Title: Application of City & Cty. of Honolulu Corp. Coun.
Citation: 507 P.2d 169
Docket Number: 5226
State: Hawaii
Issuer: Hawaii Supreme Court
Date: March 8, 1973

507 P.2d 169 (1973) Application of CITY &amp; COUNTY OF HONOLULU CORPORATION COUNSEL, For the Valuation of the Physical and Tangible Property of the Honolulu Rapid Transit Company, Limited. No. 5226. Supreme Court of Hawaii. March 8, 1973. Rehearing Denied March 28, 1973. *170 Howard K. Hoddick, Honolulu (Peter G. Wheelon, Honolulu, on the briefs; Anthony, Hoddick, Reinwald &amp; O'Connor, Honolulu, of counsel), for appellant, Honolulu Rapid Transit Co., Ltd. Robert M. Ehrhorn, Jr., Deputy Corporation Counsel (Paul Devens, Corporation Counsel, Honolulu, of counsel), for appellee, City &amp; County of Honolulu. Before RICHARDSON, C.J., and MARUMOTO, ABE, LEVINSON, and KOBAYASHI, JJ. KOBAYASHI, Justice. This is an appeal of a Decision and Order of the Public Utilities Commission (PUC), No. 2793, dated July 20, 1971. The City and County of Honolulu (City) filed before the PUC a petition for valuation of the physical and tangible property of the Honolulu Rapid Transit Company, Limited (HRT), for the purpose of acquiring said property. The petition was filed pursuant to the provisions of Section 20, Act 186, S.L.H. 1921, as amended by Act 300, S.L.H. 1967. A complete presentation of PUC's Decision and Order would be helpful: This matter was initiated by a Verified Petition of the City and County of Honolulu, hereinafter called "Petitioner", for valuation of the physical and tangible property of the Honolulu Rapid Transit Company, Limited, hereinafter called "Respondent", with a view towards acquisition of same. The Verified Petition was filed pursuant to the provisions of Section 20, Act 186, S.L.H. 1921, as amended by Act 300, S.L.H. 1967, on September 8, 1970. Proceedings relating to this matter were also considered in the State and Federal Courts. *171 A Petition for Declaratory Judgment and Motion for Preliminary Injunction was filed in the First Circuit Court and they were, after a hearing, dismissed and denied on October 20, 1970. Appeals therefrom were dismissed by the Supreme Court of Hawaii on June 8, 1971. In Civil No. 70-3275, in the United States District Court for the District of Hawaii, Respondent's complaint based upon theories of violation of civil rights, deprivation of property without just compensation and without due process of law, denial of equal protection of law, and for a declaratory judgment concerning Act 186, among others, was dismissed and denied on January 13, 1971. Appeals therefrom are pending in the United States Court of Appeals for the Ninth Circuit. Prehearing and regular hearings were held over a period of several weeks, with ample opportunity being accorded the parties to the matter. On January 22, 1971, this Commission issued Order 2696 herein, denying Respondent's Motion to Dismiss, after due hearing and filing of memoranda. Act 186, S.L.H. 1921, was passed by the territorial legislature and approved by Congress, and granted an open-end special privilege to Respondent to operate a street railway and connecting buses or other vehicles. Also included in the franchise were powers of eminent domain and other provisions for the protection of the franchise. Section 20 of Act 186 gave a right to the City and County of Honolulu to purchase and operate the company system. It spelled out the procedure to be followed in valuation of the system for purchase. Even a cursory reading of this Section shows that valuation was to be done in a manner other than in eminent domain proceedings. Respondent's arguments seeking to place the purchase here involved under eminent domain procedures fly in the face of the clear terms of Section 20 which Respondent knowingly and willingly accepted in 1922. The following portion of Section 20 is a key paragraph in this matter: This portion establishes two methods of valuation for two different classes of property. Actual cost is mandated to be the maximum for physical property, land and improvements property which cannot be intangible. Actual value is mandated to be the maximum for tangible personal property. And no consideration is to be given to intangible personal property such as "going concern" value. The words "tangible" and "intangible" are used only when personal property is involved, for these [sic] can never be intangible real property. These concepts are clear and should be given their ordinary meaning. Applying these concepts and based upon the evidence adduced, the oral presentations of the parties and the various memoranda filed by the parties, the Commission finds, concludes, decides and orders as set forth hereinbelow. 1. The Petitioner is a duly organized and existing municipal corporation under the laws of the State of Hawaii. 2. The Respondent is a duly organized and existing corporation under the laws of the State of Hawaii. 3. Respondent was duly authorized by the territorial legislature to operate as a public utility, as more particularly set forth in Act 186, S.L.H. 1921, as amended. 4. Petitioner requested his Commission to set a value on the physical and tangible property owned by Respondent for purposes of purchase. *172 5. The original cost of physical properties and the actual value of tangible properties as agreed by the parties in the Stipulation filed March 8, 1971, as amended by Stipulation filed May 14, 1971, are reasonable amounts. 