No. MC-F-33961 TOM HICKS TRANSFER CO.-PURCHASE (PORTION)— JESSE O. WILLETT Submitted April 14, 1947. Decided September 8, 1947 1. Application of Howard Tellef Tellepsen, Joe Kelley Butler, and John Charles Jacobs, partners, doing business as Tom Hicks Transfer Company, for authority to purchase certain operating rights and property of Jesse 0. Willett, doing business as J. O. Willett, denied. 2. Application of Jesse O. Willett, doing business as J. O. Willett, for authority to purchase certain operating rights of M. A. Dixon, doing business as Dixon Truck Contractors, denied. Walker C. Hay for applicants. REPORT OF THE COMMISSION DIVISION 4, COMMISSIONERS MAHAFFIE, MILLER, AND ROGERS BY DIVISION 4: Howard Tellef Tellepsen, Joe Kelley Butler, and John Charles Jacobs, partners doing business as Tom Hicks Transfer Company, of Monroe, La., herein called the partnership, and Jesse O. Willett, doing business as J. O. Willett, also of Monroe, by a joint application, in No. MC-F-3396, filed February 6, 1947, as amended, seek authority under section 5 of the Interstate Commerce Act for purchase by the former of certain operating rights and property of the latter for $25,000. By a second joint application in No. MC-F-3399, filed February 10, 1947, Willett and M. A. Dixon, doing business as Dixon Truck Contractors, of Edmond, Okla., seek authority under the same section for purchase by Willett of certain of the operating rights of Dixon for $9,000. Hearing has been held on a consolidated record at which no one opposed the applications and the parties agreed to the omission of an examiner's proposed report. All applicants herein are motor common carriers operating in interstate or foreign commerce. Willett and the partnership utilize substantially more than 20 motor vehicles in their operations. This report embraces No. MC-F-3399, Jesse O. Willett-Purchase (Portion)-M. A. Dixon. On August 16, 1944, in No. MC-63792,2 a certificate was issued to the partnership's predecessor authorizing the transportation, over irregular routes, of (a) heavy machinery, and machinery, materials, supplies, and equipment, incidental to, and used in, the construction, development, operation, and maintenance of facilities for the discovery, development, and production of natural gas and petroleum, in truckload lots, between points in Louisiana, Arkansas, and Mississippi; and (b) general commodities, with exceptions, from Monroe and West Monroe, La., to Winnsboro, Ruston, and Bastrop, La., with no transportation for compensation on return except as otherwise authorized. The authority granted under (b) above is not being exercised by the partnership at present. On August 29, 1946, in No. MC-704, a certificate was issued to Willett authorizing the transportation, over irregular routes, of (a) machinery, materials, supplies, and equipment, incidental to, or used in, the construction, development, operation, and maintenance of facilities for the discovery, development, and production of natural gas and petroleum, and of the same commodities incidental to, or used in, the construction, operation, repair, servicing, dismantling, and maintenance of natural gas and petroleum, recycling, repressuring, blending or storage plants, and facilities; and (b) pipe, pipe-line material, machinery, and equipment, incidental to, and used in, connection with the construction, repairing, maintenance, and dismantling of pipe lines, including the stringing of pipe, between points in Arkansas, Louisiana, Oklahoma, and Texas. On November 22, 1944, in No. MC-704 (Sub-No. 1), a certificate was issued to Willett authorizing practically the identical service authorized under the certificate in No. MC-704, between points in Mississippi and Alabama and between points in those States, on the one hand, and, on the other, points in Arkansas and Louisiana. The partnership does not propose to purchase any of the operating rights granted to Willett under the certificate in No. MC-704 (Sub-No. 1). In pending section 5 application in No. MC-F-3526, Jesse O. Willett-Lease (Portion)-William B. Thomas, Willett seeks authority to lease similar rights in Tennessee and Kentucky. * Pursuant to authority granted on January 18, 1946, in No. MC-FC-22314, the operating rights under No. MC-33792 were transferred from an old partnership composed of Howard Tellef Tellepsen, C. G. Richardson, and Wayne T. Benson, doing business as Tom Hicks Transfer Company, to the present partnership. 50 M. C. C. A certificate was issued to Dixon, on June 16, 1947, in No. MC58900 (Sub-No. 1),3 authorizing operations, over irregular routes, in the transportation of (a) machinery, equipment, materials, and supplies used in, or in conection with, the discovery, development, production, refining, manufacture, processing, storage, transmission, and distribution of natural gas and petroleum and their products and byproducts, and (b) machinery, materials, equipment and supplies used in, or in connection with, the construction, operation, repair, servicing, maintenance and dismantling of pipe lines, including the stringing and picking up thereof, between points in Colorado and Wyoming, on the one hand, and, on the other, points in Illinois, Nebraska, South Dakota, and Missouri; and between points in Illinois, Nebraska, South Dakota, Missouri, Oklahoma, Kansas, and Texas. The partnership's balance sheet as of December 31, 1946, which gives effect to the purchase from Willett,* shows assets aggregating $114,940, consisting of: Current assets $44,152, including cash $7,676 and accounts receivable $32,509 ; carrier operating property, less depreciation, $56,849; intangible property, $3,500; and prepayments $10,439. Its liabilities were: Current liabilities $30,667, principally notes payable $10,000 and accounts payable $15,724; equipment obligations $56,250; and partnership capital $28,023. The income statements of the partnership and its predecessor for 1944, 1945, and 1946 show net income of $43,715, deficit of $3,389, and net income of $5,309, respectively. Willett's balance sheet as of December 31, 1946, shows total assets of $331,283 composed of: Current assets $157,251, principally accounts receivable $151.131; tangible property, less depreciation, $151,028; investment securities and advances $1,000; and prepayments $22,004. His liabilities were: Accounts payable $52,236; accrued taxes and wages $13,034; notes payable $107,986; and sole proprietorship capital $158,027. His income statements for 1944, 1945, and 1946, show net income of $56,310, $26,455, and $39,799, respectively. Data are not available showing the results of operations under the rights which he proposes