In re Tennessee River Coal Co.

• Decision Date: 21 September 1912
• Docket Number: 1,412.
• Citation: 206 F. 802
• Parties: In re TENNESSEE RIVER COAL CO.
• Court: U.S. District Court — Eastern District of Tennessee

206 F. 802

In re TENNESSEE RIVER COAL CO.

No. 1,412.

United States District Court, E.D. Tennessee, Southern Division.

September 21, 1912

Brown Spurlock & Brown, of Chattanooga, Tenn., for trustee.

Chas C. Moore, of Chattanooga, Tenn., for interveners.

SANFORD District Judge.

This petition is brought by the petitioners to review an order of the Referee dismissing the original and amended petitions filed by them in which they claimed priority as secured creditors under a deed of trust, termed in the record a mortgage, wherein the bankrupt conveyed certain real estate and other property in Tennessee to secure an issue of bonds. The petitions setting up the lien claimed under this mortgage were answered by the Nashville, Chattanooga & St. Louis Ry Co. in the name of the Trustee in Bankruptcy, pursuant to leave granted by the Referee. Various defenses were set up in this answer, among others, that this mortgage was executed and recorded in Tennessee before the bankrupt, which was a New York corporation, had recorded or filed its charter in the office of the Secretary of State of Tennessee, as required by law, and that during the interval of about seven months between the date of the mortgage and the date the charter was recorded in Tennessee, the bankrupt had a resident agent in Tennessee and was engaged in developing the property covered by the mortgage in erecting buildings, opening mines and doing other acts constituting a doing of business in Tennessee.

The Referee being of opinion that as the mortgage had been executed and recorded in Tennessee before the charter of the bankrupt was recorded in the office of the Secretary of State, it was, under the laws of Tennessee, void, without passing upon the other defenses raised by the answer, ordered and adjudged that the intervening petitioners were not secured creditors and had no lien or priority against the property described therein, and dismissed their original and amended petitions with costs; and the present petition was thereupon filed to review this order.

The mortgage in question is dated June 1, 1909. It was executed by the bankrupt, a New York corporation, to the Windsor Trust Co., another New York corporation, as trustee. The Referee in his opinion, which is handed up with his certificate, does not find either the date or place of its execution or delivery, nor by whom it was recorded or caused to be recorded in Tennessee, nor that the bankrupt prior to the time its charter was recorded in the office of the Secretary of State had a resident agent in Tennessee or was actually engaged in carrying on business therein, nor where the bonds were sold or negotiated; nor do any of these matters appear from any of the testimony incorporated in the Referee's opinion or cited in the briefs of counsel. (See former rule 82 of this court; new rule 45, cl. 7.)

The mortgage, however, shows on its face that it was acknowledged by the officers of the bankrupt and of the trustee, in the city of New York, on July 12 and 13, 1909; and further that it was executed to secure the payment of bonds payable at the office or agency of the bankrupt in the city of New York. It was recorded in Tennessee on July 21, 1909.

Sections 2 and 3 of the Tennessee Act of 1891, c. 122, p. 264, as amended by sections 1 and 2 of the Act of 1895, c. 81, p. 123 (Shannon, Secs. 2546, 2547), provide:

'That each and every corporation created or organized under, or by virtue of, any government other than that of this state, for any purpose whatever, desiring to own property or carry on business in this State, of any kind or character, shall first file, in the office of the Secretary of State, a copy of its charter;' and 'That it shall be unlawful for any foreign corporation to do business, or attempt to do business, in this state without first having complied with the provisions of this chapter; and a violation of this statute shall subject the offender to a fine of not less than $100.00 nor more than $500.00, in the discretion of the jury trying the case.'

After careful consideration I am constrained to hold that the mere fact that the bankrupt, a foreign corporation, is shown to have executed and delivered to another foreign corporation a mortgage conveying property in this state, which was acknowledged in the State of which such two corporations were residents, and was given to secure an indebtedness payable in such other State, is not sufficient to render such mortgage void under the provisions of the Tennessee Acts above quoted, even though it appears that such mortgage was subsequently recorded in Tennessee.

1. Even though a foreign corporation has not complied with the provisions of a domestic statute requiring its charter to be filed or recorded before it shall engage in business within the State, a contract entered into by it is presumed not to have been made in violation of law, and even though the contract be one in reference to property within the State, in order to render it void, it must be made affirmatively to appear that the contract was entered into within the State. Railway Co. v. Fire Assoc'n, 55 Ark. 163, 173, 18 S.W. 43; White River Lumber Co. v. Improvement Assoc'n, 55 Ark. 625, 626, 627, 18 S.W. 1055; Friend v. Gin Co., 59 Ark. 86, 93, 26 S.W. 374. Thus in White River Lumber Co. v. Improvement Assoc'n, supra, it was held that a foreign corporation which had not complied with the provisions of the Arkansas statute prescribing the conditions under which foreign corporations might do business in the State, could nevertheless recover the rents due under a contract for the lease of land situated in the State, as it did not appear that the lease had been entered into within the State. The court said:

'Now it is not alleged in the complaint or answer, nor shown by the proof admitted or that excluded, that the contract sued on was made in this State or in the course of business done here; for aught that appears it may have been made in a foreign State in the course of a business lawfully done there, and in the absence of a showing the law will not imply facts disclosing the illegality of the contract. If it was lawfully made abroad, there is nothing in the laws of this state to preclude a recovery upon it in our courts. The prohibition relied upon is against doing business here, and not against doing business abroad that relates to property here. And the making of a lease abroad and taking an obligation for the rent is not doing business here within that prohibition, although the demised premises are in this State. The law was designed to regulate corporations that come within the State to transact business with its citizens, and not such as might be found and dealt with abroad.'

In the case at bar there is not only no presumption that the...