City of Boston v. Treasurer & Receiver Gen.

• Decision Date: 03 March 1921
• Citation: 130 N.E. 390,237 Mass. 403
• Parties: CITY OF BOSTON v. TREASURER AND RECEIVER GENERAL et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

237 Mass. 403

130 N.E. 390

CITY OF BOSTON

v.TREASURER AND RECEIVER GENERAL et al.

Supreme Judicial Court of Massachusetts, Suffolk.

March 3, 1921.

Report from Supreme Judicial Court, Suffolk County.

Suit by the City of Boston against the Treasurer and Receiver General and others, resulting in a decree overruling demurrers to the bill. On report to the Supreme Judicial Court. Decree overruling demurrers reversed, and decree sustaining demurrers ordered entered.

Arthur D. Hill, Corp. Counsel, of Boston (Natham Matthews, of Boston, of counsel), for plaintiff.

J. Weston Allen, Atty. Gen., and Alexander Lincoln, Asst. Atty. Gen., for defendant treasurer and receiver general.

Gaston, Snow, Saltonstall & Hunt, of Boston (Thomas Hunt, of Boston, of counsel), for defendant Boston Elevated Ry.

H. Ware Barnum, of Boston (E. A. Whitman and C. H. Waterman, both of Boston, of counsel), for defendants trustees of Boston Elevated Ry.

RUGG, C. J.

This is a suit in equity by the city of Boston against the treasurer and receiver general, the Boston Elevated Railway Company, and the trustees who are operating that railway under Sp. St. 1918, c. 159. Its object is to have certain provisions of that act declared unconstitutional and void as against the city of Boston, and to prevent the assessment upon that city of any part of the amounts paid under the act by the commonwealth to the railway company to make up the deficiency between its revenues and expenses. We are of opinion that the plaintiff fails to make out a case on the merits. It has been argued at large by all parties. It is of great public importance. We therefore have not considered several preliminary questions which have been suggested and argued. Since the decree would be the same in any event, there appears ‘to be no objectionto stating the grounds of substantive law which seem to us to support the result.’ Holmes, C. J., in Browne v. Turner, 176 Mass. 9, 12, 56 N. E. 969, 970. To that end and for the same reason the amendment is allowed admitting the present treasurer and receiver general in place of the one named in the petition, who has vacated that office.

In an opinion of the Justices given to the honorable Senate, and reported in 231 Mass. 603, 122 N. E. 763, the view has expressed that Sp. St. 1918, c. 159, violated no provision of the state or federal Constitution. The familiar rule is that such opinions are wholly advisory, given by the Justices as individuals without the benefit of argument, and are not decisions of the court. When the questions therein considered arise in the course of litigation, the ground is re-examined by the Justices sitting as a court in the light of the arguments presented and with the effort carefully to guard against any influence flowing from the earlier opinion. Young v. Duncan, 218 Mass. 346, 351, 106 N. E. 1;Perkins v. Westwood, 226 Mass. 268, 272, 115 N. E. 411, and cases collected in each judgment.

