Boston Molasses Co. v. Molasses Distributors' Corp.

• Decision Date: 04 March 1931
• Citation: 175 N.E. 150,274 Mass. 589
• Parties: BOSTON MOLASSES CO. v. MOLASSES DISTRIBUTORS' CORPORATION.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

274 Mass. 589

175 N.E. 150

BOSTON MOLASSES CO.

v.MOLASSES DISTRIBUTORS' CORPORATION.

Supreme Judicial Court of Massachusetts, Suffolk.

March 4, 1931.

Report from Superior Court, Suffolk County; Alonzo R. Weed, Judge.

Petition by the Boston Molasses Company for instructions to arbitrators on a legal question arising under a lease from petitioner to the Molasses Distributors' Corporation. Order instructing arbitrators, and case reported.

Affirmed.

R. H. Holt and A. J. Bronstein, both of Boston, for plaintiff.

C. P. Curtis, Jr., of Boston, for defendant.

SANDERSON, J.

This proceeding, brought under section 20 of G. L. c. 251 (a section added to that statute by St. 1925, c. 294, § 5), is a petition by the Boston Molasses Company, herein called the petitioner, for instructions to arbitrators upon a question of law arising under a lease from it to the Molasses Distributors Corporation, herein called the respondent. The petition was heard in the Superior Court upon the pleadings and certain oral testimony. An order instructing the arbitrators in conformity to a ruling made by the trial judge was entered and the case was reported for determination by this court, ‘such order to be made as law and justice may require.’

The petitioner held under a lease certain premises in South Boston upon which it had conducted a molasses business. On March 5, 1929, it sold to the respondent a part of the business, together with the buildings, structures and equipment previously used by it in that part, and sublet to the respondent for a period ending March 31, 1932, some of the land previously occupied by it in the conduct of its business. The rent reserved in the lease purports to be for the premises demised with the rights of access and the right to maintain and operate pipes connecting certain tanks with the wharf and with other tanks. The respondent covenanted ‘to pay for all charges for gas, water, electricity or other agency used on the leased premises.’ The lease contained a provision for the arbitration of controversies. The petitioner agreed ‘to supply steam, compressed air, water, light and other facilities available to it and which may be necessary to the reasonable enjoyment of the premises of the Lessee at the rates to be agreed upon between the parties, or, in the event of their failure to agree, to be determined by arbitration in accordance with the provision set forth in the preceding paragraph, such rates are not in any event to exceed the actual cost without executive overhead to the lessor.’ Later, when controversies arose, the parties agreed to submit them to arbitration under the provisions of the statute already referred to. The statement of controversies accompanying the agreement was in the following terms: ‘1. The quantity of steam supplied by Boston Molasses Company to Molasses Distributors Corporation from March 5, 1929, to December 31, 1929, and the price to be paid for same, all in accordance with the provisions of lease between the parties dated March 5, 1929. 2. Price to be paid by Molasses Distributors Corporation to Boston Molasses Company for steam supplied after December 31, 1929, and the method of determining the quantity so supplied, both in accordance with the provisions of said lease.’

On July 15, 1930, an award signed by a majority of the arbitrators was filed, but no judgment has been entered thereon. Majority and minority reports were also filed. The award determined the quantity of steam supplied by the petitioner to the respondent from March 5 to December 31, 1929, and the price to be paid for the same, and established a rate for the steam which should be used after the latter date. This rate consisted of two parts, a fixed operating cost per month in a stated sum and a coal and water charge. In their report the arbitrators stated in some detail the method adopted by them in reaching the conclusions appearing in the award. The items found by them to enter into fixed operating cost were interest and depreciation, taxes, fire, boiler and liability insurance, rent, maintenance, repairs, supplies, light, labor and supervision. These fixed costs were found by them to be ‘a part of the total cost of producing steam and as they are yearly costs the Arbitrators agree that they should be distributed at an average monthly rate and be a part of the monthly charge for steam in proportion to the relative average amounts of steam taken by the users. They are apportioned as a monthly average, instead of a varying amount figured each month on the basis of the actual steam used during that month, as the former method seems simpler and gives the same yearly result. These are not service charges as they are not based upon a demand but are fixed expenses distributed over the steam used.’

On June 19, 1930, the petitioner filed its petition seeking to have the arbitrators instructed that in determining fixed costs they might have regard to cost of maintaining a constantly available supply of steam and maintaining a steam plant of sufficient capacity to supply the respondent's intermittent requirements. On August 2, 1930, the respondent filed a cross-petition for instructions in which it seeks to have the arbitrators prohibited from including in the fixed costs interest and depreciation on the plant, taxes on the structure, equipment and site, fire, boiler and liability insurance, rent of the site, and maintenance and repairs of the plant.

It appears from an exhibit in the case purporting to be a letter dated September 5, 1930, from the arbitrators who made the award to counsel for the petitioner, that the reasons for the conclusions reached by them were based upon the terms of the lease and the statements accompanying the submission of controversies, and that they felt that in determining rates they could not apportion the fixed costs of maintaining the steam plant and head of steam on the basis of relative steam capacity requirements of the petitioner and respondent, and that they were bound in determining the rate to apportion against the respondent a part of the fixed costs based only on the amount of steam actually used by the respondent without regard to any part of the fixed costs due to maintaining a constantly available supply of steam or due to maintaining a steam plant of sufficient capacity to supply the respondent's intermittent requirements.

The steam used in the conduct of the business retained by the petitioner as well as in the conduct of the business sold to the respondent is generated from a central plant which formerly served the entire business. It consists of two boilers of one hundred and fifty horse power each, located on the...