Drennen v. Mercantile Trust & Deposit Co.

• Decision Date: 05 January 1897
• Citation: 23 So. 164,115 Ala. 592
• Parties: DRENNEN ET AL. v. MERCANTILE TRUST & DEPOSIT CO. [1]
• Court: Alabama Supreme Court

23 So. 164

115 Ala. 592

DRENNEN ET AL. v. MERCANTILE TRUST & DEPOSIT CO. ^[1]

Supreme Court of Alabama

January 5, 1897

Appeal from city court of Birmingham; Henry A. Sharpe, Judge.

Bill by the Mercantile Trust & Deposit Company against the Mary Lee Coal & Railway Company to foreclose a mortgage. Drennen &amp Co., assignees of defendant's employés, intervened seeking to have the claim for labor declared a preferred lien. From a judgment for plaintiff, interveners appeal. Reversed.

Coleman and Head, JJ., dissenting.

Hewitt Walker & Porter, for appellants.

Alex T London and John P. Tellman, for appellee.

McCLELLAN J.

The Mary Lee Coal & Railway Company having made default in the payment of the interest on its bonded indebtedness, the trustee in the mortgages executed by said company to secure its said indebtedness, seasonably after such default made, filed a bill in the city court of Birmingham praying the appointment of a receiver, "with full power and authority to demand, sue for, collect, receive, and take into his possession the goods, chattels, rights, credits, moneys, and effects, lands, tenements, books, papers, and property, belonging to the said Mary Lee Coal & Railway Company, and that said receiver may receive from the said court, in addition to the ordinary powers possessed by such receivers, full power and authority to manage, run, and operate said property; and to carry out any and all contracts that said company may have made, and to renew the same, connected with the conduct of their business, and especially the contract with T. G. Bush, receiver; if essential thereto, to pay to the said Bush, receiver, any indebtedness which may now be due him; and to preserve and protect the corporate franchises, privileges, and property; and to preserve the corporate existence of the said company; and to preserve all corporate property from being sacrificed under any proceeding which can or may be taken, and would be likely to prejudice or sacrifice the same; and that an injunction may issue against the said defendant company, and all persons claiming to act by, through, or under it, and all other persons, to restrain them from interfering with the said receiver's taking possession of and managing the said property." The further prayer of the bill is for the ascertainment of the mortgage indebtedness, principal and interest; a decree requiring the defendant to pay the same by a short day, to be named by the court; and, in default of such payment, for a decree that said company, and all other persons claiming under it, be absolutely barred and foreclosed of and from all right of equity of redemption in and to said premises, and for a decree directing the sale of the whole mortgaged premises for the payment of said bonded indebtedness, and the interest thereon, etc. The premises embraced in the mortgages, and for which a receiver and sale are thus prayed, consisted of a coal mine and plant, complete, coking ovens, and a railway, in Jefferson county. The railway was six or seven miles in length, built primarily, it may be admitted, for the development, and to be used in the working, of defendant's said mine; but defendant's charter, which authorized the construction and operation of this railway, required that defendant should transport persons and the property of others upon it, so that as to this road the defendant corporation was a common carrier. A receiver was appointed in accordance with the prayer of the bill, and took possession of all the property and effects of the respondent corporation. The bill was filed and the appointment made on November 28, 1893. On February 20, 1894, Drennen & Co. filed a petition in the cause, which, as finally amended, presents the following averments: That the defendant, the Mary Lee Coal & Railway Company, is indebted to petitioners in the sum of $14,697.52, including interest to time of filing the petition, and that all this indebtedness had accrued during the months of August, September, October, and November, 1893. That, as shown by the bill, said defendant owned and operated a coal mine, coke ovens, and a railway in Jefferson county at the time of the appointment of the receiver under said bill, and that the defendant had carried on these operations for six months prior to such appointment, and that the company then owed a large amount of back wages to its employés and operatives, a great part of which was due to them for work and labor done in said mine, and in and about said coke ovens and railway. That the amount alleged to be due petitioners from said company is a part of such back wages due by defendant to its said employés and operatives for work and labor done and performed for the defendant during the months of July, August, September, October, and November, 