Farmers Union Warehouse Co. v. Coweta Fertilizer Co.

Lumpkin, J. The Coweta Fertilized Company brought an equitable petition against the Farmers Union Warehouse Company, seeking to have a receiver appointed to take charge of the assets of the defendant. The plaintiff alleged that the defendant owed it the sum of $4,444, which represented more than one third of the unsecured indebtedness, and that the defendant was insolvent. On the hearing the presiding judge appointed a receiver, and the defendant excepted. The plaintiff did not proceed as having a lien on the assets sought to be placed in the hands of a receiver, but the action was based on section 2716 of the Civil Code, authorizing proceedings against insolvent traders. This section requires that to the action one or more creditors, representing one third in amount of the unsecured debts of the insolvent corporation, trader, or firm of traders, whose debts are matured and unpaid, shall be necessary parties. It has been held that this statute, authorizing the seizure of assets of a debtor, through a receiver, without having any lien or judgment, is in derogation of common law and must be strictly construed. Ball v. Lastinger, 71 Ga. 678; Scott v. Jones, 74 Ga. 762. In Knoxville Iron Co. v. Wilkins, Post & Co., 74 Ga. 493, Hall, J., said: “This act has always been subjected to a strict construction; and unless a party brings himself within its very letter, the relief it provides has been invariably denied.” Only one point was discussed in the briefs of counsel, namely, whether the plaintiff was an unsecured creditor of the defendant, within the meaning of the statute. Construing the. statute strictly, it can not be said than a debt for [134] which there is collateral security is unsecured, although the security which the creditor holds is not satisfactory to him, or is of less value than the entire debt due to him. The collateral security held by the plaintiff appears to have been applicable to the entire debt, and to every .part of it. The indebtedness was not divisible so that some of it was secured and some of it was not. All of it was secured to some extent, though the value of the security may not have been as great as the amount which it was intended to secure. Suppose that the debtor had desired to release the collateral security, it would have been impossible to have selected any fractional part of the indebtedness, to have paid that .part, and demanded the delivery of the' security. To such an effort the creditor would have promptly replied that the collateral notes were held as security for every dollar of the indebtedness, and that all of it must be paid before they would be released. The statute does not confer upon a creditor whose security is insufih eient or unsatisfactory the right to thus proceed, but upon one whose debt is unsecured. If a remark made in the decision in Lowe Brothers Cracker Co. v. Brooke, 91 Ga. 243 (18 S. E. 136), can be construed as containing an intimation that. an insolvent personal surety may be equivalent to no surety, it certainly goes no further. In the present case it was conceded that the collateral notes amounted to about $2,000 face value, but the plaintiff contended that their actual value was about 40 per cent, of their face value. If this be conceded, the plaintiff held collateral securities for its claim, of the value of about $800; and while this may have been less than the amount of the debt, it could not be said to have been an unsecured debt, that is a debt for which there was no security, within the meaning of the statute. The presiding judge therefore erred in appointing a receiver. Judgment reversed. All the Justices concur.