Heard: September 7, 2017.
Company. Municipal Corporations, Water supply. Statute,
Construction. Value. Words, "Actual cost." Civil
action commenced in the Supreme Judicial Court for the county
of Suffolk on July 3, 2013.
transfer to the Superior Court Department, the case was heard
by Christine M. Roach, J.
T. Ryan (Thomas J. Carey, Jr., also present) for the
Conner, of Tennessee (Fred A. Kelly, Jr., also present) for
Present: Vuono, Blake, & Singh, JJ.
plaintiff town of Hingham (town) filed an action for
declaratory relief in Superior Court in relation to its
statutory right to purchase the defendant water companies,
Aquarion Water Company of Massachusetts, Inc. (Aquarion
Mass), and Aquarion Water Capital of Massachusetts, Inc.
(Aquarion Capital) (collectively, Aquarion).
1879 statute that chartered the original Hingham Water
Company, Aquarion Mass's predecessor, provides in part:
"The town . . . shall have the right ... to purchase the
corporate property [of the company] ... at the actual cost of
the same, together with interest thereon at a rate not
exceeding ten per centum per annum, . . . deducting from said
cost any and all dividends which may have been paid."
St. 1879, c. 139, § 11 (hereinafter, charter or
statute). The town seeks a declaration (1) as to the purchase
price if it were to exercise its right, and (2) whether a
water treatment plant (WTP) owned by Aquarion Capital would
be included in the corporate property under the statute.
a five-day jury-waived trial, the judge ruled in a written
decision that the WTP was to be included in any future
purchase, provided the parties a formula for calculating the
purchase price, and instructed them to cooperate to submit a
proposed final judgment. When the parties could not reach
agreement, however, the judge, having reviewed additional
posttrial submissions, ordered in her second decision that
final judgment enter on a price of $88, 585, 821 as of
December 31, 2013. Both parties now appeal, challenging the
judge's interpretation of the term "actual
cost." Aquarion also challenges the judge's ruling
as to the sale of the WTP. We affirm.
facts of the case are undisputed. The statute chartering the
Hingham Water Company was enacted in 1879; Aquarion Mass.
currently owns all of the stock of the company. In 1994,
construction of the WTP began. In 1995, a separate company was
formed for the sole purpose of acquiring, developing,
financing, and leasing the WTP; after several corporate
transactions, that company is now Aquarion Capital. Because
the WTP was financed primarily through debt (in the form of
bonds), a separate corporate structure was required to avoid
violations of Aquarion Mass's mortgage indenture
obligations. After completion of the WTP, Aquarion Mass. and
Aquarion Capital entered into a lease agreement that gives
the town the express right to assume the lease if the town
acquires the water system. The WTP is an integral part of the
Hingham water system, treating practically all of the water
that is distributed through the system.
trial, Carl Jenkins, an expert for the town, offered three
alternative opinions as to the meaning of "actual
cost" --with three corresponding price calculations. Two
of the opinions based the formula on the calculated investor
equity in Aquarion over different periods of time, and then
added ten percent interest. The third calculated the net
plant, which is the gross plant (the accumulated cost of all
of the tangible corporate property) minus depreciation. In
his third opinion, however, Jenkins calculated the ten
percent interest on only the contributed equity figure from
his second opinion, rather than on the actual cost of the
corporate property as purchased through both equity and debt.
experts testified for Aquarion. John Guastella offered a
rebuttal of Jenkins's testimony, but no calculations of
his own; Michael Lee Altland provided an analysis of fair
market value of only the WTP; and Robert Reilly performed
independent calculations for a purchase price formula based
on components defined and provided to him by counsel.
Relevant here, Guastella critiqued Jenkins's use of
equity only in the interest calculation and opined ...