Appeal of Hammond, 123 Pa. 503

Appeal of Hammond

123 Pa. 503 | Pa. | 1889

Opinion,

Mr. Justice Williams :

The McTighe Electric Light and Manufacturing Company was a corporation organized in 1883. The appellant was a stockholder, a director, and the treasurer of the corporation. In March, 1886, being unable to meet its obligations, the company made an assignment to Steel for the benefit of its creditors. The assignee accepted the trust, entered upon his duties, and . during 1886 sold the entire plant and assets of the corporation. The proceeds of the sale were brought into court for distribution.

After the assignment to Steel, and after the assignee’s sale, Hammond bought several small debts of the corporation at a discount. They amounted in the aggregate to $1, 136.17, and were presented to the auditor for allowance. The auditor refused them participation in the fund, because Hammond had been prior to the assignment the treasurer of the corporation, and held that his purchase of these debts was, under the rule *507laid down in Hill v. Frazier, 22 Pa. 320, an extinguishment of them. The several assignments of error relate to this ruling, which Avas concurred in by the court below.

The facts in Hill v. Frazier were, that Eldrod was the treasurer of a corporation actually engaged in business. The funds of the corporation Avere subject to his control. While occupying this relation of trust toAvards his corporation, he paid some of its debts, took assignments to himself, and undertook to enforce them by actions brought to his use. The rule laid down upon these facts was, that the payments made by the treasurer Avere to be taken as made out of the treasury. If in point of fact the treasurer advanced out of his own money the amount used, he Avas entitled to credit in his account as treasurer for the amount so advanced, but the debts paid by him Avere extinguished, and could not be kept alive by an assignment. This was a correct holding upon the facts, just in its operations, and necessary for the protection of the company against the custodian of its funds.

But the reason on which the rule rests is wanting, in the case now before us. The corporation becoming insolvent had ceased to do business and assigned all its effects for the benefit of creditors. The entire plant had been sold by the assignee. Hammond Avas no longer a trustee, occupied no fiduciary relation to the corporation, and had not the custody of a dollar of its funds. He could not pay debts as the treasurer, for there were no funds in the treasury, and if there had been they would have passed to the assignee by virtue of the assignment. If, therefore, Hammond, after the assignment and sale, bought the debts assigned to him with his own money, we know no rule of laAV or policy that prevents his holding them, or deprives him of the right to participate with other creditors in the distribution of the fund raised by the assignee’s sale. Such seems to be the fair effect of Craig’s App., 92 Pa. 396. Justice Gordon, delivering the opinion of the court in that case, referred to Hill v. Frazier and said, “ But had that relation (of treasurer) been dissolved, either by operation of law or the act of the parties before the purchase of the claim, this rule would not have applied, since the reason for it would then have had no existence.”

In this case, the relation was effectually dissolved by opera*508tion of law, upon, the assignment and acceptance by the assignee. The management passed out of the hands of the directors, and the cash and bills receivable passed out of the hands of the treasurer. He owed no other duty to the corporation than any other stockholder. We cannot see how the corporation or its stockholders have any reason for complaint, for the assets are not diminished or the liabilities increased by Hammond’s purchase of these claims. The creditors are equally without any just ground for objection, since the fund for distribution is not reduced, nor the claims upon it increased in number or amount.

The assignments of error are therefore sustained, and

The order of the court confirming the report of the auditor is reversed; and it is ordered that the record be remitted and distribution made in accordance with this opinion.