Opinion of the Justices to the Senate

300 Mass. 607 | Mass. | 1938

On April 8, 1938, the order was transmitted to the Justices, who, on April 20, 1938, returned the following answers:

To The Honorable the Senate of the Commonwealth of Massachusetts:

The Justices of the Supreme Judicial Court respectfully submit these answers to the questions in an order adopted on April 5, 1938, copy of which is hereto annexed.

The proposed statute is in the form of an amendment to St. 1879, c. 139, whereby the Hingham Water Company was incorporated. By § 11 of that charter, the town of Hingham was empowered to purchase all the corporate property of the water company “at the actual cost of the same, together with interest thereon at a rate not exceeding ten per centum per annum, said cost to include all actual loss or damage paid or suffered by said company for injury to person or property, deducting from said cost any and all dividends which may have been paid,” together with further incidental matters not here material. The proposed statute strikes out those provisions and establishes a new basis for payment in case the town of Hingham exercises its option to purchase the corporate property of the water company. The basis thus established is a long and complicated computation founded on the actual cost of the corporate property year by year, including all loss and damage sustained by the corporation on account of injuries to person or property. From the amount of such actual cost at the end of the first twelve months’ period following incorporation, all dividends declared and paid during such period are to be deducted. On the balance thus found, interest at the rate of five per cent for one year shall be computed. This process of computation is to be continued year by year until the time of purchase authorized by vote of the town. Upon such purchase, the town shall assume and agree to pay, and to indemnify the water company from liability on, any indebtedness of the corporation secured by mortgage or hypothecation or other encumbrance placed upon any of its property, and shall receive as part of the property purchased all funds set aside as a sinking fund established as security for meeting the obligations thus assumed by the town.

The proposed statute provides a method whereby the property of the water company can be. taken by the town. That property cannot be taken except by eminent. domain or by assent of the water company. The water company has given no assent to the sale of its property to the town, except under the terms prescribed by St. 1879, c. 139, as amended. The water company, by acceptance of its charter, entered into a contract with the Commonwealth. Crease v. Babcock, 23 Pick. 334, 340. By virtue of the reserved right to amend and repeal charters of corporations, the General Court may change the terms of such a charter provided there is no violation of other constitutional guaranties. The constitutional provisions prohibiting the taking of property without compensation, or without due process of law, stand firm against impairment by such amendment and repeal. Commissioners on Inland Fisheries v. Holyoke Water Power Co. 104 Mass. 446, 451; affirmed, Holyoke Co. v. Lyman, 15 Wall. 500. Commonwealth v. Essex Co. 13 Gray, 239, 253. Commonwealth v. Boston & Northern Street Railway, 212 Mass. 82, 84. Tapper v. Boston Chamber of Commerce, 249 Mass. 235, 241.

It does not appear that the town was a party to the contract between the water company and the Commonwealth created by St. 1879, c. Í39, and its amendments. The town merely has the right to purchase the property of the water company. There are no provisions that that statute should be accepted by the town. Moreover, the town is in general a governmental agency, and the authority conferred on it by the proposed statute is to be exercised only by vote of the town. In these circumstances, the provision in the Constitution of the United States that no State shall pass any law impairing the obligation of contracts affords no protection to the water company independent of prohibitions against the taking of property without due process of law and without full compensation. Property and rights acquired upon the faith of the charter cannot be taken away under the guise of repeal or amendment without full compensation. The proposed method of ascertaining the payment to be made by the town for the property of the water company differs materially from the method prescribed in the charter to which the water company assented. That method has already been quoted. Its meaning is that the water company may demand a rate of interest as high as ten per cent per annum on the actual cost of its property, and no more, except that that rate of interest may be reduced by agreement. The words used do not signify a reasonable or fair rate of interest, but a precise rate. The rate of five per cent interest provided in the proposed bill is materially less than that specified in the original act. To the lower rate the water company has not assented.

The method of the computation of the cost stated in the proposed bill is essentially different from that prescribed in the charter of the water company; it is less favorable to the water company. The new act might be constitutional if it provided for the payment of full and complete compensation for the property of the water company and was not confiscatory. It makes no provision for ascertaining the value of the property which is to be taken. The complicated method of calculating the cost of the property with annual rests, plus an arbitrary rate of interest at five per cent, affords on its face no assurance of fair valuation. The assumption by the town of the indebtedness of the water company secured by mortgage placed on its property is payment in quite different form from that specified in the charter. This is coupled with a taking by the town of all funds set apart as a sinking fund established for the purpose of meeting the obligations assumed by the town. Apparently, the water company is to remain liable on its indebtedness secured by mortgage on its property, and yet is to transfer its sinking fund to the town as a part of its property in exchange for an unsecured obligation of the town to pay such indebtedness. We do not consider in this connection the rights of the holders of this indebtedness, since the facts are not set forth and no question is directed to that point.

It is manifest that the method prescribed by the proposed statute for ascertaining the amount to be paid by the town to the water company, in the event that the town shall exercise its right to purchase the property of the water company, is less favorable to the water company than the method established in said St. 1879, c. 139, and its amendments, under which the water company made its investment.

The result is that we answer “Yes” to questions 1 and 2, “No” to questions 3 and 4.

Arthur P. Rugg.

Fred T. Field.

Charles H. Donahue.

Henry T. Lummus.

Stanley E. Qua.

Arthur W. Dolan.

Louis S. Cox.