for $1,040. The agreement further provides that Mackensen will purchase $50,000 worth of common stock in the transferee corporation if the proposed transfer is approved; and the transferee will assume outstanding liabilities of the transferor not to exceed $9,000, pay $10,000 in cash to the transferor within 90 days from date of consummation of the transfer, and issue cumulative preferred stock, par value of $100 per share, for a total value of approximately $82,000, of which 340 shares will be allocated to Halbert Bros., Inc., a trucking company, in satisfaction of its unpaid claims against the transferor, and 480 shares to the partners as representative of the balance of the $100,000 valuation. The preferred stock is to pay cumulative dividends at 6 percent out of net profits or surplus when and as declared by transferee's board of directors, is to be redeemable at par value at any time, and has no voting rights as long as transferee pays dividends thereon. Should there be a default in the payment of dividends for 2 successive years, the preferred-stock holders would acquire voting rights in transferee to the extent of giving them the power to elect a majority of their representatives on transferee's board of directors. The issuance of additional shares of stock is not now contemplated.

If the proposed transaction is consummated, V. A. Kathan, the present general manager of the transferor, would become the vice president and general manager of the transferee. The partners would be employed in the transferee's operations in the same capacities as they are now employed. There would be no changes in transferor's other personnel but should an increase in business warrant it, additional personnel will be employed. Transferor now has seven employees and maintains stations at San Francisco, Calif., Los Angeles, Calif., and New York, N. Y. Mackensen would serve as transferee's president. It may be observed that, by virtue of their ownership of preferred stock in the transferee corporation, the partners would have a proprietary interest therein.

The transferor began operation as a freight forwarder in 1947 with a capital investment of $12,800. Additional investments of $8,025 and $8,600 were made in 1948 and 1949, respectively, by 1 of the partners. From 1947 to May 31, 1954, the transferor sustained annual operating losses, the total of which aggregated over $80,000. Its capital deficit as of the latter date was $51,711. However, operations have been maintained continuously during this period. The shipments of record for 1951 to 1953, inclusive, aggregated 19,317,333 pounds, and the total revenue therefrom was $645,836.

The transferee's balance sheet giving effect to the proposed transaction as of February 1954 shows assets aggregating $151,035, composed of: cash $50,000, prepayments $460, furniture and other tangible property $575, and estimated value of the franchise or operating

rights $100,000 to be amortized out of future earnings. Liabilities were: accounts payable $7,285, shippers' c. o. d. $450, taxes payable $1,200, payment on approval of proposed transfer $10,000, capital stock $50,000, and debenture preference shares $82,100. It is estimated that the transferee's operating expenses would be increased by approximately $16,900 annually. This sum includes the payment of $12,000 as a tentative salary to Mackensen, and $4,900 as dividends on the outstanding preferred stock.

In several years of operation, traffic in transferor's service moved only by water over intercoastal routes through Atlantic coast ports. In 1953, transferor's traffic was occasionally transported over intercoastal routes through Houston, Tex., embracing motor carriers to or beyond Houston. In June 1954, transferor established provisions in its tariffs providing for routes embracing the use of transcontinental rail and motor carriers. Transferee plans to use all modes of transportation, and believes that with added capital, the past deficits would be changed to profits. For 1955 and 1956, earnings are estimated at approximately $60,000 and $70,000, respectively. Considerable stimulation of effort by an increased solicitation staff is planned to acquire additional traffic in order to gain advantage of volume rates attached to certain volume minima of the underlying transportation agencies. Transferee's officers express the view that the transferor frequently was close to achieving tonnage of volume minima, and, that had this been accomplished, transferor's operations would have been more successful. If the proposed transaction is approved, transferee would have, at the very beginning, approximately $30,000 in funds available for increased solicitation of business which, in the opinion of its officers, is necessary for a profitable operation.

Ringsby Truck Lines, Incorporated, and Illinois-California Express show that they operate transcontinental motor-carrier services between various points in Pacific Coast and Midwestern States, and, by interchange with connections, are able to render a joint-line service to points in Eastern and Southern States. Denver-Chicago Trucking Co., Inc., provides transcontinental motor-carrier service between points in Pacific Coast and Atlantic Coast States. Acme Fast Freight, Inc., National Carloading Corporation, Universal Carloading and Distributing Co., Inc., and Republic Carloading and Distributing Company have transcontinental freight-forwarder operating rights. These forwarders maintain stations in the territories embraced by the permit proposed to be transferred, and offer service from and to points therein.

These protestants and interveners in opposition contend that the purchase price transferee proposes to pay for the operating rights involved is excessive; that such rights are dormant insofar as they relate

to the utilization of modes of transportation other than all-water routes via the Panama Canal; and that if the proposed transfer is approved, a new and different type of service would be instituted which, they contend, would be inconsistent with the public interest and the national transportation policy.

