer thereof to prevent waste of the property of such municipality. The essence of the action is the fraud or bad faith of the public official or some unlawful action which is sought to be prohibited. (Talcott v. City of Buffalo, 125 N. Y. 280; Ziegler v. Chapin, 126 id. 342, 348; Kittinger v. Buffalo Traction Co., 160 id. 377, 387; Govers v. Board Suprs. of Westchester County, 111 id. 403, 408.) Fraud or bad faith is not charged against the defendants, but it is claimed that they have violated the agreement above mentioned, and it is contended that the expenditure of money in consequence of that violation will be an illegal expenditure or waste of the public moneys, a portion of which the plaintiff as a taxpayer will be called upon to pay. Waiving for the present, any consideration of the aspect of the case as it may be controlled by the contract, there is no invalidity in the action of the grade crossing commissioners even though the time chosen for the sale of the bonds and the letting of the contract for the construction of the Perry Street viaduct may have been inopportune because of the excessively high cost of labor and materials. The Grade Crossing Act commits to the discretion of the commissioners among other things the determination of the proper time to prosecute any of the work essential or proper to the development of the general plan. They may act unwisely, their judgment may be ill-advised and the expenditures improvident of extravagant, but if they keep within the purview of their authority and .are clear of the imputation of bad faith or collusion or fraud, their proceedings are not subject to review by a taxpayer’s action. (Ziegler v. Chapin, 126 N. Y. 342; Talcott v. City of Buffalo, 125 id. 280; Weston v. City of Syracuse, 158 id. 274.) The court in the Ziegler case, in considering the scope of this action, say (at p. 349): “ The Legislature could not have intended that the courts should supply intelligence and prudence to incapable officials at the demand of a taxpayer, but manifestly did intend to give the latter protection against the dishonesty or fraud of the municipal agents.” In the Talcott case, after an extended discussion of the origin and import of the policy engrafted in section 1925 of the Code of Civil Procedure the court sums up the conclusion of its examination (at p. 288): “ We have referred to the origin of this statute, under which the action is brought, the title of the act of 1872, and the language used by the Legislature, subsequently, when re-enacting it in 1881 and 1887, for the purpose of ascertaining whether it was intended to authorize a taxpayer to maintain an action against the members, of the common council in a city, and the administrative officers thereof, for the purpose of restraining officials acting within the limits and scope of their powers and discretion, such as is alleged in the* complaint in this action, and we are of the opinion that it was not. Full force and effect can be given to the statute by confining it to a case where the acts complained of are without power, or where corruption, fraud or bad faith, amounting to fraud is charged. Any other construction would subject the discretionary action of all local officers and municipal bodies to review by the courts at the suit of the taxpayers.” Any other rule would bear fruit in countless litigation imperiling the discretionary power of the municipal officers charged with the performance of administrative functions. Such officers are selected to represent the people of the municipality and if they act honestly and do not transcend the limits of their authority their acts are amenable to condemnation or approval only when any such official may be presented for re-election. His discretion fairly exercised is not to be challenged by the courts. In the present action the trial court has found, and we assume, that the defendants in- selling their bonds and letting the' contract and in the other alleged acts preliminary to the construction of the viaduct may be charged with the breach of the agreement with the plaintiff. If substantial loss results to one party to an agreement by its violation by the other party, a remedy is generally available to the one injured. The proposition, however, does not signify that because the party charged with the breach happens to be the officers of a municipality, a taxpayer’s action will lie. That action, as already noted, is a statutory one founded on the illegal or fraudulent conduct of an officer or body. The action is at the instance of any taxpayer in the municipality or of any one who has paid a tax therein within one year before the commencement of the action. The building of the viaduct cannot be restrained by any other taxpayer of the city of Buffalo. His complaint would be that the expenditure is to be made at an nnpropitious time and that the grade crossing commissioners unwisely exercised the discretion committed to them, and however grievous the injury no" action will lie. It was not intended, because one taxpayer has entered into a contract which has been broken to his damage, that he may obtain redress under the guise of a taxpayer’s action while no one else may avail himself of the same remedy. The invalidity which will sustain that action is the usurpation or transgression of authority intrusted to them. The failure to perform an executory agreement is not the illegality which the statute was intended to meet. Other ample remedies are available to one so injured rather than by an action the pith of which is official misconduct. The fact that the plaintiff has suffered by reason of the violation of the agreement does not give it any added privilege to resort to the statutory action. If it is likely to suffer damages by the unlawful waste of the property of the city, the plaintiff, as well as any other taxpayer, may maintain an action in equity against the offending officers to prevent the dissipation. That, however, is not the" gravamen of the plaintiff’s cause of action. It is seeking to enlarge the scope of the taxpayer’s action to embrace a case dependent peculiarly upon its agreement and which damages are exclusively for itself. We apprehend the statute is not sufficiently elastic for that purpose. It is claimed that the plaintiff as a taxpayer will be compelled to contribute towards the expense of constructing the viaduct and that tins construction will be in violation of the agreement and hence illegal. This contention overlooks the fundamental principle adverted to that the grade crossing commissioners are vested with the exercise of their judgment in the development of the improvements committed to their charge.. If they agree with the railroad company to build the viaduct of one kind of stone, but later decide in good faith to use a more costly kind, the plaintiff or any other taxpayer may not maintain a taxpayer’s action to prevent the improvement. The discretion of the board must not be subjected to that restraint. The illegality which authorizes the maintenance of the action savors of bad faith, of a dishonest purpose and is not analogous to a failure to pay a promissory note at maturity or to build a house according to contract. The misconduct must be in violation of law or in defiance, of a statute and an excess of authority to be unlawful. The gist of the charge is lacking in this case. But it .is suggested that the findings show that the city cannot recover of- the plaintiff its quota of the cost of the improvement to be made and consequently that the plaintiff or any other taxpayer may enjoin the prosecution of the work. Every omission or anticipated omission to perform their contract strictly does not put the grade crossing commissioners or the city of Buffalo at the mercy of a taxpayer who may seek by this form of action to stop any particular improvement which the commissioners undertake. They possess authority to do the work in their own way and time and their contract with the plaintiff is within their power. Their failure to fulfill to the letter its provisions is not illegality akin to fraud or bad faith. Again, it seems to me, the plaintiff had an adequate remedy at law for any damages it may suffer. Bear in mind it contends that the defendants are seeking to raise money to construct a viaduct contrary to its agreement. An action in equity to enjoin the violation of an executory agreement the damages for which breach are ascertainable and may be compensated for in money is not permissible unless some peculiar necessity calls for it. By this agreement the plaintiff is to pay the city in a specific manner and in precise installments. If there is a refusal to pay, any defense which the plaintiff may have is available to it whenever the city endeavors to enforce payment pursuant to the agreement, and the damages, if any, may be easily measured and allowed. Waiving this suggestion, however, we think-the action is not maintainable. The judgment should be affirmed, with costs. All concurred, except Williams, J., who dissented, and Hiscock, J., not voting. Judgment affirmed, with costs. Chap. 161.— [Rep. Chaps. 531 and 673, respectively.— [Rep.