Toxaway Hotel Co. v. Smathers & Co.
216 U.S. 439 (1910)

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U.S. Supreme Court

Toxaway Hotel Co. v. Smathers & Co., 216 U.S. 439 (1910)

Toxaway Hotel Co. v. Smathers & Co.

No. 8

Submitted January 18, 1910

Decided February 21, 1910

216 U.S. 439

CERTIFICATE FROM THE CIRCUIT COURT

OF APPEALS FOR THE FOURTH CIRCUIT

Syllabus

A corporation engaged principally in running hotels is not a corporation engaged principally in trading or mercantile pursuits within the meaning of § 4, subs. b, of the Bankruptcy Act of 1898.

Where Congress has not expressly declared a word to have a particular meaning, it will be presumed to have used the word in its well understood public and judicial meaning, and cases based on a declaration made by Parliament that the word has a certain meaning are not in point in determining the intent of Congress in using the word.

An occupation that is not trading is not a mercantile pursuit.

A corporation not otherwise amenable to the Bankruptcy Act does not become so because it incidentally engages in mercantile pursuit, and so held as to a hotel company which, in addition to innkeeping in which it was principally engaged, conducted a small store as an incident to its hotel business.

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

Page 216 U. S. 440

North Carolina, having an aggregate capacity of seven hundred fifty 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 fourth 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

Page 216 U. S. 441

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 four 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.

Page 216 U. S. 445

MR. JUSTICE LURTON, after stating the facts, delivered the opinion of the Court.

The Act of 1867 applied to "all moneyed business or commercial

Page 216 U. S. 446

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 innkeeping, 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

Page 216 U. S. 447

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., c. 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 Showers 96; Luton v. Bigg, Skinner 276, 291; Willett v. Thomas, 2 Chitty 6519

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, Fed.Cas. No. 5,928, and In re Cote, 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 In re Smith, 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

Page 216 U. S. 448

for the purpose of making a profit." If the occupation of innkeeping 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 In re Cameron Insurance Co., 96 F. 756; Loveland on Bankruptcy, § 48; In re New York & W. Water Co., 98 F. 711. The conclusion we reach accords with that announced by the Sixth Circuit Court of Appeals in In re United States Hotel Co., 134 F. 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 & Kaul Co., just decided, post, p. 216 U. S. 449.

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 innkeeping. 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

Page 216 U. S. 449

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 innkeeping business proper with that done by the stores, the minor character of the latter is plain. The hotels employed one hundred thirty persons; the two stores, four. 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.

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