In insisting that the operating authority is dormant insofar as it pertains to the use of all-rail or all-motor carriers as underlying agencies, protestants stress that, since the second amended permit was issued to transferor, not one shipment has been forwarded over overland routes. In reply, applicants state that transferor was of the opinion that it was inadvisable to go to the expense of publishing tariffs and maintaining stations for the use of overland routes while the permit issued in No. FF-164 (Sub-No. 2) was the subject of litigation in the courts.

It is further pointed out by the opposing freight forwarders that, under the proposed transfer, the amount of stock issued and outstanding would be approximately $100,000 in excess of the capitalizable assets of the transferee corporation. In view of our conclusions hereinafter stated, it is unnecessary to discuss the question of transferee's readiness, willingness, and ability to perform the service authorized in the permit here sought to be transferred.

As seen, transferor's past operations have not been successful from a financial standpoint and have been confined to the forwarding of shipments by water carriers operating through the Panama Canal. Although issued an amended permit, effective March 20, 1953, which eliminated the restriction to the use of water carriers as a means for providing service, transferor has never expanded its operation to include the forwarding of consolidated shipments over all-rail or allmotor routes. On this record, it appears that a continuation of the service by transferee as conducted in the past would only result in recurring deficits. It is obvious that because of the high valuation placed by transferor on the permit, and of the burden to pay dividends on the debenture preferred stock, transferee would be compelled to expand operations substantially to include the forwarding of traffic over overland routes. Thus, we are confronted with a situation where transferee will undoubtedly conduct a new and different service from that performed by the transferor. No public support for such service appears of record. We do not believe that the showing made herein warrants our approval of the proposed transfer where it is evident that transferee would institute an overland service which transferor has not performed because of its devotion to the forwarding of shipments adaptable or suitable to movement by water. In the circumstances, we are unable to conclude that transfer of the operating rights would be in the public interest.

We find that the proposed transfer has not been shown to be consistent with the public interest and the national transportation policy, and that the application should be denied.

An appropriate order will be entered.

285 I. C. C.

No. FF-137 (SUB-No. 3) 1

CENTRAL STATES FREIGHT SERVICE, INC.,
EXTENSION-NEW ORLEANS

Submitted March 16, 1955. Decided May 9, 1955

Extension of applicant's service as a freight forwarder of commodities generally, when consigned for export, from points in Colorado, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Montana, Nebraska, New Jersey, New York, North Dakota, South Dakota, Wisconsin, and Wyoming, to New Orleans, La., found to be consistent with the public interest and the national transportation policy. Third amended permit and order issued. David Axelrod for applicant.

Harry C. Ames, Eugene T. Liipfert, James W. Wrape, Louis I. Dailey, and Arthur P. Sommers for protestants.

REPORT OF THE COMMISSION

DIVISION 4, COMMISSIONERS JOHNSON, ELLIOTT, AND TUGGLE BY DIVISION 4:

Exceptions to the report proposed by the examiner were filed by Universal Carloading & Distributing Co., Inc., and by Acme Fast Freight, Inc., and applicant replied. The exceptions and requested findings not discussed in this report nor reflected in our findings or conclusions have been considered and found not justified.

By application filed June 7, 1954, under the provisions of section 410 of the Interstate Commerce Act, Central States Freight Service, Inc., of Chicago, Ill., seeks a permit authorizing extension of its present service to include the forwarding of commodities generally, when

2

1 This report also embraces for the purpose of giving effect to the determination herein, No. FF-137, Central States Freight Service, Inc., Freight Forwarder Application, No. FF-137 (Sub-No. 1), Central States Freight Service, Inc., Extension-Wisconsin, and No. FF-137 (Sub-No. 2), Central States Freight Service, Inc., Extension-Michigan.

'Pursuant to second amended permit and order issued August 17, 1950, in Nos. FF-137, FF-137 (Sub-No. 1), and FF-137 (Sub-No. 2), applicant is authorized to operate, in interstate commerce, as a freight forwarder of commodities generally (1) between points in Montana, North Dakota, South Dakota, Minnesota, Colorado, Iowa, Kansas, Missouri, Nebraska, New Mexico, Oklahoma, Texas, and Wyoming, on the one hand, and points in Connecticut, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New York, New Jersey, Ohio, Pennsylvania, Rhode Island, Tennessee, Vermont, and the District of Columbia, on the other, (2) between points in Illinois and Wisconsin, on the one hand, and points specified in (1), on the other, (3) between points in Illinois, on the one hand, and points in Wisconsin, on the other, and (4), when consigned for export, from points in Michigan to points in the Port of New York district as defined in 42 Stat. 174 and indicated on the map appended to the order of March 26, 1941, in Ex Parte No. 140, Determination of The Limits of New York Harbor and Harbors Contiguous Thereto.