108 Pa. 152 | Pa. | 1885
delivered the opinion of the court, January 5th, 1885.
The appellants, who were the complainants below, were stockholders in the Pittsburg, New Castle & Lake Erie Railroad Company. A portion of the appellees were also stockholders in the same company, and with others, now claim to own the property and franchises of the said company by virtue of a title acquired through a judicial sale thereof. The appellants filed this bill by which they claimed to hold appellees responsible for the value of their stock. They say in the first place, that the sale was unauthorized by law, and therefore void as against them and their rights as stockholders: and 2d: That if even the sale should be held valid, yet that said sale was procured by collusion and fraud on the part of the appellees, some of whom were officers and directors of the road, and in duty bound to protect the property of the company; that they deceived the complainants, and prevented them from bidding at the sheriff’s sale by assurances that they (the defendants) would buy the franchises and property of the company for the benefit of all the creditors and honest stockholders; that they stated their object to be to “ wipe out the bogus stock,” and place the company upon a solid footing. In other words, 'that they had committed such acts of fraud as constituted them trustees ex maleficio for the stockholders intended to be defrauded.
While the argument of the case both at bar and in the paper books has taken a wide range, its- discussion here can be compressed into a narrow compass. The principles which control the case are neither novel nor difficult of application.
The sale was made upon an ordinary writ of fieri facias. -There appears to have been no attempt to comply with the provisions of the Act of 7th April, 1870, P. L. 58, which enacts that in addition to the provisions of the Act of 16th June, 1836, relating to executions, and in lieu of the proceedings by sequestration under said Act, by which the plaintiff in a judgment ■against a corporation, not excepted from the said Act, may “have execution b j fieri facias issued from the court wherein said judgment is entered, which shall command the sheriff or
In the somewhat analogous cases of Hare v. The Commonwealth, 11 Norris, 141, and Kaine’s Appeal, Id. 273, where an Act similar in terms authorized the sale upon a fieri facias of the interest of a partner in a firm, we held that the fieri facias must be a special writ commanding the sheriff, to sell the interest referred to. In each of the above cases the contest was between execution creditors upon distribution, and it was held that the execution' which complied with the Apt would take the fund without regard to the time of the levy. But neither case decided that a sale of a partnership interest upon an ordinary fieri facias was void and passed no title. Nor are we prepared to say so now. Such sale would undoubtedly be set aside upon the application of a party in interest if made at the proper time. But after the confirmation of the sale by the court, it cannot be attacked and overturned collaterally years afterward. This is especially true where the property has passed into the hands of a bona fide purchaser and rights of third parties have grown up.^ The principle is too well settled to need the citation of authority that mere irregularities in a judicial sale must be taken advantage of prior to confirmation.
For the same reason we need not- discuss the question whether a return of nulla bona should have preceded the levy and sale upon the fieri facias. If necessary, which we do not assert, it was but an irregularity which may be waived, and acquiescence in the sale is such waiver.
The allegations of fraud may be reduced to the following heads* viz.:—
1st. That the purchase money paid at the sheriff’s sale was the money of the Pittsburg, New Castle and Lake Erie Bail-road Company.
2d. That the Pittsburg, New Castle and Lake Erie Bailroad Company was solvent, and that the directory had pecuniary resources sufficient to conduct the enterprise to a successful termination.
■ 3d. That the defendants fraudulently conspired together to procure a sale of and to purchase in the property of the complainants; and that by this conspiracy complainants were prevented from purchasing at sheriff’s sale, and as a part of such conspiracy that the defendants informed a portion of the complainants at the sheriff’s sale, and afterwards, that their purchase would be for the benefit of all the honest stockholders and creditors.
Upon the second proposition the Master and the learned court do hot agree. The finding of the Master is vague. He says: “ From this testimony the Master is of opinion, and so finds, that the financial condition of the Pittsburgh, New Castle and Lake Erie Railroad Company was not such as to require or justify the sale on a first writ of fieri facias of all its franchises, rights, ■ privileges- and property,” &c. This is a deduction, not from facts which the Master has specifically found, but from certain testimony which he cites. The court below was more explicit. The learned judge said: “ Without entering'into a special detail of the evidence, it is sufficient to say that it leads me to conclude, beyond a doubt, that the company was hopelessly insolvent.” I have carefully examined every word of the vast mass of. testimony in this case, and am of opinion it fully justifies the view of the learned court. Indeed, I am unable to see how any one accustomed to considering and weighing evidence could arrive at any other conclusion. There was in evidence, it is true, an alluring statement rendered to the company of its assets, but that statement was confronted by the hard facts that the company was not earning enough to pay its current expenses and interest on its bonds; that it was hopelessly in debt, and had neither money nor credit; that all of its unsold bonds and other securities were hypothecated; that at' the time of the sale many of its employees had hot been paid for months, and that it had only been kept afloat by advances of money and credit by some of the officers and directors. The limited amount of rolling stock used by the company was either held under lease or pledged for debt, and one of its two locomotives would have been taken off: the road had not Mr. Callery and Mr. Marshall, two of the defendants, given their personal obligations to prevent it. Its stock had no market value, and its bonds were greatly depreciated. In view of this state of facts it is not necessary to discuss the question whether the judgment on which the property was sold, could have been paid and the sale averted. The evidence does not show either cash on hand or available assets to avert it, and the defendants were not bound to make further sacrifices in aid of the company.
We now approach the last and most important branch of the case. Here again the Master and the court below differ upon the facts, and. we are compelled to resort to" the evidence to" decide between them. The finding of the Master is in substance, 1st, That the deféndants combined to procure a sheriff’s sale o’f the property and franchises of the company, and 2d, “ That prior to.said sheriff’s sale, said Gibson, Callery, Marshall and Chalfant acting singly and in concert, circulated and caused to-be circulated among the stockholders in the Pittsburgh, New Castle and Lake-Erie-Railroad Company, reports or representations that said road was to be sold to wipe out bogus stock, and that -the stock then -held by plaintiffs would not be affected by said sale.
Just here it is important to bear in mind that the question of collusion in regard to the sheriff’s sale is put at rest by the fact established -in the cause, that the proceedings were adverse. Under such circumstances the defendants had the right to buy at the sale in order to protect themselves. It has been the conceded law of this state since the case of Fisk v. Sarber, 6 W. & S. 18, that at a judicial sale, not controlled by the trustee, the trustee can be a purchaser. The latest case upon this subject which has been called to my attention is that of Penn. Transportation Company’s Appeal, reported in the Legal Intelligencer of November 9th, 1883 [5 Out. 576], in which it was held that stockholders of a railroad company may bid, in pursuance of a private agreement between themselves, and buy in the road and franchises, ánd such sale will not be disturbed.
The defendants had the clear legal right to buy in the road and its franchises at the sheriff’s sale. They had a right to unite for that purpose. Hence the paper marked “ Exhibit W.,” about which so much useless testimony was taken, becomes of no practical importance. Whether it was executed the day of the sale, the day before, or the day after, is immaterial. It furnishes no evidence of a combination to procure the sale of the road. Nor is any such evidence to be found in the record ; at least I have been unable to discover it after a diligent search. The paper referred to shows merely that the defendants knew of the proposed sale of the road, and combined for the object-of purchasing it and reorganizing the company upon the basis of additional capital. If, however, in doing this they resorted to any trick or artifice, by which other stockholders were prevented from bidding, and misled to their injury, there is abuu
It remains to apply this crucial test to the defendants. The evidence by which this constructive trust is sought to be established is not of the most satisfactory character, consisting of loose declarations of some of the defendants, made at or about the time of the sheriff’s sale. But giving to it its widest scope, what does it amount to ? From a mass of such testimony we select the following, which is perhaps the most favorable to the appellants. I quote from the testimony of Elias Zeigler, at page 213 of the Appendix: “ Their statements were, I recollect, near the same. They all assured me that my stock and my contracts should not be interfered with, and also all the rest of the legal stockholders.' That the idea was to clean out the whole thing; clean out all fictitious stock; then we could get along; have lots of credit and plenty of money; there would be no more trouble. This is about the statement they all made, with the exception of Mr. Passavant. He positively declared to me if that wasn’t the case he would not have a thing to do with it, he wouldn’t put his name on it at all. I told him that was my fix ; if the idea was not to protect the legal stockholders I would not have anything to do with it at all.”
There is no question here as to creditors. They are not-complaining. The inquiry, is whether the defendants, in the reorganization of the company, treated the stockholders justly who may be 'presumed to have relied upon their representations. This brings us to the question, what had the complainants the right to expect from the above declarations? They knew that a reorganization of the company was contemplated, and. was necessary after the judicial sale. Whatever may be the fact, the belief certainly existed, both in and out of the Board of Directors, that stock had been issued which had not been paid for.. This is what was meant by the “ bogus stock ” which was intended to be “ wiped out.” Then there was to be “lots of credit and plenty of money,” and “legal stockholders would not be interfered wi-th.” Yet the
The allegations of fraud contained in this bill are not warranted by the evidence. The defendants were compelled, for the protection of their own interests, to reorganize the company. In doing so .they gave every other stockholder the opportunity of coming in upon precisely the same terms which they imposed upon themselves. There was no fraud in this. It was merely a matter of business, and was disposed of upon principles neither offensive to the law nor to good morals.
The decree is affirmed, and the appeal dismissed at the costs of the appellants.
