McLean v. Keith

72 S.E.2d 44 (1952) 236 N.C. 59

McLEAN et al.
v.
KEITH et al.

No. 748.

Supreme Court of North Carolina.

August 22, 1952.

W. Dennie Spry, Ratcliff, Vaughn, Hudson, Ferrell & Carter, and Ingle, Rucker & Ingle, Winston-Salem, for plaintiffs-appellants.

James E. Wilson, Washington, D. C., James J. Doherty, Baltimore, Md., York & Boyd, Greensboro, and Womble, Carlyle, Martin & Sandridge, Winston-Salem, for defendants-appellees.

JOHNSON, Justice.

Decision here turns on the answers to these questions: (1) In the absence of approval by the Interstate Commerce Commission of the purchase by the plaintiffs of Keith's operating rights, did the plaintiffs acquire a vested property interest in the rights, separate and apart from the operating authority? (2) Was the evidence sufficient to support a decree of specific performance against Keith, requiring him to join with the plaintiffs in a long-form application to the Interstate Commerce Commission asking its approval of the transfer of the operating rights to the plaintiffs?

A study of the record and the controlling authorities impels the conclusion that both questions should be answered in the negative. This being so, it follows that the judgment of nonsuit was properly entered by the trial court. We treat the questions in the order stated:

1. The Question of Separate Transfer of Operating Rights.—Here the plaintiffs urge that the operating rights evidenced by an interstate motor-carrier certificate of convenience and necessity may be transferred, separate and apart from operating authority, without the approval of the Interstate Commerce Commission.

However, transfers are authorized only under the procedure provided by Section 212(b) of the Federal Motor Carrier Act of 1935, as amended, 49 U.S.C.A. §§ 312(b) and 5(2). The Act contemplates two types of transfers—one under short-form procedure pursuant to regulations made by the Interstate Commerce Commission, the other under long-form procedure prescribed by Section 5 of the Interstate Commerce Act as amended (now treated as a part of the Federal Motor Carrier Act by virtue of amendment which repealed Section 213 of the original Motor Carrier Act and substituted therefor the amended Section 5 of the Interstate Commerce Act. See 49 U.S.C.A. §§ 5 and 312(b). And unless and until approval is obtained as prescribed by one or the other of these two modes of procedure, there can be no valid or effective transfer by sale of either a certificate of convenience and necessity or the operating rights evidenced thereby. The clear meaning of the controlling statutory provisions seems to be that prior approval by the Commission is a condition precedent to any such transfer, and until approval is obtained neither the transfer of operating rights nor any other part of the proposed sale may be lawfully consummated. This interpretation is supported by what is said in these decisions: United States v. Resler, 313 U.S. 57, 61 S. Ct. 820, 85 L. Ed. 1185; Zabarsky v. Flemings, 113 Vt. 200, 32 A.2d 663; Gregory v. Lewis, 205 Ark. 68, 167 S.W.2d 499. See also Royal Blue Coaches v. Delaware River Coach Lines, Inc., 140 N.J.Eq. 19, 52 A.2d 763,—final appeal 2 N.J. 73, 65 A.2d 264; Raymond Bros. Motor Transp., Inc.— Purchase—North American, 37 N.C.C. 431; Hoover Truck Co.—Purchase—Frank Johnson, 37 M.C.C. 507; Porashnick Local Truck System, Inc.—Purchase—George E. Smith and J. V. Griffin, 37 M.C.C. 565.

Under the interpretation urged by the plaintiffs, the mere execution of a contract or bill of sale by the holder of a certificate, without sanction or approval of the Interstate Commerce Commission, would permit the creation of a vested property interest in operating rights, separate and apart from operating authority. This would give rise to an awkward situation, wherein one might purchase operating rights and, without prior approval of the Commission, apply to the court for relief on the theory of protecting vested property rights, and thereby indirectly challenge the jurisdiction of the Interstate Commerce Commission and its statutory powers of regulation and control over interstate motor carriers.

The interpretation urged by the plaintiffs not only runs counter to the express provisions of the Federal Motor Carrier Act, but is contrary to the declared purpose of Congress in thereby delegating to the Interstate Commerce Commission the exclusive power to grant operating rights to motor carriers engaged in interstate commerce and in conferring on the Commission broad powers of regulation and control over this branch of interstate commerce, 49 U.S.C.A. §§ 304, 305 and 312; 37 Am.Jur., Sections 115-128 et seq. See also McLean Trucking Co. v. United States, 321 U.S. 67, 64 S. Ct. 370, 88 L. Ed. 544.

Factually distinguishable are the cases cited and relied on by the plaintiffs. The cases on which the plaintiffs chiefly rely as supporting the proposition here urged are: In re Rainbo Express, Inc., etc., 7 Cir., 179 F.2d 1, 15 A.L.R.2d page 876; Brown v. Smith, 32 Tenn.App. 622, 225 S.W.2d 91; Costello v. Acco Transport Co., 33 Tenn. App. 411, 232 S.W.2d 297.

Each of these cases involves, in a bankruptcy or insolvency proceeding, the validity of a chattel mortgage on a motor carrier certificate of convenience and necessity. In substance, the decisions hold that prior approval of the Interstate Commerce Commission is not necessary to the validity of a chattel mortgage on a certificate as between the mortgagor and his privies and the mortgagee.

The other cases cited on the proposition here urged—principally decisions of the Interstate Commerce Commission—deal with the rights of purchasers at mortgage sales. The gist of these decisions is that on foreclosure the purchaser acquires the right to apply to the Commission for operating approval.

