(148 N.E.) grounds, in brief, that the bill does not state, real reasons therefor. This purpose is made a case entitling the plaintiffs to relief either more clear by reference to earlier statutes. in law or in equity and that the amendments St. 1885, c. 266, $ 6; St. 1890, c. 418, 88 4, 5, to the contract were legally made and all pay- 6; St. 1909, c. 486, $ 30. ments thereunder lawful. The case is report [2-5] Critical comparison of these succesed on bill and demurrer.

sive enactments discloses a progressive legis[1] No question is made as to the validity lative intent to narrow the otherwise unlimitof the original contract. The only issue ed power of city officers, to the end that city raised, as stated by the petitioners, is wheth-contracts shall be free, open and honest. The er the amendments to the contract, and in par- statutes must be interpreted, if reasonably ticular that of August 8, 1924, are valid. The possible, so as to effectuate the purpose of issue is by them stated to be further narrow- the framers. Statutes must be interpreted ed in substance to the validity of the August as enacted. Omissions cannot be supplied by 8th amendment, because the other amend- the judicial department of government. Arments increasing the original estimates were ruda v. Director General of Railroads, 251 made necessary by the method of payment | Mass. 255, 263, 147 N. E. 21. See v. Building adopted, of paying by the cubic yard of ma- Commissioner of Springfield, 246 Mass. 340, terial in vehicles instead of in place as re- 343, 141 N. E. 105. Every presumption is to quired by the contract.

be indulged that the General Court intended The words of the controlling statutes, so to put in force a piece of legislation effectual far as pertinent, are in St. 1909, c. 486, $ 30: to remedy the evil at which it appears to be

aimed. “Every officer or board in charge of a depart- Mass. 568, 570, 139 N. E. 168. Statutes enact

Dascalakis v. Commonwealth, 244 ment

when about to do any work or to make any purchase, the estimated cost of ed at different times are to be construed so which alone, or in conjunction with other sim- far as possible to constitute a harmonious ilar work or purchase which might properly be and consistent body of legislation. included in the same contract, amounts to or [6, 7) Applying these principles to the case exceeds one thousand dollars, shall, unless the at bar, these results follow: The terms and mayor gives written authority to do otherwise, invite proposals therefor by advertisement in purpose of the governing statutes constitute the City Record. * No authority to dis- in themselves a restriction on the power to pense with advertising shall be given by the amend and alter a contract, once made in mayor unless the said officer or board furnishes accordance therewith. It cannot be changed him with a signed statement which shall be in vital and essential particulars without obpublished in the City Record giving in detail the servance of all the formalities prescribed by reasons for not inviting bids by advertisement.” the statutes. The due execution of the con

tract after advertisement and compliance And St. 1890, C. 418, 8 6:

with all statutory requirements in the light "All contracts made by any department of of the words and purpose of the governing the city of Boston, shall, when the amount in- statutes is in general a limitation upon volved is two thousand dollars or more, be in amending the contract in substantial and capwriting, and no such contract shall be deemed ital respects without conformity anew to the to have been made or executed until the ap- statutory requirements. proval of the mayor in writing is affixed thereto have authority doubtless to add to or to

The city officers * and no such contract shall be altered except by a written agreement of the contrac- change the contract within reasonable limits tor, the sureties on his or their bond, and the in order to'remedy incidental defects and to officer or board making the contract, with the improve the work in minor details. This is approval of the mayor affixed thereto."

