Southeastern Pennsylvania Transp. Authority v. Philadelphia Transp. Co.
| Decision Date | 27 July 1967 |
| Parties | SOUTHEASTERN PENNSYLVANIA TRANSPORTATION AUTHORITY and City of Philladelphia (Plaintiffs), v. PHILADELPHIA TRANSPORTATION COMPANY, Philadelphia Market Street Subway- Elevated Railway Company, Motor Real Estate Company, Hill Top Land Company and Trenton-Philadelphia Coach Company (Defendants), Appellants, and Joseph N. Janney, E. Griggs Adams, Stanley E. Dannecker, W. Wright and Elizabeth B. Humphreys, Thomas A. Marston, H. Melvin Powell, Carl Schmieg, and Charles F. and Janice F. Trouts (Intervening Defendants). PHILADELPHIA TRANSPORTATION COMPANY, Appellant, and Edmond G. Thomas v. CITY OF PHILADELPHIA, James H. J. Tate, Mayor, Charles G. Day, Commissioner of Public Property and Southeastern Pennsylvania Transportation Authority. PHILADELPHIA TRANSPORTATION COMPANY and Edmond G. Thomas v. CITY OF PHILADELPHIA, James H. J. Tate, Mayor, Charles G. Day, Commissioner of Public Property and Southeastern Pennsylvania Transportation Authority. Appeal of Edmond G. THOMAS. SOUTHEASTERN PENNSYLVANIA TRANSPORTATION AUTHORITY and City of Philadelphia (Plaintiffs), v. PHILADELPHIA TRANSPORTATION COMPANY, Philadelphia Market Street Subway- Elevated Railway Company, Motor Real Estate Company, Hill Top Land Company and Trenton-Philadelphia Coach Company (Defendants) and Joseph N. Janney, E. Griggs Adams, Stanley E. Dannecker, W. Wright and Elizabeth B. Humphreys, Thomas A. Marston, H. Melvin Powell, Carl Schmieg and Charles F. and Janice F. Trouts, (Intervening Defendants.) Appeal of Joseph N. JANNEY. |
| Court | Pennsylvania Supreme Court |
Rehearings Denied Sept. 26, 1967. [Copyrighted Material Omitted]
Philip Price, Arnold R. Ginsburg, George J. Miller Robert M. Landis, Philadelphia, Dechert, Price & Rhoads Philadelphia, of counsel, for appellants, Philadelphia Transportation Co. et al.
Eugene John Lewis, Philadelphia, amicus curiae, Transport Workers union.
William T. Coleman, Jr., Richardson Dilworth, Dilworth, Paxson, Kalish, Kohn & Levy, J. Alan Kugle, David P. Bruton, Lewis H. Van Dusen, Jr., Drinker, Biddle & Reath, Lewis H. Van Dusen, Jr., Philadelphia, for appellee, Southeastern Pennsylvania Transportation Authority.
Bertram Wolfson, Daniel B. Pierson, Raspin, Espenshade, Heins, Erskine & Stewart, Philadelphia, for appellant, Edmond G. Thomas.
Matthew W. Bullock, Jr., Second Deputy City Sol., Edward G. Bauer, Jr., City Sol., for appellees, City of Philadelphia, James H. J. Tate, Mayor, and Charles G. Day, Commissioner of Public Property.
Francis T. Anderson, Philadelphia, for appellant.
Before BELL, C.J., and MUSMANNO, JONES, COHEN, EAGEN, O'BRIEN, and ROBERTS, JJ.
These appeals involve two separate actions concerning the same matters. The first (appeals numbers 188 and 194) presents a petition seeking a declaratory judgment, which action was brought June 18, 1965 by Southeastern Pennsylvania Transportation Authority (SEPTA) and the City of Philadelphia against Philadelphia Transportation Company (PTC) and its subsidiaries. Plaintiffs' petition requested the court to determine (1) the right of SEPTA as the city's assignee to purchase the assets of PTC pursuant to an option to purchase contained in paragraph Eleventh of an agreement dated July 1, 1907, as amended; (2) the meaning of the purchase price formula set forth in the agreement; and (3) such other matters necessary to effect the transfer of PTC's property. Thereafter, certain minority shareholders of PTC petitioned to intervene as defendants, and their petition was granted by this Court on May 13, 1966. After hearing extensive testimony, the trial court held on July 14, 1966 (approved by the court en banc on September 16, 1966) that (1) the city's reserved right of purchase under the agreement of 1907, as amended, was valid; (2) the city's assignment of that right to SEPTA was valid; (3) SEPTA, as the city's assignee, must pay to PTC a sum composed of the following amounts reflected by PTC's balance sheet as of the date of payment: (a) an amount equal to PTC's then outstanding bond, mortgage and ground rent indebtedness; (b) an amount equal to ten dollars per share for all then outstanding common stock of PTC; and (c) the amount of the then 'Retained Earnings' of PTC.
