tained a narrow and undefined ribbon of land, such waters nevertheless give access to the extending some 40 miles along the lake front, sea, accounts for the rule, generally recognorth of the Phelps and Gorham grant, and separating the latter from the lake. nized and followed, that a grant whose boundaries extend to the "shore" or "along the shore" of the sea, carries only to highwater mark. Howard v. Ingersoll, 13 How. 381, 14 L. Ed. 189; Storer v. Freeman, 6 Mass. 435, 4 Am. Dec. 155; Shively v. Bowlby, supra; Kean v. Stetson, 5 Pick, (Mass.) 492; Cortelyou v. Van Brundt, 2 Johns. (N. Y.) 357, 3 Am. Dec. 439. But the word *93 That grant embraced more than 2,000,000 acres of unsettled land, for the development of which access to the lake was essential. It was made pursuant to the agreement of 1787 between Massachusetts and Phelps and Gorham to convey to them all of the property which Massachusetts had acquired under the Treaty of Hartford and pursuant to the Treaty of the Five Nations with Phelps and "shore," even in its application to tidal *waGorham of July 8, 1788, purporting to extin-ters, is subject to construction by the terms guish the Indian claims to "All that territory of the deed and surrounding circumstances, or Country of land lying within the State of and may mean the water's edge at low-water New York contained within & being parcel of mark. Storer v. Freeman, supra; Hathaway the lands and territory, the right of prev. Wilson, 123 Mass. 359; Haskell v. Friend, emption of the soil whereof from the native 81 N. E. 962, 196 Mass. 198. Indians was ceded by the State of New York" to Massachusetts by the Treaty of Hartford. There is no conceivable purpose for which it could be supposed that Massachusetts intended to retain such a proprietary interest in the shore as is now claimed, or to deny to its grantees and to settlers in the granted territory access to the great natural waterway upon its northern boundary. We are not dealing here with the disposition of *92 the jus publicum, but with *land held by Massachusetts in private ownership and granted by it to private persons. See Georgia v. Chattanooga, 44 S. Ct. 369, 264 U. S. 472, 68 L. Ed. 796. It would require clear and unequivocal language so to limit the obvious general purpose and effect of the grant. [10] The application of that rule to conVeyances of land bordering upon non-tidal waters is supported by neither reason nor authority. The lack of clear definition, by natural landmarks, of the shore of non-tidal waters, would make its application impracticable. It would deny to grantees all access to such waters except on the irregular and infrequent occasions of flood, since there are no public rights in the shores of non-tidal waters, and the abutting owner could not cross the shore to the water without trespass. Such a result would contravene public policy and defeat the intention with which such conveyances are normally made. New York has consistently refused to apply the rule to non-tidal waters, holding that a conveyance "to the shore" or "along the shore" of such In order thus to restrict its operation. waters carries to the water's edge at low Massachusetts relies on the use of the words water (Child v. Starr, 4 Hill. 369, 375, 376; "to the Shore" and "along the Shores," in- Halsey v. McCormick, 13 N. Y. 296; Yates v. stead of "to the lake" and "along the lake," Van De Bogert, 56 N. Y. 526; Stewart v. Turwhich concededly would have carried to the ney, 142 N. E. 437, 237 N. Y. 117, 131, 31 A. L. R. 960), and the local rules for interpretwater's edge; and it is argued that the same effect must be given to these words as when ing conveyances should be applied by this they are used in conveyances granting land court in the absence of an expression of a bounded by the shore of tidal waters. In different purpose (Hardin v. Jordan, 11 S. Ct. this connection, it should be observed that in 808, 838, 140 U. S. 371, 384, 35 L. Ed. 428; the Treaty of Hartford the words "shore" Oklahoma v. Texas, 42 S. Ct. 406, 258 U. S. and "lake" were used synonymously, their 574, 594, 66 L. Ed. 771; Brewer-Elliott Oil choice being determined by convenience of Co. v. United States, 43 S. Ct. 60, 260 U. S. expression. For example, the western bound-77, 88, 67 L. Ed. 140). The same rule is, howary in the treaty was described as running from the international boundary line in the middle of Lake Ontario "to the South Shore of Lake Ontario" and thence continuing tle v. Elder, 59 N. W. 197, 57 Minn. 289; ever, generally followed elsewhere. See CasLamb v. Rickets, 11 Ohio, 311; Daniels v. Cheshire R. R., 20 N. H. 85; Kanouse v. south "to Lake Erie." In each instance it is lockbower, 21 A. 197, 48 N. J. Eq. 42, 50; clear that the margin of the lake was intend-Goodrich Transp. Co., 69 N. W. 990, 94 Wis. Seaman v. Smith, 24 Ill. 521; Slauson v. ed, and it was not meant by the particular use of these phrases to exclude "the shore" from the grant. [8, 9] The "seashore" is that well-defined area, lying between high-water mark and the low-water mark, of waters in which the tide daily ebbs and flows. The fact that by the English common law, and by the law of those states bounded by tidal waters, the public has rights in the seashore, and that grants extending only to the high-water mark of 642; Burke v. Niles, 13 New Bruns. 166; Stover v. Lavoia, 8 Ont. W. R. 398. therefore, does the commonwealth of Massa[11] Upon neither of the theories advanced, chusetts sustain its claim to the land in ques tion. *94 *If any further support were required for the conclusion which we reach, it is to be found in the practical construction by the two states of the Treaty of Hartford and of (46 S. Ct.) the grants made by Massachusetts immedi- any expression of the general court or the ately following it, and in long-continued ac- Legislature of Massachusetts or of any ofquiescence by Massachusetts in that construc- ficial of the commonwealth from the time of tion. After the relinquishment by Phelps and the Phelps and Gorham grant until the comGorham to Massachusetts, of all claim to the mencement of the present suit, which sugwesterly two-thirds of the land acquired by gests that Massachusetts had reserved or reMassachusetts under the Treaty of Hartford, tained any interest whatever in land under Massachusetts, by resolution of its Legisla- Lake Ontario or upon its shores within the ture of March 8, 1791 (Laws and Res. 1790- boundaries of that grant. So far as appears, 91, c. 121, p. 221), bargained to sell to Samuel the public authorities of New York have conOgden all the title and interest which the tinuously treated the property as other propcommonwealth then had in the land granted erty in the state and as not encumbered by to it by the state of New York, except such any claim or title of the commonwealth of parts of the land as then belonged to Phelps Massachusetts. and Gorham. Robert Morris succeeded to such rights as Ogden had under this contract. Five several conveyances to Morris, embracing the westerly two-thirds of the tract, were made by a committee appointed for that pur-puted boundary. Indiana v. Kentucky, 10 S. pose, and the report of the committee, de scribing these conveyances in detail, was approved by resolution of the Massachusetts Legislature of June 17, 1791 (Laws and Res. * * 1790-1791, c. 65, p. 416). This resolution re- *95 or in the *bed of Lake Ontario east of the westerly boundary of the Phelps and Gorham grant. The deed of the most easterly land conveyed to Robert Morris describes it as bounded on the north by the international boundary line and on the east by lands "confirmed to Nathaniel Gorham and Oliver [12, 13] Long acquiescence in the possession of territory and the exercise of dominion and sovereignty over it may have a controlling effect in the determination of a dis *96 Ct. 1051, 136 U. S. 479, 34 L. Ed. 329; Michi- claim of title to the land in question. The (271 U. S. 23) v. NEW YORK TELEPHONE CO. Phelps," but makes no mention of any land BOARD OF PUBLIC UTILITY COM'RS et al. on the east belonging to Massachusetts, as would have been appropriate if it had re- (Argued Jan. 18, 19, 1926. Decided April 12, tained any interest in the shore line, east of the land granted to Morris. In 1797 Morris obtained from the Indians a grant of their right to all such part of the lands ceded by New York to Massachusetts "as is not included in the Indian purchase made by Oliver Phelps and Nathaniel Gorham," and in a resolve of the Massachusetts Legislature passed March 8, 1804 (Laws and Res. 1803-04, c. 155, p. 939), this Treaty of Morris with the Indians is referred to as having been made with the authority of Massachusetts and as having extinguished all the Indian rights in the land referred to. There is no evidence of any official act or 1926.) No. 567. I. Telegraphs and telephones 33(1)—Public utility company cannot be compelled to apply part of property represented by excessive depreciation reserve to overcome deficits in earnings and to sustain rates otherwise in. adequate. A public utility company, which by excessive depreciation charges in the past has created a reserve depreciation account greater than required to adequately maintain its property, cannot be compelled to apply a part of the property or money represented by such reserve to overcome deficits in present or future earn For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes ngs, and to sustain rates which otherwise could be a fair return for that year; that the not be sustained. 2. Telegraphs and telephones 33(1)—Just Constitutional protection against confiscation does not depend on source of money used to purchase property, it being enough that it is used to render service. amount charged by the company in 1924 for depreciation, $3,452,000 was excessive, and that $2,678,000 was sufficient. And the board found that net earnings in 1924 would be $4,449,000, less than the fair return by at least $1,300,000. *27 *The company's accounts are kept according to the uniform system of accounts for telephone companies prescribed by the Interstate Commerce Commission. Charges are made to cover the depreciation in the elements of the plant which for one cause or another will go out of use. These charges are made month by month against depreciaAppeal from the District Court of the tion in the operating expense accounts and United States for the District of New Jersey corresponding credits are entered in the deSuit by the New York Telephone Company preciation reserve account. When a unit or against the Board of Public Utility Com-element of the property is retired, there is From a decree for no charge to operating expense, but its origplaintiff (5 F.