Opelousas and Ville Platte, La.; between Alexandria and Natchitoches, La.; and between Monroe, La., and Hamburg, Ark.; serving all intermediate points. Rights confirmed in Interurban are substantially duplicated by certain of those claimed in its pending "grandfather" application. Interurban has pending a section 207 application in No. MC-19198 (Sub-No. 4), seeking similar operating rights between the Louisiana-Texas State line near Starks, on the one hand, and, on the other, Port Arthur, via Orange, Tex., over Texas Highway 87, and Beaumont, via Deweyville, Tex., over Texas Highway 235 (under construction); and between Deweyville and Orange. Approval of the latter application 2 would permit physical connection of Interurban's present operations with those of Coastal at Beaumont and Port Arthur. Applicant has presented certain evidence, for purposes of illustration, presupposing that such operating authority ultimately will be granted to Interurban, but nothing herein contained is to be construed as affecting the final action which may be taken in that proceeding. Applicant testified that he desired to consummate the instant transaction regardless of the final outcome of Interurban's extension application. Interurban owns and operates approximately 29 motor vehicles.

Coastal, a Texas corporation, is capitalized at $25,000, consisting of 250 shares of common stock, par value $100, of which 202 shares are owned by W. P. Fite, its president, and the remainder by his wife. On May 23, 1939, in No. MC-71603, issuance of a certificate to Coastal was authorized, covering operations in interstate or foreign commerce as a motor-vehicle common carrier (a) of passengers and their baggage, and of express and mail, between Beaumont and High Island, via Stowell, Tex., and (b) of passengers and their baggage, and of express, between Port Arthur and Galveston, via Port Bolivar, Tex., serving all intermediate points. Pursuant to authority granted in Coastal Coaches, Inc., Broker Application, 13 M. C. C. 623, on December 7, 1939, a license was issued to Coastal authorizing operations as a broker at Galveston, Port Arthur, and Beaumont, in connection with passenger transportation throughout the United States. Under agreement of October 14, 1939, applicant would purchase 125 shares of Coastal's capital stock from Fite for $30,000, which is to be paid in cash following our approval of the transaction. It is

In report and order recommended by the joint board, served June 9, 1939, in this proceeding, stayed by exceptions, it was recommended that authority be granted for extension between the Louisiana-Texas State line near Starks and Orange, via Deweyville; and between Deweyville and Beaumont.

This order also embraces rights originally claimed in No. MC-53137 and No. MC-72670 by Arthur Lee Burge, as to which arrangements were made to substitute G. W. Hyde and W. P. Fite as applicants in No. MC-FC-1450 on April 20, 1937, and Coastal in lieu of the two last-named individuals in No. MC-FC-1915 on June 23, 1937.

also agreed that if, within 12 months from date of our approval herein, either party should desire to sell his stock, the other party shall have first option to purchase same for $35,000 in cash and, further, that, in the event of the death of either party and sale of the stock by a legal representative of his estate, "the survivor hereby agrees, and guarantees, to pay to the legal representative of such deceased party, not less than the sum of $30,000, it being understood that this agreement shall not prevent the legal representative from selling said stock for any price over said minimum guarantee, and provided further, the survivor shall be permitted to acquire said stock, if he so desires, for a sum equal to the highest offer made." Insofar as these provisions of the agreement may concern transactions requiring our prior approval under section 213, they are not approved. It is proposed that Fite will continue as manager of Coastal.

Applicant's personal balance sheet as of August 22, 1939, shows total assets of $368,395, consisting principally of investments in numerous stocks and of real property. Liabilities were $27,261, and sole-proprietorship capital was $341,134. No funds would be withdrawn from Interurban for purposes of the instant transaction, as applicant would secure necessary funds either by loan from a bank or by sale of some of his investments.

Coastal's balance sheet as of September 30, 1939, shows assets aggregating $33,445, consisting of: Current assets $2,808; carrier operating property, including five motor vehicles, less depreciation, $10,144; intangible property (permits-franchises) $20,000; and prepayments $493. Liabilities were: Wages payable $425; capital stock $25,000; and surplus $8,020. Income statements for 1937, 1938, and the first 9 months of 1939 show net incomes of $2,628 and $2,614 and deficit of $140, respectively. It was testified that business usually improves in the later months of the year and, accordingly, that operations for the full year 1939 were expected to show a profit. Applicant also pointed to the fact that the net income and deficit shown were after payments to the stockholders, as officers' salaries, of $8,525, $8,640, and $6,290, respectively.

As already indicated, certain of the evidence of record is based on the supposition that Interurban's previously mentioned section 207 application will be granted, permitting connection of its operations with those of Coastal at Beaumont and Port Arthur. This evidence relates to present circuitous routing of passengers via Houston, Tex., and other points, moving between points served by Interurban, on the one hand, and Coastal, on the other. This situation has been occasioned largely by the desire of existing carriers to retain the traffic to their own lines for as long a haul as possible rather than

to interchange with Coastal. Such circuitous routing, however, sometimes requires the participation of three or four carriers in the movement of such passengers. This evidence primarily concerns matters for consideration in the section 207 proceeding. Assuming the extension authority sought by Interurban should be granted, advantages are described which would result from direct two-line service under common control as here proposed, and from reduced mileage and transit time in routing of passengers. However, regardless of the outcome of Interurban's extension application, we are of the opinion that evidence herein is adequate to support the required findings under section 213.

Interurban and Coastal would closely coordinate their schedules and utilize their own terminal at Beaumont, instead of that of Southwestern Greyhound Lines, Inc. Had the proposed common control and proposed extension been in effect during the year 1939, it is estimated that increased revenue and reduced expenses would have produced a net income for Coastal of $5,400. This estimate would be equivalent to a return of 9 percent on applicant's proposed investment of $30,000. The territory served by Coastal is devoted principally to shipping, oil-field development, and agriculture, and persons engaged in such pursuits frequently find it necessary to migrate from port to port or locality to locality. Coastal provides the only direct motorbus service in interstate or foreign commerce between Port Arthur and Beaumont, on the one hand, and Galveston, on the other, although, as previously indicated, other motor carriers of passengers furnish such service over more circuitous routes.

We find that acquisition by M. W. Walker of control of Coastal Coaches, Inc., through purchase of capital stock, upon the terms and conditions above set forth, which terms and conditions are found to be just and reasonable, will be consistent with the public interest, and that the conditions of section 213 have been or will be fulfilled. An appropriate order will be entered.

35 M. C. C.

No. MCF-1095

PENNSYLVANIA GREYHOUND LINES, INC.-ASSUMPTION OF OBLIGATION

Decided March 26, 1940

Findings in prior report, 35 M. C. C. 106, modified to authorize Pennsylvania Greyhound Lines, Inc., to assume obligation and liability as guarantor or endorser of not exceeding $150,000 promissory notes, subject to conditions. Appearances as in prior report.

SUPPLEMENTAL REPORT OF THE COMMISSION

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

In our prior report, 35 M. C. C. 106, dated January 20, 1940, Pennsylvania Greyhound Lines, Inc., was authorized to assume obligation and liability as guarantor or endorser of secured promissory notes of aggregate principal amount not exceeding $150,000, upon certain terms and conditions. As stated in said report, it was contemplated that, in establishing improved rest and lunch stops on applicant's routes, Greyhound Travel Stations, Incorporated, hereinafter referred to as Stations, would license various persons to operate such facilities, and to finance same it was expected that each licensee would borrow funds in an amount equal to 60 percent of the cost thereof, to be evidenced by its promissory note secured by a first mortgage on premises on which the facilities would be located. To assist the respective licensees, applicant sought and obtained authority to guarantee by endorsement payment of such secured notes.

When the proposal was first submitted to us, definite arrangements with prospective licensees and lenders had not been completed, and hence data concerning same were not available. In proceeding with the plan the parties have found it desirable to provide for alternative arrangements for the purpose, among others, of obtaining lower interest rates available on unsecured notes to be issued by Stations and guaranteed by applicant. By petition filed March 18, 1940, applicant requests issuance of a supplemental order which, in addition to continuing the authorization in our prior report and order, would authorize applicant to assume obligation and liability as guarantor or endorser of promissory notes in the aggregate amount. approved in said prior report and order under the circumstances

there contemplated as well as under the alternative arrangements hereinafter set out. In some cases licensees will own and operate the lunch and rest facilities as originally planned, but in others Stations now proposes to own and operate such facilities, and except where financing is arranged as originally authorized it is proposed that Stations in each instance issue its unsecured note in an amount equal to approximately 60 percent of the estimated cost of the improvements, to a bank or other lending agency, payment of which would be guaranteed by applicant by endorsement and pursuant to terms of an agreement to be entered into by parties to the transaction. As collateral security for the guaranty, Stations, where it owns the facilities, would deliver to applicant an indemnity bond or its note (in amount equal to the note guaranteed) secured by a first mortgage on the situs of the facilities. Where the latter is owned by a licensee, Stations, after borrowing funds on its unsecured note guaranteed by applicant, would loan approximately an equal amount to the owner of the facilities, who in turn would issue and deliver his promissory note to Stations secured by first mortgage on the premises, which latter note and mortgage would be assigned without recourse by Stations to applicant as collateral security for the guaranty. Specimen copies of notes and agreements proposed have been filed with us. Under the circumstances applicant will not be required to furnish additional information concerning each transaction prior to exercise of authority herein issued as contemplated under the first proviso contained in the findings of our prior report. Applicant also asks that the supplemental authority, if issued, be made retroactive to date of our prior order. Any assumption of obligation by applicant not in conformity with our authorization is void, and the statute provides no method for validating same.

Upon further consideration, we find that the proposed assumption by Pennsylvania Greyhound Lines, Inc., of obligation and liability as guarantor or endorser of promissory notes of aggregate principal amount not exceeding $150,000 for the purpose and upon the terms and conditions set forth in the prior report as modified herein, (a) is for a lawful object within its corporate purposes, and compatible with the public interest, which is necessary and appropriate for and consistent with the proper performance by it of service to the public as a common carrier, and which will not impair its ability to perform that service, and (b) is reasonably necessary and appropriate for such purpose, provided, however, that the authority granted herein shall not apply to any note or notes issued subsequent to January 20, 1942. An appropriate supplemental order will be entered.