6. The actual cost of the physical properties owned by Respondent and used and useful for public utility purposes are listed below and total $970,704.00: 7. The actual value of the tangible properties, as of October, 1970, owned by Respondent and used and useful for public utility purposes are listed below and total $1,947,011.00: 8. The properties listed above and sought to be purchased are not subject to any bonded or other indebtedness of Respondent. 1. Section 20, Act 186, S.L.H. 1921, as amended, grants to Petitioner the right to acquire the properties of Respondent used and useful for public utility purposes. 2. Said Section 20 reposes jurisdiction in this Commission to determine the amounts to be paid to Respondent for the purchases provided therein. 3. Acceptance of Act 186, as properly approved, created a franchise, with all the terms and conditions therein binding upon Respondent. 4. The following definitions apply to the terms used in Act 186: Based upon all of the evidence adduced, the legal memoranda filed herein, the oral arguments of the parties, and the findings and conclusions above, it is the Decision of this Commission that: 1. Petitioner's proposed findings of fact are ruled upon as follows: 2. Respondent's proposed findings of fact are ruled upon as follows: 3. Respondent's alternative Motion that its construction of Section 20 as set forth in the Memorandum attached to its Motion filed on January 5, 1971, be upheld is denied; *173 4. That the amount to be paid to Respondent for the purchase of its properties used and useful for public utility purposes is $2,917,715.00 ($970,704.00 for physical properties; $1,947,011.00 for tangible properties). IT IS HEREBY ORDERED that the amount to be paid to Respondent for the purchase of its properties used and useful for public utility purposes is $2,917,715.00. Among the findings of fact proposed by HRT, but rejected by PUC in its decision, were the following numbered paragraphs: The PUC also rejected HRT's proposed construction of Section 20. The PUC, in its decision, approved the following pertinent proposals of findings of fact of the City, to-wit: Appellant first claims that the PUC erred in concluding that acceptance by HRT of Act 186, S.L.H. 1921, created a franchise, with all the terms and conditions therein binding upon HRT; that Sections 4 and 18, Article I of the Constitution of the State of Hawaii forbid the State and its instrumentalities from taking private property for public use without the payment of just compensation. Appellant further claims that, in construing Section 20 of Act 186, S.L.H. 1921, the PUC erred in finding that (1) the words "physical property" and "tangible property" mean real property and personal property, respectively; and (2) the words "franchise or good will or any other intangible element" include going concern value. Pertinent parts of Act 186, S.L.H. 1921, are: It is entitled: Section 20 of Act 186, S.L.H. 1921, provides: Section 21 of Act 186, S.L.H. 1921, provides: In 1967 the legislature enacted Act 300, An Act Relating to Mass Transit System, wherein Section 2 thereof provides: Section 3 thereof provides: We are of the opinion that the PUC correctly concluded that acceptance of Act 186, S.L.H. 1921, by HRT created a franchise agreement between the parties herein, subject to all the terms and conditions in said Act 186. The record is clear that HRT voluntarily, without any coercion whatsoever, chose to accept, under Act 186, S.L.H. 1921, the franchise, unlimited as to time, and has, for nearly fifty years, reaped the benefits and profits of a privilege specially granted by the sovereign, the sovereign originally being the Territory and later the State. Initially HRT was authorized to conduct a public transportation business by the legislature of the Republic of Hawaii by Act 69, Statutes of 1898. This original franchise would have expired in June, 1929, or June, 1930, depending on whether one followed the then government's or the company's viewpoint. An internal communication of HRT entitled "Rapid Transit Directors Recommend Acceptance of Franchise", dated February 3, 1922, and filed with PUC in the instant case, discusses in detail the advantages and benefits HRT could obtain if HRT were to accept the franchise under said Act 186. The record shows a deliberate, business-like, knowledgeable and voluntary decision on the part of HRT in relinquishing its old franchise and accepting the new under said Act 186. Said Act 186 is, without doubt, a grant of franchise a grant of a special privilege and the sovereign has ample authority to impose the various terms and conditions of said Act 186 on the voluntary recipient of the franchise. Southern Pacific Co. v. Portland, 227 U.S. 559, 33 S. Ct. 308, 57 L. Ed. 642 (1913); Victory Cab Co. v. City of Charlotte, 234 N.C. 572, 68 S.E.2d 433 (1951). Clearly, Frost &amp; Frost Trucking Co. v. Railroad Commission of California, 271 U.S. 583, 46 S. Ct. 605, 70 L. Ed. 1101 (1926), the case relied upon by HRT as authority for its argument that an individual or corporation cannot be forced by a state to waive a constitutional right in exchange for the grant by the state of a privilege, is inapplicable in this instance. The acquisition of HRT property under the franchise is not a condemnation proceeding. The City is simply initiating the purchase of HRT property under the terms and conditions of the franchise agreement or contract made in 1921 under Act 186, S.L.H. 1921. Albrecht v. United States, 329 U.S. 599, 67 S.Ct 606, 91 L. Ed. 532 (1947); Janes