Citizens'& Marine Bank v. Mason

• Decision Date: 21 October 1924
• Docket Number: 2242.,No. 2232,2232
• Citation: 2 F.2d 352
• Parties: CITIZENS' & MARINE BANK OF NEWPORT NEWS, VA., et al. v. MASON (two cases). In re TAKA-KOLA BOTTLING CO., Inc.
• Court: U.S. Court of Appeals — Fourth Circuit

2 F.2d 352 (1924)

CITIZENS' & MARINE BANK OF NEWPORT NEWS, VA., et al. v. MASON (two cases) In re TAKA-KOLA BOTTLING CO., Inc.

Nos. 2232, 2242.

Circuit Court of Appeals, Fourth Circuit.

October 21, 1924.

R. M. Lett, of Newport News, Va. (T. Gray Haddon, of Richmond, Va., on the brief), for petitioners and appellants.

W. J. Henson, of Roanoke, Va. (Jackson & Henson, of Roanoke, Va., and Alfred Anderson, of Norfolk, Va., on the brief), for respondent and appellee.

Before WOODS, WADDILL, and ROSE, Circuit Judges.

WADDILL, Circuit Judge.

These proceedings involve the validity of a lien for an indebtedness due appellee for supplies furnished the Taka-Kola Bottling Company, the bankrupt herein, to be used in its business, and for which it is claimed under the Virginia statute the appellee is entitled to a prior lien on the franchises, gross earnings, and real and personal property used in operating its plant, superior to that of the appellants and petitioners, who hold liens secured by trust deeds upon the bankrupt's property.

The supply lien was claimed under section 6438 of the Code of Virginia 1919, which at the time of furnishing the supplies was in effect, but which as to supplies furnished mining and manufacturing companies has since been repealed. Acts of Assembly Va. 1922, p. 13, February 11, 1922; Pollard's Supp. to Code of Virginia 1922, p. 489.

Appellants and petitioners assail the validity of the claim as one entitled to a lien, because the statute under which the same is sought is alleged to be unconstitutional, and because the bankrupt company is neither by its charter, nor in what it did, a manufacturing company within the meaning of the act.

The referee, upon full consideration of the questions raised, adjudged the lien to be invalid, and the holder thereof to be only an unsecured creditor against the bankrupt's estate. Upon application to the District Court to review the ruling of the referee, that court by its order entered on the 6th of March, 1924, reversed the action of the referee, and held that the section of the Code in question was invalid only as to deeds of trust executed prior to its date, and that the bankrupt company was a manufacturing company as defined by the act, and decreed in favor of the appellee as a preferred lienholder for the amount of its debt, and entitled to priority over the trust deeds executed subsequent to the passage of the act awarding a lien, on the 13th of January, 1920, from which action this appeal is taken.

Three questions arising upon the record are presented for our consideration, which are aptly set forth in the assignments of error, viz.: That the Taka-Kola corporation by its charter was not such a company as was authorized to do a manufacturing business within the purview of section 6438 of the Code; that the business conducted by it was not a manufacturing business, nor were the supplies furnished for which the lien is claimed such as the statute authorized a lien for; and that the act under which the lien is claimed was void because in violation of section 10 of article 1 of the Constitution of the United States, as impairing the obligation of contract. These will be considered in the order named.

First. The charter of the company will be looked to to ascertain its powers. It provides as follows: "To do a general bottling business, selling at wholesale or retail, and dispensing soft drinks, and to own mineral springs or wells, and to dispense, job and sell water of all sorts."

It will be conceded that the corporation is a creature of the statute, and is limited to the authority granted in its charter, which is required to be recorded as well in the office of the state corporation commission as in the clerk's office of the city or county of the home office of the company. This recordation is required to the end that the public may be advised of the authority of the corporation to do business.

The Supreme Court of the United States, in considering the authority of corporations, aptly states the same as follows:

"We take the general doctrine to be in this country, though there may be exceptional cases and some authorities to the contrary, that the powers of corporations organized under legislative statutes are such and such only as those statutes confer. Conceding the rule applicable to all statutes, that what is fairly implied is as much granted as what is expressed, it remains that the charter of a corporation is the measure of its powers, and that the enumeration of these powers implies the exclusion of all others." Thomas v. Railroad, 101 U. S. 71, 80, 82, 25 L. Ed. 950; Clark on Corporations, p. 67; 2 Fletcher on Corporations, § 783, and cases cited.

