Refrigeration Discount Corp. v. Turley

• Decision Date: 25 November 1940
• Docket Number: 34187
• Court: Mississippi Supreme Court
• Parties: REFRIGERATION DISCOUNT CORPORATION v. TURLEY

198 So. 731

189 Miss. 880

REFRIGERATION DISCOUNT CORPORATION v. TURLEY

No. 34187

Supreme Court of Mississippi, Division B

November 25, 1940

APPEAL from the chancery court of Washington county, HON. J. L WILLIAMS, Chancellor.

Suit by the Refrigeration Discount Corporation against G. W. Turley to recover an indebtedness allegedly due on installment contract notes which had been assigned to the complainant as a finance corporation, wherein the complainant prayed for the appointment of a receiver. From a judgment in favor of the defendant, the complainant appeals. Judgment reversed, and cause remanded for further proceedings.

Reversed and remanded.

Ernest Kellner, Jr., of Greenville, for appellant.

The trial court erred in holding that a receiver should not have been appointed and in revoking the appointment of the receiver.

A reference to the various decisions, upon motions for the appointment of receivers, shows that each case has been made to depend upon its own peculiar features and throws but little light upon any new case, except so far as they establish the general principles, which are: That the plaintiff must show, first, either that he has a clear right to the property itself; or that he has some lien upon it, or that the property constitutes a special fund to which he has a right to resort, for the satisfaction of his claim. And secondly, that the possession of the property by the defendant was obtained by fraud; or that the property itself or the income arising from it, is in danger of loss from the neglect, waste, misconduct or insolvency of the defendant.

Griffith's Chan. Practice, sec. 467.

The elements necessary to sustain the appointment of a receiver are clearly shown by the proof in this case. There was an independent suit by appellant against appellee for an admitted indebtedness of approximately $ 3, 000; the indebtedness was secured by property in the possession of and under the control of the appellee which was being sold by him for cash and under contracts without properly accounting therefor; other property was involved under contracts sold and guaranteed to appellant by appellee securing approximately $ 7, 000; the security for the fixed and contingent liability of appellee to appellant of approximately $ 10, 000, which was also secured by his written guarantee of the contracts evidencing the same, was placed in imminent danger of loss and damage by the neglect and insolvency of appellee.

The trial court erred in holding that the appellant was doing business in the State of Mississippi contrary to Section 4140, Mississippi Code 1930.

In the conduct of his business the appellee sold two kinds of commercial paper to the appellant, to-wit, what were called "direct accounts" and "floor plan" or "trust receipt" paper, and entered into a contract with the appellant whereby the appellee undertook to collect for the appellant certain accounts called "meter accounts."

Out of the great mass of cases on the question of what constitutes doing business within the meaning of statutes fixing the terms and conditions upon which foreign corporations may do business in a state, it clearly appears that the question is largely one of fact to be determined by the circumstances of each particular case, and it is generally held that, to constitute doing business within the meaning of statutory provisions forbidding corporations from doing business in a state until they have complied with the statutory requirements, there must be the doing of some of the works or the exercise of some of the functions for which the corporation was created.

Wiley Electric Co. of Jackson v. Electric Storage Battery Co., 167 Miss. 842, 853; Marx & Bensdorf, Inc., v. First Joint Stock Land Bank, 178 Miss. 345.

With reference to the direct accounts, the appellant, never having maintained an office, agency, or agents in the State of Mississippi for the purchase thereof, purchased the contracts, without any obligation or understanding so to do in Detroit, Michigan, and the contracts, to which the appellee was a party, provided that they were payable in Detroit, Michigan, and that the appellee was not the agent of the appellant to collect the monies thereunder or for any purpose whatsoever. This did not constitute doing business in the State of Mississippi.

Dodds v. Pyramid Securities Co., Inc., 165 Miss. 269.

