Asheville Cigar Co. v. Brown

Under the facts stated in the record, the circuit judge committed no error in giving to the receiver the direction therein indicated. The Dade Coal Company was a corporation, and leased from the State of Georgia three hundred convicts; by executive order it was made Penitentiary Company 3STo. 1, and afterwards became the owner of portions of the stock of Penitentiary Companies Uos. 2 and 3. On May 5th, 1889, it leased to the Georgia Mining, Manufacturing <£ Investment Company all of its property of every character, except its right to control the convicts leased to it by the State. In speaking of the two corporations we will, for convenience, hereafter designate them as the coal company and the mining company respectively. The mining company agreed to furnish to the coal company from time to time all the moneys it might need in order to work its convicts. The convicts were to be employed in working the properties of the coal company, which had been leased as above stated, and upon such other property as the coal company might direct them to be worked, in accordance with the laws of the State. It undertook to furnish to the coal company all moneys needed to pay the rental to the State, the salaries of *176guards, bosses and superintendents, and all moneys necessary to feed .and clothe the convicts, and in all respects to enable the coal company to comply with its contract with the State, and as well to pay all penalties for escapes, and all damages which might be incurred by the coal company in any way by the use of the convicts. The capital stock of the mining company was made up of the stocks and bonds of the coal company and certain other incorporated companies.

It will be seen that, except nominally, there was a com-, píete amalgamation of the two companies. The mining company absorbed the coal company, except in so far as the separate entities were maintained, in order to enable the coal company to retain its possession and control of the convicts. Under the contract between the two corporations, the-earnings of the convicts belonged to the mining company. That company undertook to provide the means for the support and maintenance of the convicts, and to enable the coal company to discharge its obligations to the State, resulting from its lease of these convicts.

Nominally the right to the labor of the convicts was in the-coal company; practically the beneficial interest was in the mining company. Nominally the convicts were under the control of the coal company; but the mining company being-the owner of all of the capital stock of the coal company, the-control of the convicts was practically under and subject to its direction. Therefore, the provision in the lease to the-effect that the convicts should be employed upon the property leased by the coal company to the mining company, and upon such other property as the coal company might direct, gave to the mining company the power, in the name of the* coal company, to direct that the convicts be employed at such place and under such circumstances as it might choose-to direct; and this is true notwithstanding the statement in the agreement between the parties to the effect that no control of the convicts was leased or parted with by the coal company, but that the same was held and reserved to it in *177accordance with its contract of lease with the State of Georgia, and under the laws of the State of Georgia. The coal company would not have had the power to sublease the convicts so as to permit them to pass from under its control, but practically that result was accomplished when the mining company became the owner of the capital stock of the coal' company. In other words, the mining company being the-owner of the capital stock of the coal company, the will of its-board of directors became the will of the board of directors of' the coal company; thus, the property of the coal company became, by virtue of the lease above referred to, the asset-s of' the mining company, with the exception only that the coal company retained the nominal control of the convicts; but under the contract entered into between the parties, the earnings of the convicts employed by the coal company, under the direction of the mining company, belonged to the latter company; so that when the court seized the assets of the latter company, while the nominal control of the convicts remained with the coal company, there was such an intimate association between the assets which passed under the control of the receiver and those of the coal company, over which it yet retained control, as that it was still necessary for the receiver to maintain the same relations with the coal conn pany as had existed between the coal company and the mining company. The mining company took the assets of the coal company as a whole. It would not have been at liberty to refuse to discharge the obligation imposed upon it with reference to the maintenance and support of the convicts, and at the same time retain the assets otherwise received from the coal company. The receiver occupied no better-position as to the existing contractual relations. The same duties rested upon him as would have rested upon the mining company. The right to the labor of the convicts upon the terms stated was as much the assets of the mining company as any part of its property; and whether the Governor of the State had authority or not to impose, in the particular *178instance, the penalty assessed against the coal company, the mining company was under obligation, by express contract, to pay all damages which might be incurred by the coal company in any way in the use of the convicts. The Governor had ample authority, under the lease act, to vacate the lease under which the convicts were held, if he saw proper to do so; and that he saw proper to apply less drastic measures is certainly no cause of complaint upon the part of the penitentiary company.

At all events, the court, under the contract in question, was entitled, through its receiver, to the labor of the convicts. It could compel the coal company, as the custodian ■of these convicts, to comply with its contract for working them: so that, treating the two corporations as entirely separate and distinct entities, the interest of the mining company in the labor of the convicts,.under its contract with the coal company, constituted a valuable asset in the hands of the court to he administered for the benefit of all concerned. When, therefore, the court had the election either to direct the receiver to discharge the sums assessed against the coal company by way of damages, or to refuse to pay tbis, and incur the risk of having the lease vacated, and thus lose its interest in the labor of the convicts, it exercised a wise discretion in choosing the former rather than the latter alternative.

Judgment affirmed.