implied from the power to alter recognized

by St. 1890, c. 418, $ 6. Shea v. Milford, 145 The manifest purpose of these statutes is Mass. 528, 531, 14 N. E. 764. The reference to put a limitation upon the wide power to alteration of a contract in that section is which otherwise officers of the city would not a grant of power, but is in itself a limitapossess to make binding contracts with ref- tion as to the form in which alone it can be erence to city work. All contracts made by accomplished. That provision falls far short or in behalf of Boston must conform to the of authorizing an essential change of such requirements of the statutes. The design of magnitude as to be incompatible with the the Legislature in enacting these provisions general scheme of the statutes. was to establish genuine and open competi [8, 9] An alteration which results in a subtion after due public advertisement in the stantially new contract as to a main element letting of contracts for city work, to prevent is not permissible under the statute. With favoritism in awarding such contracts and reference to a construction contract of this to secure honest methods of letting contracts character, the alterations which in view of in the public interests. The main aim was the aim and words of the statute may be made to protect the public. Full publicity is pro- without further compliance with the statute vided as a means to that end. While there are only such as are incidental to full execuis vested in the mayor power to dispense with tion of the work described in the contract, and such advertisement, that can only be done af- are of minor importance. The alterations perter publication of a detailed statement of the missible under this principle are such in na

ture, magnitude and expense as bear a reason- , the proper city officer and published, advertis. able subsidiary relation to the work originally ing may be dispensed with in accordance with covered by the contract. When a contract is the express terms of the statute. to be modified so as in substance and effect [13] Article 2 of the contract, authorizing to be made new and different in main as the city to change or increase the work repects, that cannot be done under the guise of quired by the contract, has no application to an amendment or alteration. It would be a the conditions set forth in the bill. Article vain thing for the Legislature to establish 5 is to be read in conjunction with article 3. these safeguards for the public treasury to In any event parties cannot by contract overgovern the initial execution of a contract and come the force of the statutory requirement. yet to permit all the evils thus prohibited to The conclusion reached on this aspect of be accomplished by amendment or alteration the case is in harmony with principles deof such a contract when once executed. clared in decisions on somewhat analogous

[10] The allegations of the present bill, questions in other jurisdictions. Ely v. Grand 'which for the purposes of this decision must Rapids, 84 Mich. 336, 47 N. W. 447; Auditor be accepted as true, show that the unit of pay-General v. Stoddard, 147 Mich. 329, 110 N. W. ment has been vitally changed by the amend- 944; Schumm v. Seymour, 24 N. J. Eq. 143; ment of August 8, 1924. Cubic yards of fill- Nash v. St. Paul, 23 Minn. 132, 136; Smith ing and loam, instead of being paid for ac Philadelphia, 227 Pa. 423, 76 A. 221; Nacording to measurement in place after being tional Contracting Co. v. Hudson River Water rolled and compacted, are to be paid for as Power Co., 192 N. Y. 209, 84 N. E. 965; Clere measured in vehicles less ten per cent., an land, Cincinnati, Chicago & St. Louis Railapparent increase of almost one-third. The way v. Moore, 170 Ind. 328, 340, 82 N. E. 52, aggregate amount of change in this respect 84 N. E. 540; Chicago v. McKechney, 205 III. runs into large sums of money according to 372, 449, 68 N. E. 934. the allegations. Manifestly this is not in [14, 15] The bill is not open to successful cidental to the main contract; it is in itself attack in its averments that the alterations a major factor. The nature of the contract in the contract were without consideration. as thus altered, from a business standpoint, Facts are set out to the effect that, without is quite different from the contract as firs any change in conditions affording just ground executed. The increase in quantities called in loss occasioned to the contractor or gain for by the other amendments or alterations accruing to the city, a great deal more money in the contract accentuate this aspect of the was to be paid to the former than was rematter. It seems clear to us that a new and quired by the contract. These facts in themdifferent contract has been substituted for selves show want of consideration. Parrot the original contract. This is a violation of v. Mexican Central Railway, 207 Mass. 184, the statute.

