Lowell Gas Co. v. Department of Public Utilities

Decision Date11 March 1949
Citation324 Mass. 80,84 N.E.2d 811
PartiesLOWELL GAS COMPANY v. DEPARTMENT OF PUBLIC UTILITIES.
CourtUnited States State Supreme Judicial Court of Massachusetts Supreme Court

October 4, 5, 1948.

Present: QUA, C.

J., LUMMUS, DOLAN WILKINS, & WILLIAMS, JJ.

Gas Company. Public Utilities. Equity Jurisdiction, Public utilities. Constitutional Law, Due process of law, Public utilities. Lowell Gas Company. Equity Pleading and Practice, Bill Demurrer; Review of order of department of public utilities Master: appointment, reference. A demurrer to a bill in equity in no event could raise any question of a

"variance" between averments in the bill and findings of fact by a master to whom the suit was referred after an overruling of the demurrer.

Equity Rule 34 (252 Mass. 610) does not require that, in a suit in equity by a gas company under G. L. (Ter. Ed.) c. 25, Section 5, seeking to have annulled as confiscatory a rate order of the department of public utilities, there be set out in the bill a summary of the evidence before the department when it made the order.

The Declaration of Rights of the Constitution of the Commonwealth guarantees to a public utility company, which alleges that confiscation of its property will result from a rate order of the department of public utilities, the right to submit that issue to a court for determination upon its own independent judgment as to both law and facts; and a remedy adequate to enforce that right is afforded the company by G. L. (Ter. Ed.) c. 25 Section 5. In a suit in equity by a gas company under G. L. (Ter. Ed.) c. 25, Section

5, to annul a rate order of the department of public utilities on the ground that the rates are confiscatory and unconstitutional, the inquiry is not confined to the findings of the department or to the evidence on which they were based, but other evidence may be considered, including evidence of matters which took place after the hearing before the department and after the order was made. In a suit in equity by a gas company under G. L. (Ter. Ed.) c. 25, Section

5, to annul a rate order of the department of public utilities on the ground that it was confiscatory, the court had jurisdiction to appoint a master "to hear the parties and their evidence, to find the facts and report the same to the court." In a suit in equity by a gas company under G. L. (Ter. Ed.) c. 25, Section

5, to annul a rate order of the department of public utilities, it appeared that the order contained no clear cut finding of a rate base to which a percentage of return to the company could be applied.

The department of public utilities erred as a matter of law in including in its computation leading to a fixing of rates for a gas company income derived from a merchandise and jobbing business in the sale and servicing of gas appliances which was separate from the supplying of gas. In its computations leading to a fixing of rates for the Lowell Gas

Company, the department of public utilities should have allowed as a charge against earnings, with priority over dividends, annual payments on certain noninterest bearing but legal obligations which the department contended represented "no real indebtedness of the company" but, in the circumstances, a "moral obligation" to certain of its customers. Facts found by a master in a suit in equity by a gas company under G. L.

(Ter. Ed.) c. 25, Section 5, to annul an order by the department of public utilities fixing rates, that the reasonably to be expected annual earnings available for dividends on the basis of such rates would be less than $80,000, whereas the amount of annual earnings necessary to assure confidence in the financial integrity of the company so as to maintain its credit and attract new capital, was $202,405, required a conclusion that the order was confiscatory and required its annulment.

BILL IN EQUITY, filed in the Supreme Judicial Court for the county of Suffolk on June 10, 1947.

The suit was heard and reserved and reported to the full court by Ronan, J., upon the record described in the opinion.

R. G. Dodge, (E.

L. Twomey with him,) for the plaintiff.

D. H. Stuart, Assistant Attorney General, for the defendant.

WILKINS, J. This is a bill in equity under G. L. (Ter. Ed.) c. 25, Section 5, to annul a rate order of the department of public utilities on the ground that it is "confiscatory and unlawful." The plaintiff was incorporated by St. 1849, c. 234, "for the purpose of manufacturing and disposing of gas, in the city of Lowell, and its immediate vicinity," and has for many years supplied gas in that area. On December 12, 1946 it filed with the department a schedule of increased rates, which was disallowed in an order dated April 15, 1947, containing an authorization to file a new schedule of lesser increases to become effective May 1, 1947. The plaintiff filed the new schedule, without prejudice to its contention that the order was unlawful. A demurrer to the bill of complaint was overruled, the case was referred to a master, and the department appealed. There was a hearing before the master, who filed a report and a supplemental report. An interlocutory decree was entered denying six motions of the department, four to recommit the case to the master, one to reopen the hearing, and one to amend the order of reference. Another interlocutory decree overruled the department's exceptions and confirmed the reports. The single justice reserved and reported the case upon the pleadings, a stipulation as to dates, and the foregoing rulings, "such decrees to be entered as justice and equity may require." G. L. (Ter. Ed.) c. 214, Section 31.

