Source: http://www.law.cornell.edu/supremecourt/text/316/74
Timestamp: 2014-07-23 05:49:57
Document Index: 410164658

Matched Legal Cases: ['§ 206', '§ 306', '§ 206', '§ 2', '§ 11', '§ 206', '§ 206', '§ 212', '§ 212', '§ 206', '§ 206', '§ 206', '§ 306', '§ 211', '§ 311', '§ 174', '§ 47', '§ 306', '§ 3', '§ 21', '§ 312']

GREGG CARTAGE & STORAGE CO. et al. v. UNITED STATES et al. | LII / Legal Information Institute
Supreme Court aboutsearch liibulletin subscribe previews GREGG CARTAGE & STORAGE CO. et al. v. UNITED STATES et al.
316 U.S. 74 (62 S.Ct. 932, 86 L.Ed. 1283)
Argued: March 4, 1942.
[HTML] Appeal from the District Court of the United States for the Northern District of Ohio.
This appeal is from a judgment of a statutory three-judge court denying appellants' petition to set aside an order of the Interstate Commerce Commission refusing the Gregg Cartage & Storage Company a certificate of public convenience and necessity under the so-called grandfather clause of § 206(a) of the Motor Carrier Act, 1935, 49 U.S.C. 306(a), 49 U.S.C.A. § 306(a).
Meanwhile, the Gregg Company had failed and ceased to operate. It had arranged the filing on October 4, 1937, of a creditor's bill in a state court of Ohio, which on the following day appointed the company's counsel to be its receiver with authority to continue the business. On the day of this receiver's appointment other creditors filed a petiton in bankruptcy in the United States District Court for the Northern District of Ohio, Eastern Division, which on October 27 adjudicated the company a bankrupt, and on October 30 appointed a receiver to preserve the assets of the estate pending the election and qualification of a trustee.
In operating the business, the state court receiver confined himself to the completion of shipments en route, and did not solicit or accept new business. On October 14, he filed with the Commission a petition for permission to suspend operations without prejudice to rights under the grandfather clause. The Commission, of the opinion that it lacked power to authorize such a suspension, denied this petition on November 30, 1937. The receiver in bankruptcy took over the business on the day of his appointment, and conducted no operations at any time. Pursuant to a order of the bankruptcy court, on December 6, 1937, he sold the trade names and good will of the bankrupt estate, together with its rights under the grandfather clause application, to appellant Northeastern Transportation Company, for $850 at public auction.
A further hearing before another examiner, confined to the circumstances of the interruption of Gregg's service, resulted in another recommendation of the issuance of a certificate under the grandfather clause. The Commission, however, denied the application December 12, 1939, after a rehearing following the report of Division 5, a majority of which had held similarly on November 14, 1938. 10 M.C.C. 255, 21 M.C.C. 17. The Commission ruled that an interruption of service within the control of the applicant had occurred, that the purchase by Northeastern had conferred no operating rights, and that therefore neither corporation was entitled to a certificate under the grandfather clause. Five commissioners dissented. Gregg and its trustee in bankruptcy then filed a complaint in the United States District Court for the Northern District of Ohio, Eastern Division, praying that the order of the Commission denying Gregg's application be annulled and set aside and that the Commission be directed to issue a certificate of public convenience and necessity to Gregg. A statutory court of three judges was convened, Northeastern was allowed to intervene, and judgment went against the complainants, who appealed to this Court, 62 S.Ct. 113, 86 L.Ed. -, which noted probable jurisdiction.
Appellants contend that the Commission and the court below erroneously construed § 206(a)
of the Motor Carrier Act in holding that, excepting the specified interruptions of service, the statute required continuous operation from June 1, 1935, until the hearing by the Commission on the application. We have, however, held to the contrary. United States v. Maher, 307 U.S. 148, 59 S.Ct. 768, 83 L.Ed. 1162, petition for limited hearing denied 307 U.S. 649, 59 S.Ct. 831, 83 L.Ed. 1528; Hoey v. United States, 308 U.S. 510, 60 S.Ct. 132, 84 L.Ed. 436; Lubetich v. United States, 315 U.S. 57, 62 S.Ct. 449, 86 L.Ed. -.
How far one by an exercise of free will may determine his general destiny or his course in a particular matter and how far he is the toy of circumstance has been debated through the ages by theologians, philosophers, and scientists. Whatever doubts they have entertained as to the matter, the practical business of government and administration of the law is obliged to proceed on more or less rough and ready judgments based on the assumption that mature and rational persons are in control of their own conduct. Certainly that assumption must be made in reference to a corporation such as the applicant. Society, in creating a corporation, vesting its management in a board of directors, granting it large powers and not inconsiderable immunities, can hardly allow that its business affairs are at any time out of the control of those whose duty it is to conduct them. The Bankruptcy Act states that even an involuntary adjudication results only from some 'act of bankruptcy,' defined upon the clear assumption that it is within the bankrupt's control.
Whether or not this assumption squares with philosophical doctrine, or even with reality,
is not for our determination. The Commission, and the courts too, must get on with the application of the federal statutes without waiting to settle the verity of the philosophical assumptions on which they rest.
The claims which, together with the advance payment of premiums for new insurance, constituted the immediate cause of Gregg's financial difficulties, were, as we have said, of various sorts. Bulking largest were those for personal injuries and property damage, which numbered approximately 175 and in their face amount aggregated approximately $200,000. Their precise nature is not disclosed by the record, and conjecture in this regard is made particularly difficult by Gregg's method of doing businesswhich was to avail itself entirely of 'owner-operator' vehicles for its 'over-the-road' services. Doubtless these claims were founded almost entirely upon the negligent operation of vehicles for which Gregg was in some way held legally responsible. We are not informed whether such responsibility rested upon the principle of respondeat superior, express contractual assumption, or both. The rest of the claims, upon which about $15,000 were paid, were for cargo loss and damage. The record does not show whether payment was made solely to retain the good will of shippers, or also the satisfy the applicant's legal liability which would have rested upon its legal control of the cargo.
In any event, the choices of insurers, as well of its servants and operators, were Gregg's ownas was the judgment which was exercised with regard to the numerous other phases of its business bearing upon its solvencyand the final product could not have been a matter over which it had no control.
Furthermore, the interruption of service was the deliberate act of those who for the time being stood in the position of applicant and owned its rights. During the interval between receivership and sale of these rights to Northeastern, we take it that the beneficial interest therein vested in the creditors and the legal title in the receiver or trustee. The federal receiver or trustee could have been authorized to conduct the business of the bankrupt for a limited period, if in the best interests of the estate. § 2 of the Act of July 1, 1898, as amended, 11 U.S.C. 11, 11 U.S.C.A. § 11. The creditors and their representatives, however, failed to seek such authority, evidently regarding the rights, which later sold for $850, not worth the expense and risk of continuing business. It is the purchaser Northeastern, organized to acquire the 'grandfather' rights, and to an undetermined extent identified with the management of the bankrupt,
which, having bought these rights in this state of voluntarily suspended animation, seeks to revive them. But it cannot say that it takes the rights free of any impairment by the voluntary suspension of operation by the then owner from whom it derives title.
In its opinion the Commission stated that 'it is useless to speculate upon the question whether the 'grandfather' right expired before or after the sale.' This we understand to mean that, having determined that the cessation of operations was not a matter over which Gregg 'had no control,' the Commission was of opinion that by the time of the sale the cessation of operations was of sufficient durationat least 69 daysto establish that Gregg had not been 'in * * * operation since' June 1, 1935, within the meaning of § 206(a). This was a reasonable conclusion, especially since any substantial interruption of one carrier's service tends to result in expansion of other facilities to meet the continuing needs of shippers, and thus to cause overcrowding if the suspended service is resumed.
Finally, appellants claim to be entitled to relief from prejudice said to have resulted from delay of the Commission in acting on Gregg's application made under § 206( a) on February 12, 1936. They point out that had the Commission acted at once a certificate would have issued, thus conferring the benefits of § 212(a).
But by its terms § 212(a) is applicable only where a certificate has already issued; and, being a section of general applicability, at least for present purposes, it has no analogical bearing upon the construction of the specific provision relating to interruptions of service made in § 206(a). The delay in passing upon the application was considerable and regrettable, as the Commission acknowledged, but it does not seem to have been arbitrary or the result of any deliberate discrimination, nor, in view of the magnitude of the Commission's task, unreasonable. The Commission had nearly 90,000 applications to pass upon under § 206(a), and of course could not have been expected to pass upon them simultaneously. It is not within our province to remedy inequalities necessarily incident to the administration of the statute.
I cannot believe that experts of the subjectsay, referees charged with the duties of administering the bankruptcy lawwould conclude that every bankruptcy arose without exception from conditions which were within the 'control' of the bankrupt in any accepted meaning of the word. Nor do I think that that view would be taken in case of receiverships. Yet that is the irrebuttable presumption which the Commission has created in this type of case. Congress did not create it. Congress merely provided that this class of carrier had a right to the statutory grant on a showing, inter alia, that it was in 'bona fide operation as a common carrier by motor vehicle on June 1, 1935' and 'has so operated since that time' except as to 'interruptions of service over which the applicant or its predecessor in interest had no control.' Motor Carrier Act of 1935, § 206(a), 49 U.S.C. 306(a), 49 U.S.C.A. § 306(a). I would have supposed that the question of 'control' was 'an issue of fact to be determined by the special circumstances of each case.' Rechester Telephone Corp. v. United States, 307 U.S. 125, 145, 59 S.Ct. 754, 764, 83 L.Ed. 1147. That would mean that 'So long as there is warrant in the record for the judgment of the expert body it must stand.' Id., 307 U.S. pages 145, 146, 59 S.Ct. page 764, 83 L.Ed. 1147. But that is quite different from giving the word 'control' a construction which prevents a person from showing under any circumstances that the events which led to his business disaster were not subject to his 'control'. On the one hand, the Commission rules that interruptions of service owing to floods,
or impassable
roads, highway construction,
droughts which destroy a carrier's chief source of business,
or the illegal action of governmental authorities
constitute grounds for holding that an interruption of service is beyond an applicant's 'control'. But similar misfortunes of a purely accidental character which affect financial stability and end in bankruptcy or receivership are held as a matter of law to be subject to the carrier's 'contol'.
The distortion which that interpretation involves is well illustrated by this case. There was evidence tending to show the following: During the year 1936 the applicant was insured against public liability and property damage by the Central mutual Insurance Co. Hearing rumors that Central Mutual was in financial difficulties and was not paying claims, applicant dropped its policy in December 1936 and placed its insurance with another company. On January 11, 1937, Central Mutual was adjudged a bankrupt and ceased payment of all claims. In the fall of 1937 applicant was forced to pay several substantial damage claims arising from accidents during the period when its insurance policy was in effect with Central Mutual. These payments seriously impaired its working capital. Furthermore, applicant was confronted with approximately 175 additional claims for personal injury and property damage. These were estimated at about $200,000 and arose during the period when applicant was insured by Central Mutual. Applicant settled some of these claims. It was impossible, however, to satisfy the demands of all of these claimants. Receivership followed and on its heels came bankruptcy. There is not the slightest evidence in this record of any negligence, dereliction, or mismanagement on the part of applicant. It is undisputed that its failure was due to the failure of its insurer. And there is no evidence in this record that it did not exercise due care in the selection of that insurer. It would indeed be ironical to cast a presumption against the applicant on that score when the insurance policy presumably was accepted by the Commission and under its regulations promulgated pursuant to §§ 211(c) and 215 of the Act, 49 U.S.C. 311(c) and 315, 49 U.S.C.A. §§ 311(c), 315, had to be 'approved' by it.
Federal Fegister (1936) Vol. 1, p. 1163, Rule 1. And see 49 Code of Federal Regulations, Pt. 174, § 174.1.
An applicant carries the burden of establishing his right to the statutory grant which is contained in the 'grandfather' clause. Alton Railroad Co. v. United States, 315 U.S. 15, 62 S.Ct. 432, 86 L.Ed. -. But he should not be met at the threshold with a conclusive presumption against him unless Congress has clearly indicated that in the circumstances of his case he has no right even to undertake the burden of proof. If Congress had desired to eliminate all applicants whose continuous service was interrupted by bankruptcy or receivership, I believe it would have said so. As stated by Commissioner Lee in his dissenting opinion (10 M.C.C. p. 263): 'If such interruptions in service are to be construed as putting an end to 'grandfather' rights of carriers, whose applications therefor have not been determined, then, where such a carrier goes into receivership or bankruptcy, and such an interruption occurs, it would be impossible for the carrier to come out of receivership and resume operations; it could not effect a composition or an arrangement with its creditors and resume operations; if a corporation, it could not be reorganized under the corporate reorganization provisions of the Bankruptcy Act, and creditors could realize nothing from 'grandfather' rights, however valuable.' Such a wholesale destruction of operating rights should not be readily or lightly inferred. Operating rights are the very life of any business. Without them this business certainly has no more than scrap value.
Urgent Deficiencies Act of October 22, 1913, 28 U.S.C. 47a, 28 U.S.C.A. § 47a.
This provides in pertinent part that: 'if any such carrier or predecessor in interest was in bona fide operation as a common carrier by motor vehicle on June 1, 1935, over the route or routes or within the territory for which application is made and has so operated since that time, * * * except * * * as to interruptions of service over which the applicant or its predecessor in interest had no control, the Commission shall issue such certificate without requiring further proof that public convenience and necessity will be served by such operation.' 49 U.S.C. 306(a), 49 U.S.C.A. § 306(a).
The following are defined as acts of bankruptcy: (1) fraudulent conveyances or concealments of property, (2) transfers while insolvent, (3) permitting, while insolvent, a creditor's lien to attach to property through legal proceedings, (4) assignments for the benefit of creditors, (5) permitting or procuring, while insolvent in either the bankruptcy or equity sense, a receiver to be appointed to take charge of the bankrupt's property, (6) admissions in writing of inability to pay debts and of willingness to be adjudged a bankrupt. § 3, sub. a of the Act of July 1, 1898, as amended, 11 U.S.C. 21, sub. a, 11 U.S.C.A. § 21, sub. a.
This reads in part as follows: 'That no such certificate, permit, or license shall be revoked (except upon application of the holder) unless the holder thereof willfully fails to comply, within a reasonable time, not less than thirty days, to be fixed by the Commission, with a lawful order of the Commission, made as provided in section 204(d) (304(c)), commanding obedience to the provision of this part (chapter), or to the rule or regulation of the Commission thereunder, or to the term, condition, or limitation of such certificate, permit, or license, found by the Commission to have been violated by such holder.' 49 U.S.C. 312(a), 49 U.S.C.A. § 312(a).