No. MC-F-3675 S. H. MITCHELL-CONTROL; HENNIS FREIGHT LINES, INC.-LEASE (PORTION) AND PURCHASE-TURNER TRANSFER, INC. Submitted May 26, 1948. Decided July 8, 1948 Lease by Hennis Freight Lines, Inc., for a period expiring not later than February 2, 1950, of certain operating rights and certain property, and purchase of certain property, of Turner Transfer, Inc., and acquisition of control of the operating rights and property by S. H. Mitchell through the lease and purchase, approved and authorized, subject to conditions. Harold G. Hernly and William M. York for applicants. REPORT OF THE COMMISSION DIVISION 4, COMMISSIONERS MAHAFFIE, MILLER, AND MITCHELL BY DIVISION 4: No exceptions were filed to the proposed report of the examiners. Our conclusions differ in certain respects from those recommended. Hennis Freight Lines, Inc., of Mount Airy, N. C., and Turner Transfer, Inc., of Greensboro, N. C., herein called Hennis and Turner, respectively, by a joint application filed November 19, 1947, seek authority under section 5 of the Interstate Commerce Act for the lease by Hennis of certain operating rights and certain property, and the purchase by it of certain property, of Turner. By the same application, S. H. Mitchell, who controls Hennis through ownership of its outstanding stock, seeks authority under the same section to acquire control of the operating rights and property through the proposed lease and purchase. A hearing has been held, at which Carolina Motor Express Lines, Inc., a motor carrier, opposed the application, but confined its participation to the cross-examination of applicants' witnesses. By agreement of the parties, the record of the proceeding in Turner Transfer, Inc.-Purchase-Mannooch, 50 M. C. C. 813, decided January 7, 1948, and consummated January 31, 1948, herein called the Mannooch case, was incorporated in the instant record by reference. Pursuant to authority granted under section 210a (b), Hennis leased the considered operating rights and property for a period expiring July 23, 1948, at a rental of $500 per month. Operations under the temporary authority were begun February 2, 1948. Hennis, a North Carolina corporation, operates1 in interstate or foreign commerce, as a motor common carrier; (a) over regular routes, in the transportation (1) of general commodities, with exceptions, between Mount Airy and Martinsville, Va., serving all intermediate points, (2) of tobacco, cigarette papers, empty cartons, advertising matter, and printed forms, from Winston-Salem, N. C., to Cleveland and Columbus, Ohio, and Indianapolis, Ind., over various combinations of regular routes via Mount Airy, serving the intermediate point of Cincinnati, Ohio, restricted to delivery only, and (3) of feed, grain, and flour, from Loudenville, Ohio, to Mount Airy, and of paper products from Cincinnati to Winston-Salem over certain of the same regular routes; (b) over regular and irregular routes, in the transportation of paper boxes from Lockland, Ohio, to Winston-Salem via Cincinnati, of general commodities, with exceptions, from points in Ohio to points in North Carolina via Parkersburg, Huntington, Charleston, or Princeton, W. Va., of tobacco, cigarette papers, tobacco products, empty cartons, advertising matter, and printed forms, from Winston-Salem to points in Ohio via one of the four West Virginia points just named, of new furniture from Mount Airy, Thomasville, and High Point, N. C., to points in Ohio, and of canned goods from Mount Airy to points in Ohio; and (c) entirely over irregular routes, in the transportation of general commodities, with exceptions, between points in the Chicago commercial zone as defined in Chicago Ill., Commercial Zone, 1 M. C. C. 673, between Delphos, Ohio, and points within 15 miles thereof, on the one hand, and, on the other, points in Indiana, and those in Michigan on and south of Michigan Highway 21 and between Mount Airy, on the one hand, and, on the other, points in South Carolina, of cigarettes and tobacco from Winston-Salem to Pittsburgh, Pa., and Wheeling, W. Va., of textile products from Winston-Salem and High Point to Pittsburgh, Columbus, and Cleveland, Wheeling, and points in Wood County, W. Va., of fruits and vegetables from points in North Carolina, South Carolina and Virginia to points in Wood County, of rayon, rayon products, cases, trays, cones, and materials used or useful in the manufacture of rayon, between Parkersburg, and points within 5 miles thereof, on the one hand, and, on the other, points in North Carolina and South Carolina, and Virginia, and of new furniture from Lexington and Winston-Salem, N. C., to Bluefield, 1 Pursuant to certificate issued March 22, 1948 in No. MC-64994, embracing the operating rights, among others, acquired pursuant to authority granted in Hennis Frt. Lines, Inc.