City of New Bedford v. New Bedford, Woods Hole, Martha's Vineyard and Nantucket S. S. Authority

• Decision Date: 15 January 1958
• Citation: 148 N.E.2d 637,336 Mass. 651
• Parties: CITY OF NEW BEDFORD v. NEW BEDFORD, WOODS HOLE, MARTHA'S VINEYARD and NANTUCKET STEAMSHIP AUTHORITY et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 637

148 N.E.2d 637

336 Mass. 651

CITY OF NEW BEDFORD v. NEW BEDFORD, WOODS HOLE, MARTHA'S VINEYARD and NANTUCKET

STEAMSHIP AUTHORITY et al.

Supreme Judicial Court of Massachusetts, Bristol.

Argued Dec. 3, 1957.

Decided Jan. 15, 1958.

William B. Perry, Jr., Asst. City Sol., New Bedford (Bernard Kestenbaum, Asst. City Sol., New Bedford, with him), for petitioner.

Robert G. Dodge, Boston (Harold S. Davis and Herbert P. Wilkins, Boston, with him), for respondents New Bedford, Woods Hole, Martha's Vineyard and Nantucket S.S. Authority and others.

George M. Poland, Boston (Ella M. Dolan, Boston, with him), for respondent Backus.

Before RONAN, SPALDING WILLIAMS, COUNIHAN and WHITTEMORE, JJ.

RONAN, Justice.

These are exceptions taken by the respondents comprising a public board created by St.1948, c. 544, and known as New Bedford, Woods Hole, Martha's Vineyard and Nantucket Steamship Authority, three of its individual members, and three intervening banks who are owners of bonds issued by the board, to an order for judgment entered upon this petition for a writ of mandamus commanding the board and its five individual members 'to comply with the provisions of c. 747 of the Statutes of 1956 by taking such steps as may be reasonable and necessary to carry out the intent and purposes of the legislative mandate,' and to the denial of requests for rulings. There is another bill of exceptions filed by one Backus, a member of the board, who, with two fellow members included in the petition already mentioned, voted not to carry out the provisions of said c. 747. The questions presented by both bills of exceptions arose from the said vote of the board and will be considered together.

A brief summary of the provisions of St.1948, c. 544, in so far as they pertain to the questions now presented, will show its purpose and the method adopted to accomplish it. By § 1 the Authority was created 'to provide adequate transportation of persons and necessaries of life for the islands of Nantucket and Martha's Vineyard,' and was 'empowered to purchase, construct, maintain and operate necessary vessels, docks, wharves * * * and to issue its revenue bonds payable solely from revenues, or funds as hereinafter authorized in section nine of this act.' Section 2 provides, 'Steamship bonds issued under the provisions of this act shall not be deemed to constitute a debt of the commonwealth, nor a pledge of the faith and credit of the commonwealth, but the bonds shall be payable solely from the funds herein provided therefor. All such bonds shall contain on the face thereof a statement to the effect that neither the Authority nor the commonwealth shall be obligated to pay the same, or the interest thereon except as herein provided [emphasis supplied], and that the faith and credit of the commonwealth are not pledged to the payment of the principal or of the interest on such bonds.' Section 3 provides for the appointment and removal of the members of the Authority § 4 supplies definitions, § 5 enumerates the general powers conferred on the Authority and defines 'cost of the service' to include 'interest and amortization * * * on bonds or notes of the Authority issued under this act,' and § 6 provides for the issuance of steamship bonds and empowers the Authority to designate their form and the signatures on their faces and the use of their proceeds. It is this last provision that contains the statement upon which the interveners rely and which reads as follows: 'While any bonds issued by the Authority remain outstanding, the powers, duties or existence of the Authority shall not be diminished or impaired in any way that will affect adversely the interests and rights of the holders of such bonds.' Section 6 also provides against competition by another steamship line, while § 7 provides for an exemption from taxation. Section 8 provides for the building up of a reserve fund for the payment of interest and redemption of the bonds. Section 9 provides that when income is insufficient to meet 'the cost of the service' the reserve fund shall be used to make up the deficiency and if the reserve fund at the end of any year is insufficient therefor the Treasurer of the Commonwealth shall pay over to the Authority the amount of the deficiency less the amount in the reserve fund. In turn the Commonwealth is to be reimbursed for such payment in certain proportions by the county, city and towns benefited by the operation of the steamship line. Section 16 states that the act being necessary for the welfare of the Commonwealth, should 'be liberally construed to effect the purposes thereof,' and by § 18 all inconsistent general and special laws shall be deemed inapplicable. There is a provision in the contract between the bondholders and the Authority calling for the use of surplus funds from time to time to redeem bonds.

The interveners are three banks owning $643,300 of the bonds of the Authority, all issued prior to the enactment of St.1956, c. 747. An issue in 1949 which amounted to $4,100,000 was used to acquire the property of an existing steamship line, to improve the same, and to maintain the newly acquired property. A second issue of $2,000,000 was made in 1955 to enable the Authority to pay for the construction of a new ferry type vessel which was ordered in that year. A third issue of $250,000 was made in 1957 to complete the new vessel, and $100,000 has been made available, if necessary, to make a ferry slip at New Bedford for the use of the new vessel when it should arrive and be put in service. Nearly the total amount of these bonds is outstanding.

It appeared in evidence that the budget of the Authority for 1957 shows an anticipated deficit of $340,000 and that the reserve fund of $200,000 provided for in St.1948, c. 544, has been exhausted. The actual cost figures of the Authority for 1956 show a deficit in cost of service in that year of $111,918.33 and a deficit in every year of operation except the first, 1949.

The respondents in the first bill of exceptions stated exceptions to the failure of the judge to give three requested rulings which were as follows: '4. The provisions of St.1948, c. 544, inserted for the protection of the future buyers of the bonds and to facilitate the sale of the bonds at low rates of interest and the accomplishment of the purposes of the Commonwealth, constitute a contract between the Commonwealth and the bondholders, the obligation of which cannot be impaired by legislation. 5. Statute 1956, c. 747, is invalid under § 10 of art. 1 of the United Stated Constitution. 6. Statute 1956, c. 747, is invalid under both the Federal and the Massachusetts Constitutions as taking property of the bondholders without compensation in that it defeats or substantially impairs rights vested in the bondholders under St.1948, c. 544.'

The respondents contend that § 6 of the 1948 act, providing that 'While any bonds issued by the Authority remain outstanding, the powers, duties or existence of the Authority shall not be diminished or impaired in any way that will affect adversely the interests and rights of the holders of such bonds,' forbids the enactment of St.1956, c. 747. They contend that the bondholders are so affected by this statute, which so far as material reads as follows: 'The Authority shall provide adequate transportation of persons and necessaries of life for the islands of Nantucket and Martha's Vineyard throughout the year, and shall provide regularly scheduled ferry runs daily throughout the year of the type that will accommodate standard size trucks and semi tractortrailer vehicles to and from the ports of New Bedford, Woods Hole, Vineyard Haven, and Nantucket, and adequate ferry slips or transfer bridges shall be constructed and maintained at said ports to facilitate and accommodate said vehicular traffic.'

The parties direct attention to Opinion of the Justices, 334 Mass. 765, 138 N.E.2d 212, where it was stated that St.1956, c. 747, changing the powers and duties of the Authority by requiring the daily operation of the...