Gregg Cartage & Storage Co. v. United States

• Decision Date: 20 February 1941
• Docket Number: Civil Action No. 20369.
• Citation: 42 F. Supp. 266
• Parties: GREGG CARTAGE & STORAGE CO. et al. v. UNITED STATES et al. (NORTHEASTERN TRANSPORTATION CO., Intervener).
• Court: U.S. District Court — Northern District of Ohio

42 F. Supp. 266

GREGG CARTAGE & STORAGE CO. et al. v. UNITED STATES et al. (NORTHEASTERN TRANSPORTATION CO., Intervener).

Civil Action No. 20369.

District Court, N. D. Ohio, E. D.

February 20, 1941.

Howell Leuck and Bingham W. Zellmer, both of Cleveland, Ohio, for plaintiffs.

Frank Coleman, Atty., Department of Justice, of Washington, D.C., and S. R. Brittingham, Sp. Asst. to Atty. Gen., for the United States.

Daniel W. Knowlton and E. M. Reidy, both of Washington, D. C., for the Interstate Commerce Commission.

Before ALLEN, Circuit Judge, and JONES and WILKIN, District Judges.

PER CURIAM.

This action was brought under Sec. 41 (28), 43-48, Title 28 U.S.C., 28 U.S.C.A. §§ 41 (28), 43-48, to set aside, annul or suspend an order of the Interstate Commerce Commission which denied the plaintiff's application for certificate of convenience and necessity, as provided for in Sec. 306(a), Title 49 U.S.C., 49 U.S.C.A. § 306 (a).

The Intervenor, Northeastern Transportation Company, claims to have succeeded to the rights and interests of the plaintiff by virtue of sale and assignment from the receiver of the bankrupt estate of the plaintiff. Sec. 45a, Title 28 U.S.C., 28 U.S.C. A. § 45a.

There is no dispute as to the essential facts. The question presented is whether the ruling upon the facts by the Commission is justified in law.

The undisputed evidence shows that the plaintiff was in operation on June 1, 1935, and was therefore entitled to the rights specified in Sec. 306(a), Title 49 U.S.C., 49 U.S.C.A. § 306(a), known as "grandfather" rights. On February 12, 1936, the plaintiff filed an application for certificate of authorization. Plaintiff was at that time insured against public liability by the Central Mutual Insurance Company, and in January, 1937, such insurance company was adjudged a bankrupt and ceased payment of all claims, leaving the plaintiff with about $200,000 of liabilities. Being unable to discharge such obligations, the plaintiff asked for the appointment of a receiver in the common pleas court of Cuyahoga County, Ohio, on October 4, 1937. At the same time creditors filed a petition in bankruptcy, and the plaintiff was adjudged bankrupt by this court (West, J.). On October 14, 1937, plaintiff made application to the Interstate Commerce Commission for permission to suspend operations without prejudice to its "grandfather" rights. Such permission was denied for want of authority by the Commission. On October 30, 1937, a receiver was appointed for the bankrupt estate, and, on December 6, 1937, the good will and assets of the plaintiff, including its rights under pending applications with the Commission were sold by the receiver at public auction to the Intervenor for $850.

The state court receiver, between October 5 and October 30, confined his operations to deliveries of shipments then en route. No new business was accepted. The federal court receiver sought no authority to continue operations and confined his efforts to liquidating the business. After sale, the federal court receiver and the Intervenor filed a joint request that the Intervenor be substituted as applicant for plaintiff's "grandfather" rights. Action on the application for substitution was held in abeyance by the Commission pending determination of plaintiff's original application. Pending determination of such applications, no operations were engaged in by the Intervenor, although it had asked permission to file tariffs and resume service.

The original application was referred to an Examiner, who, on December 17, 1937, recommended allowance of the application. The matter was referred again to an Examiner for further hearing on the question of "discontinuance of operation". Hearing was had on May 4, 1938, and on June 29 the Examiner recommended that applicant be granted a certificate because the interruption in service was one beyond applicant's control. In November, 1938, the application and the Examiner's report were reviewed by Division 5 of the Commission and the application was denied. On December 12, 1939, after review by the full Commission, the decision of Division 5 was sustained, upon the ground that the interruption of service following bankruptcy was fatal to applicant's rights.

Section 306(a) provides that a carrier in operation on June 1, 1935, shall be granted a certificate provided it has operated bona fide since that time. But it excepts from the requirement as to operation "interruptions of service over which the applicant or its predecessor in interest had no control". The plaintiff and the intervenor contend that the evidence reveals a state of facts "over which the applicant or its predecessor in interest had no control". It is their view that the interruption of service was due entirely to the failure of the insurance company, which created a condition clearly beyond their control.

The Commission, however, declined to look beyond the bankruptcy. It held bankruptcy to be a matter within the control of the applicant without considering the causes of bankruptcy. Such a ruling by the Commission is the adoption of a proper administrative policy or the application of a rule of law, and in either case it seems to be a proper exercise of its authority and not subject to change by this court. A line of demarcation must be drawn somewhere, and bankruptcy seems to be a reasonable point on which to establish it. If failure of the company insuring the applicant should be held to be reason for exonerating the applicant, then responsibility for countless other causes of bankruptcy would also have to be determined. Even if it were conceded that the applicant had no responsibility regarding the insurance company, it could hardly be said that it had no control over the large amount of accident claims filed against it.

The rule or policy established by the Commission seems supported by the holding of the Supreme Court in the case of Chicago Auditorium Association v. Central Trust Co., Trustee, 240 U.S. 581, 591, 36 S.Ct. 412, 415, 60 L.Ed. 811, L.R.A.1917 B, 580, in which the court said: "* * * bankruptcy proceedings are but the natural and legal consequence of something done or omitted to be done by the bankrupt". When the court said: "We conclude that proceedings, whether voluntary or involuntary, resulting in an adjudication of bankruptcy, are the equivalent of an anticipatory breach of an executory agreement, within the doctrine of Roehm v. Horst, supra 178 U.S. 1, 20 S.Ct. 780, 44 L.Ed. 953", it established an analogy for the Commission's rule that bankruptcy is within the control of the applicant.

The plaintiff and intervenor point out that if the original application had been acted upon promptly by the Commission, a certificate would have been granted, and that then it could not have been revoked unless the holder thereof had willfully failed to comply, within a reasonable time, not less than thirty days, with a lawful order of the Commission, commanding obedience to the law. Sec. 212(a). This cannot be denied. If the application had been acted upon between February 12, 1936, the date of its filing, and October 5, 1937, the date of bankruptcy and interruption of service, it no doubt would have been allowed.

The evidence, however, does not disclose that the failure of the Commission to act upon the application within that time was arbitrary or intentional. The number of motor carriers entitled to "grandfather" rights was so great that all their applications under Section...