Alabama Nat. Bank v. Mary Lee Coal & Ry. Co.

• Decision Date: 16 January 1896
• Citation: 19 So. 404,108 Ala. 288
• Court: Alabama Supreme Court
• Parties: ALABAMA NAT. BANK v. MARY LEE COAL & RAILWAY CO. ET AL.

19 So. 404

108 Ala. 288

ALABAMA NAT. BANK v. MARY LEE COAL & RAILWAY CO. ET AL.

Supreme Court of Alabama

January 16, 1896

Appeal from city court of Birmingham; W. W. Wilkerson, Judge.

Bill by the Alabama National Bank against the Mary Lee Coal & Railway Company and another. From a decree sustaining a demurrer to the bill, complainant appeals. Reversed.

The bill in this case was filed by the appellant, the Alabama National Bank, against the appellees, the Mary Lee Coal &amp Railway Company and the Mercantile Trust & Deposit Company of Baltimore. The bill alleged that the Mary Lee Coal &amp Railway Company, on the 15th of March, 1889, and on the 10th day of July, 1890, respectively, executed two deeds of trust of all of its property then and to be acquired thereafter to the Mercantile Trust & Deposit Company of Baltimore, Md., to secure certain bonds therein described, copies of said deeds of trust being attached to the original bill; that, after the execution of said deeds of trust, the said Mary Lee Coal &amp Railway Company, going on in business, and using its personal property-its coal, coke, iron, and debts-as its own, without accounting to said trustees, the Mercantile Trust & Deposit Company, became indebted to the Alabama National Bank in the sum of $1,754.58, as set forth in the second paragraph of the bill. It was further averred, in the bill, that on the 28th day of November, 1893, the said Mercantile Trust & Deposit Company of Baltimore, Md., as trustee in said mortgages heretofore referred to, filed a bill in the city court of Birmingham, Ala. (No. 1,666, on the equity side thereof) against the said Mary Lee Coal & Railway Company, praying for the appointment of a receiver to take possession of and hold, not only the property covered by said deeds of trust or mortgages, but all the other property of said Mary Lee Coal & Railway Company, and asking for an injunction against said Mary Lee Coal & Railway Company, and all persons claiming to act by, through, or under it, and all other persons, to restrain them from interfering with said receivers taking possession of and managing said property. The said Mercantile Trust & Deposit Company of Baltimore, Md., further prayed, in said bill, for the payment of certain unsecured creditors out of the property of said Mary Lee Coal & Railway Company for debts contracted prior to said receivership, to the exclusion of other and equally meritorious debts owing by said company. "Complainant avers that, immediately upon the filing of said bill, the said Mary Lee Coal & Railway Company, on the same day of the filing of said bill, filed a short answer, which complainant is informed and believes was prepared by the same attorneys who prepared the original bill, in which answer said company, while not admitting the allegations of said bill (that portion of the prepared answer being erased), consented to the appointment of receivers 'until some arrangement can be made with its creditors, and its financial embarrassment removed, so as to enable it properly to conduct its operations.' Complainant avers that, upon the filing of said answer, and upon the same day, a decree was rendered, by consent of said Mary Lee Coal & Railway Company, appointing J. Bernard Scott and J. A. Montgomery receivers of said company, directing them to take charge 'of all and singular the mortgaged premises specified and described in the deeds of trust referred to in the complainant's bill'; all the books, papers, and records of said company; all and singular the stock, tools, machinery, engines, and all other property, of every kind and description, of said company, wherever situated,-and that thereupon the said receivers did take charge of all the property of said Mary Lee Coal & Railway Company." Complainant further averred: That when said receivers took charge of all the property of said Mary Lee Coal & Railway Company, among other property the said Mary Lee Coal & Railway Company had on hand, which was taken charge of by said receivers, was 24 1/2 tons of pig iron at Gadsden, Ala.; also, 980 tons of coal at the mines of said company in Jefferson county, Ala.; also, 1,120 tons of coke at the ovens of said company in Jefferson county, Ala. That said Mary Lee Coal & Railway Company also had, at the time of the appointment of said receivers, and which was taken possession of by said receivers under said decree appointing them as aforesaid, a large number of debts due said company, aggregating $43,506.01, more particularly described on the books of said company, which said books are hereby referred to for a more particular description of said debts. "Complainant avers that it is advised, and therefore charges and avers, that said property described in this paragraph is not covered by said mortgages or