Spence v. Boston Edison Co.

• Decision Date: 15 December 1983
• Citation: 390 Mass. 604,459 N.E.2d 80
• Parties: Lewis H. SPENCE, receiver, et al. 1 v. BOSTON EDISON COMPANY et al. 2
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 80

459 N.E.2d 80

390 Mass. 604

Lewis H. SPENCE, receiver, et al. ¹ v. BOSTON EDISON COMPANY et al. ²

Supreme Judicial Court of Massachusetts,

Suffolk.

Argued Sept. 12, 1983.

Decided Dec. 15, 1983.

Richard M. Bluestein, Boston, for Lewis H. Spence, receiver.

Robert S. Cummings, Boston (John J. Desmond, III, Boston, with him), for Boston Edison Co.

Thomas A. Barnico, Asst. Atty. Gen., for Dept. of Public Utilities.

Marsha Weinerman and Leslie S. Newman, Cambridge, for interveners, submitted a brief.

Before WILKINS, ABRAMS, LYNCH and O'CONNOR, JJ.

LYNCH, Justice.

This case was brought by Lewis H. Spence, receiver, on behalf of the Boston Housing Authority (BHA), against Boston Edison Company (Edison) and the Department of Public Utilities (DPU). ³ The BHA challenged the validity of Multiple Housing Rate K (Rate K), the rate promulgated by the DPU under which Edison charges the BHA for electricity, on the grounds that it was unconstitutionally discriminatory and in violation of G.L. c. 93A. In addition, the BHA alleged that minimum monthly charges for unoccupied apartments violated a contract between Edison and the BHA and G.L. c. 93A, § 11. It also alleged that Edison had grossly overcharged the BHA for the purchase of steam, in violation of G.L. c. 93A, § 11, and the common law. Motions to dismiss were filed both by Edison and the DPU. ⁴ A judge of the Superior Court granted both defendants' motions to dismiss the BHA's first claim and denied Edison's motion to dismiss the second and third claims. Edison was permitted to pursue an interlocutory appeal from the Superior Court's denial of its motion to dismiss claims two and three, and the Superior Court reported to the Appeals Court its decision allowing Edison's and the DPU's motions to dismiss the BHA's discrimination claim. The appeal and report were consolidated in the Appeals Court, and the case is here on direct appellate review. We affirm both the Superior Court's dismissal of the discrimination claim and its decision on the third claim, that of the steam overcharge. We reverse its denial of Edison's motion to dismiss on the "contract" claim, and remand the case to the Superior Court for further proceedings not inconsistent with this opinion.

The BHA owns and operates approximately 18,643 apartments in sixty-seven housing projects for families and elderly persons of low income living in Boston. G.L. c. 121B, § 26. Edison supplies electrical power to the BHA at rates which are approved by the DPU. G.L. c. 164, § 94. Approximately 10,000 of the apartments (occupied and unoccupied) are billed at Rate K. Rate K applies to apartments in apartment complexes having more than one free-standing building. Edison charges different rates for other types of apartments and for commercial and industrial users. There has been a Rate K in effect since 1953. ⁵ It provides for a monthly minimum of $2.24 for each apartment, whether or not the apartment is occupied. Many of the apartments in the BHA projects have been vacant for years, due to structural defects, unsanitary conditions, and the need for major rehabilitation. Edison has been collecting $2.24 a month for each of these uninhabitable apartments. Some of the smaller apartments have been combined to make larger ones, yet the minimum is still charged for each small one. Other apartments are vacant for a period of some months between tenancies. It is estimated that Edison has charged the BHA $393,322 for apartments that have not been using any electricity at all.

Edison also supplies steam for heat and hot water to two BHA projects. The DPU does not regulate Edison in the sale of steam. The BHA generates its own steam at other developments and claims that compared to its own costs for steam production, Edison has overcharged the BHA approximately $700,000 to $1,000,000 a year.

1. Ability of BHA to raise constitutional challenge. The issue whether the BHA may assert that its rights to due process and equal protection of the law, protected by the United States and Massachusetts Constitutions and 42 U.S.C. § 1983 (1976 & Supp. V 1981) and G.L. c. 12, § 11I, the Federal and State Civil Rights Acts, though not initially addressed by the parties, is a crucial one. The issue boils down to whether the BHA is entitled to those constitutional protections and whether it is a "person" for the purpose of bringing an action pursuant to § 1983 or G.L. c. 12, § 11I. ⁶

The BHA is a "public body politic and corporate." G.L. c. 121B, § 3, inserted by St.1969, c. 751, § 1. It is a creation of the State. On the one hand, the BHA has some of the characteristics of a private corporation and is generally considered independent of the Commonwealth and the city or town within whose territory it is set up. Costonis v. Medford Hous. Auth., 343 Mass. 108, 113, 176 N.E.2d 25 (1961). Johnson-Foster Co. v. D'Amore Constr. Co., 314 Mass. 416, 419, 50 N.E.2d 89 (1943). On the other hand, however, it is clear that a housing authority is basically a governmental entity. G.L. c. 121B, §§ 1-44A. Analogy to a municipal corporation is appropriate. Another "body politic and corporate," the Massachusetts Port Authority, was described as "a purely public corporation for public purposes--an arm of the State--analogous to a municipal corporation." Opinion of the Justices, 334 Mass. 721, 735, 136 N.E.2d 223 (1956).

In 1923, the United States Supreme Court held that a "City cannot invoke the protection of the Fourteenth Amendment against the State." Newark v. New Jersey, 262 U.S. 192, 193, 196, 43 S.Ct. 539, 540, 67 L.Ed. 943 (1923). This principle has often been reiterated. See Arlington Heights v. Regional Transp. Auth., 653 F.2d 1149 (7th Cir.1981) (city may not challenge the constitutionality of certain tax ordinances enacted by the authority); South Lake Tahoe v. California Tahoe Regional Planning Agency, 625 F.2d 231 (9th Cir.1980) (city may not challenge the constitutionality of regulations and land use plans adopted by the planning agency, a political subdivision of the State of California).

The constitutional provisions invoked by the BHA give rights to the citizens which may not be infringed by the government. The words used to describe those entitled to these protections are "people" (Mass. Declaration of Rights, art. 1), "individual" (Mass. Declaration of Rights, art. 10), "subject" (Mass. Declaration of Rights, art. 12), "citizens" or "persons" (U.S. Const. amend. XIV). The BHA does not have these rights.

Recognition of the basic principle that governmental entities do not enjoy the constitutional guarantees of due process and equal protection leads one to the inevitable conclusion that they cannot assert a cause of action under 42 U.S.C. § 1983 or G.L. c. 12, § 11I.

In Holden v. Division of Water Pollution Control, 6 Mass.App. 423, 426, 376 N.E.2d 1259 (1978), the court said that in order "[t]o determine whether a party is a 'person aggrieved' within the meaning of a statute [G.L. c. 21, § 46A], it is necessary to look at the purpose of the statute." It is generally understood that one purpose of § 1983 is to protect the constitutional rights of individuals or entities (such as corporations) from violation by governmental action. Public action may not invade private rights. Monell v. Department of Social Servs. of the City of N.Y., 436 U.S. 658, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978).

After Monell, it is clear that a municipality may be a "person" within the meaning of § 1983 for the purposes of liability. See also United States v. Massachusetts Bay Transp. Auth., 614 F.2d 27 (1st Cir.1980) (MBTA is a "person" subject to civil penalties pursuant to 33 U.S.C. § 1321 for causing oil spills into navigable waters). However, Monell does not raise the question whether a municipality may be a "person" for the purpose of challenging State action itself. ⁷ Appling County v. Municipal Elec. Auth. of Ga., 621 F.2d 1301, 1308 (5th Cir.1980). As noted above, the usual answer to that question is no. Newark v. New Jersey, supra.

The BHA makes the argument that courts are likely to hold that a governmental entity is a "person" within the meaning of a particular statute when the governmental entity is engaged in a purely business or commercial transaction. In United States v. Coumantaros, 165 F.Supp. 695 (D.Md.1958), for example, the United States was found to be a "person" within the meaning of the nonresident attachment statute and therefore was permitted to sue the defendant for money owing on the sale of a ship. The judge stressed that "the sovereign entity involved is acting not in its sovereign capacity but rather is engaging in commercial and business transactions such as other persons, natural or artificial, are accustomed to conduct." Id. at 698. In United States v. Public Serv. Comm'n, 422 F.Supp. 676, 682 (D.Md.1976), Blair, J., concurring, stated that "[w]hen ... situated in the market place, the United States is, like other consumers of utility services, engaged in a purely business and commercial transaction.... The sovereign asserting no rights of sovereignty has become merely a consumer."

It is one thing to allow governmental agencies the protections of a private consumer where the parties are both acting in a private capacity and where there is absolutely no "public aspect" to the transaction. It is quite another, however, to permit an agency created by statutory authority to raise constitutional challenges to procedures developed by legislative authority. The BHA is suing Edison not because it failed to deliver electricity as promised, but because (it claims) its rates unconstitutionally discriminate against housing authorities. This is a challenge not to the business practices of the electric company, but rather to the rate-setting procedure itself, which is directly and completely under the control of the DPU, which is itself a State agency. The BHA acknowledges the public nature of this claim by joining the DPU...