Court Opinion

ID: 5236648
Source: CourtListenerOpinion
Date Created: 2022-01-06 17:10:49.389771+00
Date Added: 2024-06-11T08:27:44.403939
License: Public Domain

Scott, J. (dissenting):
The facts in this case have been so carefully and thoroughly stated by Mr. Justice Dowling that I shall not attempt to restate them, contenting myself with a brief expression of my views upon the questions involved. I entirely agree with Mr. Justice Dowling that the question of the value of the property of the relator company was irrelevant to the question before the Public Service Commission. With the other conclusions reached by him I am unable to agree. The whole matter resolves itself, as I see it, into the question whether or not the obligations sought to be refunded are such as the company is entitled to refund under the Public' Service Commissions Law. It is not questioned that the obligations are valid and represent bona fide indebtedness of the relator company. By far the greater portion of this indebtedness was incurred and the obligations issued long before the passage of the Public Service Commissions Law, and at a time when it was perfectly lawful, although perhaps unwise, for such a corporation as the relator to issue time obligations to meet current expenses, and to issue stock or scrip representing the enhancement of the value of its property, although such enhancement was not in the form of money. Hone of these old obligations, therefore, some dating back to 1884, were tainted with illegality at their inception or *311at the time of the passage of the Public Service Commissions Law.
That act took effect on July 1,1907 (Laws of 1907, chap. 429), and imposed restrictions, theretofore unknown, upon the powers of corporations within its purview to issue long-time securities. Section 55 of the act, as it now stands (Consol. Laws, chap. 48; Laws of 1910, chap. 480), is the provision of law by which the relators’ claim to be entitled to issue bonds must be tested. It is quoted at length in the opinion of Mr. Justice Dowling. It provides that certain corporations, including street railroad corporations, may issue bonds or other evidence of indebtedness payable more than twelve months after the date thereof for certain specified purposes, to wit: (1) For the acquisition of property; (2) the construction, completion, extension or improvement of its facilities; (3) for the improvement or maintenance of its service; (4) for the discharge or lawful refunding of its obligations ; (5) for the reimbursement of moneys actually expended from income within five years prior ,to the filing of an application with the proper Commission for the required authorization, for any of the aforesaid purposes except maintenance of service and except replacements.
The purpose for which the relator company seeks authority to issue long-time bonds is one of the purposes for which it is specifically provided that such bonds may be issued, to wit, “for the discharge or lawful refunding of its obligations.” The debts sought to be refunded being concededly lawful outstanding obligations it would seem that the language of the act expressly permits their refunding. That some part of these obligations may in the past, prior to July 1, 1907, have been issued for purposes for which long-time bonds may not now be issued, seems to me to be beside the question. I see nothing in the Public Service Commissions Law indicating that it was intended to operate retroactively so as to place under the ban of its disapproval valid obligations issued before the passage of the act, and lawful when issued. The act was intended to introduce a new system of financing public service corporations, and to forbid, in the future, the issue of longtime securities for purposes which ought, in the opinion of the Legislature to be met and paid out of current income. All *312the provisions of the act forbidding the issue of long-time securities for purposes properly chargeable to operating expenses or to income look to the future, not to the past. From this point of view the language of the Court of Appeals in People ex rel. Delaware & Hudson Co. v. Stevens (197 N. Y. 1) is significant. The court was speaking of an application for the refunding of notes issued for a purpose lawful when they were issued, but unlawful when the refunding application was made. It said: “It was, therefore, evidently the legislative intent in the enactment of this provision that the commissioners should have supervision over the issuing of long-time bonds to the extent of determining whether they were issued under and in conformity with the provisions of the statute for the purposes mentioned therein, or whether they were issued for the discharge of the actual and not the fictitious debts of the company, or whether they were issued for the refunding of its actual obligations and not for the inflation of its stocks or bonds. Beyond this it appears- to us that the power of the commissioners does not extend, unless it may pertain to the power to determine whether an obligation should be classified as operating expenses and as to whether such expenses should be paid by obligations running beyond a year,” for even as to operating expenses the Commission has power in its discretion to permit the issue of long-time bonds. I am not unmindful of the late decision of the Court of Appeals in People ex rel. Binghamton Light, Heat & Power Co.v. Stevens (203 N. Y. 7), from which my brother Dowling- has so copiously quoted. The opinion in that case must, of course, be read with reference to the particular circumstances upon which it was based. The court had before it an order permitting the refunding of both long-time and short-time obligations, some of the latter, if not all, having apparently been incurred after the passage of the Public Service Commissions Law. The Commission had attached to its order, as a condition, the requirement that the relator company should reduce its capital stock. What the court decided was that this condition was improper, not that the consent should not have been given as to any part of the obligations sought to be refunded, for it remitted the application to the Commissioners for further consideration. In the course of the opinion the learned judge *313who spoke for the court dwelt strongly upon the impropriety, under the terms of the act, of allowing the issue of long-time bonds to meet operating and replacement expenses. His remarks were applicable, as is the act which he was engaged in expounding, to securities issued after the act became a law, but there is no single word in the opinion which can be fairly construed as indicating that obligations lawfully incurred before the passage of the act, for whatever purposes, might not be refunded.
If the obligations which the relator company seeks to refund are, as I consider that they are, those which by the express terms of the statute the said relator is authorized to refund by long-term obligations, the defendants were bound to give their assent to the issue. All that the Commission is authorized to do in such a case is to inquire whether the obligations sought to be refunded belong to one of the classes enumerated in the section cited, as in my opinion these securities clearly do, and that the amount of the refunding issue is not excessive for such purpose. As to the latter point there can be no question in this case, because it is proposed to surrender and refund capital securities amounting to $3,168,513.60, upon which there has accrued interest exceeding $1,000,000, by the issue of new bonds of the par value of $2,760,000.
For these reasons, and without elaborating them at greater length, I am of opinion that the order of the Public Service Commission should be reversed and the case remanded with instructions that the application be granted.
Ingraham, P. J., concurred.
Writ dismissed and proceedings affirmed, with costs. Order to be settled on notice.