205 Pa. 83 | