Hopkins's & Johnson's Appeal

| Pa. | May 7, 1879

Mr. Justice Mercur

delivered the opinion of the court,

This contention is for a fund raised by sheriff’s sale of personal estate of the Chester Valley Wheel and Axle Company, an insolvent corporation. The appellants and one Sharpless were the sole directors of the company, at the time the judgments were obtained, on which the executions issued. Johnson was also the president, and Hopkins the secretary and treasurer. ..The notes on which the judgments were procured were signed and attested by the appellants in their respective oflicial capacity, and given to each of said three directors. The master has found as a fact “ that when these notes were given, and proceedings instituted thereon, the company was insolvent. It was embarrassed and unable to continue its operations, unless more capital or other means was secured.” The insolvency was manifestly known to the appellants, and the notes given to each of them undoubtedly with a view of giving a preference over other creditors; yet, as they were given for an existing indebtedness, the master found “ there was no intention to collude and commit actual fraud;” nevertheless, he was “of the opinion, that the proceedings of Hopkins and Johnson, acting together as •before stated, were, under the circumstances and in the insolvent condition of the company, a fraud in law on the other creditors.”'

The method first commenced, and pursued for sometime, to make distribution, was unusual and very irregular. But defects which might otherwise have proved fatal to the whole proceeding, were cured by agreement of parties, including the appellants. They agreed that the question, -whether their respective judgments were obtained in fraud of the creditors of the company, should be referred to a master and examiner named, with like effect as if tried by a jury, and that he should make distribution of the money as upon a bill in equity, filed by Downing, a creditor of the company, against the appellants, charging them with fraud, and with holding the money in trust for the creditors and stockholders of the company. By this agreement, signed by the appellants and certain creditors of the company, the court acquired jurisdiction of the proceeding. Although irregular in form, the parties agreed to treat it as a bill in equity. The court having entertained it as such, it became subject to amendment, like other bills, so far as to add the names of other creditors, in furtherance of the specific object of the bill. We therefore discover no error in the court having permitted an amendment, adding the names of other creditors; more especially as the claims of those creditors had, apparently -without objection, actually been considered by the master. Under all the circumstances, the amendment was in time.

The master reported that the money should be distributed among all the creditors, giving no preference to any of the execution-creditors. The court below confirmed the report, and decreed accordingly.

As a general rule, it may be conceded that between creditors claiming a fund raised by sheriff’s sale, only those who are parties to the record, and have a lien on the property, can be heard. In the distribution of the personal estate of an insolvent corporation, a different rule prevails. Prior to the Act of 7th April 1870, Purd. Dig. 291, pi. 52, the remedy to enforce execution against a corporation was by sequestration. That remedy was superseded by this act: Philadelphia and Baltimore Central Railroad Co.’s Appeal, 20 P. F. Smith 355; Bayard’s Appeal, 22 Id. 453. Although the act authorized the personal property and franchises of a corporation to be sold on a fieri facias, yet it did not intend that the whole property of an insolvent corporation should be for the sole use and benefit of the plaintiff in the execution. The levy on property of such a corporation does not give a preferred lien on the property thus seized. The proceeds are to be distributed among all the creditors, as in case of insolvency: Id. It follow’s, therefore, notwithstanding the anomalous proceeding, yet aided by the agreement of the parties, substantial justice has been done, and the decree ought not to be disturbed.

Decree affirmed, and appeal dismissed at the costs of the appellants.