194, 93 N. E. 590, 34 L. R. A. (N. S.) 261. [11] The good faith of city officers and of There is no room on the facts alleged for the contractor, and the absence of averments of application of the principle illustrated by fraud do not overcome or affect the case as cases like Crocket v. Boston, 5 Cush. 182, 183, made by the bill. That case in substance is that offer and acceptance constitute a conthe making, under the garb of an amendment tract. Mere offer by a contractor to take or alteration of an old and valid contract, a more money for performance of public work change in its terms and obligations so great than is required by a valid contract, when acas to be the equivalent of a new contract. cepted by city officials, does not bind the Good faith does not warrant the violation of municipality. this statute. Com. v. Mixer, 207 Mass. 141, [16] The allegations are sufficient to the 93 N. E. 249, 31 L. R. A. (N. S.) 467, 20 Ann. effect that payments under the contract as Cas. 1152.

amended are proposed in the immediate fu[12] The argument of inconvenience, aris- ture. Adequate facts are set forth in this ing from the possibility of having two differ- particular to satisfy the requirements of G. ent contractors working upon the same job, L. C. 40, $ 53, as to a bill by the 10 taxpayers. if there must be another advertisement and Fuller v. Deerfield Academy, 252 Mass. award of contract under the statute, is not 147 N. E. 878, and cases there collected. impressive. Mere inconvenience does not It is not necessary to discuss other ques. warrant departure from a statutory mandate. tions argued. The bill is full enough on its In instances where the public interest requir- face to warrant judicial inquiry. es, and the detailed reasons are furnished by Demurrer overruled.

(148 N.E.)

may have been added thereto by new construcCITY OF CINCINNATI V. PUBLIC .UTILI- tion, extensions, or betterments. TIES COMMISSION.

4. Telegraphs and telephones Om 34–Classified CINCINNATI & SUBURBAN BELL TELE. service schedule held reasonable, and not dis. PHONE CO. V. SAME.


A classified service schedule requiring the (Nos. 18777, 18779.)

payment of toll charges for communications be

tween unlimited subscribers contracting for (Supreme Court of Ohio. June 16, 1925. Re- service at a higher rate and limited subscribhearing Denied Sept. 29, 1925.)

ers contracting for optional service at a lesser

cost, each residing in different zone areas, is (Syllabus by the Court.)

reasonable, lawful, and not discriminatory. 1, Telegraphs and telephones Om 33(1)

Marshall, C. J., and Allen and Kinkade, JJ., Amount deducted for depreciations is actual

dissenting in part. depreciation at time of inquiry; deduction for depreciation made from reproductive cost

Error to Public Utilities Commission of of physical properties.

Ohio. Section 614-50, General Code, provides that moneys in the depreciation fund may be

Proceeding by the Cincinnati & Suburban expended by a public utility in new construc- Bell Telephone Company before the Public tion, extensions, and additions to its property. Utilities Commission for approval of a new Section 614–23, General Code, provides that schedule of rates. Protest was filed by the the Public Utilities Commission, in fixing rates, City of Cincinnati and others against inshall have due regard to the utility's property crease in rates and against change in ter"actually used and useful for the convenience ritorial limits of so-called Metropolitan Disof the public." Section 499–9, subd. F, Gener

To review the al Code, provides that the net value, as of a trict of Hamilton County. date certain, of all physical property (other order of the Commission fixing rates, the than land), is derived by deduction of depre- City of Cincinnati and the Telephone Comciation from the sum of the new reproductive pany both bring error. Order affirmed in costs. Under these sections the amount de part, and reversed in part.-[By Editorial ducted for depreciation is the actual deprecia- Staff.] tion existing at the time of the inquiry. This deduction is made from the reproductive cost For convenience the parties hereto will of physical property, including such as may

be referred to as the telephone company and have been added by new construction, additions, the city, respectively. On June 25, 1920, the or betterments.

telephone company filed with the Public Util[Ed. Note.-For other definitions, see Words ities Commission of Ohio schedules designatand Phrases, First and Second Series, Net ed “P. U. C. 0. No. 2,". to become effective Value.]

