No. MC-F-788

CAROLINA COACH COMPANY-ISSUANCE OF NOTES

Decided March 1, 1940

Findings in prior report, 25 M. C. C. 306, modified to authorize issuance of not exceeding $47,700, aggregate face amount, of secured promissory notes to replace outstanding notes. Application dismissed in all other respects.

Appearance as in prior report.

SUPPLEMENTAL REPORT OF THE COMMISSION

DIVISION 5, COMMISSIONERS EASTman, Lee, and ROGERS

BY DIVISION 5:

In the prior report, 25 M. C. C. 306, we authorized Carolina Coach Company, of Raleigh, N. C., to issue two secured promissory notes payable in 48 consecutive monthly installments, one in the amount of $10,800 to be dated February 15, 1939, and the other for $37,753 to be dated on or about April 15, 1939. Action upon that part of the application requesting authority to issue notes to be substituted for outstanding void notes was deferred, pending further investigation of the circumstances of issuance of the latter. Such investigation has been made.

While the application herein was under consideration, applicant issued two secured short-term promissory notes, one for $10,000 dated February 3, 1939, and the other for $37,700 dated June 24, 1939, both having final maturity 12 months after date of issuance. Those notes bore interest at the rates of 5 and 4.5 percent per annum, respectively, and each was secured by deed of trust or chattel mortgage upon certain motorbusses. Each of said notes has been replaced with a new note, of identical terms as the outstanding note except that each new note is payable in 48 consecutive monthly installments. The monthly payments on each of these notes have been met as they became due and as of November 30, 1939, the aggregate balance remaining unpaid was $41,688.05. The notes issued do not conform to the authority granted. Having been issued without authority they are void, and no means are provided whereby they may be validated. St. Paul & K. C. S. L. R. Co. Bonds, 180 I. C. C. 272, 273. Our order entered herein will modify the prior order so as to authorize issuance by applicant of one note to Central National Bank,

Richmond, Va., in face amount not exceeding $10,000 to be dated February 3, 1939, to bear interest at not to exceed the rate of 5 percent per annum and to be secured by deed of trust upon two motorbusses, and one note to Mountain Trust Bank, Roanoke, Va., in face amount not exceeding $37,700 to be dated June 24, 1939, to bear interest at not to exceed the rate of 4.5 percent per annum, and to be secured by chattel mortgage upon five motorbusses. Each note shall have monthly maturities over a period of 48 months after date of issuance and shall carry endorsements showing curtailments made on the outstanding notes of equal amounts dated February 3 and June 24, 1939, for which the new notes are to be substituted.

Applicant has guaranteed payment of four equipment promissory notes of aggregate face amount $29,000 issued during 1937 and 1939 by its wholly owned subsidiary, Virginia Carolina Coach Company. As of November 30, 1939, the unpaid balances thereon aggregated $17,166.64. Our authority for such assumption of obligation as guarantor has not been obtained, but applicant has indicated that it will file application requesting appropriate authority in the premises.

The void notes of original face amount $122,356.80, consideration of which was deferred, were issued by applicant to finance the purchase of new motorbusses purchased under conditional-sale agreements. All of those notes have been surrendered by the holders, and applicant's obligation now is represented by conditional-sale agreements only, without notes. As such agreements are not securities within the purview of section 20a, execution thereof is not a matter which requires our authorization, and to that extent the application will be dismissed. Lehigh Valley R. Co. Conditional Sale Contract, 233 I. C. C. 359.

An appropriate order will be entered.

35 M. C. C.

No. MC-F-1114 1

WILSON STORAGE AND TRANSFER CO.-PURCHASEFLAMMING MOTOR EXPRESS, INCORPORATED

Submitted February 29, 1940. Decided March 6, 1940

Purchase by Wilson Storage and Transfer Co. of operating rights and property of Flamming Motor Express, Incorporated, and Wilson Transportation Company, approved and authorized, subject to conditions.

A. L. Murphy for applicant.

Warren Newcome for a vendor.

0. L. Buckingham, Dwight Campbell, H. F. Chapman, H. L. Fuller, I. L. Longworth, G. M. Springer, R. D. Springer, and O. H. Timm for interveners.

REPORT OF THE COMMISSION

DIVISION 4, COMMISSIONERS PORTER, MAHAFFIE, AND MILLER BY DIVISION 4:

Wilson Storage and Transfer Co., of Sioux Falls, S. Dak., by applications filed January 16, 1940, seeks authority under section 213, Motor Carrier Act, 1935, to purchase operating rights and properties of Flamming Motor Express, Incorporated, and Wilson Transportation Company, both of Sioux Falls, hereinafter called Flamming and Transportation, respectively. At the hearing four motor carriers, two rail carriers, and the Sioux Falls Chamber of Commerce intervened, and the latter presented testimony in support of the application. Participation of the other interveners was confined to statements of counsel and cross-examination of witnesses. No one opposed the application except to the extent hereinafter indicated, and all parties waived service of a report and recommended order by the examiner.