deeds of trust heretofore mentioned." Complainant averred that the said Mercantile Trust & Deposit Company of Baltimore, Md., as trustee, had no right, as trustee, or otherwise, to take possession of said property; that it took possession of said property, through said receivers, for the reason that said suit was a friendly suit, for the purpose of holding off the unsecured creditors of said Mary Lee Coal & Railway Company, for the purpose of shielding the property from levy and attachments and executions, and for the purpose of hindering, delaying, and defrauding the creditors of the Mary Lee Coal & Railway Company; that the said Mercantile Trust & Deposit Company of Baltimore, Md., knew that the said Mary Lee Coal & Railway Company owed a large number of unsecured creditors; that it conspired with said company to procure the appointment of said receivers for the purpose of covering up said property not covered by said deeds of trust or mortgages, in order to hinder and delay said unsecured creditors in the collection of their debts "until some arrangements" could be made with them and "its" (Mary Lee Coal & Railway Company's) "financial embarrassment removed," as is stated in the answer of the said Mary Lee Coal & Railway Company in said cause. Complainant further averred that said suit of the Mercantile Trust & Deposit Company against the Mary Lee Coal & Railway Company, filed in the city court of Birmingham, on the 28th of November, 1893, was filed for the purpose of shielding the property of the said Mary Lee Coal & Railway Company not covered by said deeds of trust or mortgages from the unsecured creditors, and that the said Mary Lee Coal & Railway Company procured the bringing of said suit, and consented to the appointment of said receivers to shield itself, according to its own admission in the answer filed in said case, from its unsecured creditors, until such time as it could make proper arrangements with them. "Your orator avers the tying up of the property of the said Mary Lee Coal & Railway Company not covered by said deeds of trust from the claims of your orator and the other unsecured creditors. Your orator refers to said bill and exhibits thereto, filed by said Mercantile Trust & Deposit Company, against the Mary Lee Coal & Railway Company, in the city court of Birmingham (case No. 1,666 on docket of said court), on November 28, 1893, on the equity side thereof, and also to the answer filed in said court in said case by the said Mary Lee Coal & Railway Company on the same day; also, the decree of the court appointing said receivers, and the reports of said receivers in said case, and makes them a part of this bill by reference to the same, as far as may be necessary for the purposes of this suit." Complainant further averred that, all of said Mary Lee Coal & Railway Company's property being in the hands of said receivers in said case, and complainant being enjoined from interfering with said property, it has no remedy at law to collect its said debt. In an amendment to the original bill, it was further averred that, if it should be construed that all of said property described in the fifth paragraph of said bill was covered by said deeds of trust or mortgages mentioned in the fourth paragraph of said bill, said personal property and proceeds thereof, hereinafter described, was left in possession of the said Mary Lee Coal & Railway Company, with authority to use, sell, and otherwise dispose of it as its own, without accounting to the said trustee in said deeds of trust or mortgages; that said property was allowed to remain in the possession of said Mary Lee Coal & Railway Company, at the time of the appointment of said receivers mentioned in said original bill, and the proceeds of personal property left in the possession of said Mary Lee Coal & Railway Company after the giving of said mortgages or deeds of trust, with the power of disposition by said Mary Lee Coal & Railway Company, without having to account for the same to the said trustee in said mortgages or deeds of trust; "that said property and the proceeds of said property consisted, so far as complainant is informed, of 24 1/2 tons of pig iron at Gadsden, Ala., 980 tons of coal at the mines of said Mary Lee Coal & Railway Company in Jefferson county, Ala., 1,120 tons of coke at the ovens of said company in Jefferson county, Ala., also a large number of debts due to said company, aggregating $43,506.01, more particularly described on the books of said company, which are hereby referred to for a more particular description of said debts, which said books are now in the possession of said receivers. Complainant is advised, and therefore avers, that, if it should be construed by the court that said deeds of trust or mortgages covered said property above described, then said deeds of trust or mortgages, so far as said property is concerned, are fraudulent and void as to the creditors of the said Mary Lee Coal & Railway Company. Complainant avers that, in giving said...