People ex rel. Binghamton Light, Heat & Power Co. v. Stevens

• Citation: 203 N.Y. 7,96 N.E. 114
• Court: New York Court of Appeals
• Decision Date: 03 October 1911
• Parties: PEOPLE ex rel. BINGHAMTON LIGHT, HEAT & POWER CO. v. STEVENS et al.

203 N.Y. 7

96 N.E. 114

PEOPLE ex rel. BINGHAMTON LIGHT, HEAT & POWER CO.

v.STEVENS et al.

Court of Appeals of New York.

Oct. 3, 1911.

Appeal from Supreme Court, Appellate Division, Third Department.

Certiorari by the People, on the relation of the Binghamton Light, Heat & Power Company, to review an order of Frank W. Stevens and others as Commissioners constituting the Public Service Commission for the Second Public Service District and the Public Service Commission. Appeal by relator from an order confirming an order of the Commission. 128 N. Y. Supp. 440. Order reversed.

Adrian H. Joline, for appellant.

Ledyard P. Hale, for respondents.

CHASE, J.

Public service commissions were established in this state by chapter 429 of the Laws of 1907, to take effect July 1st of that year. The act was amended and revised by chapter 480 of the Laws of 1910, which took effect June 14, 1910. Section 69 of the act of 1907 as amended by the act of 1910 (Consol. Laws 1910, c. 48), so far as now material, is as follows: ‘A gas corporation or electrical corporation organized or existing, or hereafter incorporated, under or by virtue of the laws of the state of New York, may issue stocks, bonds, notes or other evidence of indebtedness payable at periods of more than twelve months after the date thereof, when necessary for the acquisition of property, the construction, completion, extension or improvement of its plant or distributing system, or for the improvement or maintenance of its service or for the dischage or lawful refunding of its obligations or for the reimbursement of moneys actually expended from income or from any other moneys in the treasury of the corporation not secured or obtained from the issue of stocks, bonds, notes or other evidence of indebtedness of such corporation, within five years next 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 in cases where the applicant shall have kept its accounts and vouchers of such expenditure in such manner as to enable the commission to ascertain the amount of moneys so expended and the purposes for which such expenditure was made; provided and not otherwise that there shall have been secured from the proper commission an order authorizing such issue, and the amount thereof, and stating the purposes to which the issue or proceeds thereof are to be applied, and that, in the opinion of the commission, the money, property or labor to be procured or paid for by the issue of such stock, bonds, notes or other evidence of indebtedness is or has been reasonably required for the purposes specified in the order, and that except as otherwise permitted in the order in the case of bonds, notes and other evidence of indebtedness, such purposes are not in whole or in part reasonably chargeable to operating expenses or to income. Nothing herein contained shall prohibit the commission from giving its consent to the issue of bonds, notes or other evidence of indebtedness for the reimbursement of moneys heretofore actually expended from income for any of the aforesaid purposes, except maintenance of service and replacements, prior to five years next preceding the filing of an application therefor, if in the judgment of the commission such consent should be granted; provided application for such consent shall be made prior to January first, nineteen hundred and twelve. For the purpose 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 corporation shall not without the consent of the commission apply said issue or any proceeds thereof to any purpose not specified in such order. Such gas corporation or electrical corporation may issue notes, for proper corporate purposes and not in violation of any provision of this or of any other act, payable at periods of not more than twelve months without such consent; but no such notes shall in whole or in part, directly or indirectly be refunded by any issue of stock or bonds or by any evidence of indebtedness running for more than twelve months without the consent of the proper commission. Provided, however, that the commission shall have no power to authorize the capitalization of any franchise to be a corporation or to authorize the capitalization of any franchise or the right to own, operate or enjoy any franchise whatsoever in excess of the amount (exclusive of any tax or annual charge) actually paid to the state or to any political subdivision thereof as the consideration for the grant of such franchise or right. * * *’

That part of the section quoted which is in italics was added by the amendment of 1910, and in place of the paragraph beginning with the words ‘the money’ and ending with the words ‘hundred and twelve’ there was in the act of 1907 a clause as follows: ‘The use of the capital to be secured by the issue of such stock, bonds, notes or other evidence of indebtedness is reasonably required for the said purposes of the corporation.’

