Brown Express, Inc. v. Railroad Commission

GRIFFIN, Justice

(dissenting).

On June 30, 1964, Ryder Truck Lines of Mo. requested Railroad Commission approval of its sale of six certificates of convenience and necessity to its wholly owned *399subsidiary, Ryder Truck Lines of Texas, Inc. Being a corporate inter family transaction, the consideration for the sale or transfer was $1,000.00. Thereafter on July 7, 1964, Brown Express, Inc. and other competitors of Ryder Truck Lines of Mo. filed a complaint with the Railroad Commission under the provisions of Article 911b, § 12(b) and 14(a), asserting, in effect, that the six certificates sought to be transferred were dormant.1

While the application for the approval of the sale was pending, the parent corporation, Ryder System, Inc. sold all the corporate stock of Ryder Truck Lines of Mo., Inc. to Lee A. Hyde, Sr. This transaction was subject to the sale of the six certificates in controversy to Ryder Truck Lines of Texas, Inc. (which remained a Ryder System subsidiary). Hyde changed the corporate name of Ryder Truck Lines of Mo., Inc. to Southern Plaza Express, Inc. The purpose of these transactions was to vest title to the six certificates in a Ryder System subsidiary and thus except them from the sale to Hyde. It may perhaps also be inferred that this was done so that the subsidiary corporation could be sold to another carrier by Ryder System, Inc. It is suggested that this might result in a tax saving and there is evidence that Ryder System, Inc. had been offered $800,000.00 for the certificates. However, there is nothing illegal about the sale of corporate capital stock and the matter involved in this litigation is the transfer of six certificates of convenience and necessity from one Ryder corporation to another, or as stated in the respondents’ brief, the transfer of assets from one Ryder pocket to another.

The Commission refused to consider petitioners’ claim of dormancy because under its established practice, that question was not considered an issue upon a hearing held to determine whether or not a sale of certificates should be approved. The sale of such certificates to Ryder Truck Lines of Texas, Inc. was ultimately approved on November 12, 1964.

This Court has now held that actually there are two orders or matters involved here, namely, the question of the dormancy of the certificates and the question of approving the sale from Ryder of Mo. to Ryder of Texas. The Court has held that the order approving the sale must fall because the Commission did not first determine the issue of dormancy before approving the sale. The effect of this holding is to make dormancy a possible issue in every application for the approval of a sale of a certificate of convenience and necessity. I cannot agree to such holding. The approval of a sale and the cancellation of a permit for dormancy are two different things and to insert the issue of dormancy into the sale approval process is to encourage delay and obstruction.

The Motor Carrier Act, Article 911b, Vernon’s Ann.Tex.Stats., was originally adopted in 1929 and from that date to the present time, the Commission has never construed the Act as requiring that a hearing as to dormancy should be held prior to or along with a hearing to determine whether a sale of a certificate should be approved by the Commission. This Court’s decision overturns an administrative ruling of some thirty-five years’ standing upon the stated theory that a competitor’s economic position might be weakened by such sale. We may now expect most sales of certificates to be contested upon a claim of dormancy because delay if nothing else may be gained thereby.

This is not a case in which a “new service” is brought about by a combination of existing certificates, and despite repeated holdings, by this Court that where no “new *400service” is involved, the issue of convenience and necessity is not at issue, the majority opinion now allows competing carriers, in effect, to litigate such issue under the guise of a dormancy proceeding.

It seems undisputed that the six certificates here involved, which the competing carriers assert are dormant and hence inoperative, have a substantial market value. The Motor Carrier Act provides that certificates of convenience and necessity may be bought and sold. Heretofore, the approval of a sale was determined by well-recognized rules followed by the industry and the Railroad Commission. The effect of the Court’s holding will obviously be to introduce a new and uncertain factor which will affect the proposed sale of many certificates hereafter. The effect upon the market of such certificates will be unfortunate for with every purchase the purchaser will acquire not only a chance to obtain a certificate but a lawsuit as well.

I agree with the Court of Civil Appeals that this case is, or should be, controlled by Tarry Moving & Storage Company v. Railroad Commission, 367 S.W.2d 322 (Tex.Sup.1963), wherein it was pointed out that the Commission’s authority over a proposed sale of certificates of convenience and necessity was “a veto whereby it ‘may disapprove’ a proposed sale, if it finds and determines that (1) the sale is not in good faith, (2) the purchaser is not capable of continuing the operation, or (3) the sale is not best for the public interest”.