v. City of Racine, 155 Wis. 1, 143 N.W. 707 (1913). We are of the opinion that the paramount question before this court is whether the decision and order of PUC conforms with the terms and conditions of said Act 186. The dispute of the parties herein is centered in paragraph two of Section 20, which provides as hereinabove stated: *178 In construing said paragraph of Section 20 the PUC gave the following interpretations: HRT, the appellant, urges upon this court as follows: We cannot accept this argument and must concur with the substance of PUC's determination that said Section 20 "establishes two methods of valuation for two different classes of property. Actual cost is mandated to be the maximum for physical property, land and improvements property which cannot be intangible. Actual value is mandated to be the maximum for tangible personal property... ." It is a cardinal rule of statutory construction that a statute ought upon the whole be so construed that, if it can be prevented, no clause, sentence or word shall be superfluous, void, or insignificant. Application of Island Airlines, Inc., 47 Haw. 87, 112, 384 P.2d 536, 565 (1963); State v. Taylor, 49 Haw. 624, 425 P.2d 1014 (1967). Thus, in order to give effect to the phrase "in both cases" as provided in Section 20, it was proper for PUC to construe Section 20 as providing two completely different methods of valuation with different meanings to the terms "physical" and "tangible" property. We are of the opinion that the disjunctive "or" in the context as used in Section 20 actually imparts the meaning of the conjunctive "and". The sense of a word which harmonizes best with the whole context of the statute and promotes in the fullest manner the apparent policy and objects of the legislature must be adopted. Samuel Mahelona Memorial Hospital v. County of Kauai, 46 Haw. 260, 377 P.2d 703 (1962). See HRS § 1-18. We are of the opinion that the statutory construction made by PUC is proper so long as the construction is warranted by the record and is reasonable. Unemployment Compensation Commission of Alaska v. Aragon, 329 U.S. 143, 67 S. Ct. 245, 91 L. Ed. 136 (1946); Barlow v. Collins, 397 U.S. 159, 90 S. Ct. 832, 25 L. Ed. 2d 192 (1970). There is nothing in the legislative history of Act 186 or of prior legislation which would be helpful or be dispositive in construing the meaning of "physical property" and "tangible property". HRT alleges that no evidence was adduced to support PUC's concept of the ordinary meaning of "physical property" and "tangible property". We disagree. The record does reflect that the ordinary meaning of the phrases in question as determined by PUC was a reasonable one, notwithstanding HRT's presentation of other meanings of the phrases in issue. There was a rational basis for the statutory interpretation made by PUC. Furthermore, the long and well established rule of construction in all grants of special rights or privileges by the government to private individuals is that the words of the privilege granted (franchise herein) are construed strictly against the grantee. City of Mitchell v. Dakota Central Telephone Co., 246 U.S. 396, 38 S. Ct. 362, 62 L. Ed. 793 (1918); Los Angeles County Flood Control District v. Southern *179 California Edison Co., 51 Cal. 2d 331, 333 P.2d 1 (1958). And where the terms of the franchise are uncertain and reasonably susceptible to multiple meanings or if the provisions of the franchise are conflicting or ambiguous, the terms of the franchise are construed favorably to the public interests. Russell v. Sebastian, 233 U.S. 195, 34 S. Ct. 517, 58 L. Ed. 2d 912 (1914); Southern California Gas Co. v. City of Los Angeles, 50 Cal. 2d 713, 329 P.2d 289 (1958). Thus, the several arguments made by HRT are without merit. We note that the parties stipulated to the values of real and personal properties and to the meanings of the terms "actual cost" and "actual value", so that as to those terms there is no dispute on this appeal. HRT alleges that PUC erred in denying HRT's claim for compensation for "going concern value". We are of the opinion that HRT's claim is without merit. The provision of said Section 20 providing "... the value of the franchise or good will or any other intangible element shall not be considered in determining the amount to be paid" (emphasis added), is too clear and unequivocal to leave any room for ambiguity and construction as advocated by HRT. The decision and order of PUC is affirmed. PER CURIAM. The following statement of HRT in its Petition for Rehearing merits comment: The Decision and Order of the Public Utilities Commission in the instant case fails to mention anything about the alleged unrecouped write-offs. The record of the case also fails to show any evidence of unrecouped write-offs. HRT's appeal also fails to mention any alleged error by PUC relative to unrecouped write-offs. The reason for the dearth of any claim and/or proof of unrecouped write-offs becomes crystal clear when one reviews HRT's petitions filed before PUC in 1941 relative to the alleged unrecouped write-offs. Section 13 is clear and unambiguous and obviously does not include the write-offs of "street car tracks, ties and all matters appertaining thereto, as well as street cars and equipment appertaining thereto" which HRT voluntarily abandoned when it substituted other transportation facilities. There is no obligation on the part of the City to pay the alleged unrecouped write-offs. The Petition for Rehearing is denied without argument.