Knoxville Iron Company v. Harbison

In the chancery court of Knox county, Tennessee, Samuel Harbison, a citizen of said state, on June 2, 1899, filed a bill of complaint against the Knoxville Iron Company, a corporation organized under the laws of the state of Tennessee, alleging that he was the bona fide holder by purchase in due course of trade of certain specified accepted orders for coal that had been issued by the defendant company in payment of wages due to its employees; that he had made due demand for their redemption in cash according to law, which demand had been refused; and that he was entitled to a decree for the amount of said orders, with interest. The company filed an answer denying that the complainant was a bona fide holder of the orders in question, and alleging an agreement between the company and its employees that the latter would accept coal in payment of said orders, etc.

Proof was taken and the case heard by the chancellor, who rendered a decree in favor of the complainant for $1,702.66 as principal and interest of said orders, with costs. An appeal was taken by the defendant company to the court of chancery appeals of Tennessee, an intermediate court of reference in equity causes, where the decree of the chancery court of Knox county was affirmed.

The facts as found by the court of chancery appeals are as follows:

'The defendant is a corporation chartered under chapter 57, Acts of 1867-68. The following powers are given by § 4: 'To purchase, hold, and dispose of such real estate, not to exceed 70,000 acres, leases, minerals, iron, coal, oil, salt, and personal property as they may desire, or as they may deem necessary for the legitimate transaction of their business; to mine, bore, forge, smelt, work, and manufacture, transport, refine, and vend the same. The company to have and enjoy and exercise all the rights, privileges, and powers belonging to or incidental to corporations, which may be convenient to carry out any business they are in this act authorized to engage in.'

'The defendant has its principal office at Knoxville, where it is engaged in the manufacture of iron. As an incident to this business it also mines and sells coal. Its mines are located in Anderson county. It works about 200 employees. It has now and has had for many years a regular pay day, being that Saturday in every month which is nearest the 20th day of the month. Upon this pay day each employee is paid in cash the amount then due him, excepting what may be due him from the first of the month, up to said pay day; that is, the company keeps in arrears with its employees all the time to the extent of their wages for about twenty days' time, so far as concerns the matter of cash payments, but they may collect this sum and all sums that may be due them in coal orders, as stated below. It does not and will not pay cash to its employees for wages at any other time than upon said regular pay days. Defendant, however, nearly always has on hand in its Knoxville yard a large amount of coal which it sells to all persons who are willing to purchase, whether such persons are its laborers or the public generally. For some time prior to the filing of the bill and at the time the bill was filed the defendant was and had been accustomed to accept from its laborers, after work had been performed, orders for coal in the following form:

"Let bearer have _____ bushels of coal and charge to my account.

"________ ________.'

'The defendant's employees are accustomed to sign orders, and in this form they are accepted by a stamp in these words:

"Accepted _____ 1899.

"Knoxville Iron Company.'

'Many of the defendant's employees have never drawn an order on the defendant, and many others have used them only in the purchase of coal for themselves; but the defendant in this way pays off about 75 per cent of the wages earned by its employees. Many of the employees who draw these orders get small wages, 90 cents to $1.20 per day, and sell these orders to get money to live on, but those who get the largest wages, $65 to $175 per month, draw more of such coal orders in proportion than do those who get small wages. Defendant has never insisted upon any of its laborers giving any such orders, but has been willing to accept such orders when any employee would draw them and ask their acceptance. Defendant, however, sets apart every Saturday afternoon, from 1 o'clock to 5 o'clock, for the acceptance of such orders. It makes some profit in accepting said orders in that, instead of paying the wages of its employees in cash, it pays them in coal at 12 cents per bushel, and also, to some extent, its coal business is increased thereby. On the other hand, such orders are a convenience to the defendant's employees in the way of enabling them to realize on their wages before the regular monthly pay day and up to that pay day. When these orders are drawn by defendant's employees and accepted, defendant credits itself with said orders on its accounts with the persons so drawing them at the rate of 12 cents per bushel for the amount of coal called for by said orders. There is no proof of an express agreement between the defendant and its employees that the orders should be paid only in coal, unless the face of the order shall be construed as setting forth such an agreement. The only proof of any implied agreement to that effect is to be found in such inferences as may be drawn from the face of the orders and from the custom of the company to issue them and the employees to receive them on other than the regular cash pay days and the fact that no employee has ever presented one of such orders for redemption in anything else than coal. There is no proof of any compulsion on the part of the defendant upon its operatives, except in so far as compulsion may be implied from the fact that unless defendant's operatives take their wages in coal orders they must always on each monthly pay day suffer the defendant to be in arrears about twenty days; that is, that on the regular pay day on that Saturday which is the nearest the 20th of the month, the defendant will not pay wages except up to the last day of the preceding month, but will pay in coal orders the whole wages due at the end of each week, and that such is the course of business between the defendant and its employees. The complainant purchased 614 of said accepted orders from defendant's employees, and within thirty days from the issuance of each of said orders he presented each of them to the Knoxville Iron Company, defendant hereto, and demanded that it redeem them in cash, which was refused by defendant. Complainant is a licensed dealer in securities, and sent his agents among the employees of the defendant to buy these coal orders. They had previously been selling at 75 cents on the dollar,-that is, before the passage of chapter 11, act of 1899-but he instructed his agents to give 85 cents on the dollar, and the orders now in suit were purchased at that price. They amount in dollars and cents to $1,678. There is no evidence of bad faith on the part of the complainant in the purchase of said orders.'

The orders sued on in this case were issued after the passage of the act of March 17, 1899.

From the decree of the chancery court of appeals an appeal was taken by the company to the supreme court of Tennessee, by which court the decrees of the courts below were affirmed. The case was then brought to this court by a writ of error allowed by the chief justice of the supreme court of Tennessee.

Messrs. E. T. Sanford, Cornelius E. Lucky, and James A. Fowler for plaintiff in error.

Mr. John W. Green submitted the case for defendant in error, and Mr. Samuel G. Shields was with him on the brief.

Mr. Justice Shiras delivered the opinion of the court: