Court Opinion

ID: 5773576
Source: CourtListenerOpinion
Date Created: 2022-01-12 17:36:46.241636+00
Date Added: 2024-06-11T08:41:50.037567
License: Public Domain

Cooke, J.
This is a proceeding under article 78 of the CPLR (transferred to the Appellate Division of the Supreme Court in the Third Judicial Department by order of the Supreme Court at Special Term, entered in Albany County) to review a determination of the Public Service Commission, which denied the petition of the Brooklyn Union Gas Company to issue stock for the purpose of acquiring all of the stock of New Jersey Natural Gas Company, a New Jersey public utility engaged in the distribution and sale of natural gas in that State.
In its decision of November 12, 1969, the commission rejected the application upon the grounds (1) that the proposed acquisition is not in the public interest and (2) that the proposed security issue is not authorized by statute. By a supplemental decision of December 4,1969, a petition for rehearing and reconsideration was denied and the commission “ amplified ” the reasons outlined in the initial determination.
Section 70 of the Public Service Law, providing in part that no gas corporation shall acquire the stock of any other corporation incorporated for or engaged in the same or a similar business unless authorized to do so by the commission, mandates that such consent shall not be given ‘ ‘ unless it shall have been shown that such acquisition is in the public interest.” This court’s review of the action of the Public Service Commission, when it decides whether such a stock acquisition is in the public interest, is very limited (cf. Matter of Mounting & Finishing Co. v. McGoldrick, 294 N. Y. 104, 108; People ex rel. Woodhaven Gas Light Co. v. Public Service Comm., 203 App. Div. 369, 370-371, affd. 236 N. Y. 530, affd. 269 U. S. 244). If the commission’s determination has any rational basis for the conclusion arrived at, it cannot be held by us to be arbitrary and capricious or an abuse of discretion and the judicial function is exhausted (Matter of Campo Corp. v. Feinberg, 279 App. Div. 302, 307, affd. 303 N. Y. 995). Given such a rational basis, courts will not substitute their judgment for that of the Public Service Commission regarding the issue of public interest, the determination of which has been committed to the expertise of the commission (Matter of Grade Crossings [N. Y. Cent. R. R. Co.], 255 N. Y. 320, 322; People ex rel. New York & Queens Gas Co. v. McCall, 219 N. Y. 84, 88, affd. 245 U. S. 345; Matter of New York, Ontario & Western Ry. Co., 244 App. Div. 664, 666, affd. 271 N. Y. 567).
*73The proof justified the finding by the commission that the transaction would result in an immediate dilution of earnings available for Brooklyn Union’s common stock because of its obligation to pay an annual dividend of $1.75 per share on 2,446,898 shares of preferred stock to be issued and the ^receipt, in turn, of an equal number of shares of common stock of New Jersey Natural, which in 1968 earned $1.55 a share and paid a cash dividend of $1.00. This would be detrimental to petitioner’s stockholders and, if continued, would be adverse to the interests of ratepayers as well. There was no showing that New Jersey Natural, even with assumed growth, would be permitted by the New Jersey regulatory body to earn a greater amount per share than in the past. It is not unreasonable to expect disapproval of higher future dividends in view of New Jersey Natural’s high return of 16.5% on equity in 1967 and 16.1% in 1968. Furthermore, under the proposal, it is obvious that a substantial segment of petitioner’s assets and operations would be beyond the commission’s jurisdiction with no assurance that the New Jersey affiliate will be conducted for the benefit and protection of this State’s consumers. New York’s commission would have no control over New Jersey Natural’s capitalization, purchases and sales of utility property, rates, service or any other phase of its operations. (Cf. Matter of Rochester Gas & Elec. Corp. v. Maltbie, 258 App. Div. 682, 684-685, affd. 284 N. Y. 626.) On these premises alone, we cannot hold justly that no substantial reason whatever appears in the record to sustain the determination under review. A discussion of the other bases mentioned by the commission is unnecessary.
The determination should be confirmed and the petition dismissed, with costs.