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.
