Valley Resources, Inc. v. South County Gas Co., 82-366-A
| Decision Date | 23 January 1985 |
| Docket Number | No. 82-366-A,82-366-A |
| Citation | 486 A.2d 1076 |
| Parties | VALLEY RESOURCES, INC. et al. v. SOUTH COUNTY GAS COMPANY. ppeal. |
| Court | Rhode Island Supreme Court |
This case comes to us on appeal from a Superior Court judgment dismissing the plaintiffs' complaint seeking a declaration of the rights and obligations of Valley Resources, Inc., under the Rhode Island Business Corporations Act. 1 We affirm the judgment of the Superior Court justice and therefore deny and dismiss the plaintiffs' appeal.
The pertinent facts are as follows. South County Gas Company (hereinafter South County), a public utility, purchased 27,350 shares of the outstanding $10 par-value common stock of Valley Resources, Inc. (hereinafter Valley Resources), a holding company, which at the time of purchase amounted to 6.5 percent of the outstanding stock. Valley Resources owns all of the outstanding shares of Valley Gas Company (hereinafter Valley Gas), which is a public utility within the meaning of G.L.1956 (1984 Reenactment) § 39-1-2(7). According to plaintiffs' complaint, this purchase was illegal since it was made without first obtaining the approval of either the Securities Exchange Commission (SEC) or the Rhode Island Division of Public Utilities and Carriers (division) under applicable state law. 2 The plaintiffs contend that G.L.1956 (1984 Reenactment) § 39-3-24(d), requiring approval of the division prior to the purchase of public utility stock by another public utility, applied to the purchase of Valley Resources stock by South County. 3 Hence, plaintiffs filed suit against South County seeking a declaration of Valley Resources' rights and obligations under the Rhode Island Business Corporation Act with respect to South County. In addition, plaintiffs sought to enjoin South County from making any additional purchases of Valley Resources shares and from exercising general stockholder privileges until regulatory approval was obtained. The trial justice granted plaintiffs' motion for a temporary restraining order on August 26, 1981. Consolidated hearings were held on plaintiffs' motion for a preliminary injunction and on the merits respectively on October 2 and 7, 1981. The trial justice dismissed the complaint and denied plaintiffs' subsequent motion for injunction pending appeal. This appeal ensued.
The sole issue presented on appeal is whether South County, a public utility, was required to obtain regulatory approval pursuant to § 39-3-24(d) prior to its purchase of stock in Valley Resources, a holding company that owns all of the outstanding shares of Valley Gas Company, a public utility.
We conclude that the regulatory approval required by § 39-3-24(d) was not required prior to South County's purchase of the Valley Resources shares since that section applies only to the purchase of one public utility's stock by another public utility. Although South County is in fact a public utility, Valley Resources is a holding company, and by definition, a holding company is not a public utility.
The plaintiffs' argument in support of the applicability of § 39-3-24(d) is auspicious as a novel concept. Unfortunately, it is not legally persuasive. Their argument is essentially the following. Since Valley Resources, a holding company, owns all of the outstanding shares of Valley Gas, a legitimate public utility within the meaning of § 39-1-2(7), South County's purchase of Valley Resources shares amounted to the purchase of one public utility by another public utility. Thus, § 39-3-24(d) applies to that purchase requiring prior regulatory approval. Since such approval was not obtained by South County, the purchase was illegal.
The plaintiffs concede that Valley Resources is not a public utility yet they argue that statutory language applicable only to public utilities applies to Valley Resources, a holding company. What plaintiffs suggest is that public policy requires § 39-3-24(d) to be read in a nonliteral light and that from a public-policy standpoint, we ought to expand the application of § 39-3-24(d) to cover the situation in which a public utility purchases stock in a holding company that owns the stock of a public utility. According to plaintiffs, in that situation, regulatory approval would be necessary prior to the purchase, just as it would be if two public utilities were directly involved. To hold otherwise, plaintiffs argue, would result in allowing a public utility to accomplish indirectly what it cannot do directly.
Upon assay, this case boils down to a simple question of statutory interpretation. 4 The definitional section of the statute § 39-1-2(7) defines a...
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