August 1, 1920. These schedules comprised 2. Telegraphs and telephones 33(1)-Valu. three sections; one relating to local exchange

ation of property of utility fixed by consider tariff, another to general exchange tariff', and ing actual depreciation; utility entitled to the third to toll tariff. A protest was filed reasonable return.

by the city against the increased rates proIn fixing the valuation of such physical vided in the schedules and also against the property, actual depreciation at the time of change in the territorial limits of the so-callinquiry should be considered. Where the books ed metropolitan district in Hamilton counof the utility carry a “reserve depreciation ac

ty, Ohio, count" largely in excess of the actual depre

Between the time when these proceedings ciation found and deducted by the Commission, such excess should not also be deducted from were commenced before the Commission and the present reproductive cost. The utility is their culmination by its final order, the Pubentitled to a reasonable return

on the fair lic Utilities Commission conducted extensive value of its property actually used and useful hearings, and a voluminous record for the convenience of the public.

made, consisting of a great many exhibits, 3. Telegraphs and telephones ww33(1)-De- supplemented by a mass of testimony. duction of more than actual depreciation in

The case has been before this court twice ascertaining present valuation of property not heretofore, as will hereafter be noted. The justified.

final order of the Commission against which While the history of a utility is an element complaint is here made by both parties was to be considered in fixing a rate, this does not dated July 17, 1924. This order is now atjustify a deduction of more than actual depre- tacked in this court by separate proceedciation from the net value of such physical ings in error; by the city against the teleproperty in order to ascertain its present fair phone company, in case No. 18777, and by valuation; nor does the fact that past profits the telephone company against the city, in secured from consumers in former years were invested in plant additions justify the deduction case No. 18779. Previous to the making of of the entire "reserve depreciation account the final order, the telephone company filed carried on the utility's books, from the fair a bond guaranteeing repayment to its convalue of the utility's plant, including such as sumers of such portion of the increased rates

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes 148 N.E.-52


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as upon final hearing the Commission might , practice, “save as it sought to continue it by find unreasonable or excessive.

establishing an optional service in certain As stated, the Commission made its final exchange areas under which the subscriber order on July 17, 1924, finding the valuation, is given a limited service for a lesser rate." and fixing rates, which, under the schedules, This evidently refers to the action of the were to become effective on August 1, 1920. public utility, on or about April 11, 1923, In that order the Commission, finding that which; though it re-established the metrothe zoning in the metropolitan district was politan district, provided a new schedule unreasonable, ordered a refund of tolls col- whereby the company gave optional service lected from August 1, 1920, to May 1, 1923, at a lesser cost to subscribers who had to certain subscribers as shown in that find-selected the limited seryice, and further ing: and likewise that a refund should be provided that subscribers for universal or made to those subscribers who had sub- unlimited service should be charged a toll scribed for universal or unlimited service in when they put through a call to a subscriber Hamilton county of all tolls collected after who enjoyed limited service only. So much May 1, 1923. The detailed finding with re- of the final order of the Commission as respect to these refunds will be found in the lates to that feature, and to the reasonablefinal order of the Commission.

ness of the rates, other than toll charges, is In its final order the Commission definite- hereto appended. The Commission's order ly stated that, with the exceptions relating reads: to these toll refunds, the telephone company

"That a universal service to all the company's had "sustained the burden of proof imposed subscribers in Cincinnati and Hamilton county by law and had shown that the proposed should be provided and furnished by the comchanged and increased rates, joint rates, pany and that, while it is a proper practice charges, rentals, classifications and practices for the company to allow and provide for an set forth in its said proposed schedule, des optional service at a lesser cost to those subignated P. U. C. O. No. 2, filed with the Com- scribers who select the limited service and to mission to become effective August 1, 1920, charge such a subscriber a toll when he comare just and reasonable and that the main practice of the company in charging a sub

municates outside of the optional district, the tenance, imposition and collection thereof scriber, who subscribes for the universal or will not provide it a greater rate of return unlimited service, a toll when this latter subthan it is entitled to earn upon its property scriber attempts to call one with the limited devoted to and used and useful for the con- service is an unjust, unreasonable and unjustly venience of the public."