[2d] 245), defendants appeal. missioners and others. Affirmed. inal cost, less salvage, is charged to the re serve account. December 31, 1923, the com pany's books showed a credit balance in de preciation reserve accounts of $16,902,530. This was not set aside or kept in a separate fund, but was invested in the company's telephone plant. The board prescribed a rule for the determination of depreciation expenses to be charged by the company in 1925 and subsequent years. It declared that the credit balance was more than required for the main *Mr. Justice BUTLER delivered the opin- tenance of the property, and directed that ion of the Court. This is an appeal from a decree of the District Court-three judges sitting; section 266, Judicial Code (Comp. St. § 1243) which granted a temporary injunction restraining the enforcement of certain telephone rates. $4,750,000 of that amount be used by the company to make up deficits in any year when earnings are less than a reasonable return as found by the board. And it said: "But, having made such charges in the past, future charges, beginning January 1, 1925, may be deducted from the normal charge, until such time as at least $4,750,000 of the excess is absorbed as hereinafter provided." The effect of the order is to require that, if total operating expenses deducted from reve The company owns and operates a telephone system in New Jersey, New York, and Connecticut. In the territory served in New Jersey there are a number of local areas. Service between telephones in the same area nues leaves less than a reasonable return is exchange service, and that between tele- in 1925 or a subsequent year, there shall be phones in different areas is toll service. The deducted from the expense of depreciation latter includes both intrastate and interstate in that year, and added to the net earnings, business. The system is used to give exa sum sufficient to make up the deficiency; change and toll service to all subscribers. then, by appropriate book entries, the resultFor about 10 years prior to the commence-ing shortage in depreciation expense is to be ment of this suit the rates in New Jersey made good out of the balance in the reserve remained at substantially the same level. account built up in prior years. March 6, 1924, the company filed with the Board of Public Utility Commissioners, to take effect April 1, 1924, a schedule providing for an increase of rates for exchange service in New Jersey. The board suspended the proposed rates pending an investigation as to their reasonableness. December 31, 1924, the increase was disallowed, and the company was required to continue to serve at the existing rates. The board found that the value of the company's property in New Jersey, as of June 30, 1924, was $76,370,000; that a rate of return of 7.53 per cent., producing from $5,750,000 to $6,000,000, would On the application for a temporary injunction, the company attacked the findings *28 of the board as to rate *of return, property value, and expense of depreciation, and it contended that the charges on account of depreciation in earlier years were not excessive, and that in any event the company could not be compelled to make up deficits in future net earnings out of the depreciation reserves accumulated in the past. The record shows that the rates in effect prior to the temporary injunction were not sufficient to produce revenue enough to pay For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes *29 (46 S. Ct.) necessary operating expenses and a just rate turn on $88,417,448 as the reasonable value of return on the value of the property. There of the property. The calculation is made on is printed in the margin1 a statement made three bases: (1) Depreciation taken at the by the board and included in its decision, company's figure, $4,128,000; (2) depreciation as found by the board, $3,314,716; and giving a comparison of re*sults of operation (3) depreciation allowed by, the board's orin 1924 under these rates as found by the der, $683,430. The effect of the order is board and as estimated by the company. to deduct $2,631,286 from operating expenses And, in opposition to the motion for the tem- found by the board properly chargeable for porary injunction, the board submitted an depreciation in 1925. This deduction is made affidavit containing a statement2 *which set at the expense of the property of the comforth in detail the estimated results for 1925 pany paid for out of depreciation reserves based on the same rates. The affidavit shows built up in prior years, and it has the same net additions to the company's property in effect on net earnings as would the addition New Jersey in 1924, amounting to more than of the same amount of revenue received for $13,000,000, and the board calculates the re-service. On the basis of the company's esti (271 U. S. 29, 30) Revenues: Exchange revenues Toll revenues *30 1 Results under Present Rates-Estimated for the Year 1924, Miscellaneous operating Total telephone revenue.. Expenses: Traffic expenses Commercial expenses General and miscellaneous expenses.. Uncollectible operating revenues.. Rent and other deductions. Current maintenance Depreciation Taxes Licensee revenue, Dr...... Total telephone expenses.. Total telephone earnings..... *Include a certain portion of depreciation for right of way from clearing accounts. † Omits concessions ($102,000) and interest during construction ($160,727) aggregating $262,727 in Exhibit C-34. 