Costello v. Acco Transport Co.
| Decision Date | 14 October 1949 |
| Citation | 232 S.W.2d 297,33 Tenn.App. 411 |
| Parties | COSTELLO et al. v. ACCO TRANSPORT CO. et al. |
| Court | Tennessee Court of Appeals |
Certiorari Denied by Supreme Court Feb. 10, 1950. [Copyrighted Material Omitted]
Wils Davis, Dick Busby, Harsh, Pierce, Cochran & Rickey, Boyte Howell, Jr., all of Memphis, for complainants.
Charles H. Hudson, Jr., Wrape & Hernly, all of Memphis, for defendants.
The bill was brought by Costello and Gregory on May 6, 1947, against the Acco Transport Company, a corporation, with situs in Memphis and its Secretary-Treasurer, S. A. Godman. The purpose was to have the Chancellor declare the rights of the parties under a chattel mortgage held by Acco, in so far as it covered certain motor common carrier vehicle rights evidenced by a certificate of convenience and necessity issued by the Interstate Commerce Commission. The complainants had acquired said operating rights from one Jamison, subject however to the mortgage thereon held by Acco. The bill prayed that the defendants be enjoined from foreclosing the mortgage, the indebtedness secured thereby having been in default for some time. The bill was presented to the Chancellor for a temporary restraining order. He declined to prohibit the sale under the mortgage which had been advertised, but enjoined the defendants 'from disposing of or effecting in any manner the certificate' of necessity and convenience as described in the bill until further orders of the Court. Later, Costello and Gregory were also enjoined from disposing of, transferring, or incumbering the certificates. The sale was had and Acco, being the only bidder, became the purchaser at a price of $5,000.
The cause proceeded to issue and thereafter to a trial on oral evidence pursuant to a stipulation that it be so tried, resulting in a decree wherein the Chancellor held that the mortgage held by Acco was a valid encumbrance on operating rights evidenced by the certificate of necessity and convenience; that Acco was not estopped to assert its rights under said mortgage; that the sale under said mortgage at which Acco had become the purchaser of said operating rights was a valid sale. Title thereto was accordingly divested out of complainants Costello and Gregory and vested in Acco. From this decree the complainants appealed.
The assignments of error present for decision the following principal questions:
(1) Whether the issue as to the existence and validity of the mortgage was res judicata by reason of the decrees entered in a certain other cause in the Chancery Court?
(2) Whether by reason of its acts, conduct and representations Acco was equitably estopped from enforcing the lien of the chattel mortgage? [1]
(3) Whether the mortgage and sale thereunder was invalid by reason of the fact that prior consent of the Interstate Commerce Commission to the execution of the mortgage and the foreclosure thereof was not obtained?
To understand the import of the questions presented, it is necessary to relate the circumstances giving rise to the controversy. Prior to October 18, 1943, the defendant Acco Transport Company, was engaged in business as a common carrier by motor vehicle, operating between Memphis, Tennessee, and Texarkana, Texas, by virtue of the certificate of convenience and necessity issued to it by the Interstate Commerce Commission in Docket Nos. Mc-103,364, Sub. Nos. 106-107. On September 27, 1943, by a written contract, Acco sold to one Jamison its rights under said certificate and also certain motor vehicles and office furniture for a total purchase price of $30,000. Under the contract of sale, $4,000 was payable upon the approval by the Interstate Commerce Commission of the transfer from Acco to Jamison of the certificate. The remainder of $26,000 was evidenced by twenty-six promissory notes of $1,000 each, payable at three months' intervals. The contract of sale provided that the deferred purchase money notes were to be secured by a chattel mortgage to be executed by Jamison upon the equipment and the certificate of necessity and convenience so purchased by him. On September 21, 1943, Jamison deposited in escrow the $4,000 cash payment to be delivered to Acco upon the approval by the Commission of the transfer of the certificates of necessity and convenience to Jamison. The transaction was submitted to the Commission by the joint application of the parties. On October 18, 1943, that body granted the application and approved the transfer of the certificates. On the same day, Acco executed and delivered to Jamison a bill of sale, covering the certificates and other properties sold, and Jamison authorized the delivery of the fund in escrow to Acco. Concurrently with the execution of the bill of sale, Jamison executed and delivered to Acco the series of notes provided by the contract of sale and also the chattel mortgage securing same. On November 5, 1943, the mortgage was filed for registration in the Register's Office of Shelby County, Tennessee, and thereafter duly recorded. In addition to the office furniture and rolling stock covered by the mortgage, Jamison thereby conveyed to Acco as security for the mortgage indebtedness, 'all of its rights, title and interest in and to its certificates of convenience and necessity issued by the Interstate Commerce Commission in Docket Nos. Mc-103,364, Sub. 1; Mc-103,364, 6; and Mc-103,364, 7.'