discriminatory practice. Omitting the detailed schedules for the "Coming now to test the reasonableness of proposed changes in rates, charges, and prac- schedule, and which the company has been col

the rates provided by the company's proposed tices filed with the Commission, and omit- lecting under bond, the Commission is in a poting also the detailed items constituting the sition to test these rates and charges by using fair value of the property, as of August, the actual experience of the company over a 1920, the finding of the Commission as to period of practically three and one-half years the fair value of that property used and use and will not have to rely, as in many cases ful to the public on August 1, 1920, is as fol- | before the Commission, on estimates and proglows:

nostications. It found the total value of the physical

“The experience of the company discloses

that for the five months' period, August 1, property, less depreciation (including 2% for omissions and contingencies),

1920, to December 31, 1920, the total operating

$15,387,094 00 revenues in Hamilton county (which as in all It allowed 12% for overheads, compris

other statements of total rerenue used herein. ing engineering, administrative, and

includes the toll collections which will be orlegal expenses, liability insurance, tax

dered to be refunded), amounted to $1,653,es, and interest during construction

534.00 and the total operating expenses for and working capital (including material and supplies), $450,000 totaling.... 1,846,451 00

the same period in the same territory, were

$1,110,732.00. (The Commission is disregardThe Commission found that the grand

ing odd cents in all of its calculations.) No total of the items aforesaid resulted

supported criticism has been made as to the in a fair value of the telephone prop

unreasonableness or excessiveness of the op: erty, as of August 1, 1920, in the sum

erating expenses of the telephone company and $17,233,545 00 the Commission's own, independent investiga.

tion of such expenses, through its telephone After finding the valuation of said proper- department, has not disclosed any matters of ty to be $17,233,545, the Commission found facts which would warrant the Commission in that the zoning practice and toll charges, attempting to substitute its judgment as to under its original filed schedules, were un salaries paid officers, prices paid for material reasonable, and that the toll charges collect or wages paid for service, for the managerial ed from subscribers between August 1, 1920, the aforesaid expenses from the said revenue


company. The deduction of and May 1, 1923, should be refunded by the leaves a balance of $547,802.00 available for telephone company. The Commission states the depreciation reserve fund and for interest that some time during the progress of the and dividends. proceedings the company discontinued that "The claim has been made in this case that

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(148 N.E.) the depreciation reserve allowance should be the property as of August 1, 1920, adding theremade either, as contended for by the company, to the net additions and betterments of $377,on the reproductive value of the depreciable 307.00 and deducting the sum of $319,195.00. property, or, as claimed by the city, on the sum “The experience of the company for the year which is the result of subtracting from the 1922 discloses that the total operating revenues value of the depreciable property the depre- | in Hamilton county amounted to $4,427,585.00; ciation reserve or, in other words, that a de- that its total operating expenses in Hamilton preciation reserve charge should not be allowed county amounted to $2,727,236.00 and that there on property acquired by means of the depre was a balance available for the depreciation ciation reserve fund. The Commission cannot reserve charge and interest and dividends of agree with either of these contentions believ- $1,700,349.00. Computing the depreciation reing, from its experience, which results from serve charge for the year 1922 on the preshearing the testimony of a great many engi- ent value of the depreciable physical property, neering experts who have appeared before it, amounting, as of January 1, 1922, to $15,175,that in a telephone property the allowance of 566.00 (arrived at by adding to the value of an annual depreciation reserve charge of 5% the depreciable physical property as of Januof the present value of the depreciable physical ary 1, 1921, which amounted to $15,002,258.00, property will provide a sum sufficient to take the net additions and betterments made between care of this account, and, at the same time, January 1, 1921, and January 1, 1922, of $921,believing that an annual depreciation reserve 421.00, and subtracting from that amount the charge should be allowed on the present value accrued depreciation of the year 1921, or the of all depreciable property in the plant wheth sum of $750,113.00) at 5% results in the sum er acquired or built with moneys raised by the of $758.678.00, which latter sum deducted from sale of securities, borrowed from financial in- $1,700,349.00 leaves a sum of $941,671.00 as stitutions, or taken from the depreciation re a balance available for interest and dividends, serre fund.