'Estimated Rate of Return During Year 1925 under Present Rate Schedule. *Allowing a return of 6 per cent. on value of property depreciation and amortization expense will be $2,163,471. mate of depreciation expense, the return is 4.12 per cent.; on the board's estimate it is 4.93 per cent.; and by increasing net earnings $2,631,286, as directed by the order, it is made 7.53 per cent. It is conceded that, unless, as directed by the board, depreciation expense is reduced below what the board itsel found necessary and net earnings are correspondingly increased, the rates cannot be sustained against attack on the ground that they are unreasonably low and confiscatory. Appellants do not contend that the rate of return from the intrastate business is or will be higher than that resulting from the company's business as a whole in New Jersey; and the record supports the claim of the company that the intrastate business or that covered by the exchange rates complained of is not relatively more profitable than the other business of the company. [1] It may be assumed, as found by the board, that in prior years the company charged excessive amounts, to depreciation expense and so created in the reserve account *31 *balances greater than required adequately to maintain the property. It remains to be considered whether the company may be compelled to apply any part of the property or money represented by such balances to overcome deficits in present or future earnings and to sustain rates which otherwise could not be sustained. Cf. the service, the customers must pay for it. *32 gia Ry. v. R. R. Comm., 43 S. Ct. 680, 262 U. does not require the company to give up for S. 625, 632, 67 L. Ed. 1144. And the law the benefit of future subscribers any part of its accumulations from past operations. Profits of the past cannot be used to sustain confiscatory rates for the future. Newton v. Consolidated Gas Co., 42 S. Ct. 264, 258 U. S. 165, 175, 66 L. Ed. 538; Galveston Electric Co. v. Galveston, supra, 396 (42 S. Ct. 351); Monroe Gaslight & Fuel Co. v. Michigan Public Utilities Commission (D. C.) 292 F. 139, 147; City of Minneapolis v. Rand (C. C. A.) [2, 3] The just compensation safeguarded 285 F. 818, 823; Georgia Ry. & Power Co. to the utility by the Fourteenth Amendment V. Railroad Commission (D. C.) 278 F. 242, is a reasonable return on the value of the 247, affirmed 43 S. Ct. 680, 262 U. S. 625, 67 property used at the time that it is being used L. Ed. 1144; Chicago Rys. Co. v. Illinois for the public service, and rates not suffi-Commerce Commission (D. C.) 277 F. 970, cient to yield that return are confiscatory. 980; Garden City v. Telephone Co., 236 F. Willcox v. Consolidated Gas Co., 29 S. Ct. 693, 696, 150 C. C. A. 25. Customers pay for service, not for the 192, 212 U. S. 19, 41, 53 L. Ed. 382, 48 L. R. A. (N. S.) 1134, 15 Ann. Cas. 1034; Blue- property used to render it. Their payments field Co. v. Public Service Commission, 43 are not contributions to depreciation or othS. Ct. 675, 262 U. S. 679, 692, 67 L. Ed. 1176. er operating expenses or to capital of the company. By paying bills for service they Constitutional protection against confiscation does not depend on the source of the do not acquire any interest, legal or equimoney used to purchase the property. It is table, in the property used for their convenenough that it is used to render the service.ience or in the funds of the company. PropSan Joaquin Co. v. Stanislaus County, 34 S. Ct. 652, 233 U. S. 454, 459, 58 L. Ed. 1041; Gaslight Co. v. Cedar Rapids, 120 N. W. 966, 144 Iowa, 426, 434, 48 L. R. A. (N. S.) 1025, 138 Am. St. Rep. 299, affirmed 32 S. Ct. 389, 223 U. S. 655, 56 L. Ed. 594: Consolidated Gas Co. v. New York (C. C.) 157 F. 849, 858, affirmed 29 S. Ct. 192, 212 U. S. 19. 53 L. Ed. 382, 48 L. R. A. (N. S.) 1134, 15 Ann. Cas. 1034; Ames v. Union Pacific Railway Co. (C. C.) 64 F. 165, 176. The customers are entitled to demand service and the company must comply. The company is entitled to just compensation and, to have erty paid for out of moneys received for that purchased out of proceeds of its bonds service belongs to the company just as does and stock. It is conceded that the exchange rates complained of are not sufficient to yield a just return after paying taxes and operating expenses, including a proper allowance for current depreciation. The property or money of the company represented by the credit balance in the reserve for depreciation cannot be used to make up the deficiency. Decree affirmed. Mr. Justice STONE took no part in the consideration of this case. |