The Court of Civil Appeals correctly pointed out the difference in the statutes providing for issuance of an original certificate to a motor carrier to operate, and the sale and transfer of existing operating certificates as follows:

“A prerequisite to original issuance is that the Railroad Commission act affirmatively. That it make an affirmative finding to the effect that public convenience and necessity require the operation.
“No such prerequisite attends subsequent sales since the statute provides that, once issued, a certificate ‘may be sold, assigned * * * transferred,’ without the need for affirmative action or affirmative findings of any character. The Commission’s only power over such sales is a veto whereby it ‘may disapprove’ a proposed sale if it finds and determines that (1) the sale is not in good faith, (2) the purchaser is not capable of continuing the operation, or (3) the sale is not best for the public interest.
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“However, where, as in the case at bar, the Commission has issued an order approving a subsequent sale of a certificate, the problem of judicial review is entirely different. A Commission order approving such a sale is in effect an order of ‘no disapproval,’ since the statute itself grants the power to make the sale. Therefore, an order of approval is not necessary to confer the power of sale; and any such order can only mean that the Commission is refraining from exercising its veto power. Such an order does mean that the Commission has not found that (1) the sale is not in good faith; (2) the purchaser is not capable of continuing the operation, or (3) that the sale is not in the public interest.” (399 S.W.2d 869-70. All emphasis that of the Court of Civil Appeals.)

This construction of the statutes follows the Tarry case; the majority opinion herein fails to recognize and to give effect to the wording of the statute.

With reference to the question of public interest, this Court said in Tarry:

“It may reasonably be said that since the Commission has found in this case that (1) the purchaser is financially able and capable of maintaining the service authorized; (2) the equipment proposed to be used by him meets all requirements; (3) he agrees to conduct operations in the same manner as theretofore authorized;
*401(4) the application is made in good faith; and the further fact that the Commission found initially that ‘convenience and necessity’ required this service, the public interest has been sufficiently considered”.

The Court then held, primarly on the basis of long standing departmental construction, that the issue of public convenience and necessity was not involved in the case.

This Court has now imported into sale approval cases — by the back door, so to speak —the rejected issue of public convenience and necessity under the guise or appellation of “dormancy”. This is accomplished by bringing into play a purely permissive and unconnected provision of the Motor Carrier Act, namely, Article 911b, § 12(b). The argument is made that Ryder has allowed its certificates to become dormant with the result that its competitors have expanded their facilities so there is no further need (public convenience and necessity) for Ryder to continue operations. And it is argued that to permit Ryder to resume operations under a supposedly dormant certificate would amount to the establishment of a “new service” under the holding of Railroad Commission of Texas v. Jackson, 157 Tex. 32, 299 S.W.2d 266 (1957).

Article 911b, § 12(b) is a purely permissive statute and was intended by the Legislature to vest in the Railroad Commission a discretionary power to be exercised by it in the interest of a proper control of the motor carriers of this state. This section reads as follows:

“The Commission at any time after hearing, had, upon notice to the holder of any certificate or permit and after opportunity given such holder to be heard, may by its order revoke, suspend or amend any certificate or permit issued under the provisions of this Act, where in such hearing the Commission shall find that such certificate or permit holder has discontinued operation or has violated, refused or neglected to observe the Commission’s lawful orders, rules, rates or regulations or has violated the terms of said certificate or permit; provided, that the holder of such certificate or permit shall have the right of appeal as provided in this Act.” (Emphasis mine)

Under this section, when the Commission finds that a certificate holder has discontinued operation, etc., it may revoke, suspend or amend a certificate. The provisions of the section do not require the Commission to revoke a certificate even if the holder thereof has discontinued operation. I take it, then, that if the Commission had held a hearing and found that the holder of the certificate had discontinued operations, it would not necessarily be required to cancel the certificate. As pointed out by the Court of Civil Appeals, the Attorney General has so ruled. It would follow that under Article 911b, § 12(b), as written, no court would be authorized to compel the cancellation of a certificate by the Commission. It seems that under any well considered form of motor carrier regulation, the administrative authority after holding a hearing should have the discretionary power to determine whether a certificate should be cancelled outright or whether the holder thereof should be given a reasonable opportunity to bring his service up to the standard contemplated by the certificate, or take some similar action. The statute provides for administrative and not judicial regulation. A scheme of statutory regulation without an administrative authority proved unsatisfactory and ineffective many years ago. 40 Tex.L.Review 230. When the Legislature says “may” and the permissive term makes sense, there is little excuse for the judiciary to substitute a mandatory construction. However, the Court’s opinion, in effect, accomplishes this by holding that when a complaint of dormancy is filed, the Commission must hold a hearing and must hold such hearing prior to deciding whether or not to exercise its veto power over a proposed sale of a certificate. The premise upon which this construction is based is prejudice to Ryder’s competitors, —that the non-use or restricted use of the *402Ryder certificates has caused Ryder’s competitors to increase the scope of their operations so that there is no longer any need (public convenience and necessity) for Ryder to operate in the area which has now been occupied by its competitors. Thus, convenience and necessity come in the back door, and it is argued that Railroad Commission v. Jackson, 157 Tex. 32, 299 S.W.2d 266 (1957), supports this theory. In Jackson, there was no question raised as to the supposed dormancy of the certificates involved. The Railroad Commission under its authority to regulate motor carriers found that a combination of certificates would bring into existence a “new service” and that as to such new service, there had never been a showing of public convenience and necessity. This Court supported the Commission’s view. However, in the instant case, the Court’s action is contrary to the long established practice of the Commission. The Ryder certificates are supported by a finding of public convenience and necessity and consequently, in my opinion, this case should be ruled by Tarry Moving & Storage Company v. Railroad Commission, 367 S.W.2d 322 (Tex.Sup.1963).