Later a certificate was issued to Jamison on April 10, 1944, bearing Docket Nos. 103,364, Sub. 1, covering the same operating rights formerly held by Acco.
The operating rights in question were first established under what is commonly called the 'grandfather's clause' of the Federal Motor Carrier Act, Title 49 U.S.C.A. Sec. 301 et seq. With the permission of the Commission, they were transferred by the original holder to the Overnight Motor Service, Incorporated, and by that concern to Acco on October 14, 1943. As already stated, the Commission authorized the transfer of these rights from Acco to Jamison on October 18, 1943, and on April 10, 1944, issued to him a certificate evidencing the same.
Jamison seems to have been devoid of financial resources as well as of integrity. He borrowed $4,000 from the complainant Costello with which to make the cash payment on the purchase of the business from Acco. After the sale was consummated, Costello and Jamison entered into a contract whereby the former was to receive one-half of the net profits of the business. This agreement was dated October 23, 1943, five days after the mortgage was given.
On June 17, 1944, Jamison entered into another partnership contract with the complainant Gregory, whereby he sold to the latter a one-half interest in the business. Neither of the complainants knew that Jamison had had any dealings with the other with reference to the business, until shortly after the transaction with Gregory, when they became apprised of the situation, and thereupon brought suit in the Chancery Court known as Docket No. 47,310. The bill in that case was filed on or about July 1, 1944. The object was to set up the partnership interest of the complainants in the business. There was a prayer for a receiver to take charge of the business and on July 5, 1944, an order was entered appointing H. W. Clark, receiver; and among other things, authorizing him to issue receivership certificates to be secured by a lien on all the assets of the company, subject to the mortgage held by Acco.
The business seems to have been operated by the receiver until May 26, 1945, when, with the permission of the Interstate Commerce Commission, the rights evidenced by the receivership certificates were leased by Costello and Gregory to the Refrigerator Truck Lines. The rentals were paid the receiver and about $2,000 had been realized from this source at the time the present litigation arose. This lease gave the lessee an option to purchase, and on August 1, 1947, after the present suit was filed, a contract was entered into whereby, conditioned on the outcome of the present suit, Costello and Gregory agreed to sell the operating rights evidenced by the certificate to Refrigerator Truck Lines for the sum of $10,000, with the understanding that the rents paid under the lease should be applied on the purchase price.
On November 8, 1944, a consent interlocutory decree was entered in Cause No. 47,310. This decree recited the transactions had by Jamison with Costello and Gregory, respectively; described the property of which the business in question consisted, including the certificate of necessity and convenience, the office furniture and the rolling stock; and divested all right, title and interest in the property described, out of Jamison, and vested a one-half undivided interest in each of the complainants. The decree specifically recited that the property described and the vestiture of title in the complainants was subject to the mortgage held by Acco.
At this time, Acco was still trying to collect its indebtedness secured by the mortgage, and payments had been made thereon by the receiver and by Costello and Gregory, through the receiver. A number of conferences had been held between counsel for the respective parties regarding the payment of the indebtedness.
Just before the note due July 18, 1944, became due, at the request of the complainants Costello and Gregory, a written agreement was entered into by them and the receiver and Acco, extending the time of the payment of this note to August 18, 1944, and the payment thereof was personally guaranteed by Costello, Gregory and Clark the receiver. By agreement dated August 26, 1944, this note was assigned to one Hollinger. The agreement recited that the note was one of a series of notes secured by the...
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