7 Pa. Commw. 352 | Pa. Commw. Ct. | 1973
Opinion by
We are required by Rule 63 of the Supreme Court to file a statement of our reasons for refusing a preliminary injunction in this matter.
The complaint of the Pennsylvania Public Utility Commission and the Commonwealth of Pennsylvania alleges that General Waterworks Corporation is a public utility in the State of Pennsylvania rendering steam heat service through the instrumentality of certain operating steam heat companies owned by it; that in February, 1972, General Waterworks Corporation caused the operating steam heat companies to seek approval of abandonment of service; that the applications for abandonment met opposition; that for the purpose of avoiding an order requiring General Waterworks Corporation to continue steam heat service, General WaterAvorks Corporation sold its shares in the subsidiary companies to another of the defendants, International Service Industries, Inc., and thereafter the applications for abandonment by the operating companies were withdrawn; that General Waterworks knew or should have known that International Service Industries, Inc. and the persons in control thereof were without experience to operate the steam heat companies, were financially irresponsible and had détermined on a program to waste the assets of the operating companies; that General Waterworks received a $5,000,000 note as consideration for the conveyance of the companies which it knew was worthless; that following the sale, International Service Industries fraudulently spent and wasted the assets of the steam heat companies; that after the sale General Waterworks Corporation became aware of the mismanagement of the operating companies, and took no action against International Service Industries; that in November, 1972, the five operating steam heat companies filed petitions under Chapter XI of the
The Complaint is in two counts. Count I asks for a preliminary and permanent injunction . . enjoining General Waterworks Corporation from abandoning or discontinuing steam heat service heretofore rendered by it through the five steam heat companies” and an order nullifying the sale by General Waterworks to International Service Industries. Count II asks for an accounting by General Waterworks Corporation for the expenditure of some $500,000 in net current assets owned by the five steam heating companies when those companies were sold by General Waterworks Corporation to International Service Industries, and for an accounting for the deterioration in condition of the operating properties of the five companies sold to International Service Industries. At this stage of the proceedings we are concerned only with the request for a preliminary injunction enjoining General Waterworks Corporation from abandoning or discontinuing steam heat service.
The plaintiffs’ theory is, we conceive, that General Waterworks Corporation is a public utility as defined by the Public Utility Law, Act of May 28, 1987, P. L. 1058, as amended, 6(5 P.S. §1101 et seq.; that General Waterworks, being a public utility, was required by subsection 202(e) of the Public Utility Law, 66 P.S. § 1122(e), to obtain from the Public Utility Commission a certificate of public convenience as a condition to the lawful transfer of the capital stock of the op
The facts developed at the hearing can be summarized as follows: General Waterworks Corporation pri- or to March, 1972, owned 90 percent of the outstanding shares of capital stock of Pennsylvania Utilities Investment Corporation which in turn owned all outstanding shares of capital stock of the following named operating steam heat companies: Lewis Jones, Inc. (which serves Lower Merion Township, Montgomery County), Overbrook Steam Heat Company (which serves parts of the Overbrook section of Philadelphia), Scranton Steam Heat Company, and Wilkes-Barre Steam Heat Company. General Waterworks also owned all of the outstanding shares of capital stock of Longacre Park Heating Company, which serves the Borough of Yeadon in Delaware County. Those companies served about 6000 properties with steam heat during the winter season. Each of the operating companies had the same president who reported to the Vice-President of Operations of General Waterworks Management and Service Company, a subsidiary of General Waterworks Corporation. General Waterworks Management and Service Company provided financial, engineering and technical services to the five operating companies, subject to the ultimate control of General Waterworks Corporation. General Waterworks Corporation owned the shares of and controlled approximately 80 operating utilities throughout the United States, of which, prior to March, 1972, 18 water utility companies and the five steam heat companies here involved were located in Pennsylvania.
