Toxaway Hotel Company v. J. L. Smathers & Company

From the facts certified it appears that the Toxaway Hotel Company was, in May, 1905, duly incorporated under the laws of Georgia. Among the purposes of the company, as stated in the application for incorporation, were these: 'to conduct hotels for the accommodation of the public,. . . to keep, manage, conduct, and carry on the business of running hotels, cottages, inns, and restaurants, with their usual and necessary adjuncts, including the running of billiard and pool rooms, bowling alleys, buying and selling liquors and tobacco in all their forms, conducting and leasing news and book stands; baths of all kinds, to conduct livery stables, operating farm and fish hatcheries, to run omnibuses and transfer lines, together with all other pursuits incident to the operation of hotels.' The company acquired and operated six hotels, situated in a thinly populated part of the mountains of western North Carolina, having an aggregate capacity of 750 guests. These were carried on from March, 1905, until October, 1906, when an assignment was made. Within four months after such assignment, creditors filed a petition seeking to adjudicate the corporation a bankrupt, as having been 'engaged principally' in trading and mercantile pursuits. It contested adjudication, and averred that it was not a corporation subject to involuntary proceedings, as it had not been principally engaged either in 'trading' or 'mercantile pursuits,' but was a hotel company, and, as such, was not one of the class of corporations specified in the 4th section of the bankrupt act, as amended.

The material facts as to the character of the business done by this corporation are these:

'That the business done by the corporation at these hotels during the first season, from March to October, 1905, as shown by the receipts, amounted to $119,171.36; and that done during the second season, from January 1st to October 1st, 1906, as shown by the receipts, amounted to $127,136.01.

'That during 1905, and until June, 1906, the said corporation did no other business than conducting hotels, excepting the cultivation of a small farm connected with one of the hotels, for the purpose of supplying vegetables and garden truck.

'That in June, 1906, said corporation acquired and began conducting two country stores,-one located at Toxaway Inn and the other at Lake Sapphire and Fairfield Inn. In these stores were kept stocks of general merchandise, such as is usually carried in country stores; to wit, dry goods, groceries, notions, hats, caps, clothing, a small assortment of hardware, flour, meal, meat, feed, etc., the average value of each stock being from three to four thousand dollars.

'The said hotels were located in a thinly settled section of the mountains of North Carolina, quite a distance from any town; that the stores furnished the hotels from their stocks, and also with such produce and other things necessary for the hotels as came into the stores, and they also sold goods and merchandise to people generally; and also bought and sold some tan bark. That from two thirds to three fourths of the goods handled by these stores went as supplies to the hotels on orders from the stewards of the hotels, and the remainder were sold generally, principally to employees of the corporation, and also to the people at large. That the business of the hotels and the stores was kept without separation in one set of books. The corporations also kept a bar in the Toxaway Inn, at which liquors were sold exclusively to the guests, and had a number of boats and launches on the lakes at Taxaway Inn and at Fairfield, which it hired to patrons when called for.

'That said corporation employed about 130 persons in and about the hotels, and 4 persons in and about the stores.'

Upon these facts the bankrupt court adjudicated the corporation bankrupt. An appeal was allowed to the circuit court of appeals, and the question certified as to whether, upon the facts stated, this hotel company is subject to the provisions of the bankrupt act, and liable to be adjudicated a bankrupt.

Messrs. Theodore F. Davidson, Louis M. Bourne, John M. Slaton, Ben Z. Phillips and Haywood Parker for Toxaway Hotel Company.

[Argument of Counsel from pages 441-444 intentionally omitted]

Mr. Julius C. Martin for J. L. Smathers & Company.

[Argument of Counsel from pages 444-445 intentionally omitted]

Mr. Justice Lurton, after stating the facts, delivered the opinion of the court: