Bank of Rome v. Haselton

• Decision Date: 30 September 1885
• Citation: 83 Tenn. 216
• Parties: BANK OF ROME et al. v. J. C. HASELTON et al.
• Court: Tennessee Supreme Court

83 Tenn. 216

BANK OF ROME et al.

v.J. C. HASELTON et al.

Supreme Court of Tennessee.

September Term, 1885.

FROM HAMILTON.

Appeal from the Chancery Court at Chattanooga. W. M. BRADFORD, Ch.

BARTON & SON, WHEELER & MARSHALL and CLIFT & BATES for complainants in general creditors' bill.

KEY & RICHMOND and J. A. CALDWELL for Ward & Hamill and others, attacking creditors.

J. B. & T. H. COOKE for Lowe and others.

TOM. FORT for Wason Car & Foundry Company and others.

DODSON & MOON for Weihl.

J. J. MCGLOHON for Musgrove.

INGERSOLL, Sp. J., delivered the opinion of the court.

Within these ten consolidated causes are contained the controversies of about one hundred creditors for priority of satisfaction of their respective demands out of the assets pledged, mortgaged and unencumbered of an insolvent firm of iron-makers. The record presents many questions of substantive law and of procedure, involving the constitutionality of statutes, the validity of mortgages, attachments and pledges, powers and duties of warehousemen, the character and effect of warehouse receipts, and the rights of holders thereof, the nature and requisites of a general creditors' bill, and the course of proceeding thereunder, the understanding of which requires a full statement of the circumstances of the case and an outline of the progress of a very complex proceeding.

In 1877, Haselton & Harris, both then residents of New Jersey, began as partners to operate the “Vulcan Works” at Chattanooga for the manufacture of iron, nails, etc. The business was carried on till May 28, 1880, when the firm failed, and under attachment bills filed in the chancery court at Chattanooga, their mills and property were all placed in the hands of a receiver. The two members of the firm had contributed each $30,000 to its capital. They had purchased the “Vulcan Works” on credit and committed the entire supervision and control of their business to one Stone as their attorney-in-fact and manager. He so conducted and managed the business that at the end of the three years of operation the firm had amassed an indebtedness of more than $300,000, while their assets were about one-third of that sum. The failure is attributed to the shrinkage in value of iron, and the great falling off in sales of the product of their mills in 1880.

The conduct of the business included the purchase of scrap-iron, pig-iron, coal, coke, etc., the puddling and rolling of the iron, the manufacture of nails and spikes, keeping a supply store, and the storing, sale and shipment of the product of the mills and factories, and the other incidents of a large iron manufacturing enterprise. The firm was probably insolvent during the last year of its existence, but by energy and a system of shrewd financiering, manager Stone succeeded in keeping the large business in operation and the firm's credit fair up to the day before the failure, when the partners, on a visit to Chattanooga and conference with him, determined that a longer struggle to keep afloat would be unavailing, and concluded, instead of making an assignment, to let their business and creditors take care of themselves. In the week following May 27, 1880, these ten bills were filed, and all the visible property of the firm was seized for the benefit of the creditors. J. C. Warner and others had filed their bill on May 27 to attach certain property for their debts. But as their priority is conceded, and the proceeds of their sale were insufficient to satisfy their debts, this suit need not be further noticed.

The leading bill in the consolidated causes is that filed by the Bank of Rome, Georgia, the Roane Iron Company, and the First National Bank of Chattanooga, on May 28. It shows an indebtedness of about $6,000 to the Bank of Rome, due and unpaid, and to the other two complainants of about $18,000, of which from $4,000 to $5,000 only, was matured; it alleges that the firm is insolvent, and that the members are non-residents of Tennessee, and reside in New Jersey, and on this ground prays for an attachment; because of their temporary presence in the State personal process is also asked against them; it is further alleged that the closing of the mills and factories would cause great hardship among the employes and their families, and therefore asks for the appointment of a temporary receiver to continue the operation of the mills and factories, as well for the benefit of the creditors as of the employes and the public. There is also a prayer that this bill “may be filed in behalf of themselves and all other creditors of the firm who may make themselves parties to this bill by petition in the nature of or as a general creditors' bill;” and that the attachment inure to the benefit of all such creditors; that their claims be adjudged, and the attached property sold for satisfaction, not only of the debts then due, but also of those thereafter to mature. Before filing the bill a fiat was obtained from the circuit judge for an attachment on a bond of $5,000, and also an order appointing J. C. Warner, on his giving bond in a like sum, receiver of the property. This temporary appointment, before even the filing of the bill, was made, as the order recites, “in view of the particular nature of the case, and for the reasons assigned in the bill.” On the same day subpœna to answer was issued. The defendants acknowledge, by their solicitor, due and legal service of the same. The attachment was duly levied on all the property of Haselton & Harrison at the Vulcan Works, subject to any prior valid legal lien; and the property was turned over to the receiver. The officer did not include in this levy “a large lot of pig-iron, muckbar and manufactured iron” pointed out and claimed by S. B. Lowe as his property.

No order was ever made that the bill be filed or stand as a general creditors' bill, nor was any order of publication made for creditors to appear and file their claims in said cause. Yet on the very day of the filing of the bill, other creditors began to treat it as a general creditors' bill, and filed petitions therein, asking the benefit of the proceeding, and in the next twelve months no less than twelve petitions were filed, embodying the claims of forty or more creditors. One of these, filed on the day after the filing of the bill, assumes the form of an answer and cross-bill, contesting the demands of the complainants, and setting up in favor of the employes an alleged lien for labor on the product of the mills. Of all these petitions only two--those of the Soddy Coal Company and others and Musgrove and others--pray for separate writs of attachment. Such writs were issued and duly levied on the property of the firm, so that these petitioners obtained a distinct status in the case, differing from that of those petitioners who rely solely upon the general attachment sued out by the original complainants in the cause.

On May 31, 1880, some twenty creditors, declining to avail themselves of the offer in the “general creditors' bill,” and accept the benefit of the attachment therein, filed a distinct bill under the style of Ward & Hamill and others against all the parties, complainant and defendant, to the leading bill, and also against one S. B. Lowe, an iron-factor and warehouseman; in which, after reciting the allegations of said leading bill and the proceedings thereunder, they impeach the validity of the appointment of the receiver therein, because made in vacation, without notice or sufficient cause shown; they impeach also the validity of the attachment: First, as to the debts admitted to be not yet due, because the only ground alleged for attachment was the non-residence of the debtors. Second, as to the debt due the Bank of Rome, because the debtor, Hamilton, was not, as alleged in the bill, a resident of New Jersey, but was in fact a resident of Georgia, wherein also said bank had its residence, and it was not charged, as required by statute, that the property of said Harrison or the firm had been fraudulently removed to this State to evade legal process in Georgia. This bill also charges the firm with fraudulent conveyances of its property: First, in making a mortgage of merchandise and other chattels for the benefit of the First National Bank of Chattanooga, and retaining the possession and continuing the sale of the merchandise; second, in placing in the hands of said Lowe hundreds of tons of nails, spikes and bar-iron fraudulently and for the purpose of hindering and delaying their creditors, which property Lowe was aiding them to cover up and conceal by claiming it for himself and others holding his warehouse receipts. This claim of title by Lowe is attached because his warehouses were at the “Vulcan Works,” on the premises of Haselton & Harrison, and because, as alleged, his own debts are, many of them fictitious and fraudulent, his manner of obtaining possession of much of the property was fraudulent, his manner of holding it all was fraudulent; that without registered chattel mortgage he could not hold it; that his warehouse receipts were issued in violation of the statute requiring actual possession, and hence were invalid; and moreover, that the iron was all stored in bulk, so that the various lots could not be separated or identified. Wherefore, they pray for attachment to be levied on all the property in the receiver's hands, and all other property of the firm at the Vulcan Works, including that claimed by Lowe; and that Lowe be enjoined from disposing of any of said property; that they have judgment for their several debts and priority of satisfaction over the creditors in the leading bill.

Moross & Co. and others seek by their bill, filed June 1, to reach especially a debt due to the firm from the Alabama & Great Southern Railway, and for this purpose to set aside an alleged fraudulent and unauthorized assignment of the same by manager Stone to S. B. Lowe.The Wason Car and Foundry Company and others file their bi...