Court Opinion

ID: 5384540
Source: CourtListenerOpinion
Date Created: 2022-01-08 09:18:27.62757+00
Date Added: 2024-06-11T08:30:12.329905
License: Public Domain

Foster, J.
(dissenting). There is some doubt as to whether this proceeding presents for review a final determination of the Public Service Commission. Petitioner sought approval for the issuance and sale of first mortgage bonds in the principal amount of $16,677,000; 50,000 shares of preferred stock, and shares of common stock, of no-par value, sufficient to raise $2,000,000. The proposals submitted by petitioner were not conclusive, for the prices and terms of the securities were to be determined by competitive bidding, and after such matters were determined the further approval of the Commission would necessarily have to be sought. However, the Commission entertained the proposals and made certain recommendations. Thereupon petitioner amended its application and accepted for the most part, and without prejudice, the requirements laid down in the Commission’s original memorandum. The Commission’s final resolutions set forth conditions which differed in two important respects from the proposals submitted in the amended petition. Petitioner refused to comply with these and withdrew its amended petition. There is dispute as to its right to do this, which seems wholly unimportant. The important thing is that the Commission finally denied its application and refused to grant a rehearing.
In other words petitioner sought, in advance of the event, advice as to whether the Commission would approve the issuance and sale of securities upon terms and conditions that were partially unknown. From a viewpoint of strict construction the Commission was obliged only to entertain an application for an order approving a complete plan for the issuance and sale of securities at a definite price, interest and dividend rate. But *122from a practical viewpoint, to compel conformance to such a narrow construction might easily result in an immense duplication of labor. If petitioner acted without first obtaining the Commission’s approval to invite bids, and without knowledge with respect to any conditions that might be imposed, its work might be in vain. The latter hurdle had to be surmounted, if possible, before it would be practical for petitioner to proceed further. In entertaining the application at all the Commission acquiesced in this view. It finally imposed conditions which petitioner refused to accept. The order of the Commission is final in form and has all the finality that the mechanics of the situation permitted. It has refused to approve the issuance and sale of securities except upon conditions relevant to the financial setup of petitioner which the latter refuses to accept. It would seem a useless bit of legal, technicality to hold now that the action of the Commission is not final in the sense that it may be reviewed. Such a holding would do nothing more or less than solidify the impasse already reached.
A construction of section 69 of the Public Service Law is involved in this controversy, with sections 36 and 38 of the Stock Corporation Law playing a minor role. The real issue in the case is the power of the Commission under section 69 of the Public Service Law. Petitioner apparently takes the view that the only power the Commission has under this section is to determine whether the proposed issuance of securities is necessary and reasonably required for one of the purposes stated in the statute. To the contrary, the Commission maintains that it has the power and duty to determine whether the issuance of securities is in the public interest, and that the fulfillment of its duty in that regard requires it to take into consideration the financial soundness of the company, its proposed total capitalization, the value of its property and all other factors affecting the interest of the investing and consuming public. These contrasting views pose the issue. The Commission agrees that the issuance of the proposed securties is for one or more of the purposes enumerated in the statute, and hence there is no issue on that score. It follows that if the petitioner’s view is correct the Commission was bound to approve its application irrespective of other considerations.
I think petitioner’s conception of the Commission’s power is erroneous. Carried to its ultimate conclusion it would mean that whatever cracks might appear to exist in the capital structure of a public utility the Commission would be powerless to withhold its approval for the issuance of new securities so long *123as they are to he issued for value received and reasonably necessary for one of the purposes enumerated in the statute. This extreme view is inconsistent with the fundamental supposition that implicit in every section of the Public Service Law is the standard of public interest, and wherever regulatory power is conferred on the Commission it must be exercised in the light of this standard. By the same token every part of the statute conferring power in general language must be broadly construed so far as the public interest is concerned, and limited only when such a legislative intent is plainly expressed or when the exercise of power may violate constitutional limitations (Matter of Rochester Gas & Electric Corp. v. Maltbie, 258 App. Div. 682, affd. 284 N. Y. 626; People ex rel. Iroquois Gas Corp. v. Public Service Comm., 264 N. Y. 17; Matter of International Railway Co. v. Public Service Comm., 264 App. Div. 506, affd. 289 N. Y. 830; Matter of Staten Island Edison Corp. v. Public Service Comm., 263 N. Y. 209).
The language of the disputed section imposes no limitation such as the petitioner claims. For instance it provides, << * # « For the purposes of enabling it to determine whether it should issue such an order, the Commission shall make such inquiry or investigation, hold such hearings and examine such witnesses, books, papers, documents or contracts as it may deem of importance in enabling it to reach a determination * * ®.” Such a determination would be relatively simple, and would not require the power to investigate in such detail as the statute directs and permits, if the only purpose was to determine ¡whether the proposed securities were reasonably necessary for one of the purposes mentioned in the statute. It would seem unnecessary to strain the point that the public, both consumers and investors, has an interest so far as the issuance of new securities is concerned in whether a utility is already overcapitalized or its existing capital structure impaired. The most elementary considerations of regulation in the public interest dictate the necessity of such a view. Even in those cases where dicta is cited to the contrary the facts do not support a different conclusion, and the dicta should be read in connection with the facts passed on (People ex rel. D. & H. Co. v. Stevens, 197 N. Y. 1; People ex rel. Binghamton Light, Heat and Power Co. v. Stevens, 203 N. Y. 7).
When we come to the recommendations by the Commission relative to the proposals submitted by petitioner we find the following situation. Two cases are presently before the Commission and undetermined, which involve the question of whether *124a total sum of $6,658,171 shall be taken out ol petitioner’s capital accounts and charged to surplus. It is unnecessary to attempt to review in detail the conflicting claims as to the matters involved in these cases. Suffice it to say that they have yet to be determined and no one can say at the present time what their ultimate disposition may be. In addition to these matters there is substantial testimony in the record, accepted by the Commission, which tends to indicate that petitioner’s depreciation reserve may have a deficiency of some $10,700,000. This is also a matter of sharp dispute, but for the purpose of the present review no one can say how this controversy may ultimately be resolved. This alleged deficiency item was computed by the Commission’s witness upon the basis of what is known as straight line depreciation. This method of computation has'been condemned (Matter of New York Edison Co. v. Maltbie, 244 App. Div. 685; 245 App. Div. 897, affd. 271 N. Y. 103), but I do not understand the condemnation to extend to the use of this method in all cases and under all conditions. In fact under proper. conditions its use by a qualified expert has been approved (Matter of Yonkers Railroad Co. v. Maltbie, 251 App. Div. 204; Matter of Long Island Lighting Co. v. Maltbie, 249 App. Div. 918). The straight line method of determining depreciation is only condemned where it is imposed as a universal and inflexible rule without regard to the facts of a particular case. Apparently where there is a sufficient factual foundation to indicate that the method accurately reflects real depreciation it may be used.
In any event the method used is somewhat of a collateral issue so far as this review is concerned. The Commission has made no final order with respect to such alleged depreciation. All that the Commission’s resolutions required was that petitioner make provision for a special surplus account in the sum of $17,358,171. This sum represents the total of the disputed items in the cases now pending before the Commission plus a possible deficiency in petitioner’s depreciation reserve. Against this amount petitioner was to earmark the surplus which it had on hand December 31, 1946, in the amount, of $9,578,950. The difference between these amounts petitioner was to make up by reservations from current income, prior to the payment of any dividends on common stock, and on the basis of $75,000 per month. The purpose of this special surplus account was to take care of any necessary adjustments in the balance sheet accounts and in that manner to insure the financial soundness of the securities regardless of the outcome of controversies with respect *125to the questioned capital issue. There was no determination that the whole sum of $17,300,000 would he needed to cover such adjustments; nor was there any direction made for the transfer of any part of the special surplus account to any other account. The surplus special account was simply moneys earmarked so as to prevent their use for the payment of dividends prior to final determinations as to disputed items, and to he kept intact for adjustments that might he ultimately ordered. In the future if such adjustments are directed by the Commission petitioner will have an opportunity for reviewing them. If it should be determined that the Commission is wrong about these disputed capital items, then the amount in the special surplus account will, of course, be returned to free surplus; and the same disposition will be made of any balance over and above the amount of any capital impairment shown. Without discussing all the minutia involved the foregoing is a rough summary of the action which the Commission took, that is to say, the proposals which it recommended as a basis for its approval. In all this I can see nothing arbitrary or capricious, or anything beyond the power of the Commission in its regulatory functions. It is unfortunate, of course, that a matter of this importance to petitioner and the residents of the area affected could not be decided more expeditiously, but that is a circumstance outside of a judicial consideration of an issue of power.
The determination of the Commission should be confirmed.
Russell and Deyo, JJ., concur with Hill, P. J.; Foster, J., dissents, in an opinion in which Heffernan, J., concurs.
Determination annulled, on the law and facts, with $50 costs and disbursements, and matter remitted to the Commission for further consideration. [See post, p. 930.]