Persons dealing with corporations whose charters are duly recorded, are charged with knowledge of the limitations and restrictions contained therein. Radford Water & Power Co. v. Dunlap, 128 Va. 658, 674, 105 S. E. 257. A careful examination of the charter of this company, as bearing upon its authority to do business, gives but little support to its being a manufacturing company, within the intent and meaning of section 6438, under which the claim is made. Counsel for appellee frankly concedes in argument that the real question in this case turns upon whether the bottling business, as usually conducted, is a manufacturing business. We can but feel that considering its charter in the light stated, and having due regard to just what the actual business so far as bottling carbonated water consisted of, there is but little to give color to the claim that the provision in the charter made the bankrupt company a manufacturer within the spirit and meaning of the law.

Second. Considering the question of whether or not the business conducted was in point of fact a manufacturing business, and the supplies furnished such as the statute authorized a lien for, the statute itself and the fact of just what supplies were furnished, and what was done in connection with the bottling business, becomes material. The statute is briefly as follows:

"Sec. 6438. Lien of Employees, etc., of Transportation Companies, etc., on Franchises and Property of Company. — All conductors, brakemen, engine drivers, firemen, captains, stewards, pilots, clerks, depot or office agents, storekeepers, mechanics, traveling representatives or laborers, and all persons furnishing railroad iron, engines, cars, fuel, and all other supplies necessary to the operation of any railway, canal, or other transportation company, and all clerks, mechanics, traveling representatives, and other persons who furnish their services, labor or supplies to any mining or manufacturing company, * * * shall have a prior lien on the franchises, gross earnings, and on all the real and personal property of said company which is used in operating the same to the extent of the moneys due them by said company for such wages or supplies, and no mortgage, deed of trust, sale, hypothecation, or conveyance executed since the first day of May, eighteen hundred and eighty-eight, shall defeat or take precedence over said lien. * * *"

The facts found are as follows:

"The materials supplied by the Columbia Chemical Corporation to the bankrupt were in the form of syrups. The bankrupt company, after diluting the syrup thus supplied, poured it into the bottles and sold it in that form.

"The process used by the bankrupt in diluting and carbonating the syrup was as follows:

"The carbonic gas was bought in tubes and the gas therefrom discharged into plain cold water, sweetened with sugar and thoroughly mixed with it. A portion of the syrup was then poured into the bottle and the bottle then filled with this carbonated water. It was then crowned and kept cool for the purposes of sale. In this process considerable machinery was used, especially in the processes of washing and crowning the bottles. A refrigerating machine was used for cooling purposes. Another machine was used in mixing the gas and water and putting the mixture into the bottles.

"The same materials which were furnished by the Columbia Chemical Corporation for use by the bankrupt company, were also furnished to sundry soda fountains. These same syrups were diluted and mixed at the soda fountains with the same character of carbonic gas, cooled and supplied for drinking purposes out of the glass instead of out of the bottle as furnished by the bankrupt. The same materials were used and the same result produced, except that the drink in one case is poured into the bottle and the other in the glass.

"It further appeared in evidence that after the plant in Norfolk was built and established, at a later date than the place at its home office in Newport News, the bankrupt made a practice, for a part of its business, of buying from the wholesale houses ingredients in packages, upon each of which packages there was a formula by which the ingredients could be mixed in a barrel, and, after being stirred about with a wooden paddle, could be used in the same manner as the syrup furnished by the Columbia Chemical Corporation. This process was used in about half of the business in the Norfolk plant, after it was started in the year 1920."

Respecting the statute itself, it may not be amiss to note that as originally drawn, it applied only to railroads, canals, and other transportation companies, and that by subsequent amendment, mining and manufacturing companies were added. The word "supplies" has now been omitted from the act, so far as mining and manufacturing companies are concerned. The Legislature, in placing railroad, canal, and other transportation companies and mining and manufacturing companies all in one section, plainly had in mind corporations extensive in character, and at least those actually and chiefly so engaged, and not such as might incidentally, from a technical viewpoint, be engaged partially in manufacturing something used, or capable of being used in connection with the business in hand....