Boston & A.R. Co. v. New York Cent. R. Co.

• Decision Date: 02 July 1926
• Citation: 256 Mass. 600,153 N.E. 19
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: BOSTON & A. R. CO. v. NEW YORK CENT. R. CO. et al. BREWER et al. v. SAME. BOSTON & A. R. CO. v. DEPARTMENT OF PUBLIC UTILITIES OF COMMONWEALTH OF MASSACHUSETTS.

256 Mass. 600

153 N.E. 19

BOSTON & A. R. CO.

v.NEW YORK CENT. R. CO. et al.

BREWER et al.

v.SAME.

BOSTON & A. R. CO.

v.DEPARTMENT OF PUBLIC UTILITIES OF COMMONWEALTH OF MASSACHUSETTS.

Supreme Judicial Court of Massachusetts, Suffolk.

July 2, 1926.

Case Reserved and Report from Supreme Judicial Court, Suffolk County.

Petition to the Department of Public Utilities of the Commonwealth of Massachusetts by the New York Central Railroad Company, lessee, for approval of a bond issue by its lessor, the Boston & Albany Railroad Company. Bond issue in specified amount was approved. Separate petitions in the Supreme Judicial Court by the Boston & Albany Railroad Company, by Clifford M. Brewer, trustee, and others, and in the name of the Boston & Albany Railroad Company by the New York Central Railroad Company, to review, annul, or amend the order. On reservation and report by a single justice. Decree dismissing petition in each case entered.

Nathan Matthews and C. H. Baesler, both of Boston, for Boston & Albany R. Co. and Brewer and others, stockholders of said company.J. R. Benton, Atty. Gen., and C. F. Lovejoy, Asst. Atty. Gen., for respondent Department of Public Utilities.

R. J. Cary, of Chicago, Ill., and G. H. Fernald, Jr., R. A. Stewart, F. H. Nash and C. O. Pengra, all of Boston, for New York Central Railroad Co.

SANDERSON, J.

The New York Central & Hudson River Railroad Company (hereinafter called the Central) became the lessee of the Boston & Albany Railroad Company (hereinafter called the Albany) by an indenture dated November 15, 1899, for the term of 99 years from July 1, 1900, which was consented to by the commonwealth July 17, 1900, by St. 1900, c. 468. On June 13, 1923, the Central filed a petition to the department of public utilities (hereinafter called the department) for approval of an issue by the Albany of bonds to the amount of $3,000,000, alleging that it had made permanent additions to and improvements upon the demised premises, and asking approval of the proposed issue as reasonable and proper and also as consistent with the public interest, taking into consideration the fixed charges of the Albany, the amount and character of its contingent liabilities and other pertinent conditions. The petition was accompanied by a schedule purporting to show such additions to and improvements upon the demised premises amounting to $3,018,282.18. The department, after hearing, found that the amount of additions and improvements of a permanent character was $2,990,000; and that that amount was properly capitalizable; but it further found that there had been a gross accrued depreciation of the depreciable property since the execution of the lease to November 30, 1922, of $2,450,000, and that the net accrued depreciation of the property accruing during the same period was $1,490,000, and approved an issue of bonds of the face value of $1,500,000.

The Albany and certain of its stockholders made requests for rulings before the department, which hereafter will be referred to. No requests were made by the Central. After the decision, the Albany and certain of its stockholders, filed petitions in the Supreme Judicial Court asking that the order of the department be annulled, reviewed, modified, or amended, for the reasons that under the lease the plaintiff is under no obligation to issue any more bonds and that the department erred in approving an issue to the amount of $1,500,000, and for the further reason that the department adopted an erroneous rule in deciding what expenditures were for permanent additions and improvements. The grounds stated in these petitions were based upon the requests for rulings made before the department. The Central filed a petition for reviewing, modifying, amending or annulling the orders and rulings of the department for the reason that the department did not approve an issue of bonds to the amount of $2,990,000.

The case came on for hearing before a single justice of the Supreme Judicial Court, who made certain findings of fact and reserved and reported the case, and who also reserved the question whether the stenographic notes of oral testimony and arguments at the hearings and conferences before the department and certain reports, votes, letters and schedules then offered in evidence by the Central, were admissible.

