Voightman & Co. v. Southern Ry. Co.

• Decision Date: 19 November 1910
• Citation: 131 S.W. 982
• Parties: VOIGHTMAN & CO. et al. v. SOUTHERN RY. CO. et al.
• Court: Tennessee Supreme Court

131 S.W. 982

VOIGHTMAN & CO. et al. v. SOUTHERN RY. CO. et al.

Supreme Court of Tennessee.

November 19, 1910.

Appeal from Chancery Court, Knox County; Henry R. Gibson, Special Chancellor.

Insolvent proceedings to wind up the affairs of the Oliver Sollitt Company. From a decree assigning priority to the Chicago Lumber & Coal Company, a creditor of the insolvent corporation, it appeals; and from a decree allowing a claim of the Chicago Lumber & Coal Company as a lien on a fund paid into court by the Southern Railway Company, certain creditors of the insolvent corporation appeal. Affirmed in part, reversed and entered in part, and remanded for further proceedings.

Shields, Cates & Mountcastle, for Pittsburgh Plate Glass Co. and all general creditors. Maynard & Lee, for Converse Bridge Co. Cornick, Wright & Frantz, for Chicago Lumber & Coal Co. Jourolmon, Welcker & Smith, for Southern Ry. Co.

NEIL, J.

This is an insolvent proceeding instituted in the chancery court of Knox county to wind up the affairs of the Oliver Sollitt Company, a foreign corporation doing business in Tennessee. The general course of the litigation in the court below was satisfactory to the parties concerned, and nothing is presented on this appeal except the action of the chancellor on two claims filed by the Chicago Lumber & Coal Company. The first of these is for the sum of $3,023.98. This was allowed in the report of the master as a claim, and as entitled to priority of satisfaction out of the amount due the Oliver Sollitt Company from the Southern Railway Company after the satisfaction of certain liens. Exception was filed to this action of the master by other creditors, and the exception was sustained by the chancellor, and the priority of satisfaction disallowed. From this action the Chicago Lumber & Coal Company has appealed to this court and assigned errors.

The claim to priority of satisfaction was based upon a bill which the Chicago Lumber & Coal Company filed in the chancery court of Knox county on the 30th day of October, 1907, against the Southern Railway Company and the Oliver Sollitt Company, wherein it was sought to attach certain funds alleged to be due the latter from the former. The Oliver Sollitt Company had a contract with the Southern Railway Company to build certain structures on its grounds at Knoxville. At the time of the filing of the attachment proceedings the railway company, as subsequent accounting showed, was indebted to the Oliver Sollitt Company in a sum much more than sufficient to satisfy the demand sued on. On November 4, 1907, the general creditors' bill was filed, and a receiver appointed. Thereafter the bill of the Chicago Lumber & Coal Company was consolidated with the general creditors' bill.

It is insisted in behalf of the Chicago Lumber & Coal Company that, when its attachment was levied, the Oliver Sollitt Company was a going concern. This is denied by the objecting creditors. They insist that prior to the filing of the bill of the Chicago Lumber & Coal Company there had been an overt act of insolvency on the part of the corporation, indicating such an assured insolvency as converted the assets of the corporation into a trust fund for the benefit of all creditors within our authorities upon that subject, viz.: Memphis Barrel, etc., Co. v. Ward. 99 Tenn. 172, 42 S. W. 13, 63 Am. St. Rep. 825; Smith v. Bradt Printing Co., 97 Tenn. 351, 37 S. W. 10; Tradesman's Publishing Co. v. Car Wheel Co., 95 Tenn. 634, 32 S. W. 1097, 31 L. R. A. 593, 49 Am. St. Rep. 943; McClaren v. Roller Mill Co., 95 Tenn. 696, 35 S. W. 88; Bank v. Lumber & Mfg. Co., 91 Tenn. 12, 18 S. W. 400; Smith v. St. Louis M. L. Ins. Co., 6 Lea, 564; same case, 3 Tenn. Ch. 502; Leipold v. Marony, 7 Lea, 128; Comfort v. McTeer, 7 Lea. 652-660; Moseby v. Williamson, 5 Heisk. 278; Marr v. Bank of West Tennessee, 4 Cold. 471.

There are several tests indicated in these cases for the purpose of fixing the period, or point of time, when the assets of the corporation are converted into a trust fund for creditors. One of these tests is that it has permanently ceased to do business, or to exercise its franchises.