Applicant has an authorized capitalization of 5,000 shares of common stock having a par value of $100 each. Of 2,776 shares outstanding, 1,881 are owned by William Wilson. Wilson also controls Flamming through ownership of all its outstanding stock. Transportation is a wholly owned subsidiary of the Chicago, Saint Paul, Minneapolis and Omaha Railway Company. Applicant, Flamming,

This report also embraces No. MC-F-1115, Wilson Storage and Transfer Co.-Purchase Wilson Transportation Company.

and Transportation are South Dakota corporations. Their corporate histories and operations in interstate or foreign commerce as motor-vehicle property carriers are described in Wilson-ControlFlamming Motor Exp., Inc., 25 M. C. C. 41, and Wilson Storage & Transfer Co.-Purchase-Black Hills, 35 M. C. C. 67.3 The purchase of operating rights authorized in the latter case was consummated December 28, 1939.

Applicant engages in two disconnected regular-route commoncarrier operations, (1) between Gillette, Wyo., on the one hand, and Hot Springs, Rapid City, and Belle Fourche, S. Dak., on the other, and, (2) in territory bounded generally by Aberdeen, S. Dak., on the north, St. Paul and Mankato, Minn., on the east, Sioux City, Iowa, on the south, and Pierre, S. Dak., on the west. Flamming operates over regular routes principally between Sioux City, on the one hand, and Omaha, Nebr., and Kadoka, via Sioux Falls, and Martin, S. Dak., on the other, and between a point on U. S. Highway 18 near Bonesteel, S. Dak., on the one hand, and Omaha and Grand Island, Nebr., on the other. Transportation operates over numerous regular routes in territory bounded generally by Huron and Watertown, S. Dak., on the north, Mankato, on the east, Sioux City, on the south, and Winner and Presho, S. Dak., on the west.

Under agreement of January 5, 1940, as amended, applicant would purchase, for 580 shares of its capital stock, all of Flamming's operating rights, including intrastate rights, under South Dakota certifi cates and permits owned by the latter and as lessee of similar certificates owned by Transportation and leased to Flamming, and 17 motor vehicles and miscellaneous furniture and office equipment variously represented as having a value of $10,100 to $15,000. This agreement recites that the physical property, as of November 1, 1939, had a book value of $10,756 and provides for adjustment of the purchase price in the event of a different book value, at the time of consummation, resulting from depreciation or substitution of newly acquired equipment. In the event of increase in value, the additional purchase price would be paid in cash. After liquidation of its affairs, Flamming would be dissolved, and presumably the majority, if not all, of the 580 shares of applicant's stock received by it would be transferred to Wilson, who has invested approximately $60,000 in that carrier since its incorporation in 1936.

2 Flamming and Transportation operate solely as common carriers; and, with the exception of its operation as a contract carrier of lard from Fargo, N. Dak., to Huron, S. Dak., applicant's motor-vehicle operations in interstate or foreign commerce are also confined to common carriage.

Subsequent to the decision in the last-cited case, applicant filed an application under section 207 in No. MC-29120 (Sub-No. 4), seeking authority to extend its common-carrier operations between points located in Minneapolis and St. Paul, Minn., and the vicinity thereof, over irregular routes.

Under agreement of January 2, 1940, applicant would purchase, for 800 shares of its capital stock, all of Transportation's operating rights, including South Dakota and Minnesota intrastate rights, and physical property consisting of 44 motor vehicles valued at $10,000, furniture and office equipment valued at $2,000, and land, buildings, and leasehold rights valued at $70,000. Applicant further agrees to pay Transportation the amount of the unearned premiums on any prepaid insurance policies or bonds then in force covering or relating to the latter's motor-vehicle operations or the property transferred, and an amount representing the unexpired pro rata portion of any license or compensation plates or registration certificates relating to the equipment sold. Obligations with respect to payment of realestate or other taxes or with respect to unearned prepaid insurance premiums on the buildings involved will be determined as of the date of transfer. The sale by Transportation is conditioned upon consummation of the previously described purchase by applicant from Flamming. It is planned to preserve the corporate existence of Transportation, but the latter has no present intention of reengaging in motor-carrier operations.

Flamming's balance sheet as of December 31, 1939, shows assets aggregating $75,034, consisting of: Current assets $15,421, principally cash and accounts receivable; carrier operating property, less depreciation, $10,100; intangible property $47,508; and prepayments $2,005. Liabilities were: Current liabilities $29,182, substantially all accounts payable; equipment obligations $5,571; deferred credits $38; reserves for injuries, loss, and damage $1,277; capital stock $45,872; and earned surplus (debit balance) $6,906. Its income statements for the fiscal year ended June 30, 1937, the 6-month period ended December 31, 1937, and the calendar years 1938 and 1939 show deficits of $1,616 and $1,749, net income of $455, and deficit of $915, respectively.

Transportation's balance sheet as of December 31, 1939, shows total assets of $244,121, consisting of: Current assets $25,564, principally cash and accounts receivable; carrier operating property, less depreciation, $43,246; nonoperating property, less depreciation, $86,810; intangible property $82,993; and deferred debits $5,508. Liabilities were: Current liabilities $43,856, including accounts payable $37,098; deferred credits $984; capital stock $350,000; and earned surplus (debit balance) $150,719. Its income statements for 1937, 1938, and 1939 show deficits of $24,131, $9,377, and $2,474, respectively. Pro forma balance sheet of applicant, as of December 31, 1939, giving effect to the proposed purchases, shows assets aggregating $643,665, consisting of: Current assets $67,940, principally accounts receivable $54,135 and material and supplies $9,307; carrier operating