Court Opinion

ID: 9444223
Source: CourtListenerOpinion
Date Created: 2023-08-03 19:46:42.709198+00
Date Added: 2024-06-11T17:29:46.755422
License: Public Domain

WILBUR K. MILLER, Circuit Judge
(dissenting).
The ultimate question presented by this appeal is whether we should reverse the District Court’s denial of the Commission’s application for a preliminary injunction. It is settled law that a federal appellate court will not set aside the *252action of a trial court in either granting or denying an application for a preliminary injunction unless its action was clearly erroneous or an abuse of discretion. Cox v. Democratic Central Committee, 1952, 91 U.S.App.D.C. 416, 200 F.2d 356.
Because of this principle I dissent from the order this day entered by my colleagues which grants a preliminary injunction pending further investigation by the Commission. Judge Curran’s refusal to issue a preliminary injunction was not, in my opinion, clearly erroneous, nor was it an abuse of discretion. To the contrary, his action was clearly correct. He could have done nothing else under his findings of fact, which were supported by evidence and which are not really challenged on this appeal. The Commission contents itself with saying the trial court had no right to make many of the vital findings upon which decision depended.
The Commission simply failed to make out a case for a preliminary injunction. This failure was not due to lack of opportunity to present whatever grounds the Commission had for injunctive relief. The hearing in the District Court continued for five days. The transcript of the proceeding there fills hundreds! of pages. Ample proof was introduced concerning the factual issues. I think this appeal should be decided on the merits now, and the order denying a preliminary injunction should be affirmed because the Commission signally failed to show grounds for the relief it sought.
The order now being entered by this court implicitly decides, it seems to me, that on the record before us the motion for a preliminary injunction was correctly denied. In effect, the order says to the Commission: “You did not make out a case in the five days of hearing before Judge Curran. But we give you an additional period of about thirty days to see if you can discover something more to present in support of your application for a preliminary injunction.”
Such action on our part is, I think, beyond our function. Nor do I see how the Commission can hereafter discover anything about the Capital Transit Company which it did not know as it presented its case in the District Court. The life of the utility is the proverbial open book. Its affairs and activities are constantly observed and studied by the regulatory body.
The Commission’s argument, which this court has accepted, is that redemption of the bonds and payment of the dividend should be enjoined until it has had on opportunity to complete the investigation, initiated by its Order No. 4060, into:
“(a) The action of the Company in transferring approximately $4,000,000 to the Union Trust Company of the District of Columbia for the call of its outstanding Mortgage Bonds;
“(b) The proposed action of the Company in distributing its non-transit properties described above;
“(c) The past, present and contemplated dividend policies of the Company;
“(d) The financial practices of the Company;
“(e) The adequacy of the provisions made by the Company for future adverse contingencies;
“(f) The adequacy of the Company’s reserves for depreciation.”
I stop to consider only the last of these six investigative objectives because it seems the most serious, and because a discussion of it may throw some light on the first five objectives which, for lack of time, I cannot treat in detail.
The Order’s reference to the inadequacy of reserves for depreciation is based upon this recital earlier therein:
“It appearing to the Commission that:
* * * * * *
“F. The Company’s depreciation reserves may be understated in substantial amounts, estimated at about $2,200,000 as of December 31, 1952, which, if determined, may operate as a restriction on earned surplus available for dividends * *
*253Order No. 4060 was entered February 26, 1954, after the dividend had been declared and after funds to redeem the bonds had been deposited with the trustee — and the day before the injunction suit was filed in the District Court. This indicates a rather sudden apprehension on the Commission’s part that depreciation reserves, which the Commission itself has constantly supervised, may be inadequate. It amounts to a substantial change in the view concerning depreciation which the Commission expressed as recently as January 20, 1954, when, in its opinion in “In the Matter of Change in Fares of Capital Transit Company,” it noted with respect to reserves for depreciation, injuries and damages, and income taxes, that
«•» * * jn thg past, substantial overaccruals in these accounts have occurred from time to time, with adverse effects on apparent rate of return during these periods.
* * * In respect of these items, we find no sufficient basis for adjustment at this time, but we will continue to closely scrutinize these accounts to guard against habitual overaccruals which ultimately prejudice the interests of the transit riders.
“As noted, the account for reserves for depreciation was on May 29, 1953, changed to a new basis, which in effect lowered the current annual charges. The group rates now in effect reflect the best depreciation practice so far derived from the Commission studies. Studies on this subject will continue, but in this, as in the case of the other reserves, we find for present purposes the reflections contained in Mr. Falk’s exhibits not subject to further adjustments.”
Let us look at the facts. On February 28, 1954, after the declaration and deduction of the dividend, Capital Transit had earned surplus of $2,499,954.65. On the same day, the bond redemption money having already been deposited with the trustee, the Company had current assets in the sum of $4,139,438.39, including cash and marketable securities of $2,563,133.86. Its property, plant and equipment had been depreciated to $23,756,276.12 from an original cost of $48,647,590.63. Judge Curran found, on evidence, “That the equipment of Capital Transit Company is outstanding, modern and in excellent repair.” It is difficult for me to understand the Commission’s fear, expressed on February 26, 1954, that Transit’s depreciation policy, which it has kept under surveillance for many years, may have produced reserves which were inadequate by about $2,200,000 as long ago as December 31, 1952.
Moreover, Judge Curran found “That as of February 28, 1954, Capital Transit Company owned approximately $27,896,-507 of unencumbered and unpledged assets, and had total liabilities of $6,644,-561.” The stockholders’ equity on that date amounted to $21,249,945.65.
A word should be said about the short-term loan of $1,500,000 which Capital Transit obtained from American Security and Trust Company just before the bond redemption money was deposited with the trustee. The Commission argued to us that the loan was illegal because it had not approved the transaction. Whether so or not is immaterial to the issues here. The sum borrowed was not necessary for the payment of the bonds and the dividend. After both had been deducted, the Company had cash of about $2,200,000. So, if it were directed to repay the bank loan, it would still have, after paying the dividend and the bonds, the amount of cash shown by the evidence to be necessary for its daily operations.
Uncontradicted evidence strongly supports Judge Curran’s findings that the redemption of the bonds will not impair the Company’s ability to furnish adequate service to the public, and that the payment on April 1, 1954, of a forty-cent dividend will not impair the Company’s capital or its ability to furnish adequate service in performing its public functions. That being true, there is no> threat of irreparable injury to the pub-*254lie interest to warrant either the Commission or the court in interfering with the Company’s management of its own affairs. Some may think the Commission should have statutory authority, which it now lacks, to forbid the payment of debts and the declaration and payment of dividends from earned surplus, even when the utility’s eapitál will not be impaired thereby and when its ability to furnish service will not be affected. That is a matter for legislative determination with which the courts are not concerned.