— Purchase (Portion)-Duff Truck Line, Inc., 50 M. C. C. — Princeton, Beckley, Charleston, Huntington, and Parkersburg, W. Va., and points in Ohio. The irregular-route general-commodity operating rights, having been acquired pursuant to separate purchases from other carriers, in combination with other rights of Hennis, authorize it to perform through south-bound service from points in the Chicago commercial zone, those in Indiana, and those in southern Michigan, on the one hand, to points in North Carolina via Delphos or a point within 15 miles thereof as a gateway, and also to points in South Carolina through Mount Airy as a second gateway. Hennis utilizes more than 20 motor vehicles in its operations. 3 Turner was organized in North Carolina as successor to Guy M. and Frank B. Turner, partners, doing business as Turner's Transfer, herein called the partnership. It now operates, pursuant to certificate issued April 9, 1948, in No. MC-109188,2 in interstate or foreign commerce, as a motor common carrier, (a) over regular routes, in the transportation of general commodities, with exceptions, between Danville, Va., and Durham via Yanceville and Roxboro, N. C., between Danville and Greensboro via Reidsville, N. C., and between Danville and Martinsville, Va., via West Fork, and Ridgeway, Va., serving all intermediate points and 7 off-route points in Virginia and North Carolina; and (b) over irregular routes, in the transportation (1) of the same commodities, with the same exceptions, from Danville to designated areas in Virginia and North Carolina, and between Danville and Martinsville, on the one hand, and, on the other, Wentworth, N. C., and points in a triangular area in Virginia and North Carolina, of which Danville, Reidsville, and Martinsville form the vertices, (2) of cottonfactory products from Hillsboro, N. C., to Danville, (3) of studio couches, beds, mattresses, and bedsprings from Mebane, N. C., to Danville and Martinsville, (4) of textiles and textile products from points in Alamance, Cabarrus, Chatham, Davidson, Durham, Forsyth, Guilford, Mecklenburg, Orange, Randolph, Rockingham, Rowan, and Wake Counties, N. C., and Anderson, Cherokee, Greenville, Laurens, Newberry, Richland, Spartanburg, and York Counties, S. C., to points in the Chicago commercial zone, (5) of general commodities, with exceptions, from points in the Chicago commercial zone to points in * Embraces a portion of the rights previously granted to the partnership under No. MC66691, transferred to Turner in No. MC-FC-26551, approved September 18, 1947, and assigned No. MC-109188; all operating rights of the partnership in No. MC-66691 (SubNo. 1), transferred to Turner in No. MC-FC-26551-A, approved September 18, 1947 and assigned No. MC-109188 (Sub-No. 1); and all operating rights acquired by Turner under No. MC-30232, pursuant to authority granted in the Mannooch case. • Commodities in pieces weighing over 10,000 pounds, commodities in bulk not adaptable to motor-carrier equipment, commodities contaminating or injurious to other lading, merchandise requiring special equipment, such as refrigerator or tank trucks, and commodities of extraordinary value. the above-named North Carolina and South Carolina counties, and between Guilford, Randolph, Chatham, and Alamance Counties, on the one hand, and, on the other, Philadelphia, Pa., Baltimore, Md., and points in Ohio, (6) of commodities requiring special equipment and handling by reason of size or weight, and machinery, between points in North Carolina, on the one hand, and, on the other, points in Georgia, South Carolina, Tennessee, Virginia, Maryland, Pennsylvania, New Jersey, New York, Massachusetts, and Rhode Island, (7) of empty machinery cases (wooden boxes) from points in North Carolina to Reading, Pa., (8) of empty containers, skids, and rejected or damaged shipments from and to the above-specified points and places in either direction, and (9) of knitting machines, including incidental parts thereof, between points in Alabama, Connecticut, Delaware, Georgia, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia, West Virginia, and the District of Columbia. On June 8, 1948, in No. MC-109188 (Sub-No. 3-TA), Turner was granted temporary authority to continue transporting knitting