which is equivalent to 5.39% plus of the total "The Commission, therefore, finds that a value of the property as of January 1, 1922, proper amount to be set aside, annually, for the amounting to $17,462,965.00, which is arrived depreciation reserve fund is a sum equal to at by taking the total value of the property as 5% of the present value of the depreciable of January 1, 1921, adding thereto the net ad. physical property which, in this case, as of ditions and betterments of $921,421.00 and deAugust 1, 1920, amounted to $14,944,141.00, ducting the sum of $750,113.00. being the present condition value of all of the "Because of the fact that there was presented physical property except land and right of way at the hearings the figures covering only the and would amount, for a period of one year, first four months of the year 1923, and the to $747,207.00 and reduced to the period of Commission has obtained its information covfive months' operation, to $311.336.00. Sub- ering the other eight months of that year by tracting this amount, set aside for the de- independent examination of the company's recpreciation reserve fund, from the total net ords, we deem it expedient to discuss the exincome of $547.802.00 leaves a balance of $236,- perience of the company for the year 1923 in 466.00 available for interest and dividends. these two periods. This latter amount, having been earned in the "For the first four months of 1923, viz. five months' period, is extended to show the January 1 to April 30, 1923, inclusive, the exexperience for one year and would amount to perience of the company discloses that the total the sum of $567,518.00 and represents an operating revenues in Hamilton county amountamount available for interest and dividends ed to $1,562,547.00, that its total operating equivalent to 3.29% plus of the total valua- expenses in Hamilton county amounted to tion of the property ($17,233,545.00) as of $954,466.00 and that there was, for said period, August 1, 1920.

a balance available for the depreciation re“The experience of the company for the year serve charge and interest and dividends of 1921 discloses that the total operating revenues / $608,080.00. Computing the depreciation rein Hamilton county amounted to $4,132.856.00; serve charge for the said period, viz. the first that its total operating expenses in Hamilton four months of 1923 on the present value of county amounted to $2,640,736.00 and that the depreciable physical property, amounting there was a balance available for the deprecia- as of January 1, 1923, to $15,617,733.00 (artion reserve charge and interest and dividends rived at by adding to the value of the depreciaof $1,492,120.00. Computing the depreciation ble property as of January 1, 1922, which reserve charge for the year 1921 on the pres- amounted to $15,173,566.00 the net additions ent value of the depreciable physical property and betterments provided in the year 1922, of amounting, as of January 1, 1921, to $15,002,- $1,202,845.00 and subtracting from that amount 253.00 (arrived at by adding to the value of the accrued depreciation for the year 1922, or the depreciable physical property as of Au- the sum of $758.678.00), at the rate of 5% gust 1, 1920, which amounted to $14,944,141.00, per annum, results in the sum of $260,296.00, the net additions and betterments made be- which latter sum, deducted from $608,080.00 tween August 1, 1920, and January 1, 1921, of leaves a sum of $347,784.00 as a balance avail. $377,307.00, and subtracting from that amount able for interest and dividends, which is equivthe accrued depreciation for said period of alent, when expanded for the year to the sum five months amounting to $519.195.00) at 5% of $1,043,352.00, to an annual return of 5.82% results in the sum of $750.112.00, which latter upon the total value of the property as of sum deducted from $1,492,120.00 leaves a sum January 1, 1923. amounting to $17,907,132.00, of $742,008.00 as a balance available for in- which is arrived at by taking the total value terest and dividends, which is equivalent to as of January 1, 1922, adding thereto the net 4.29% of the total value of the property as of additions and betterments of $1.202.845.00 and January 1, 1921, amounting to $17.291.657.00, deducting the sum of $758,678.00, accrued which is arrived at by taking the total value of depreciation.

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