1893, and that the books and accounts of petitioners, showing the said amount alleged to be due them, have been compared and checked over with the books and accounts of the defendant, which are in the possession of the receivers in the cause, and both sets of books and accounts agree as to said amount due the petitioners. That the work done by said employés and operatives during said months consisted in part in digging and mining and shipping coal, in keeping said mine in operation, and in preparing said coal for shipment, and that about $8,947.52 of the amount due petitioners was for this work; in other part, to the extent of about $750 in value, in operating and repairing defendant's said railroad; and for the rest, to the extent of about $5,000, in operating and repairing said coke ovens, and in preparing coke for shipment to market. And that all said work was necessary to enable the defendant to carry on its business, and was done for the benefit of the complainant in the cause, and to preserve the property and franchises of the defendant embraced in the deeds of trust to the complainant. That petitioners have been informed, and believe, and so state, that there was due to the defendant at and before the time of the appointment of the receiver the sum of about $40,000, for coal and coke sold by the defendant, which had been taken from said mine and manufactured in said ovens; that said $40,000 represented gross earnings of the defendant, into which the labor of said employés and operatives entered, and that they performed work and labor in mining said coal and in manufacturing said coke. That defendant was, and had been for a year or more prior to the appointment of the receiver, a corporation duly organized under the general laws of Alabama, and as such had power to condemn land for railroad purposes, and to operate its said railroad as a common carrier, and did so operate it. And that petitioners, for value, purchased from said employés and operatives their claims against the defendant, aggregating said sum of $14,697.52, and said claims were duly transferred and assigned to them before the appointment of said receiver. The following is the prayer of this petition: "*** That your honors will take jurisdiction of this petition, and that a day be fixed or set for the hearing of the same, and that such notice as is required by law and the rules of your honors' court be given or served upon the parties to this cause, and that upon the hearing of this, their petition, your honors will render a decree declaring or establishing the said claim of the petitioners a prior and preferred claim to and over said mortgage or deeds of trust of complainant, and that the said receiver be required to pay said claim of petitioners out of the first moneys that come into his hands over and above what shall be necessary to pay the running and operating expenses of said property. Petitioners ask and pray for all other, and such other, orders and decrees as may be necessary in the premises." The petition is verified; one of the petitioners making oath that its allegations and statements made of his own knowledge he knows to be true, and those made upon information and belief he believes to be true. To this petition the complainant in the cause interposed a demurrer, assigning numerous grounds of objection to its sufficiency. The assignments chiefly relied on may be summarized as follows: (1) That the petition fails

to show that the Mary Lee Coal & Railway Company is a railroad corporation. (2) That the petition fails to show that the receiver has any money in his hands subject to the payment of petitioners' claim, or that complainant or the bondholders ever received any moneys that should have been paid to the petitioners, or that they were ever paid anything on their bonds after the accrual of the claims of petitioners, or that the security afforded by said mortgages was enhanced or improved in value by the rendition of the services referred to in the petition. (3) That the petition fails to show that the Mary Lee Coal & Railway Company ever diverted any of its gross earnings from the payment of its running expenses, either for the improvement or betterment of its said railroad or other property, or for the payment of interest on any of the bonds secured by said deeds of trust, or any of the other charges secured by either of said deeds. And there are other assignments, based on the grounds above stated, going separately to the particular claims of petitioners for work, etc., done on the railroad, on the coke ovens, and in manufacturing and shipping coke, and in the mine, severally. These need not be further set out at this place. The city court sustained complainant's demurrer, and dismissed the petition, and from that decree petitioners prosecute this appeal.

The equitable doctrine whereby employés of railway corporations which have passed into the hands of receivers on bills for foreclosure, and the like, filed by or in behalf of the...