CENTURY SYSTEM, No. MC-F-979 INC.-PURCHASE-AJAX MOTOR SERVICE, INC. (LAWRENCE S. NEWMARK, RECEIVER) Submitted December 6, 1989. Decided January 13, 1940 Purchase by Century System, Inc., of operating rights and property of Ajax Motor Service, Inc. (Lawrence S. Newmark, receiver), and acquisition of control by Charles H. Morse, Jr., and Eugene Dupont III of Century System, Inc., through ownership of a majority of its capital stock, approved and authorized, subject to condition. David Axelrod and Jack Goodman for applicant. B. W. LaTourette and Joseph P. McArdle for protestants. REPORT OF THE COMMISSION DIVISION 4, COMMISSIONERS PORTER, MAHAFFIE, AND MILLER BY DIVISION 4: Century System, Inc., of Chicago, Ill., by application, as amended, filed August 8, 1939, seeks authority under section 213, Motor Carrier Act, 1935, to purchase operating rights and property of Ajax Motor Service, Inc. (Lawrence S. Newmark, receiver), of Chicago. At the hearing before an examiner, two motor carriers and certain stockholders of vendor opposed the application but offered no evidence. All parties waived service of a report and recommended order. Pursuant to authority granted under section 210a (b), applicant leased operating rights and property of vendor, herein considered, for a period of 180 days, expiring March 13, 1940, at a rental of $25 per month. No other motor-carrier operations are conducted by it. Applicant, an Illinois corporation, was organized August 9, 1939, with an authorized capitalization of 450 shares of common stock, having a par value of $100 each, of which 400 shares have been issued. Charles H. Morse, Jr., and Eugene Dupont III own 150 shares each of such stock, and William P. Bonbright owns 100 shares. Its board of directors is composed of the aforesaid stockholders, and Morse is president, Dupont secretary, and Bonbright treasurer. Morse and Dupont are president and vice president, respectively, of American Terminal Company and of Atco Service Company, both of Chicago, hereinafter called American and Atco, respectively. Morse owns 30 percent, members of his immediate family together own 21 percent, and Dupont owns 8 percent of American's common stock. Morse and Dupont own 23 and 3 percent, respectively, members of the former's family together own 8 percent, and American owns 29 percent of the capital stock of Atco. The remainder of the stock of both companies is divided among 9 stockholders. It is evident that Morse has the power to control both American and Atco through stock ownership, directly or indirectly, and that Morse and Dupont manage the affairs of both companies. Acquisition of control of an additional motor carrier would here be secured by the two individuals last named coincidentally with purchase by applicant of vendor's properties. Compare American Motor Transport, Inc.-Purchase-Lewin, 25 M. C. C. 236. American owns and rents terminal facilities to various motor carriers, including Atco and applicant. It conducts no motor-carrier operations but has an application pending, in No. MC-12124, for a broker's license. Atco operates in interstate or foreign commerce, pursuant to pending "grandfather" application in No. MC-81567 1 as a motor-vehicle property carrier between points in the Chicago commercial zone, principally in the performance of pick-up and delivery service. It utilizes approximately 25 motor vehicles in such operations. In pending application No. MC-613, filed under the "grandfather" clause, vendor seeks a certificate covering operations as a motor-vehicle common carrier of general commodities over regular routes, principally between Chicago and Cincinnati, Ohio, via Indianapolis, Ind., between Indianapolis and Springfield, Ohio, and between Cincinnati and Springfield, via Dayton, Ohio, serving all intermediate points and certain off-route points. By application in No. MC-84659, belatedly filed October 16, 1936, under the "grandfather" clause, vendor also seeks a permit authorizing operations as a contract carrier over the same routes as are described in its common-carrier application. On September 24, 1938, an order was entered embracing both of the above dockets, authorizing issuance of a certificate to vendor as a common carrier substantially as above described, which order was vacated July 21, 1939, primarily because of question as to the validity of rights granted to serve Indianapolis and all intermediate points. Our findings will authorize purchase of common-carrier rights only. The receiver was appointed by the circuit court of Cook County, Ill., on July 20, 1939, in a creditor's proceeding brought against vendor in that court. He took over the operations on July 24, 1939, and conducted them until September 16, 1939, when vendor's motor 1 On June 11, 1938, in No. MC-FC-4062, Atco was substituted as applicant in No. MC-81567, in lieu of Fred Scherring, doing business as Blue Bell Transit Company. carrier properties were leased to applicant. Pursuant to bid submitted in open court by Virgil L. Garrison, representing the interests which subsequently organized applicant, acceptance of which bid was approved by the court's order of July 28, 1939, and under agreement entered into on that day, the receiver would sell to Garrison 2 vendor's operating rights, and certain property valued at $13,800, including office furniture and equipment and 38 motor vehicles, for $3,150, subject to chattel mortgages and conditional-sale agreements on certain of the vehicles, aggregating $10,783, which the purchaser agreed to pay. The consideration of $3,150 has been paid to the receiver and approximately $4,800 has been paid on the obligations assumed. Subsequent to execution of the aforesaid purchase and sale agreement, involuntary bankruptcy proceedings were instituted against vendor in the District Court of the United States for the Northern District of Illinois, Eastern Division, and a receiver was appointed by that court, but as yet no order of adjudication has been entered. On August 29, 1939, vendor filed a petition in the Federal court proposing an arrangement with its unsecured creditors under the provisions of chapter XI of the Bankruptcy Act, as amended. The Federal court receiver, who was represented at hearing on the instant application, has interposed no objection to the transaction. Applicant's balance sheet as of September 17, 1939, giving effect to the proposed transaction, and certain subsequent related transactions, shows assets aggregating $45,925, consisting of: Current assets $30,866, including cash $29,866; carrier operating property $12,409; and intangible property $2,650. Liabilities were: Equipment obligations $5,925; and capital stock $40,000. Vendor's balance sheet as of March 31, 1939, shows assets aggregating $21,764, consisting of: Current assets $9,536, principally accounts receivable; carrier operating property, less depreciation, $11,296; and deferred debits $932. Liabilities were: Notes payable $16,633; loans payable $1,333; accounts payable $2,539; accrued liabilities $20,401; capital stock $3,000; and surplus (debit balance) $22,142. Its income statements for the fiscal years ended September 30, 1937 and 1938, and the 6-month period ended March 30, 1939, show deficits of $5,775, $7,413, and $8,867, respectively. Applicant intends to recondition some of the equipment purchased from vendor and expects to purchase additional equipment. Terminals are maintained at present by applicant in Chicago, Dayton, and Cincinnati, and it proposes to render daily overnight dry and refrig Pursuant to agreement of August 5, 1939, between Garrison and the three persons now owning applicant's stock, Garrison assigned all of his interest in the considered properties of vendor to applicant. erated service between those and intermediate points. Applicant's personnel is experienced in the motor-carrier industry; it has greater resources than vendor and should be able to render improved service to the public. Protestant contended that the transaction had been consummated illegally without our approval, but the record does not warrant such a conclusion. The receiver testified that, prior to lease under section 210a (b), the operations had been conducted under his supervision by a former employee of vendor. However, the record does show that the receiver was for a time assisted by one of applicant's employees and used American's terminal facilities without definite arrangement as to the charge that would be made therefor. Thus, while the evidence adduced fails to show that applicant, or its stockholders, exercised control over or managed the operations, it is quite apparent that they did cooperate closely with, and exert considerable influence on, the receiver in his conduct thereof. As previously indicated, applicant proposes to record an amount of $2,650 in its intangible-property account upon consummating the instant purchase. Subsequent to hearing, we were advised that applicant proposes to amortize this amount within 1 year, and our findings will be appropriately conditioned to secure this result. We find that purchase by Century System, Inc., of common-carrier operating rights and property of Ajax Motor Service, Inc. (Lawrence S. Newmark, receiver), including the right to operate pending determination of the latter's "grandfather" applications in Nos. MC-613 and MC-84659, and the right to any certificate which hereafter may be issued as a result of such applications, and acquisition of control by Charles H. Morse, Jr., and Eugene Dupont III of Century System, Inc., through ownership of its 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; provided, however, that, if the authority herein granted is exercised, applicant shall amortize in equal monthly amounts over a maximum period of 1 year, commencing with the date of consummation herein, the amount of increase in the "Other Intangible Property" account as result of the instant transaction, in manner consistent with the provisions of the uniform system of accounts for class I motor carriers, or, in lieu of amortization, applicant may write off to surplus, in accordance with said accounting provisions, the amount of such increase in the "Other Intangible Property" account, so as to remove from such account within 1 year, either through amortization or write-off, the entire amount of the increase. An appropriate order will be entered. No. MC-F-1060 CAROLINA COACH COMPANY-ISSUANCE OF NOTES Submitted December 27, 1939. Decided January 20, 1940 Execution of contracts for purchase of motor equipment and payment therefor held not to be within the provisions of section 214, Motor Carrier Act, 1935. Application dismissed. Robert E. Quirk for applicant. REPORT OF THE COMMISSION DIVISION 4, COMMISSIONERS PORTER, MAHAFFIE, AND MILLER BY DIVISION 4: By application filed, Carolina Coach Company, of Raleigh, N. C., originally requested authority under section 214, Motor Carrier Act, 1935, to issue secured promissory notes payable to Morris Plan Bank of Virginia, in face amount not exceeding $120,000, to finance the purchase of 15 new motorbusses. As supplemented and amended, the application is for authority to issue conditional-sale agreements providing for the possession, use, and ultimate ownership by applicant of 17 new motorbusses to be purchased from The Flexible Company, from time to time during 1940, at a total cost of not more than $136,000. No representation has been made by any State authority, and no objection to granting the application has been offered. In explanation of the change in its plans, applicant states that since the application was filed the bank has agreed to finance the purchase by applicant of said equipment upon conditional-sale contracts which will not be accompanied by notes. The conditional-sale contracts proposed to be executed will contain all the terms of payment and will obligate applicant to pay the manufacturer of the busses the purchase price thereof at Roanoke branch, Morris Plan Bank of Virginia, Roanoke, Va., or at such other place as the seller may designate. Part of the purchase price will be paid upon delivery of the equipment, and the balance will be paid in installments with interest on the unpaid balance. Upon payment by applicant of the full purchase price and all interest thereon, and the performance by it of all its obligations under said contracts, the manufacturer will deliver to applicant a bill of sale covering the motorbusses purchased. |