The bill alleges, with supporting factual allegations, that the rate order "is confiscatory and unlawful in that it prevents the plaintiff from receiving a reasonable return on the fair value of its property and has the effect of depriving the plaintiff of property without due process of law contrary to arts. 10 and 12 of the Declaration of Rights and to the Fourteenth Amendment to the Constitution of the United States." Other allegations are that the order contains errors in computation and an error in law in including the anticipated amount of revenue to be received by the plaintiff on its merchandise business. The prayers are that the order be annulled, and that, pending final disposition, the order be stayed. [1]

The department's answer, which was filed without waiving its demurrer, in part alleged that "all allegations as to the fair value of the company's plant are not material in that a court is not bound to consider evidence of the fair or historical value of the company's plant in the determination of rates"; that "the legality of the department's order must be judged by evidence before the department, and not by matters that have taken place since the hearing before the department and since its order was made"; that "the company is only entitled to rates that permit the company to operate successfully, maintain its financial integrity, attract capital and compensate its investors for the risks assumed"; that the increased revenues provided in the order "were, when added to a conservative estimate of net earnings based on the experience and evidence of the plaintiff, sufficient to attract capital to the company"; and that "no constitutional question is involved in the rate making process which is solely an exercise of the police powers of the State by its duly authorized regulatory body." The demurrer.

The demurrer was general to the whole bill, and properly was overruled if any case for relief is stated in the bill. Lydia E. Pinkham Medicine Co. v. Gove, 298 Mass. 53 , 57. Bleck v. East Boston Co. 302 Mass. 127 , 129. O'Connor v. Brockton, 308 Mass. 34 , 36. In overruling it there was no error. Of the grounds now relied on, grounds 2 and 3 referred respectively to two paragraphs of the bill which were later amended, and those paragraphs as they stood before amendment are not in the record. Notwithstanding the department's contention, the demurrer in no event could raise any question of a "variance" between the bill and the master's findings. Likewise of no avail are those grounds which, in general (ground 10) or in particular respects (grounds 4 to 7, inclusive), set up that the bill fails to summarize the evidence before the department upon issues of which the plaintiff seeks redetermination. The department mistakenly relies upon the last paragraph of Equity Rule 34 (252 Mass. 610), which specifically refers only to review of orders of the department relating to the promotion and sale of securities. St. 1921, c. 499; see now G. L. (Ter. Ed.) c. 110A, Section 13, as appearing in St. 1932, c. 290, Section 1, as amended by St. 1936, c. 68. Ground 9, asserting that the "bill erroneously seeks a trial de novo upon issues of fact other than those involving the constitutionality of the department's order," misconstrues the allegations of the bill.

The remaining grounds are (ground 11) that the "bill erroneously seeks to review findings of fact of the department"; and (ground 8) that the bill contemplates a trial de novo of the facts on the issues of confiscation and unlawfulness, and fails to show that these issues should not be determined upon the evidence received by the department. In so far as ground 8 seeks to delimit the scope of admissible evidence, it could not furnish a valid reason for sustaining the demurrer. Both grounds could be dismissed by saying that the allegations of the bill, which contains no copy of the order, do not disclose that the order does not show on its face that it is confiscatory. Even on these contentions of the department the case could proceed to hearing for the purpose of introducing the department's order in evidence. Inasmuch, however, as these two...

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  • Lowell Gas Co. v. Dep't of Pub. Utilities
    • United States
    • United States State Supreme Judicial Court of Massachusetts
    • 11 Marzo 1949
    ... 324 Mass. 80 84 N.E.2d 811 LOWELL GAS CO. v. DEPARTMENT OF PUBLIC UTILITIES. Supreme Judicial Court of Massachusetts, Suffolk. March 11, 1949. .         Reservation and Report from Supreme ......

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