[1] A fundamental question raised by the Albany and its petitioning stockholders is whether the department had authority to approve the issue of any bonds. They contend that the expression in the lease ‘to the extent that it lawfullymay’ refers to the law in force in Massachusetts when the lease went into effect, and controls in the construction of the lease, and limits the amount the Albany may be required to issue upon petition of the Central to $25,000,000, the amount of its capital stock. It appeared that at the time when the lease was made there were outstanding bonds of the Albany amounting to $7,485,000, and that from that time to and including June 12, 1913, six bond issues aggregating $17,515,000 have been approved, making a total of $25,000,000 outstanding bonds. By St. 1913, c. 784, § 16, and section 15 as amended by St. 1915, c. 303 (G. L. c. 160, § 47), it is provided in substance that an issue of bonds or other evidences of indebtedness shall not exceed the amount of the capital stock unless any excess above such amount shall have been previously approved by the commissioners as consistent with the public interest, taking into consideration the fixed charges of such corporation, the amount and character of its contingent liabilities and other pertinent conditions; but that in no event shall the aggregate amount of all bonds, notes, or other evidences of indebtedness of which it is the maker or which it has assumed, exceed twice the amount of the capital stock. On July 27, 1917, by vote of directors of the Albany and with the approval of the department, $1,000,000 in bonds were issued, bringing the total now outstanding up to $26,000,000.

It is provided in the lease:

That ‘if the board of directors of the lessor, by a majority vote, shall consent to or approve of any or all of such permanent additions and improvements or the doing of such other things, including the acquisition of real estate as aforesaid, or if, after a hearing, the Board of Railroad Commissioners of Massachusetts approve an issue of bonds therefor, fixing the amount and purposes for which said bonds may be issued, the lessor shall, at the request of said lissee and to the extent that it lawfully may, issue its bonds at such lawful rate of interest as may be determined by the lessee for such sums as may be necessary or specified by said Railroad Commissioners, to meet the cost and expense thereof, and shall, take such lawful corporate action to that end as may be requested by said lessee’; and also that ‘the lessee, its successors and assigns, may, at its own expense and charge, use the name of the lessor in making and prosecuting petitions to the Board of Railroad Commissioners or other boards of governmental or judicial authority, to secure the determinations aforesaid, from time to time, and the lessor hereby appoints said lessee its agent and attorney during the duration of this lease for the purpose aforesaid, but the lessor reserves the right in all cases to be heard before said board or other authority in opposition to granting in whole or in part the prayer of such petition.’

It is further provided in the lease that if the Board of Railroad Commissioners should ‘be deprived of its present power in reference to the issue of bonds by railroad companies and the same or similar power shall not be conferred by law on some other governmental or judicial authority, then no such bonds for improvement shall be issued without the approval of the Governor of the commonwealth unless the board of directors of the lessor, by a majority vote, consents thereto.’

The question whether the department had authority to approve the issue of any bonds requires us to determine what the parties reasonably intended by the words ‘to the extent that it lawfully may.’ It is to be noted that this expression is a part of a sentence which relates to the future, and naturally refers to what may lawfully be done when the time for action arrives. The parties must have been considering bond issues which might be made at any time in 99 years. The word ‘may’ itself naturally looks to the future, and indicates doubt instead of certainty. The meaning of this word in a contract depends upon the connection in which it is used. Greene v. Robinson, 41 Conn. 470. Payment in lawful money means in money lawful at the time of payment. O'Neil v. McKewn, 1 S. C. 147. It is probable that if the parties were intending to limit bond issues under the lease to the amount of outstanding capital stock of the Albany at the time of the lease, they would have stated the amount or made that meaning clear by some definite expression. There is nothing in the language used in other parts of the lease to show an intention to confine the future issues to the amount authorized when the lease was made. The parties in providingfor an issue of bonds by the Albany for permanent additions or improvements not financed by the Central used the expression ‘required to be made, by force of any law now or hereafter existing, or by any court, tribunal, board of commissioners or public officers having lawful authority in the premises.’ The expression in this clause ‘by force of any law now or hereafter existing’ throws little light on the construction of the clause under consideration. In both cases the parties are referring to the law as it may be in the future-in one case to what the law may thereafter authorize and in the other to what the law may thereafter require. The clause, ‘the lessor shall * * * and to the extent it lawfully may,’ applies to an issue based upon additions and improvements assented to by a majority of the directors...