84 Pa. 319 | Pa. | 1877
delivered the opinion of the court,
On the 6th of October 1874, when the mortgage which the Farmers’ and Mechanics’ Bank of Shippensburg held against T. P. Blair was assigned to John A. Ahl, the legal plaintiff here, an indebtedness to him had accrued and -was existing amounting to $15,659.25. For this indebtedness the mortgage was designed to be a collateral security. It consisted of deposits subject to check, made from time to time in the usual course of business. The arrangement was made, according to the terms of the case stated, “ as an inducement to Ahl to keep a large balance in his favor in his deposit account.” The balance due was payable on demand, and was subject to no lien and no right of retention in favor of the bank. The mortgage of Blair was a security which the corporation
Even if the adjustment which these parties made had been of a character to which the inhibition of the constitution of 1873 would, in its terms, apply, still, upon this branch of this controversy, the rule settled in Hays v. The Commonwealth, 1 Norris 518, would be decisive. It was there distinctly held that “ charters of private corporations are left exactly as the new constitution found them, and so they must remain until the companies holding them shall enter into a new contract with the state by accepting the benefit of some future legislation.” The corporate powers and privileges of this bank were created and defined by the act of incorporation passed on the 11th of April 1862, and the general legislation then in force. From the review of the authorities made in The Commonwealth v. The Pittsburgh and
John A. Ahl was a director of the bank from the 2d of November 1863, until the 1st of November 1874, except for the period intervening between the 3d of November 1868 and the 1st of November 1869. On the 3d of May 1875, the bank made an assignment to the present defendants in pursuance of the provisions of the Act of the 16th of April 1850. Auditors appointed under the fourth section of that act, reported on the 14th of December 1875, that the bank was fraudulently insolvent, a finding which was confirmed by a decree of the Court of Common Pleas on the 30th of March 1876. In August 1876, under the authority of the Act of the 12th of April 1867, a bill in equity was filed by the assignees against Ahl and a number of other persons, in which jointly with them he was charged with misfeasance and neglect as a director in a variety of particulars by which the fraudulent insolvency of the corporation had been produced. The bill alleged that acts in which he participated had resulted in losses amounting to $68,011.75, and contained a prayer for a decree against him for that sum. Proceedings on this bill are still pending in the Common Pleas of Cumberland. The case stated stipulated for a judgment in favor of the plaintiff, if it should be held that the board of directors had the power to execute the mortgage of the 29th of January 1873, without the previous consent of the holders of a majority of the capital stock, and that on the trial of a scire facias on that mortgage the defendants would not be entitled to give evidence of the misfeasance and neglect charged in the bill in equity against the plaintiff, as a set-off to his claim. If the decision on either point should be adverse to the plaintiff, it was stipulated that judgment should be entered for the defendants.
By the Defalcation Act of 1705, a defendant in any action on a contract was authorized to plead payment, and give any bond, bill, receipt, account or bargain in evidence. The construction of this statute by the courts has been broad and liberal. It has been so extended that the right of a defendant may be regarded as established to set off against a plaintiff’s demand any damages capable of liquidation, and for which an independent action ex contractu could be maintained. This may be stated as the general result of the authorities, extending especially from Nickle v. Baldwin, 4 W. & S. 290, to Hunt v. Gilmore, 9 P. F. Smith 450. But, broad and liberal as the construction has been, it has never authorized the admission of proof of damages arising from a technical tort. In Beyer v. Fenstermacher, 2 Whart. 95, it was held that a plaintiff in replevin, founded upon a distress for rent, could not set off a
An interjection into the trial of a scire facias on a mortgage, or an inquiry into the whole history of the management of this corporation during the period of eleven years that elapsed from the plaintiff’s first election until he ceased to be a director, would involve elements of confusion, inconvenience and incongruity that would be countless. By what limits would the inquiry be bound ? Would the liability of the plaintiff alone be investigated? Would the investigation stop when a charge should be fastened upon him equal in amount to the mortgage-debt ? If so, would the residue of the charge against him be recoverable in the suit in equity ? Or would the entire claim of the assignees, so far as it would extend to him, be adjusted by the verdict and judgment in the scire facias ? What then would be the effect of the adjustment on the other defendants in the bill ? And on what principle and by what process would ulterior rights of contribution be worked out? For every reason of convenience, accuracy and safety, the claim against the plaintiff must be relegated to the forum whose forms and jurisdiction are adapted to its investigation. It was said in Russell v. Miller, supra, that “ where the right of the defendant is only to call the plaintiff to an account, and his demand is such as must be settled by an action of account-render, or by a bill in equity for an account, it is not a proper set-off. A jury cannot pass on a question of this nature without great inconvenience. A set-off to a set-off would not be permitted, and it would be much worse to try before a jury at bar an unadjusted question of account and of profits arising out of a long and complicated business to be found only in numerous books of account.” Objections to the admission of evidence based on inconvenience and of want of adaptability in the tribunal, could never be rested on better grounds than those which exist in the circumstances of this case.
To sustain their decision, the court below relied on the authority of Kisterbock’s Appeal, 1 P. F. Smith 483. The circumstances of that case differed in some essential respects from those developed in this record. In the first place, the proceeding there was the distribution of the entire estate of The Premium Loan Association, which had been assigned for the benefit of creditors. All parties in interest were represented before the auditor. He had power to ‘investigate and adjust all existing equities, and no subsequent litigation could arise, and no ulterior rights could be left open or outstanding. His report, when confirmed, was a settlement of all conflicting claims. If this set-off were permitted here, inquiry into the same subject-matter would be still inevitable in the disposition of the bill in equity, and the effect would be to hamper and embarrass that whole proceeding. Again, no statute 'had defined the acts which would create a liability on the part of a director in a loan association, and none had specified the mode by which redress was to be obtained. And again, it was under no statutory rule measured by which particular things done and particular things omitted were to become misfeasance or neglect, just as it was on no doctrine of constructive fraud, that Kisterbock was held responsible. The auditor found the fact of his knowledge of the fraudulent insolvency of the institution at the time when the money he claimed in the distribution was advanced to pay the dividend that had been fraudulently declared. It was because he had been a participant in an actual fraud of which he had actual knowledge that his claim on the fund was postponed. In delivering the opinion
The judgment is reversed, and it is ordered and adjudged that judgment be entered in favor of the plaintiff, in accordance with the stipulations of the case stated.