Birmingham state herald. (Birmingham, Ala.) 1895-1897, 1897-01-31

as to manufacturing corpora tlonS, in FL
deity ms. Co. VS.. Shenandoah Iron Co.
AZ Fed Rep. 372 and in Bank VS.. Shenan-
doah Co. IS Fed. Rep. 436. In Cook on
stockholders, section 861, p. 1402, it is said
the rule lis extraordinary" and does not
apply to manufacturing companies" The
principle is criticised as to its applica-
ton In railroad cases, and 1t is held that
1t plainly impadrs the obligation of the
mortgage contract by the following en-
tnent texts: Wait on InSolvent Corpora
tons, sec. 280-1; Reech on Receivers,
secs. 391-393; High on Receivers, sec.
1894 a; Jones on Corporate Bonds, sec. 555.
Surely the rule ought not TO be extended
by adjudications of a court, as 1t has been
in the case before us, in the face of such
high authority, and in defiance of the OBJ
legation of contracts.
. If the equitable right exist as an alb
stract right, the parties themselves can
come into the courts and insist upon its
protection, and need not wait for the
bondholder or mortgage. That / have not
ovefstated the position of this court may
be seen by reference to the case of Mer-
chants Bank vs. Moore, ct al, II SO. Rep
704, which the present opinion and deci-
sion of the court declares to be unsound
In that case, there was no question of a
bondholder or prior lien claimed by con-
tract. A general creditors bill was filed
on behalf of all creditors and a decree
rendered, which declared a conveyance
made by the defendant In favor of certain
creditors to be a general assignment for
the like benefit of all creditors. The de-
PENDANT debtor had been engaged in saw
ing and planning lumber for a market,
mere private business concern. 1t was
not continued or asked to be continued
as a going concern" Moore, ct al,
filed their petition in which they claimed
that the company was indebted to them
for labor and materials, which entered
into the permanent improvement OF
bYa xuhi hod
for the benefit Of creditors and which
fact petitioners asserted gave them a pri-
ority over the other general creditors.
There was no claim of priority by vir-
tue of any contract or statutory lien,
but the contention was based purely and
solely upon the one fact, that their labor
and materials entered into the perma-
nent improvement of the property. This
court held that these facts did not en-
title them to a priority over the other
creditors. Certainly this has been the
uniform holding of this court under like
circumstances from it's organization, and
now 1t is proposed to declare different
principles and annul long established rule
of parties contracting on personal credit,
and lay down the new rule that labor per-
formed or materials furnished which en-
ter into the Improvement OF property,
creates a perfect equity which entities
that class of creditors to a priority over
other creditors, without regard to the
TERMS OIL the contract OF PROVISIONS Oh
statutes. The very Improvements may
have been the basis OF credit, and the
credit given without any notice or knowl-
edge of the existence of claims for labor
or material. The writer of the opinion
in the case of Merchants Bank VS..
Moore, supra, did not at the time sup
pose there was any conflict between that
case and that of Ta1lassee county, "a, Ala
567, and after a careful denomination,
believes it to be demonstrable beyond
reasonable controversy, that there is no
conflict upon any issue involved and de-
cided in these cases. In the case of the
Tallassee Manufacturing company there
were three different creditors who ap-
pealed from the decree of the chancery
court to this court, Lehman Bros, Clop-
ton, ct al, and Stone & Clopton.
Lehman Bros. appealed upon the
grounds that the chancery court
held that they were not bona fide holders
of certain bonds which were in their
hands as collateral security, and that
Lehman Bros. & Co. were not entitled
was no contest between the bondholders
and mortgages, and Clopton ct al. On
the contrary, the bondholders acceded to
the claim of Clopton ct al. and consented
so far as they were concerned, to the
granting of the payment of this claim
The claim of Stone & Clopton, was for the
allowance of attorneys fees out of the
general fund, not covered by any mort
gage. The chancery court disallowed
this claim. The other claim was that of
Clopton. Goldthwaite ct al. and arose from
the following facts. The Tallassee Manu-
featuring company was financially press
ed and unable to raise money 1t had
hypothe Gated certain cotton which was
needed for manufacturing purposes. 1T
was at that time a "going concern" In
order to release the cotton and get pos
session of it, for the use and benefit of
the company, with the consent of the
trustees and assignees, and with the I'M
dersta nding had with these parties that
they were to be repaid as appears from
the pleadings, these parties, upon their
individual responsibility, raised the
money for the purpose of releasing the
cotton. There was no litigation in the
case whatever between the bondholders
and mortgages on the one hand, and
other creditors, but the contest was solely
between general creditors, the petitioners
as such claiming priority of payment over
other unsecured creditors, upon the facts
stated, just as in the case of Bank VS..
Moore, supra, out of the property or pro-
ceeds of property, not covered by any
mortage or lien. 1t was conceded
throughout the opinion. and by all the
creditors, that the bondholders were en-
titled to everything covered by their
mortgage, and the opinion of the court
was careful to keep separate not only the
property itself covered by the mortgage.
but the income from this source, so far as
it could be separated from the income
derived from property not mortgaged for
the benefit of the bondholder The
phase of the litigati ton applicable to the
case under consideration, arose only be-
tween unsecured creditors as to their
rights in the property and the Income
from property not included In the mort
gage Clopton. Goldthwaite ct al. claim
ed that the face gave them a preference
over the other unsecured creditors, as to
the properly not included in the mort
gage. They set up no claim to property
covered by the mortgage. The chancery
court denied their right to any pref
erence whatever. This ruling was af-
.firmed on appeal. The one or other of
the two conclusions follows-ether, that
the claim of Clopton, Goldthwaite ct al.
was not claim similar to that preferred
by Moore ct al. in Merchants Bank VS..
Moore, supra, or If 1t was similar then
the decision of this court affirming the
decision of the chancery court, which
had denied and refused to decree prior
ity to petitioner, is directly in harmony
with the case of Merchants Bank VS..
Moore, and directly at variance with the
new doctrine. On the other hand, If the
\ ola i'm of CIopton GOldtn waite ct al was