machinery to and from points in certain additional States until further order of this Commission, but not beyond the date of final determination of its pending section 207 application in No. MC-109188 (Sub-No. 6) requesting corresponding permanent authority. The operating rights described above under (a), (b) (1), (b) (2), and (b) (3), together with North Carolina intrastate certificate 312, and physical property, consisting of six trucks, two tractors, and three semitrailers, and office, shop, and garage equipment, were purchased by Turner, for $24,000, pursuant to authority granted in the Mannooch case. At that time the physical property was valued by Turner at $8,000. Under an agreement dated October 31, 1947, Hennis would lease, for a period of 112 months beginning on the date of consummation of the transaction, following our approval,* all of the above-described operating rights of Turner except those described under (b) (6) through (b) (9), together with North Carolina and Virginia intrastate rights covered by certificates 312 and 9705, respectively, at a rental of $500 per month, payable monthly between the first and tenth days. Under the same agreement, Hennis would purchase from Turner the six trucks, two tractors, three semitrailers, and office, shop, and garage equipment * Hennis assumed the operations under temporary authority on February 2, 1948. Under the terms of the lease accompanying the section 210a (b) application, it is provided, paragraph 4, that the time Hennis operates under the temporary authority shall be included in computing the 112 months. Under this computation, the proposed lease term would expire June 2, 1957. which the latter acquired pursuant to authority granted in the Mannooch case, for $8,000, payable upon our approval of the transaction and delivery of the property. The agreement provides for the assignment to Hennis of Turner's lease covering a warehouse and terminal space in Chicago, or for the sublease of the premises, whichever is approved by the lessor of the premises; for the lease of the lower office and so much of the terminal space of Turner, located on High Point Road in Guilford County, as Hennis may desire, at a rental equivalent to 12 percent of the amount invested therein by Turner, for a period of 6 months, with options to renew for successive 12-month periods; and, in conection with the office and terminal space referred to, for a division between Hennis and Turner of the cost of heat, lights, and water. As a guarantee of performance, Hennis agrees to deposit $11,000 with Turner, to be held by the latter until termination of the lease. Of the guarantee fund, $1,000 was deposited upon execution of the agreement, $1,000 would be deposited upon our approval of the transaction, and the remainder would be deposited in 18 monthly installments of $500 each. Any rental payment in default for more than 30 days would bear interest at the rate of 4 percent per annum, and if Hennis should fail or neglect to pay as many as 12 months' rent, and become in arrears a total of $6,000, including rent and interest, Turner would have the right to terminate the lease upon 15 days' written notice to Hennis, to charge the rent and interest in arrearage to the $11,000 guarantee fund, retaining the remainder as liquidated damages, and to resume operations under the considered authority. The agreement grants Hennis an option to purchase the operating rights at any time during the last 12 months of the lease, subject to this Commission's approval, for $11,000 plus the amount of unpaid rental for the unexpired lease term. It also grants Hennis the privilege of leasing or otherwise contracting for the operation of any portion of the rights leased, subject to the right of Turner to receive and collect the monthly rental of $500, or for the sale of all or any part of the operating rights, provided the sales price is satisfactory to Turner and that the consideration received is applied as a credit on the rent reserved and optional purchase price. If Hennis exercises the option to purchase, the guarantee fund, or so much of it as has not been applied to the payment of rent, would be credited upon the purchase price. Hennis' balance sheet as of December 31, 1947, shows assets aggregating $211,459, consisting of: Current assets $43,924, composed of cash $16,958, special deposits $100, accounts receivable $15,012, and material and supplies $11,854; carrier operating property, less depreciation, $126,545; intangible property $36,960; and prepayments $4, |