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DUQUESNE LIGHT COMPANY v. PITTSBURGH RAILWAYS COMPANY (10/09/63)

October 9, 1963

DUQUESNE LIGHT COMPANY
v.
PITTSBURGH RAILWAYS COMPANY, APPELLANT.



Appeals, Nos. 26 and 27, March T., 1963, from orders of Court of Common Pleas of Allegheny County, Jan. T., 1959, No. 3536, in case of Duquesne Light Company v. Pittsburgh Railways Company. Orders affirmed; reargument refused December 18, 1963.

COUNSEL

Clyde A. Armstrong, with him Charles M. Thorp, Jr., Frank J. Gaffney, and Thorp, Reed & Armstrong, for appellant.

Edmund K. Trent, with him Thomas J. Munsch, Jr., and Reed, Smith, Shaw & McClay, for appellee.

Before Bell, C.j., Musmanno, Jones, Cohen, Eagen, O'brien and Roberts, JJ.

Author: Cohen

[ 413 Pa. Page 2]

OPINION BY MR. JUSTICE COHEN

No. 26 and No. 27 are appeals from the denial of two separate petitions to open judgment.

On June 5, 1933, appellant Pittsburgh Railways Company (Railways) and appellee Duquesne Light Company (Duquesne) entered into an agreement for the lease to Railways of certain substations and equipment necessary to convert electric power supplied by Duquesne. At that time, Railways and Duquesne were affiliated companies. The lease which was terminable upon 60-days' notice provided for an annual rent of $220,600.43.*fn1

[ 413 Pa. Page 3]

Pursuant to a warrant of attorney contained in the lease, Duquesne on December 31, 1958, confessed judgment in the amount of $95,843.31, the rent due for the last nine months of 1958.Railways denied that this amount was owing and asserted, on the contrary, that it had overpaid rent in the sum of $414,530. Duquesne's claim and Railways' counterclaim were accordingly submitted to a board of three arbitrators as provided in the lease.

Before the arbitrators, Railways relied on the following clause of the lease: "The rental herein set forth includes a return to Duquesne for interest, amortization, insurance and maintenance except that insofar as the rental payment relates to land no return to Duquesne is made to cover amortization, insurance and maintenance. In making these computations the following percentages based on the costs of the properties have been used with reference to the type of property indicated, namely, land 7% per year, buildings 9.7% per year, high tension switching equipment 11.5% per year, and utilization equipment 10.7% per year." (Emphasis supplied).

Railways argued that the purpose of this agreement between the affiliated companies was to have Duquesne finance the establishment of the conversion system; that Duquesne - as evidenced by the use of the term "amortization" - was to be reimbursed only for the cost of its investment and was not to receive a profit therefrom; and that since the amortization periods had expired,*fn2 the rent should be reduced ...


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