The rule there announced by this court is in accord with the general rule which is stated in 12 R. C. L. 72, as follows: "In many cases the doctrine has been enunciated that, even though a corporation enters into a contract relating to property situated within a state, it is not doing business therein if the contract is consummated outside of the state, and hence is not required to comply with, nor is it bound by, the statutory regulations or restrictions generally applicable to foreign corporations attempting to do business therein, it being determined that such statutes were not intended to affect such cases, nor to change the rules of comity that have always been observed by the courts of the several states. Thus, it has been held that the taking of a chattel mortgage on a piano that is within the state does not constitute the transacting of business. Nor, it has been held, does a building and loan association, having its office in the state of its domicile, where under its constitution and by-laws its business must be conducted, all payments made, and all contracts passed upon, by making a loan in another state to a citizen thereof, through its agent therein, and taking a mortgage on land therein as security, do business therein within the meaning of a statute requiring the registration of foreign corporations, since in such case the contract is made and to be performed at the domicile of the corporation. Similarly, a corporation of one state does not carry on business in another state by discounting a note sent to it from the other state."

There are two lines of authority as to the legal effect of the transaction which is generally referred to as "The Trust Receipt as Security. " In many states it is held that a trust receipt is a chattel mortgage and will not prevail against a bona fide purchaser for value without notice unless recorded. This seems to be the majority holding in the various courts. A very interesting discussion of the courts adhering to this view will be found in the decision of the circuit court of appeals, second circuit, in an opinion delivered by Justice Hand, in the case of In Re A. E. Fountain, Inc., 282 F. 816.

The holding in other courts, including this court, is that a trust receipt is a conditional sale of the property covered by the trust receipt, and will prevail against a purchaser of the property, with or without notice, whether recorded or not, except in cases where the maker of the trust receipt is a trader or merchant engaged in the business of selling the character of property covered by the trust receipt and the holder of the trust receipt either expressly or impliedly authorizes the sale of the property in the trade or business of the maker of the trust receipt.

Burkhalter v. Mitchell et al., 107 Miss. 92; Mitchell v. Williams, 155 Miss. 343; U.S. Motor Truck Co. v. Securities Co., 131 Miss. 664; Poss-Meehan Brake Shoe Foundry Co. v. Pascagoula Ice Co., 72 Miss. 608, 18 So. 364; Hunter v. Crook, 93 Miss. 812, 47 So. 430.

Under the well-settled rule in our state it is indisputable that the purchase by the appellant of the several notes and trust receipts of the appellee was, in each instance, a conditional sale of the property covered by the trust receipts consummated in Detroit, Michigan, where the appellant purchased the same.

In this case the appellant requested the First National Bank to act for it in the execution and transmission of the trust receipt papers of the appellee which did not become a completed contract between the appellant and the appellee until the same were received by the appellant in Detroit, Michigan, and the appellant was under no duty or obligation to accept the same, and, if accepted became a Michigan contract. This clearly did not constitute doing business in Mississippi.

Saxony Mills v. Wagner et al., 94 Miss. 233; Union Cotton Oil Co. v. Patterson, 116 Miss. 802.

The activities of the agents of the appellant in the State of Mississippi were all for the purpose of realizing on contracts or accounts which the appellant had theretofore purchased outside the State of Mississippi and under the decisions of this court did not constitute "doing business" in the State either in contemplation of our privilege tax statute or in contemplation of the statute invoked by the appellee in this case.

Gully v. C. I. T. Corp., 168 Miss. 268; North American Mortgage Co. v. Hudson et al., 176 Miss. 266; C. I. T. Corp. v. Stuart, 185 Miss. 140.

Wynn, Hafter & Lake, of Greenville, for appellee.

The chancellor was manifestly right in dissolving the receivership which he had ordered on an ex parte petition and without notice to the appellee. It is our opinion, considering all of the testimony in the record, that the chancellor could have had four causes for revoking the receivership, any of which would be sufficient to sustain our position on this appeal. (1) The appellant totally failed to prove any grounds warranting the apointment of a receiver for Mr. Turley's business. (2) That there was no debt due the appellant by the appellee at the time of the appointment of the receiver. (3) That if any debt was owed by the appellee to the appellant that the suit was prematurely brought. (4) That the appellant was a foreign corporation and was doing business in Mississippi without qualifying and in violation of the Mississippi statute so providing.

We agree...