Airline, Inc. v. Railroad Commission

730 S.W.2d 185, 1987 Tex. App. LEXIS 7440
CourtCourt of Appeals of Texas
DecidedMay 6, 1987
DocketNo. 14593
StatusPublished

This text of 730 S.W.2d 185 (Airline, Inc. v. Railroad Commission) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Airline, Inc. v. Railroad Commission, 730 S.W.2d 185, 1987 Tex. App. LEXIS 7440 (Tex. Ct. App. 1987).

Opinion

GAMMAGE, Justice.

The Railroad Commission issued a final order on November 7, 1983, cancelling Airline, Inc.’s Specialized Motor Carrier Certificate. Airline appeals from the district court judgment affirming that order. We will affirm the judgment of the district court.

The certificate in question was issued to Barnett & Gardenhire, Inc. in 1959, authorizing the transportation of livestock, household goods and used office furniture, oil field equipment and water pipe. It is undisputed that from 1959 until February of 1982, a period of approximately twenty-two years, the only commodity transported under the certificate was livestock.

In November of 1981, Barnett & Garde-nhire began negotiations with Dennis Forrest for the sale of the certificate. The parties were aware that if the transaction were pursued as a certificate sale, as opposed to a stock sale, they would have to file a sale and transfer application seeking approval of the Commission and pay a transfer fee equal to ten percent of the amount paid as consideration for the transfer of the certificate. Tex.Rev.Civ.Stat. Ann. art. 911b, § 6(f) (1964). They also realized that scrutiny by the Commission might result in cancellation of all or a portion of the certificate for dormancy. Article 911b, § 12(b); Brown Express, Inc. v. Railroad Commission, 415 S.W.2d 394 (Tex.1967); Herrin Petroleum Transport Equipment Corp. v. Railroad Commis[187]*187sion, 619 S.W.2d 588 (Tex.Civ.App.1981, writ ref’d n.r.e.). In order to avoid the transfer fee and possible cancellation of the certificate, the parties structured the transaction as a sale of stock. C & F Oilfield Services, Inc. was incorporated, with Dennis Forrest as president, for the purpose of acquiring the stock of Barnett & Gardenhire. The contract between Barnett & Gardenhire and C & F provided that on the date of the stock sale, Barnett & Gardenhire would have no liabilities and the only asset remaining in the corporation would be the certificate. At the time of the sale in February 1982, Barnett & Gardenhire, in fact, had no assets other than the certificate.

Sometime thereafter C & F began transporting household goods and oilfield equipment pursuant to the permit. On July 15, 1982, C & F’s articles of incorporation were amended to change the corporate name to Airline, Inc.

On December 21,1982, Allied Van Lines, Inc., Central Forwarding, Inc., North American Van Lines of Texas, Inc., and several other carriers filed a complaint with the Railroad Commission alleging among other things that the household goods portion of Airline’s certificate should be cancelled for dormancy. Standing of these carriers is not challenged.

At the hearing before the Commission, Airline offered as evidence an annual operating report purporting to summarize certain financial data regarding 1982 operations under the certificate. The only other evidence submitted by Airline was an “Agent’s Roster” listing the agents representing it in the movement of household goods as required by 16 Tex.Admin.Code § 5.252. At the request of Allied, et al., the Commission issued subpoenas to compel Airline’s president to attend the hearing and to produce certain records pertaining to transportation performed by Airline under its certificate. Airline refused to honor the subpoenas. A second hearing was held at which Airline presented no evidence. The Commission’s final order, issued in November 1983, cancelled Airline’s certificate on the basis of dormancy.

The term “dormant” is not statutory, but is used to refer to a certificate, the holder of which “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.” Article 911b, § 12(b). The dormancy concept is based upon the perception that “... 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.” Gregg Cartage & Storage Co. v. United States, 316 U.S. 74, 83, 62 S.Ct. 932, 936, 86 L.Ed. 1283 (1942).2 That the Commission may revoke a certificate upon a finding of dormancy is well settled. Article 911b, § 12(b); Brown Express, Inc. v. Railroad Commission, supra; Herrin Petroleum Transport Equipment Corp. v. Railroad Commission, supra.

In its first point of error, Airline argues that the Commission’s finding of dormancy is not supported by substantial evidence in light of evidence presented by Airline that revenues in excess of $1,099,000 were generated by operations under the certificate in 1982. We disagree.

Airline argues that it is a new owner of the certificate and any failure on the part of the former owner is irrelevant to Airline’s authority to operate under the certificate. Airline states in its brief: “The fact that the former owner may have transported one commodity and not the other does not limit a subsequent owner’s activity under the Certificate.” Airline’s premise is erroneous; there is no former or subsequent owner in this case. The certificate is and always has been held by the same corporation. The fact that corporate stock changed hands or that the articles of incorporation were amended to change the corporate name is irrelevant. The corporation is still the same entity. Indeed, in this proceeding Airline has claimed the stock transfer transaction was not a “sale or [188]*188transfer” of the certificate precisely because ownership of the certificate did not change. Airline chose to structure the transaction as a stock transfer in order to avoid the consequences of a direct sale of the certificate and cannot now divorce itself from the shortcomings of its predecessor shareholders by claiming to be a “new” owner.

The Railroad Commission must be allowed discretion in exercising its regulatory function, but it must act within the confines of its statutory grant of authority. Tex.Rev.Civ.Stat.Ann. art. 6252-13a, § 19(e); Art. 911b, § 4. The language of Art. 911b, § 12(b) is broad. It provides the Commission may revoke a certificate if it finds the certificate holder has “discontinued operation.” The Commission found that the certificate was issued in 1959, and there was no evidence the corporation ever transported anything other than livestock before February 1982. These findings are not challenged by Airline and are supported by substantial evidence. They reflect that the corporation discontinued operations and support the Commission's ultimate finding of dormancy. The revival of operations for several months does not preclude such a finding, especially in view of the rationale underlying cancellation for dormancy. See, Gregg Cartage & Storage Co. v. United States, supra. Airline’s first point of error is overruled.

Airline argues in its second point of error that the trial court erred in sustaining the order of the Commission because dormancy is not an issue properly before the Commission unless a sale and transfer application is pending.

We note that no such qualification exists in Art. 911b.

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Related

Gregg Cartage & Storage Co. v. United States
316 U.S. 74 (Supreme Court, 1942)
United Savings Ass'n of Texas v. Vandygriff
594 S.W.2d 163 (Court of Appeals of Texas, 1980)
Brown Express, Inc. v. Railroad Commission
415 S.W.2d 394 (Texas Supreme Court, 1967)
Texas Industrial Traffic League v. Railroad Commission
683 S.W.2d 368 (Texas Supreme Court, 1984)
Lumbermen's Underwriters v. State Board of Insurance
502 S.W.2d 217 (Court of Appeals of Texas, 1973)
Herrin Petroleum Transport Equipment Corp. v. Railroad Commission
619 S.W.2d 588 (Court of Appeals of Texas, 1981)

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Bluebook (online)
730 S.W.2d 185, 1987 Tex. App. LEXIS 7440, Counsel Stack Legal Research, https://law.counselstack.com/opinion/airline-inc-v-railroad-commission-texapp-1987.