The allegations of the bill in substance are that by virtue of St. 1902, c. 534, and St. 1911, c. 741, the city of Boston has expended about $31,000,000 in the construction of subways and tunnels and has leased the same to the railway company, whereby all these subways and tunnels and also those built by it under earlier statutes, and the rents and profits thereof, are held by the city ‘in its private or proprietary capacity, for its own property’ never to be taken by the Commonwealth except on payment of just compensation. The leases, which have been extended to July 1, 1936, provide for repairs by the lessee and maintenance of the demised property in good condition, and give the city the right of entry upon default in payment of rent. The essential parts of said chapter 159 are stated in or by reference imported into the bill. That act provides for public operation of the railway through a board of five trustees appointed by the Governor, who ‘shall manage and operate the Boston Elevated Railway Company * * * and the properties owned, leased or operated by it, for a period of ten years,’ and thereafter upon the same terms until such time as the commonwealth shall elect to discontinue public management and operation, and who, subject to the provisions of the act, ‘shall take and have possession of said properties in behalf of the commonwealth,’ with ‘the right to regulate and fix fares,’ transfers and other charges, and to ‘determine the character and extent of the service and facilities to be furnished.’ The railway company is required to raise $3,000,000 by the issuance of preferred stock, with dividends not to exceed 7 per cent. for the improvement of the property of the company and the establishment of a reserve fund. The trustees are directed to ‘fix such rates of fare as will reasonably insure sufficient income to meet the cost of the service, which shall include operating expenses, taxes, rentals, interest on indebtedness, such allowance as they may deem necessary or advisable for depreciation of property and for obsolescence and losses, fixed dividends on preferred stock and dividends on the common stock at the rate of 5 per cent. for the first two years, 5 1/2 per cent. for the next two years and 6 per cent. for the remainder of the period of public operation. If there is a deficiency between the cost of operation as thus defined and the receipts, the trustees are required to notify the treasurer and receiver general and the commonwealth shall thereupon pay the amount of the deficit ascertained according to the act. The trustees are required to maintain the property of the railway company in good operating condition and to make such provision for depreciation, obsolescence and rehabilitation that upon the expiration of the period of public management, the property shall be ‘in good operating condition,’ and shall then revert to the railway company. In case the commonwealth is called upon to make payments to the trustees to meet deficits or diminution of the reserve fund provided for in the act, such amounts shall be assessed upon the several cities and towns in which the railway company operates by addition to the state tax next thereafter assessed in proportion to the number of persons in said cities and towns using the service of the company at the time of the payments as determined by the trustees. The act contains provision for acceptance by stockholders of the Boston Elevated Railway Company and of the West End Street Railway Company, but not by the city of Boston, that none of its provisions shall be construed to constitute a contract binding on the commonwealth, except those which define the terms and conditions under which the property shall be managed and operated by the trustees and the provisions of section 13 relating to the upkeep of the railway company's property. The bill further alleges the appointment of trustees, performance of their functions, and the existence of a deficit of nearly $4,000,000 as determined by the trustees, on July 18, 1919, notice whereof has been given to the treasurer and receiver general, who proposes to pay the amount to the company; that in ascertaining this deficit the trustees have charged for the fiscal year ending June 30, 1919, depreciation of approximately $2,000,000 and $2,300,000 for maintenance and repair, the average amount charged by the railway company for depreciation for the 10 years prior thereto having been about $98,000 each year and having been inadequate, in consequence whereof the property had run down and was badly depreciated; that the amounts thus charged by the trustees for depreciation and maintenance and repairs are ‘excessive, unreasonable, unnecessary’; and that if assessment of this deficit is made according to the act, the plaintiff, as one of the cities liable therefor under the act, will be called upon to pay a very large proportion of any sum paid by the commonwealth to the railway company. All the defendants demurred to the bill. One common ground is want of equity. Additional grounds of demurrer are set up by the trustees and by the Boston Elevated Railway Company.

Some analysis of the provisions of Sp. St. 1918, c. 159, is necessary in order to deal with the contentions that it is unconstitutional. Its general scope is indicated by its title, which is, ‘an act to provide for the public operation of the Boston Elevated Railway Company.’ The accuracy of the title is confirmed by the substance of the act throughout. Its purpose is operation through public officers and not public ownership. That is shown by the manifest tendency of its main provisions and is accentuated by section 16, whereby definite terms for a sale to the commonwealth or any political subdivision thereof, ‘at any time during the period of public management and operation,’ of the ‘whole assets, property and franchises' of the Boston Elevated Railway Company ‘as a going concern,’ are set forth, together with a further precautionary clause to the effect that the power of eminent domain is not thereby suspended. Examination in detail of the provisions of the act discloses that there is no inexorable legislative mandate that such public operation be undertaken. There is no power conferred upon the trustees to seize by eminent domain or to acquire in any other way ownership of the railway system of the railway company. It is expressly provided by section 18 that the act, with the exception of section 5 giving the company power to raise $3,000,000 by issuing preferred stock to that amount, shall take effect only upon its acceptance by majority vote of the stockholders of the two railway companies to be affected. In substance and effect the act is a proposition made by the commonwealth to the two railway companies for their consideration and action. If either rejects that proposition, all goes for naught. If they both accept, than the act becomes vital and binding according to its terms. Those terms are contractual in their nature. That is plain not only from the...