Hollins v. Brierfield Coal Iron Company

Statement by Mr. Justice BREWER: The facts in this case are as follows: The Brierfield Coal & Iron Company was incorporated under the laws of Alabama, May 4, 1882. On September 1, 1882, a conveyance was made by the company to Preston B. Plumb, as trustee, to secure an issue of $500,000 in bonds. On July 25, 1887, the trustee, Plumb, requested a further conveyance and assurance, pursuant to a covenant in the deed of September, 1882, which further conveyance veyance was executed by the company on July 29, 1887. On August 1st, he demanded the surrender of all the company's property to him, as trustee. This was done, and he placed John G. Murray in charge, to control and manage it. On August 3d, he filed a bill in the circuit court of the United States for the middle district of Alabama, against the company, joining as defendants certain stockholders, bondholders, and creditors, though not the plaintiffs in the present suit. That bill set out the organization of the corporation, the stockholders, with the amounts of stock subscribed, and the amounts paid upon such stock, and alleged that the subscribers were liable for the unpaid subscriptions, but that the assistance of the court was necessary for the assessment of such sums. It also set out the issue of the bonds, and their present owners, so far as known, a default in the payment of the interest due thereon, the property and indebtedness of the company,-the unsecured indebtedness being aleged to amount to about $2000,000. The bill further averred that up to that time the chief industry of the company had been the manufacturing of cut nails from iron; that, owing to overproduction in the country, this business had become unprofitable to the company, and that it was desired to change the industry from the manufacture of nails to the production of pig iron, and that it had purchased property with a view to carrying on that industry; that it did not have money enough to successfully carry it on. The bill also alleged that the trustee had taken possession, as authorized by the deed of trust; that he could not carry on the business of the company without obtaining money on the credit of the property; and prayed the direction of the court as to whether he should be permitted to borrow such money, and issue certificates of indebtedness therefor. It asked that all creditors of the corporation, and claimants against the estate, be permitted to make themselves parties, and have their claims adjudicated; that a full administration be had of the estate, and, if need be, a foreclosure and sale. Subsequently, Plumb resigned as trustee, and W. L. Chambers was substituted in his place. Proceedings were had in that case, which resulted, on July 8, 1889, in a decree for the foreclosure of the trust deed, and a sale of the property. Nearly three months after the commencement of the Plumb suit, and on October 28, 1887, these appellants, as plaintiffs, filed a bill in the same court, making the coal company and sundry stock and bond holders, together with the trustee Plumb, parties defendant. The plaintiffs were unsecured creditors of the company, having claims contracted in 1886 and 1887, four or five years after the issue of the bonds and execution of the trust deed, who sued on behalf of themselves and all other creditors of the coal and iron company, who were willing to come in and contribute to the expenses of the suit. After setting forth their claims, they alleged that the conveyance to Plumb, as trustee, was absolutely void; that a large amount was still due on the stock. They asked to have a receiver appointed and the property sold in satisfaction of their claims, and that such receiver have authority to collect the unpaid stock subscriptions, to be also applied in satisfaction of their claims. They alleged the pendency of the suit brought by Plumb as trustee, but did not ask to intervene therein. After the decree of foreclosure and sale in the Plumb case, and on July 24, 1889, a final decree was entered, dismissing this bill. From such decree of dismissal, plaintiffs have appealed to this court.

A. T. London and H. C. Tompkins, for appellants.

[Argument of Counsel from pages 374-378 intentionally omitted]

Wm. F. Mattingly and E. W. Petus, for appellees.

Mr. Justice BREWER, after stating the facts in the foregoing language, delivered the opinion of the court.