The relator is a domestic corporation organized in 1902 for the purpose of generating and selling electricity for light, heat, and power. On the last day of February, 1902, it acquired the property and franchises of the Binghamton General Electric Company, which company had on and prior to that day supplied electric light and power in the city of Binghamton. At the close of business on that day the balance sheet of the Binghamton General Electric Company showed, so far as now material, as follows:

+-----------------------------------------+
                ¦Total fixed capital including¦           ¦
                +-----------------------------+-----------¦
                ¦franchises                  ¦¦$385,954 92¦
                +----------------------------++-----------¦
                ¦Total floating capital      ¦¦21,204 66  ¦
                +----------------------------++-----------¦
                ¦                            ¦¦$607,159 58¦
                +-----------------------------------------+
                

+-----------------------------------------+
                ¦                ¦Liabilities.¦           ¦
                +----------------+------------+-----------¦
                ¦Capital stock   ¦$280,000 00 ¦           ¦
                +----------------+------------+-----------¦
                ¦Funded debt     ¦266,500 00  ¦           ¦
                +----------------+------------+-----------¦
                ¦Bills payable   ¦20,000 00   ¦           ¦
                +----------------+------------+-----------¦
                ¦Accrued interest¦6,687 50    ¦           ¦
                +----------------+------------+-----------¦
                ¦Surplus         ¦33,972 08   ¦           ¦
                +----------------+------------+-----------¦
                ¦                ¦----------  ¦$607,159 58¦
                +-----------------------------------------+
                

It is asserted by the petition hereinafter mentioned that the relator issued for the assets of said company its common stock to the amount of $500,000 and its refunding mortgage bonds presumably upon the property purchased to the amount of $325,000 . It does not appear just how the sale was consummated, who were the stock and bond holders of the Binghamton General Electric Company or of the relator, how or upon what terms the bonds and stock of the old company were taken up or retired and the assets of the old company transferred to the new company. It does appear, however, that on the next day (March 1, 1902) the books of the relator were opened with a statement of assets as follows: ‘Plant, real estate, personal and other property, franchise rights, etc., and noted below and heretofore owned by Binghamton Gen. Elec. Co., $759,231.19.’ The other items of assets referred to as noted below are principally taken from the items comprising the floating capital as stated on the balance sheet of the Binghamton General Electric Company. The book value of the plant, etc., increased to the extent of $173,276.27 in one day. Such increase is unexplained in the record; but it does appear that the increase did not arise from charging organization expenses to the capital account prior to the entry of March 1, 1902, because subsequently there was charged to capital account the organization expenses aggregating $79,795.83, the details of which it is unnecessary to enumerate at this time. From March 1, 1902, until the filing of the petition hereinafter mentioned the relator spent for what it terms new plant and property improvements and betterments, or became liable therefor pursuant to contract obligations, the sum of $441,792.90. In the meantime and prior to July 1, 1907, it had issued and sold $175,000 more of its first refunding mortgage bonds and $150,000 of 6 per cent. cumulative preferred capital stock. During the same time it had sold property for $15,618.88 which it had credited to capital account.

[1] On February 17, 1909, the relator filed with the public service commission in the second district its petition alleging facts from which the most of those above were taken, and asked for an order under section 69 of the public service commissions law authorizing:

(1) A mortgage to be dated April 1, 1909, to secure $1,000,000 of 5 per cent. bonds with the right to issue forthwith: (a) $500,000 of said bonds to enable the petitionerto acquire an equal amount of its bonds then outstanding; (b) $180,000 additional of said proposed bonds.

(2) $50,000 of its 6 per cent. cumulative preferred stock.

It was stated in the petition that the petitioner proposed to use the proceeds of the $180,000 of bonds and of said proposed stock to pay and discharge its promissory notes outstanding, amounting to $158,000, and the balance in paying, to the extent thereof, its floating indebtedness.

It is alleged in a schedule attached to the petition that the petitioner was indebted to the extent of $244,315.76, not including the funded debt of $500,000, and such indebtedness is made up of notes payable not exceeding 12 months from...