The facts shown in the present case are that on the 23d day of October, 1907, the Oliver Sollitt Company was forced to cease doing business upon all of its operatives refusing to work and leaving its service, because it would not pay them for their work. Its failure to pay arose from the fact that it did not have funds and could not procure them. Sufficient funds were owing on the work which had been done for the Southern Railway Company, if due. The latter company refused to pay, because the work had not been completed according to contract. The Oliver Sollitt Company insisted that the work had been done properly. There were four buildings which the Oliver Sollitt Company had undertaken to construct. One of these, the smallest, had been finished. Two others were clearly unfinished. As to the main building, called "No. 1," the machine shop, that was substantially finished; but the railway company insisted it was not wholly finished. The record is not in a condition to enable us to settle this phase of the controversy, because all of it has not been sent up to us; parts having been selected by counsel applicable to that subject. However, this is immaterial. The main point is that, from whatever cause, the Oliver Sollitt Company had in fact ceased work on the 23d of October. There was no employé present on the work, except Mr. Garvey, and he was there only to watch the building and to receive notice of suits which were being brought against the company by the operatives and other creditors. The evidence shows that the company was wholly insolvent. Under these facts, we think the property was a trust fund, and could not be attached by any creditor so as to give him priority.

It is said that this was a foreign corporation, and that the evidence shows that it had other contracts at Mobile and Birmingham, Ala., and perhaps in other states, and that we cannot know what assets there may be in other states. It is sufficient to say that it is not the duty of the court to inquire into this matter. We must deal with the foreign corporation as we find it here Smith v. St. Louis M. L. Ins. Co., supra; Leipold v. Marony, supra.

We think there was no error in the decree of the chancellor upon this branch of the case.

The second demand presented by the Chicago Lumber & Coal Company is for $13,831.70, alleged to be the price of a bill of lumber furnished to the Oliver Sollitt Company for use in the construction of the new machine shop, referred to supra as "Contract No. 1." There was a bill filed by the Chicago Lumber & Coal Company on the 31st of October, 1907, in which it was alleged that this sum was a lien upon the property, rights, franchises, roadbed, etc., of the railway company and seeking to enforce said lien. An attachment by garnishment was also levied upon the indebtedness alleged to be due from the Southern Railway Company to the Oliver Sollitt Company to further secure the amount claimed. This suit was likewise consolidated with the insolvency proceeding, and a report made upon this claim by the master. He reported it as a lien both upon the road and the fund, the latter by virtue of the attachment, and the former by virtue of the furnisher's lien. The other creditors excepted to the report. The objections urged were that the Chicago Lumber & Coal Company had taken two notes in settlement of the demand, indorsed by Oliver Sollitt personally, and had thereby waived and lost the lien, if any ever existed, and particularly because the maturity of the notes fell upon a day later than the expiration of the 90 days in which by statute the lien could be fixed by notice upon the property; also that the last item in the bill was furnished March 5, 1907, while the notice claiming the lien was not given until September 10, 1907, or more than 90 days thereafter; also that merely by attaching the money due from the Southern Railway Company to the Oliver Sollitt Company the claimant waived the lien on the property, and that this attachment upon the fund could not be maintained because at and before the levy was made the Oliver Sollitt Company had been guilty of an overt act of insolvency, which converted all of its assets into a trust fund for the benefit of its creditors.

The ineffectiveness of the attachment or the fund is fully shown by what we have said upon the first demand filed by the Chicago Lumber & Coal Company. We need add nothing to what is there said. Moreover, in the view we take of the case, it is unnecessary to refer to any other of the objections made, except that pertaining to the date on which the last item on the bill was furnished.

The Chicago Lumber & Coal Company insists that the last item was furnished June 14, 1907, and that this was within 90 days of the date when the notice of lien was given, September 10, 1907.

The solution of this matter depends upon the following facts which are proven on the record; that is to say: The last item of the bill, as originally ordered and contracted for by the Oliver Sollitt Company, was furnished by the Chicago Lumber & Coal Company on the 5th day of March, 1907. However, after the material was in, the inspector of the Southern Railway Company having oversight of the construction objected to 65 pieces "designed for us in the construction of the roof of the machine shop," because in his judgment they were defective, and thereupon the Oliver Sollitt Company notified the Chicago Lumber & Coal Company of the fact, and ordered other pieces of the same kind to take the place of the alleged defective pieces. The Chicago Lumber & Coal Company replied to the effect that the pieces it had formerly sent were such as had been ordered of it by the Oliver Sollitt Company, and therefore it would not remit any of the price charged therefor, but that it would send 48 new pieces, for which it...