It is true that in basic theory the execution of a chattel mortgage passes legal title to the res to the mortgagee. And the plaintiffs, relying upon this theory, call to their aid these decisions in chattel mortgage cases and urge that by analogy it follows that a separate property right is created ipso facto by the execution of a contract for the sale of a certificate or the operating rights evidenced thereby. However, this so-called passing of legal title in mortgage transactions is fictional only, as furnishing in legal contemplation a repository and notional vehicle for the later transfer of title, if need be, in case of foreclosure, so as to effectuate the underlying security purposes of the chattel mortgage. Even under this theory, the equitable or beneficial title remains in the mortgagor. In the cited cases, the recognition of this fictional theory of the passing of legal title to the mortgagee means nothing more than that this fictional vehicle carries to the purchaser on foreclosure the right to apply to the Commission for approval of transfer of the operating rights. Such seems to be the rationale of the decisions reached in the cited cases. At any rate, we are not inclined to treat these decisions in cases involving chattel mortgages as authoritative or controlling in support of the proposition that, notwithstanding want of approval by the Commission, as required by statute, operating rights become clothed with the attributes of property in a constitutional sense upon the mere execution of a contract of sale of a certificate of convenience and necessity.

Therefore, if it be conceded arguendo that the holder of an interstate certificate of convenience and necessity has a vested property right therein, even so, with the transfer in the present case standing unapproved by the Interstate Commerce Commission, it follows from what we have said that the alleged or proposed transfer of rights to the plaintiffs entitles them in no aspect of the case either to an adjudication of title or to injunctive relief against the defendants as prayed. Accordingly, we do not reach for decision, and it is not necessary for us to discuss, the refinements arising out of the arguments in the briefs respecting whether a certificate of convenience and necessity to operate as an interstate motor common carrier is regarded as a franchise—limited or special—possessing the attributes of property and entitling the holder to the usual constitutional protective safeguards. See, however: 60 C.J.S., Motor Vehicles, § 84(a) and (c); Annotation: 15 A.L.R. 2d 883; 73 C.J.S., Property, §§ 1, 2, 13 and 15; Elizabeth City v. Banks, 150 N.C. 407, bottom page 415, 64 S.E. 189, 22 L.R.A.,N.S., 925; City Coach Co. v. Gastonia Transit Co., 227 N.C. 391, 42 S.E.2d 398; North Carolina Utilities Commission v. McLean, 227 N.C. 679, 44 S.E.2d 210; Atlantic Greyhound Corporation v. North Carolina Utilities Commission, 229 N.C. 31, 47 S.E.2d 473.

2. The Question of Specific Performance.—While approval by the Commission is a condition precedent to a valid and effective transfer of a certificate of convenience and necessity or operating rights evidenced thereby, nevertheless a failure to secure such prior approval does not leave the proposed purchaser remediless. A contract to convey or a bill of sale, unapproved by the Commission, but otherwise valid, confers upon the proposed purchaser the right to apply to the Commission for approval. Royal Blue Coaches v. Delaware River Coach Lines, Inc., supra. Ordinarily, a court of equity will decree specific performance of a valid contract to transfer operating rights evidenced by a certificate of convenience and necessity, to the extent of compelling the parties to take steps necessary to effectuate the transfer, such as making application to the Commission in manner and form as agreed by the parties in making the contract. Lennon v. Habit, 216 N.C. 141, 4 S.E.2d 339; Watson Bros. Transp. Co. v. Jaffa, 8 Cir., 143 F.2d 340.

Here, the plaintiffs contend they are entitled to a decree compelling the defendants to join in another application to the Commission—the long-form type of application designated as Form BMC 44 under Section 5 of the Interstate Commerce Act, 49 U.S.C.A. § 5.

However, all the evidence discloses that Keith expressly contracted to sell only under the short-form procedure set up under Section 212(b) of the Federal Motor Carrier Act, 49 U.S.C.A. § 312(b), and all the evidence tends to show he has complied with the contract in this respect. He joined with Ravenel in the short-form application, as agreed, and the transfer was approved. This being so, the plaintiffs are not entitled to specific performance. The remedy of specific performance is an equitable remedy of ancient origin. Its sole function is to compel a party to do precisely what he ought to have done without being coerced by the court. 49 Am.Jur., Specific Performance, Sec. 2, p. 6.

Equity can only compel the performance of a contract in the precise terms agreed on. It cannot make a new or different contract for the parties simply because the one made by the parties proves ineffectual. 49 Am.Jur., Specific Performance, Sec. 22, pp. 35 and 36. "The remedy of specific performance is never applicable where there is no obligation to perform," 58 C.J., p. 847, and specific performance does not lie until there has been a breach of contract. 58 C.J., p. 851.

The plaintiffs contend that under all the circumstances it was implied in the terms of the contract that Keith should do all things necessary to effectuate a transfer to the plaintiffs. The answer to this is that the parties did not leave to implication the matter of procedure to be followed in effectuating the proposed transfer. As to this, they contracted in express terms, and the rule is that there can be no implied agreement where an express one exists. It is only when the parties do not expressly agree that the law may raise an implied promise. Winstead v. Reid, 44 N.C. 76; Lawrence v. Hester, 93 N.C. 79; 12 Am.Jur., Contracts, Sec. 7.

Accordingly, with no breach of contract being made to appear, the action of the court below in declining to decree specific performance will be upheld. With decision being rested on this ground, it is not necessary for us to discuss the contentions pro and con treated at length in the briefs respecting whether or not the plaintiffs are barred relief under application of the rule of equity expressed in the maxim that "he who comes into equity must come with clean hands," and these related maxims: Ex turpi causa non oritur actio, and In pari delicto portior est conditio defendentis.

A study of the record impels the conclusion that the court below followed and applied the pertinent, controlling principles of law and equity and reached the right decision. Therefore the judgment below is affirmed.