The authority to cancel certificates for non-use or upon other statutory grounds is to be exercised in behalf of the public welfare at the discretion of the Commission. It should not be converted into a delaying device for the benefit of any particular group of competitors. It would indeed be an idle thing to require the Commission to hold a hearing which it had refused to hold when for some reason of administrative policy, it had decided not to cancel a certificate upon the grounds set forth in the complaint. This, for the reason that the decision to cancel or not to cancel is within the discretionary powers of the Commission under the statute.

This new idea of making it mandatory for the Commission to hold a dormancy hearing prior to or along with the hearing relating to the requested approval of the sale of a certificate is not only unsupported by statute but as above indicated is contrary to a departmental construction of long standing duration. As pointed out by the Court of Civil Appeals, Mr. Horace Soule, an examiner for the Railroad Commission for a period of almost twenty-five years testified that the Commission had never adopted or followed any theory of dormancy in connection with a hearing involving the approval or non-approval of the sale of a certificate. This was competent evidence of departmental construction. Tarry Moving & Storage Company v. Railroad Commission, 367 S.W.2d 322 (Tex.Sup.1963).

It further seems to me that in Tarry, this Court noted the distinction between the practice of the Interstate Commerce Commission under the Acts of Congress and the Texas Railroad Commission under Article 911b with respect to dormancy or material change in operating conditions as to competition and traffic in the territory served by competing truck lines. The practice of the Texas Commission differs quite naturally from that of the Interstate Commerce Commission and should remain different until changed by the Legislature. Administrative practices should present as few possibilities for harassment and delay as possible and still serve the public good. I would not add the gloss or interlineation to Article 911b, § 12(b) as the Court has done in its opinion and disturb a departmental practice of thirty-five years. If the Motor Carrier Act is not operating properly as it is written, it is the prerogative and duty of the Legislature to change it and not the courts.

What disturbs me most about the Court’s opinion is the opportunity for delaying tactics which it will afford. I realize that this certificate sale is hardly comparable to the merger between the New York Central and the Pennsylvania Railroad, but nevertheless, any proposal that goes before the Interstate Commerce Commission moves with the speed and alacrity of a moribund glacier. Heretofore in Texas, the transfer *403of certificates has been accomplished with a minimum of delay in all but exceptional cases. The type of evidence that would be adduced upon a dormancy hearing as envisioned by petitioners would be the same as that applicable to a convenience and necessity hearing with public witnesses, etc. We are all acquainted with these voluminous records. I would not incumber a sale where no new service is involved with all the possibility of delay that would be entailed by what really amounts to a public convenience and necessity hearing.

Finally, I would also mention that Mr. Soule raised the question of why the petitioners never sought action from the Commission because of dormancy until the proposal to transfer the certificates from one Ryder pocket to another came along. This inaction transpired although petitioners had operated for years and were expanding their facilities (so they say), knowing all the time that the Ryder certificates were outstanding. Can it be that one carrier may ignore an outstanding certificate and expend his operations and thus secure some sort of a vested right that calls for judicial protection?

The majority opinion cites as authority for its holding the case of T.C.S. Motor Freight Lines v. Vanway Express Co., 148 S.W.2d 899 (Tex.Civ.App.1941, writ dism’d, jdgmt. cor.). That case has no relevance here. There the Commission on April 9, 1935 after hearing ordered two certificates of convenience and necessity cancelled for failure of the operators to remit C.O.D. collections to shippers. This order was held in abeyance until the completion of certain litigation which was terminated by a judgment rendered on September 24, 1935. This judgment necessarily sustained as valid the cancellation order of April 9, 1935 and thereafter, on October 4, 1938, the Commission again determined that the certificates were no longer in force. (148 S.W.2d 902.) Therefore, when the application for transfer of such certificates was filed on May 26, 1939 and approved by the Commission on May 29, 1939, there were no certificates in existence to transfer. The previous orders entered after hearing which cancelled the certificates had long since become final. We have no such facts in the case at bar.

In my opinion, the authorities cited by the Court of Civil Appeals fully support its decision and I would affirm the judgment of that court. Accordingly, I respectfully dissent from this Court’s order reversing the judgment of the Court of Civil Appeals.

SMITH, NORVELL and HAMILTON, JJ., join in this dissent.

. The words “dormant” and “dormancy” are used by the petitioner as designating a condition described in Article 911b, § 12(b), Vernon’s Ann.Tex.Stats. as existing when a certificate bolder “has discontinued operation, or has violated, refused or neglected to observe the Commission’s lawful orders, rules, rates or regulations or has violated the terms of said certificate or permit”. Petitioner’s primary complaint here relates to an alleged discontinuance of operations. In this dissent, I shall follow the nomenclature used by petitioners.