to sell. This certificate supersedes an earlier one of October 16, 1943, in No. MC-34090, transferred to Dixon from Ted Worthington and Hugh Wilcox, partners, doing business as Service Trucking Co., pursuant to order of June 30, 1945, in No. MC-FC-21105. It also covers rights granted in an extension application in No. MC-34090 (Sub-No. 4), embraced in the report and order of division 5 in No. MC-74595 (Sub-No. 15), Mercer Extension—Oil Field Commodities, 46 M. C. C. 845, which were transferred to Dixon pursuant to order of April 27, 1947, in No. MC-FC-21105-A. As hereinafter indicated, the equipment has already been acquired and the purchase price covering the equipment ($21,500) has been paid. In giving effect to the entire transaction, the following changes were made: Carrier operating property, less depreciation, was increased $21,500 and the remaining balance of the total purchase price ($3,500), was assigned to intangible property. The partnership borrowed funds to pay the purchase price, of which $10,000 is represented by notes payable, and $15,000 is included in the equipment obligations. Dixon's balance sheet as of December 31, 1946, shows assets of $72,831 consisting of: Current assets $10,601, principally accounts receivable $10,066; carrier operating property, less depreciation, $51,740; and intangible property $10,490. Liabilities were: Notes payable $15,060; payables to associated companies $1,763; accounts payable $8,622; taxes accrued $411; and proprietorship capital $46,975. His income statements for 1945 and 1946 show net incomes of $15,391 and $8,238, respectively. No. MC-F-3396.-In this transaction the parties propose to effect a purchase by the partnership of Willett's rights under the certificate in No. MC-704 to transport the commodities and perform the service authorized under (a) above only, between points in Texas and Oklahoma, and between points in those States, on the one hand, and, on the other, points in Arkansas and Louisiana. In other words, Willett proposes to retain all operating rights under (b) covering the transportation of pipe, pipe-line material, machinery, and equipment incidental to, and used in, the construction, repairing, maintenance and dismantling of pipe lines, including the stringing of pipe, between points in all four States, and rights to perform the service described under (a) above, and between points in Arkansas and Louisiana, the partnership taking over similar right between points in Texas and Oklahoma and the cross-haul operations between points in those States, on the one hand, and, on the other, points in Arkansas and Louisiana. Future discussion herein will be on the basis that division of the operating rights in No. MC-704 in the manner just described is intended by the parties. The transaction also includes purchase by the partnership of two trucks and two tandem trailers, the total purchase price for the rights and physical property being $25,000. The transaction is covered by two separate instruments dated December 26, 1946. One is a bill of sale covering the physical property which was sold on that date for $21,500; and the other is the agreement covering transfer of the operating rights only, for $3,500. As above stated, the purchase price for the equipment has been paid by the partnership, and title and possession has been taken by it. The amount of $3,500 has been deposited in escrow for delivery to Willett upon approval of the transaction by this Commission. We have repeatedly found that partial consummation of a transaction through transfer of the physical property in advance of approval, when it is part of a single transaction subject to section 5, is unlawful. Refiners Transport & Term. Corp.-Purchase-Marshall, 39 M. C. C. 93, 105. To finance the transaction, the partnership borrowed $15,000 from a bank, secured by a chattel mortgage on the equipment, and payable in monthly installments of $1,250 each, with interest at 5 percent per annum; and $10,000 from another bank, represented by an unsecured 90-day note bearing the same rate of interest. At the time of the hearing, the partnership had repaid $3,750 on the $15,000 loan, and the $10,000 note had been renewed for an additional 90 days. No. MC-F-3399.-The record is not clear with respect to the exact operating rights proposed to be purchased by Willett from Dixon pursuant to the oral agreement between them. The application and the evidence were presented by the parties at a time when the earlier certificate of October 16, 1943, in No. MC-34090, was still in full force and effect. That certificate described the operating rights somewhat differently than does the present certificate. It appears to be the intent of the parties, and future discussion will be on the basis, that Willett would purchase for $9,000, payable upon approval, all Dixon's rights to transport the commodities and render the service described under (b) above, namely, machinery, materials, equipment and supplies used in, or in connection with, the construction, operation, repair, servicing, maintenance, and dismantling of pipe lines, including the stringing and picking up thereof, between points in Colorado and Wyoming, on the one hand, and, on the other, points in Illinois, Nebraska, South Dakota, and Missouri; and between points in Illinois, Nebraska, South Dakota, Missouri, Oklahoma, Kansas, and Texas. Under this proposed division, Dixon would retain all rights to transport the commodities and render the service described under (a) between points in the same States. The purchase price would be obtained by Willett from available funds without borrowing. GENERAL As above indicated, under the certificate issued to Willett in No. MC-704, he is authorized to conduct nonradial operations in Arkansas, Louisiana, Oklahoma, and Texas, in the transportation of various oil-field commodities. The commodities authorized to be transported and the service authorized to be performed are divided into three groups, the first two of which generally relate to commodities used in the construction, development, operation, maintenance, servicing, processing, and storage of natural gas and petroleum described under (a) above, and the third group consisting of pipe and commodities used in connection with pipe-line stringing and the dismantling of pipe lines described under (b). By this application the partnership would purchase Willett's authority to transport the commodities referred to in the first two groups, except between points in Arkansas and Louisiana, but including all his rights under (a) to operate in Oklahoma and Texas, and between points in those States, on the one hand, |