89-006162 Terrell Oil Company, Inc. vs. Department Of Transportation Status: Closed Recommended Order on Thursday, May 17, 1990.

Summary: Petitioner qualified for certification as minority business enterprise. Petitioner qualified as a regular dealer.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

TERRELL OIL COMPANY, )

)

Petitioner, )

)

vs. ) CASE NO. 89-6162

)

DEPARTMENT OF TRANSPORTATION, )

)

Respondent. )

__________________________________)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly

designated Hearing Officer, K. N. Ayers, held a public hearing in the above-

styled case on March 27, 1990, at Tampa, Florida.

APPEARANCES

For Petitioner: John J. Chamblee, Jr., Esquire

202 Cardy Street

Tampa, Florida 33601

For Respondent: Vernon L. Whittier, Jr., Esquire

605 Suwannee Street

Tallahassee, Florida 32399-0458

STATEMENT OF THE ISSUES

Whether Petitioner qualifies for certification as a Minority Business

Enterprise.

PRELIMINARY STATEMENT

By letter dated November 1, 1989, Terrell Oil Company (TOC), Petitioner,

requested an administrative hearing to contest the denial of its application for

certification as a Minority Business Enterprise. By letter dated October 24,

1989, the Department of Transportation (DOT), Respondent, notified TOC that its

application for certification had been denied. As grounds for the denial, DOT

alleged that the minority owner did not exercise control over the firm, and the

firm does not appear to be an independent business entity. Further, DOT alleged

TOC does not meet the definition of "regular dealer", and the firm failed to

provide information requested by DOT.

At the hearing, Petitioner called five witnesses, Respondent called two

witnesses, one of which had been called by Petitioner, and 27 exhibits were

admitted into evidence.

Proposed findings were timely submitted by Respondent. Those proposed

findings are generally accepted. Proposed findings not included herein were

deemed immaterial to the conclusions reached.

FINDINGS OF FACT

1. Terrell Oil Company (TOC) was incorporated in 1986 with Grady Terrell,

Jr., as president; Richard W. Gilliam and J. Anthony Belcher as board director

members.

2. As of the time of this application, Grady Terrell owned 60 percent of

the stock of the company, Belcher owned 20 percent, Gilliam owned 19 percent,

and Anna Alverez, company secretary, owned 1 percent.

3. The company was started with a $6000 loan made by Grady Terrell, Jr.,

which sum was borrowed from C & S National Bank (Exhibit 16).

4. Grady Terrell, Jr., is a black male and, therefore, designated as a

member of a minority and/or disadvantaged class by statute.

5. Neither Belcher nor Gilliam invested capital in TOC, but received their

stock in the company for services in kind.

6. The By-Laws of TOC provide that all times at least 51 percent of the

stock in TOC shall be owned by "minority individuals" as that term is defined in

state and federal statutes applicable to minority business enterprises or

disadvantaged business enterprises.

7. Several lines of credit obtained by TOC from C & S Bank were guaranteed

by Grady Terrell, Jr. (Exhibits 9-12). No loans to TOC were guaranteed by

anyone else.

8. Anthony Belcher resigned from the Board of Directors of Belcher Oil

Company in 1982 and thereafter served as a consultant for approximately two

years. He has not been affiliated with Belcher Oil Company since that time

(Exhibit 15).

9. Grady Terrell, Jr., executed the lease for the property occupied by TOC

for an office (Exhibit 6).

10. Grady Terrell, Jr., approves all major purchases, all invoices for

payment, and other bills for payment except routine monthly bills for utilities,

vehicle payments, etc., at TOC.

11. In connection with the line of credit with C & S Bank, TOC assigns

most of its receivables to the bank for collection.

12. TOC is involved with bidding on and supplying various agencies of

government (federal, state and local) with petroleum supplies.

13. To make these deliveries, TOC owns two small tank vehicles of 1500 and

2500 gallon capacities, respectively. (The record is unclear whether the 2500

gallon tank vehicle replaced the 1500 gallon truck.) When necessary to deliver

larger quantities than can be hauled in TOC's trucks, a commercial carrier is

utilized. In all cases, however, TOC takes ownership of the oil at the loading

site.

14. TOC entered into a lockbox agreement with Belcher Oil Company in which

Belcher extended TOC a line of credit to purchase petroleum products from

Belcher. An arrangement was made with the bank to establish a special account

into which the customer would remit payment for product delivered and the bank

would credit Belcher's account for the invoice price. This lockbox arrangement

with Belcher has been inactive for several years. At one time, TOC purchased

nearly all of its products from Belcher, but that is no longer true.

15. Richard W. Gilliam is the executive vice-president of Terrell. He

receives no salary from TOC, but is reimbursed for out-of-pocket expenses. He

has the authority to accept bids for the purchase of fuel from dealers and to

execute contracts with purchasers. Gilliam has operated other businesses in the

past and has considerably more experience in business matters than does Grady

Terrell, Jr. However, no evidence was presented upon which a finding can be

made that Gilliam is the person actually running TOC, and Grady Terrell, Jr., is

but a figurehead. It is a fact that Grady Terrell, Jr., is legally in charge

of, and has the authority to, fully direct the operations of TOC.

