Toxaway Hotel Company v. J. L. Smathers & Company/Opinion of the Court

The act of 1867 [14 Stat. at L. 517, chap. 176] applied to 'all moneyed business or commercial corporations and joint-stock companies.' The present act applies only to such corporations as are 'principally engaged' in certain enumerated kinds of business. That of inn keeping, though as old as civilization, is not specifically enumerated. Unless, therefore, a corporation engaged in the business of hotel keeping is embraced within one or the other of those which are enumerated, it is not liable to an involuntary adjudication.

The contention is that this was a corporation principally engaged in 'trading' or 'mercantile pursuits.'

For the present we shall only deal with the bare question as to whether inn keeping is within a proper definition of 'trading' or 'mercantile pursuits.' The keeping of a bar, cigar and news stand are obviously but ordinary incidents to the main business when conducted within the inn, and primarily for the convenience of guests. The maintenance of a livery and of small pleasure boats for the accommodation of guests may also be accepted as merely incidental to that class of hotels called 'resorts.' The significance of the fact that this company did, in addition to the ordinary business of hotel keeping, engage to a certain extent in an outside trading or mercantile business, will later be considered.

Having thus narrowed the question, we must answer that a corporation engaged principally in running hotels is not a corporation engaged principally in 'trading' or 'mercantile pursuits.' An innkeeper is one who maintains a house for the entertainment of strangers, for a reasonable compensation. To secure this compensation he is given a lien upon the property of his guests within the inn. For this property he is under liability much like that of a common carrier. So long as he has room, he must receive all who may apply and are fit persons. He may not discriminate. To say that he buys and sells articles of food and drink is only true in a limited sense. Such articles are not bought to be sold, nor are they sold again, as in ordinary commerce. They are bought to be served as food or drink, and the price includes rent, service, heat, light, etc. To say that such a business is that of a 'trader' or a 'mercantile pursuit,' is giving those words an elasticity of meaning not according to common usage.

Until changed by a Parliamentary declaration in 1825, act 6, Geo. IV., chap. 16, defining the persons included under the term 'trader,' as used in the bankrupt and insolvency acts, it was held that an innkeeper was not a tradesman. Newton v. Trigg, 1 Shower, 96; Luton v. Bigg, Skinner, 276, 291; Willett v. Thomas, 2 Chitty,

In Luton v. Bigg it was said of an innkeeper: 'He is in the nature of a public person, and his house and occupation a thing of necessity, and his gain does not rise from the victuals which he sells, but from his furniture and attendance.'

In Newton v. Trigg, cited above, it was said: 'An innkeeper cannot set his own prices, but is bound to reasonable prices. A tradesman may sell to whom he pleases. An innkeeper cannot refuse his guest. . . . He doth not get by buying and selling. He gets by the price and hire of his lodgings [also] by the profit or use of his kitchen. The profits from the stables do not arise from the hay only, but from the standing.'

Congress having never by express legislation declared an innkeeper a 'trader,' it must be presumed to have used the word in its well-understood public and judicial meaning, and cases based upon a Parliamentary meaning are not in point. See Hall v. Cooley, 3 % n. y. l/eg. Obs. 282, Fed. Cas. No. 5,928, and Re Cote, 2 Low. Dec. 374, Fed. Cas. No. 3,267, where Judge Lowell, referring to the declaratory act giving a list of occupations which should constitute trading, said that Congress 'had not defined a tradesman, and the question was therefore addressed to the common usage of this country and to the judge's knowledge of his own language.' He defined a tradesman 'as substantially the same as shopkeeper.' In the case styled Re Smith, 2 Low. Dec. 69, Fed. Cas. No. 12,981, the same learned judge adopted the definition of Bouvier, who defines a tradesman as 'one who makes it his business to buy merchandise or goods or chattels to sell again for the purpose of making a profit.' If the occupation of inn keeping is not 'trading,' it is not a 'mercantile pursuit,' for little more than a broader significance can be given to that term than to 'trading.' It is, in fact, trading in the larger sense. 'Mercantile' is defined 'as having to do with trade or commerce; of or pertaining to merchants, or the traffic carried on by merchants' (Century dictionary). To be principally engaged in a mercantile pursuit, one must be carrying on commerce in some of its branches. See Re Cameron Town Mut. F. Lightning & Windstorm Ins. Co. 96 Fed. 756; Loveland, Bankr. § 48; Re New York & W. Water Co. 98 Fed. 711. The conclusion we reach accords with that announced by the sixth circuit court of appeals in Re United States Hotel Co. 68 L.R.A. 588, 67 C. C. A. 153, 134 Fed. 225, where the matter is considered and the cases bearing upon the subject reviewed.

But it is said that although this was a hotel company, and engaged in doing the business of an innkeeper, it was in fact principally engaged in trading and mercantile pursuits. If so, that is the end of the matter; for liability under the act is dependent upon what it was actually doing rather than upon what it was organized to do or professed to be doing. See Friday v. Hall & K. Co. just decided. [216 U.S. 449, 54 L. ed. --, 30 Sup. Ct. Rep. 261.]

It may have been engaged in doing two distinct kinds of business. But unless this corporation was 'engaged principally' in mercantile pursuits, it was not amenable to the act. 'Engaged principally' are plain words of no ambiguous meaning. They need no construction. Amenability to the statute must turn upon the facts of the case where, as here, the same corporation was engaged in 'mercantile pursuits' in addition to inn keeping. There is no way to settle whether it was 'engaged principally' in the one or the other but by a comparison of the two. When we do this it is easy to see that the mercantile business which it did was of minor character, and was largely an incident to the location of the hotels of the company in a thinly settled mountainous region. The stores were country stores,-that is, stores dealing in a great variety of ordinary necessities. From two thirds to three fourths of the goods handled were used in the running of the hotels, upon order of the stewards. Much of the remainder were sold to the employees, and the rest to customers at large, who paid in money or bartered country supplies for goods. The average stocks carried were from three to four thousand dollars in value. They were, in a large sense, hotel commissaries. The business was done but for one season. If we compare the volume of that done by the inn-keeping business proper with that done by the stores, the minor character of the latter is plain. The hotels employed 130 persons; the two stores, 4. The receipts of the hotel business plus the mercantile business-for all were kept upon one set of books-for the year 1906 were $127,136.01. The receipts for the previous year, when no stores were operated, were $119,171.36. The volume of mercantile business must have been small compared to the volume of the hotel business proper. That the company was 'engaged principally' in the hotel business proper is plain. It was, therefore, not amenable to the act.

The answer to the interrogatory of the Circuit Court of Appeals must therefore be in the negative.