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PHILADELPHIA v. PHILADELPHIA TRANSPORTATION COMPANY. (06/26/61)

THE SUPREME COURT OF PENNSYLVANIA


June 26, 1961

PHILADELPHIA, APPELLANT,
v.
PHILADELPHIA TRANSPORTATION COMPANY.

Appeal, No. 169, Jan. T., 1961, from order of Court of Common Pleas No. 1 of Philadelphia County, June T., 1960, No. 31, in case of City of Philadelphia v. Philadelphia Transportation Company. Order affirmed.

COUNSEL

Harold E. Kohn, with him William T. Coleman, Jr., Special Counsel for City of Philadelphia, and David Berger, City Solicitor, for appellant.

Hamilton C. Connor, Jr., with him Edward G. Bauer, Jr., Peter Platten, and Ballard, Spahr, Andrews & Ingersoll, for appellee.

Before Jones, C.j., Bell, Musmanno, Jones, Cohen, Bok and Eagen, JJ.

Author: Jones

[ 404 Pa. Page 283]

OPINION BY MR. JUSTICE BENJAMIN R. JONES.

This appeal presents the problem of the availability of a declaratory judgment proceeding to construe and interpret an option-to-purchase provision in a written agreement between the City of Philadelphia (City) and Philadelphia Transportation Company (PTC).

On July 1, 1907, the City and the Philadelphia Rapid Transit Company, of which PTC is now the successor, entered into a written agreement which, by a later extension, remains effective until July 1, 1962. Under the provisions of that agreement, the City is granted an option to purchase on the first of July of any year, while the agreement is in force, all the leaseholds, franchises, real and personal property of PTC

[ 404 Pa. Page 284]

    and its wholly-owned subsidiaries. If the City exercises that option, the option price is to be ascertained in accordance with a formula set forth in paragraph 11 of the agreement.*fn1

On June 6, 1960, the City filed a petition for a declaratory judgment in Court of Common Pleas No. 1 of Philadelphia County in which proceeding that court was asked to determine both the proper construction of paragraph 11 of the agreement, i.e., the price fixing formula, and the option price. In its petition, inter alia, the City averred that: (1) since April 1, 1952, the City and PTC have been negotiating to establish a proper price for the option; (2) PTC claims that under the formula the option price as of December 31, 1960 exceeds $95,000,000, while the City claims that the option price as of that date does not exceed $62,000,000; (3) the existence of this dispute as to the contract formula and the option price prevents the exercise of the option; (4) the source of the dispute is not only the interpretation of the language of paragraph

[ 404 Pa. Page 28511]

but in the application of such language, i.e., whether certain items appearing on PTC's books as assets should not be eliminated as worthless, fictitious and excessive, whether PTC's books correctly and properly reflect the depreciation reserve, etc.; (5) it is important that the City, prior to its exercise of the option, know the exact price called for under the formula since the City will be required to raise the money for the purchase by a bond issue which will require the electorate's approval.

In its answer raising questions of law, the PTC attacked the jurisdiction of the court to entertain a declaratory judgment under the circumstances, i.e., no actual controversy and no imminent and inevitable litigation threatened, and PTC contended that the City was merely seeking an advisory opinion.

The court below sustained PTC's position and, by an appropriate order dismissed the proceeding. From that order, the City has appealed.

The nub of the lower court's ruling was: "The City has not averred that it has exercised, or will exercise its option; it merely requests the Court to fix the price of an option which may never be exercised. It is quite clear, therefore, that the City, in effect, is asking the Court to issue an advisory opinion."

The City takes the position that there is an actual controversy the nature of which is such as to lend itself to declaratory judgment and that, if the City were to exercise the option prior to ascertaining the purchase price under the formula, such exercise might cause a forfeiture of the City's option rights.

In Johnson Estate, 403 Pa. 476, 488, 489, 171 A.2d 518, we recently said: "... a declaratory judgment must not be employed for the determination of rights in anticipation of an event or events which may never occur, or for the consideration of moot cases or as a medium for the rendition of advisory opinions." In

[ 404 Pa. Page 286]

    to exercise the option - in fact, the petition avers that the exercise of the option may be in the best interests of the City. There is a complete lack of any evidence that, even if the price under the formula proved to be satisfactory, the City would exercise this option and such willingness to exercise the option can be evidenced only by official action taken by the City, i.e., by an ordinance duly passed by City Council approved by the Mayor: Philadelphia Home Rule Charter, Section 2-200 et seq. Until this is accomplished the exercise of the option is a matter of conjecture and surmise, an event the occurrence of which is uncertain.

The City urges that to require such exercise of the option until the price is ascertained is to demand the impossible. The City argues that, if it did exercise the option for $62,000,000 - apparently, the City's top price under the formula - it would be subjected to two risks: (1) if the City exercised its option, the courts might hold the City bound to the purchase even if the price under the formula was fixed in excess of $62,000,000; (2) if a court determined the formula price to be $75,000,000 and the City had exercised its option at $62,000,000, the City by naming the wrong price, might be held to have forever forfeited its exercise of the option even at the correct price. Regardless of the City's apprehensions, until the City takes an official position with regard to the exercise of this option declaratory judgment will not lie.

If the City intends to exercise this option, such intent must be evidenced by the passage by City Council of an ordinance, approved by the Mayor, to that end. Such ordinance could be couched in such terms to relieve the City of its apprehensions either as to forfeiting its option rights or becoming obligated to pay a higher price than it deems appropriate. Unless and until the City takes such action, no justiciable controversy

[ 404 Pa. Page 288]

    exists under the Declaratory Judgment Act. Under the circumstances the court below properly held that it lacked jurisdiction to entertain this petition.

Disposition

Order affirmed. Costs on City.


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