16. In addition to the tank truck(s), TOC has leased a service station

where three 3000 gallon tanks are located in which TOC can store inventory if

desired. Grady Terrell, Jr., also executed this lease.

17. TOC has been certified as a DBE by several governmental agencies,

including the Defense Logistics Agency who contracts with TOC to deliver

petroleum products to ships in Miami; and certification has been denied by more

than two agencies to which applications were made.

18. No evidence was presented that TOC failed to submit all information

requested by DOT.

CONCLUSIONS OF LAW

19. The Division of Administration Hearings has jurisdiction over the

parties to, and the subject matter of, these proceedings.

20. Section 339.0805, Florida Statutes, provides that not less than 10

percent of the amounts expended from the State Transportation Fund shall be

expended with small business concerns owned and controlled by socially and

economically disadvantaged individuals; and authorizes the DOT to promulgate

rules to certify these small business concerns as minority business enterprises

or disadvantaged business enterprises.

21. Those rules promulgated by DOT upon which the denial of certification

of TOC was based included Rule 14-78.002, Florida Administrative Code, which

provides in part:

(8) "Regular Dealer" means a firm that owns,

operates, or maintains a store, warehouse, or

other establishment in which the materials and

supplies required for the performance of the

contract are bought, kept in stock, and regularly

sold to the public in the usual course of business.

To be a regular dealer, the firm must engage in,

as its principal business and in its own name,

the purchase and sale of the products in ques-

tion. A regular dealer in such bulk items as

steel, cement, gravel, stone, and petroleum

products does not need to keep such products

in stock, if the dealer owns and operates the

appropriate distribution facility. Brokers

and packagers shall not be regarded as regular

dealers within the meaning of these rules.

22. Rule 14-78.005(7), Florida Administrative Code, provides in part:

The ownership and control exercised by socially

and economically disadvantaged shall be real,

substantial, and continuing, and shall go

beyond mere pro forma ownership of the firm,

as reflected in its ownership documents. The

socially and economically disadvantaged owner

shall enjoy the customary risks and profits

commensurate with their ownership interests,

as demonstrated by an examination of the sub-

stance rather than form of financial and

managerial arrangements. In assessing business

independence, the Department shall consider all

relevant factors, including the date the firm

was established, the adequacy of its resources,

and the degree to which financial relationships,

equipment leasing, and other business relation-

ships with non-DBE firms vary from industry

practice.

23. Rule 14-78.007(2), Florida Administrative Code, provides in part:

(8) In order for the additional information to

be considered, the DBE shall return the requested

information to the department within 30 days

after receipt of the request. If the additional

information is not received within 30 days, the

department will process the application with

the information as provided.

24. As noted in the findings above, no evidence was submitted by DOT that

additional information requested was not received, or that lack of information

influenced the determination that TOC did not qualify for certification.

25. The primary, if not sole, reason this application was denied by DOT

was because of the belief that Grady Terrell, Jr., although the majority owner

of the stock in TOC, was not actually running TOC, but that Richard Gilliam was

directing the operations of TOC, and that TOC was closely affiliated with

Belcher Oil Company. The evidence presented will not support such a conclusion.

To the contrary, the evidence was unrebutted that Grady Terrell, Jr., has both

de facto and de lure control over the operations and business activities of TOC.

He is the one guaranteeing repayment of loans made to TOC, the one who approves

the purchase of equipment, the one who approves payment of bills submitted to

TOC, and the one responsible for all business decisions made at TOC. The only

current links with Belcher Oil Company is the use of office space at Belcher Oil

when Terrell is in Miami.

26. Further, Terrell is the only person assuming financial risk in the

operations of TOC. He provided the start-up capital, albeit it from a bank

loan, and he is the only one to obtain loans to TOC from the bank to provide

operational capital.

27. Although TOC does not have facilities at which to store most of the

petroleum products itself, nevertheless TOC qualifies as a regular dealer

because it owns or operates the transportation facility and the product carried

thereon to the purchaser. By owning the product before transferring it to the

buyer, TOC is a dealer and not a mere broker.

28. From the foregoing, it is concluded that Terrell Oil Company, Inc.,

meets all the requirements for certification as a Disadvantaged Business

Enterprise.

RECOMMENDATION

It is recommended that Terrell Oil Company, Inc., be certified as a

Disadvantaged Business Enterprise.

DONE and ENTERED this 17th day of May, 1990, in Tallahassee, Florida.

_________________________

K. N. AYERS

Hearing Officer

Division of Administrative Hearings

The Desoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

[phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 17th day of May, 1990.

COPIES FURNISHED:

John L. Chamblee, Jr., Esquire

202 Cardy Street

Tampa, FL 33601

Vernon L. Whittier, Jr., Esquire

Department of Transportation

605 Suwannee Street

Tallahassee, FL 32399-0458

Ben G. Watts

Secretary

Department of Transportation

Haydon Burns Building

605 Suwannee Street

Tallahassee, FL 32399-0458

Attn: Eleanor F. Turner, MS 58

Robert Scanlan

Interim General Counsel

Department of Transportation

562 Haydon Burns Building

605 Suwannee Street

Tallahassee, FL 32399-0458