The second action (appeals numbers 189 and 192) involves a complaint in equity filed July 8, 1966 by Edmond G. Thomas (a taxpayer) and PTC against the City, the Mayor, and the Commissioner of Public Property of Philadelphia, and against SEPTA. Plaintiffs' complaint prayed, inter alia, for an injunction restraining defendants from carrying out the agreement of June 8, 1965, whereby the city assigned to SEPTA its right to purchase PTC. The city and SEPTA filed preliminary objections, and on September 16, 1966 the complaint was dismissed for the reasons stated in the opinion of the court en banc filed that day in the declaratory judgment proceeding.
The lower court's opinion, we believe, sets forth a comprehensive well-reasoned analysis of the problems involved and proposes, in every instance, a solution which this Court deems fair and proper. Accordingly, we recommend to the interested reader that he closely study that opinion for we intend here only to highlight the matters of importance.
In 1902, the Philadelphia Rapid Transit Company (PRT) was formed as a consolidation of the various transit systems previously existing in Philadelphia. On its own or through subsidiaries, PRT leased, owned and operated high speed lines, and but and taxi facilities throughout the city. On July 1, 1907, the city and PRT entered into a written agreement which provided in Section Eleventh:
'The City reserves the right to purchase all the property, leaseholds and franchises of the Company, subject to all indebtedness * * * upon July 1st, 1957, or upon the first day of any July thereafter by serving six months' notice * * * (for) an amount equal to par for its capital stock then outstanding, to wit: the thirty million (30,000,000) dollars of capital stock now authorized, plus any additional capital stock issued with the consent of the City hereunder * * *.'
In the decades that followed, PRT suffered financial misfortune. Finally, in 1938 the Pennsylvania Public Utility Commission approved a reorganization plan filed by PRT. On May 20, 1939, City Council consented to the reorganization and enacted an ordinance authorizing the execution of an amendment to the 1907 agreement. On June 12, 1939, the amendment was executed. It made five major changes in Section Eleventh:
1. The 1939 agreement enabled the city to purchase the Entire transportation system (since PTC, unlike PRT, owned the leaseholds and franchises of the underliers and traction companies), not just PRT's leaseholds and franchises, as provided in the 1907 agreement.
2. It allowed the city to purchase PTC's assets free and clear and not subject to PTC's indebtedness.
3. It permitted the city to exercise its reserved right of purchase on any July 1, with 6 months' notice to PTC.
4. The formula for determining the purchase price was changed to the following:
a. The amount of PTC's outstanding bonds, mortgage and ground rents;
b. The par value of PTC's outstanding preferred stock;
c. $10.00 per share of PTC's outstanding common stock;
d. The amount of PTC's then undistributed corporate surplus.
5. The city reserved the right of condemnation.
The 1907 agreement was further amended on October 26, 1950, July 1, 1957, July 5, 1962 and February 25, 1965.
PTC argues that the purchase option was void under the rule against perpetuities. As the lower court said:
'The best way to state PTC's argument is to state its best case.
'In Barton v. Thaw, Appellant, 246 Pa. 348 (92 A. 312) (1914), plaintiffs were children of Joseph Barton, who had conveyed coal under certain land to Thaw's predecessors in title, by a deed that provided that
'And in case the said parties of the second part, their heirs or assigns, should at any future time whatsoever desire to purchase any of said land in fee simple, then the said parties of the first part, for themselves, their heirs or assigns, hereby covenant and agree to sell and convey the same to the said parties of the second part, their heirs or assigns, at a price not exceeding one hundred dollars per acre.' (246 Pa. at 350 (92 A. 312)).
'The sale of the coal was admittedly good, but plaintiffs claim, by a bill to remove a cloud upon title, that the option to purchase the surface of the land was void because in violation of the rule against perpetuities. 'It (was) conceded by counsel that the case presents for the first time to the courts of Pennsylvania the question whether an option or right to purchase land, unlimited in point of time, violates the rule against perpetuities, and therefore is void. * * *' (246 Pa. 350--351 (92 A. 312)). The lower court in a careful opinion held that the option did violate the rule, and the Supreme Court affirmed.
The historical purpose of the rule against perpetuities was to destroy serious hindrances to the beneficial and prosperous use of property. PTC claims that under Barton v. Thaw, supra, Pennsylvania law recognizes a blanket condemnation of all remote options. That is not so, far Barton stated at 246 Pa. 364, 92 A. 312 that its result is dependent on the interests of the community at large. In this case, the danger of fettering the free use of property is outweighed by considerations of public concern and welfare.
Furthermore the purchase option is not an...
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