Southern New England Tel. Co. v. Public Utilities Commission
| Decision Date | 29 July 1957 |
| Citation | 144 Conn. 516,134 A.2d 351 |
| Court | Connecticut Supreme Court |
| Parties | , 20 P.U.R.3d 29 The SOUTHERN NEW ENGLAND TELPHONE COMPANY v. The PUBLIC UTILITIES COMMISSION. Supreme Court of Errors of Connecticut |
Louis Weinstein, Asst. Atty. Gen., with whom, on the brief, were John J. Bracken, Atty. Gen., and John D. McHugh, New Haven, for appellant (defendant).
Morris Tyler, New Haven, with whom were John Lashnits, New Haven, and, on the brief, James W. Grady, Jr., New Haven, for appellee (plaintiff).
Before WYNNE, J., and MURPHY, RYAN, DEVLIN and COVELLO, Superior judges.
There is no dispute on the facts. By an application filed September 12, 1956 the plaintiff, a public service company, sought authority to issue 679,012 additional shares, of the par value of $25 each, of its authorized capital stock. Hearings were held by the public utilities commission on September 24, 25 and 26, 1956, at which the company offered evidence in support of its application. The only person appearing in opposition was a stockholder who objected only so far as the offering price per share exceeded the par value of the stock. The company proposed to offer the additional shares for subscription at $30 per share to stockholders of record in the ratio of one additional share for each eight shares then outstanding. The company further proposed to dispose of any unsubscribed shares at not less than $30 per share. Transferable subscription warrants were to be issued to stockholders of record. Net proceeds to be received by the company from the sale of the additional stock were expected to approximate $20,275,000 and were to be applied, first, to the repayment of advances from the American Telephone and Telegraph Company of approximately $15,800,000. The balance of the net proceeds, approximately $4,475,000, was to be expended on the company's construction program.
Since 1946 the company has raised new capital by the sale of more than $100,000,000 of capital stock and $65,000,000 of debentures to pay for its large construction program, which was expected to continue at a high level through 1956 and 1957. The company estimated that for 1956 its gross capital expenditures would be about $49,000,000 and that for 1957 its construction program would comprise additions to telephone plant and property amounting to about $52,000,000. In addition to the amount raised from the proposed stock issue, further financing would be necessary to pay for the construction program. The commission on a number of occasions since 1945 has passed upon the issuance of additional equity and debt securities by the company, the proceeds of which have been used to finance plant expansion and improvements to meet the continuing demand for more and better telephone service. Since 1945, the annual gross revenues of the company have increased by $51,545,500, from $37,284,500 in 1946 to $88,830,000 in 1955. In the same period the number of telephones in service increased from 588,604 in 1946 to 1,000,464 in 1955. The company's gross investment in telephone plant and property has grown from $123,171,000 in 1946 to $313,285,000 as of December 31, 1955, an increase of $190,114,000. The gross book cost of telephone plant as of August 31, 1956, was approximately $338,347,000.
The commission found that the purpose for which proceeds from the issue and sale of additional common stock were sought is in the public interest. It expressed concern, however, about the proposed offering price of $30 per share and issued the following order: 'Now, therefore, it is ordered, that the application for the Company to issue and sell 679,012 shares of capital stock upon the terms set forth in the application should be and it hereby is approved, with the exception that the offering price of $30 per share is disapproved, and, [i]t is ordered further, that The Southern New England Telephone Company should be and it hereby is authorized to issue and sell 679,012 shares of its capital stock of the par value of $25 upon the terms and conditions set forth in the application * * * at a subscription price of not less than $32 per share, and to sell any unsubscribed shares at a price not less than the subscription price per share of $32 herein authorized * * *.'
From this order the company appealed to the Superior Court, which sustained the appeal. The commission has appealed from the judgment of the Superior Court. The question before us is whether the commission, having found that the purpose of the issue and sale of the additional common stock is in the public interest and having approved, with the exception noted, the application and authorized the issuance of the stock upon the terms and conditions set forth in the application, is empowered under Connecticut statutes to direct the change of the offering price from $30 per share to $32 per share. The issuance of securities by public service companies is governed by General Statutes, § 5433, the pertinent part of which reads as follows:
The company claims that this statute expressly prohibits the commission from imposing, in its order, any conditions as to the offering price of the stock. The commission takes the position that since, pursuant to the provisions of § 5433, no public service company may issue any securities of any nature without having first obtained the approval of the commission, jurisdiction to approve an issue necessarily implies jurisdiction to approve its terms. The commission points out that for every dollar of increase in the offering price of this issue of common shares, there will result an additional $679,012 of new money at no additional cost to the company, providing the market price of the company's shares remains within reasonable bounds and does not reach a point at which existing, or new, investors refuse to purchase the issue; and that the issuance of the stock at a price of $32 per share would enable the company to raise an additional $1,358,024 of new money which will inure to the benefit of the investors and the rate payers, inasmuch as the new financing required by the company in the future will be reduced by that amount.
The determination of the rights of the parties requires a construction of § 5433 and particularly that...
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