In February, 1972, the five operating steam heat companies filed petitions with the Public Utility Com
Shortly after acquiring the companies, International Service Industries and its principals obtained a loan of $300,000 from the First Pennsylvania Bank and a commitment from that institution to lend another $725,-000. In May, 1972, International Service Industries applied to General Waterworks Corporation for a loan. General Waterworks conducted an audit of the books and declined the loan because, among other reasons, it believed the principals were providing themselves ex-cessivesalaries and perquisites.
Hurricane Agnes raked Pennsylvania in June of 1972. It very seriously damaged the Wilkes-Barre plant. The Commonwealth of Pennsylvania lent International Service Corporation the sum of $2,500,000, of which $2,100,000 was drawn down by the company. Of this amount all except $650,000 was spent in rehabilitating the Wilkes-Barre plant. The Chapter XI Receivers had used and were proposing to continue to use this $650,000. There is litigation in the District Court, however, instituted by certain creditors of the steam heat companies. These creditors are enterprises who are constructing solid waste burners for International Service Industries who contend that the funds in question were escrowed for them upon delivery of the equipment. Another effect of Hurricane Agnes was that operating personnel from all of the companies were sent to Wilkes-Barre during the summer of 1972 to help in the rehabilitation of that plant. This contributed to a breakdown' of services in the plants serving the other areas during the heating season of 1972.
At the time of the hearing herein, the Receivers had made application to the Public Utility Commission for substantial increases in rates which, if granted, would assist the Receivers in continuing services. Substantial
As we have previously noted, we are asked to enjoin General Waterworks Corporation preliminarily from abandoning service. Although couched in prohibitory terms, the order requested would require the General Waterworks Corporation to operate the steam heat companies. It is, therefore, mandatory. A mandatory preliminary injunction will be granted only to prevent immediate and irreparable injury, and where the rights of the parties are entirely clear. McMullin v. Wohlgemuth, 444 Pa. 563, 281 A. 2d 836 (1971). In the chancellor’s view not only were the rights of the plaintiffs far from clear, no great urgency was proved. Furthermore, the operating companies were and are being operated by Receivers appointed by the United States District Court. While we can concede that any financial support from General Waterworks would be welcomed by the Receivers, we do nevertheless, question the propriety of an order of this court directing someone other than the Receivers to operate the properties.
Our reasons, therefore, for refusing the preliminary injunction were as follows, not necessarily in the order of their importance in our consideration,
1. At the time of the hearing the steam heat companies were in operation under the direction and control of court-appointed Receivers. While there were financial projections produced in evidence which tended to show that at some future time the losses might be such that operations might cease, there was also evidence of a proposed rate increase and the present, although questioned, availability of about $650,000 in Commonwealth funds. The problem in Lower Merion Township which received local publicity was shown on the record to have resulted not from present lack of
2. The fact that Receivers are in possession and are operating the plants under orders of the United States District Court raises a question of our jurisdiction to order some other person to operate the properties. The defendants filed preliminary objections raising the question of our jurisdiction of the subject matter before the hearing. These are founded on the exclusive jurisdiction of the Bankruptcy Court over the petitioner and its property provided by Federal Statute, 11 U.S.C. §711.
3. The plaintiffs rely on Section 202(e) of the Public Utility Law, 66 P.S. §1122 (e), which requires a public utility to obtain a certificate of public conveyance for the transfer of “tangible or intangible property used or useful in the public service.” Are shares of capital stock of a utility intangible property used or useful in the public service? The plaintiffs cite no authority and, indeed, the Commission’s Counsel conceded that the plaintiffs’ contention that they are has never before been advanced by the Commission. Furthermore, Section 202(f), 66 P.S. §1122(f), does require a certificate for any public utility to acquire five percentum or more of the voting capital stock of any corporation. This indicates that the Legislature knew how to legislate on the subject of transfer of capital stock if it intended to do so.
4. As noted, Section 202(e) applies in any event only to public utilities. Subsection 2(17) (a) of the Public Utility Law, 66 P.S. §1102(17) (a), defines a public utility as a person or corporation which produces or