Etowah Min. Co. v. Wills Valley Min. & Mfg. Co.

• Decision Date: 23 April 1895
• Citation: 17 So. 522,106 Ala. 492
• Court: Alabama Supreme Court
• Parties: ETOWAH MIN. CO. v. WILLS VAL. MIN. & MANUF'G CO. ET AL.

17 So. 522

106 Ala. 492

ETOWAH MIN. CO. v. WILLS VAL. MIN. & MANUF'G CO. ET AL.

Supreme Court of Alabama

April 23, 1895

Appeal from chancery court, Etowah county; S. K. McSpadden Chancellor.

Action by the Wills Valley Mining & Manufacturing Company and other creditors against the Etowah Mining Company, a corporation W. M. Nixon, trustee, and another, and petition to appoint a receiver. From a ruling of the chancellor affirming an order of the register without notice appointing a receiver defendant corporation appeals. Reversed.

Denson & Burnett and Pritchard & Sizer, for appellant.

Goodhue & Sibert, for appellees.

COLEMAN J.

On the 14th day of March, 1894, complainants, as creditors of the Etowah Mining Company, filed their bill in the chancery court against the Etowah Mining Company, a corporation, W. M Nixon, trustee, and M. L. Robinson, and at the same time upon petition the register appointed a receiver without notice. The respondents appealed to the chancellor from the order of the register appointing a receiver. The present appeal was taken from the ruling of the chancellor confirming the appointment of the receiver by the register. The appellees contend that the jurisdiction of the chancellor on appeal from the register was only appellate, and that it was not permissible for the appellant to introduce any evidence other than that upon which the register acted. This contention was demonstrated to be unsound, and not tenable, in the case of Heard v. Murray, 93 Ala. 127, 9 So. 514. On appeal to the chancellor, the question came before him as on original petition, after notice, and was determined by him on its merits. He had authority to extend the time of hearing, and to grant either party leave to file additional affidavits, or admit other competent evidence of any character, bearing on the issue. The question before us is whether the discretion reposed in the court to appoint a receiver, under all the circumstances, was judiciously exercised. The Etowah Mining Company is a private corporation, organized for the benefit of its stockholders and no others, and its chief purpose was to make money for the owners of the stock. On the 29th day of July, 1893, some seven or eight months previous to the filing of the bill, the Etowah Mining Company conveyed to W. M. Nixon by deed of trust all of its effects, consisting of real and personal property, choses in action, rights and interests, which included a lease of mining lands for a period of five years, with the right to elect a renewal for a period of five additional years, upon certain conditions, and, if not renewed, the leased property was to be returned, with covenants and obligations on the part of the lessors to pay for permanent improvements placed upon the leased property and certain designated personal property. The trustee, Nixon, was invested with full power to manage, control, sell, improve, continue, or cease the mining business as to him might seem best for the benefit of the creditors of the Etowah Mining Company and its owners. His powers were very extensive. Complainants in their bill do not impeach the validity of the deed of trust. We presume from the averments of the bill, and from written argument of counsel for appellees, that they claim to be beneficiaries in the deed of trust and entitled to the benefit of its provisions.

The bill charges that the Etowah Mining Company is insolvent; and charges the trustee with waste, mismanagement unskillfulness, collusion with M. L. Robinson, a sister, in recognizing as due her a simulated claim, and also the recognition of a debt claimed to be due E. M. Nixon for $15,000; and, in a general way, without facts, avers that the trustee is insolvent. The bill does not pray for a dissolution of the corporation, or for a sale of its property for the payment of claims due its creditors. It contemplates a continuance of the business, apparently for an indefinite time, but instead of being operated by a trustee, as provided in the deed of trust, it is to be operated by the court, through a receiver. The Wills Valley Mining & Manufacturing Company, one of the complainants, is also a corporation. It became a creditor in this way: The original lessors, five in number, transferred and conveyed to the Wills Valley Mining & Manufacturing Company their title and interest in the mining lands leased to the Etowah Mining Company and their interest in the lease. The lessors are the stockholders of the Wills Valley corporation. If it owns any other property or has any business to perform other than to collect the royalty from the Etowah Mining Company, for the stockholders who were the lessors, it is not disclosed. These facts do not appear in the bill of complaint, but are made manifest in the answer of the respondents to the bill and ex parte affidavits, which were before the chancellor for his consideration. By the provisions of the lease, the lessee agreed to pay monthly a royalty of 10 cents per ton, for five years, and after that time, if it elected to continue the lease for another period of five years, 15 cents per ton. Ordinarily a creditor's interest is best served by the condemnation and sale of his debtor's property, and its appropriation to the payment of his claims. This, at least, is the only legal ground upon which creditors of a private business corporation can ask that property be taken from the possession of its owner, and placed in the hands of a receiver. A few days before the filing of the bill W. M. Nixon, the trustee, gave notice to the lessors that the Etowah Mining Company, the lessee, declined to elect to continue the lease, and that on the 18th of March, 1894, he would surrender the lease and property, and would demand payment from the lessors, for the improvements and property, as stipulated in the lease contract. The lessors' contention is that the first five years expired in November, 1893, and that by holding over until March, 1894, the lessee had made its election, and was bound for the additional period of five years and the increased royalty. We do not think a construction of the provisions of the lease necessary to determine the question of the appointment of a receiver. The other creditors have not the same interest involved in the continuance of the lease as the stockholders of the Wills Valley Mining & Manufacturing Company. The only interest of the former is in securing the payment of their present accrued, claims. We know of no principle of law which justifies a court of chancery to take possession of property admitted to be that of a private corporation, whether conveyed to a trustee or not, merely for the purpose of running its business indefinitely through a receiver, to realize an income for...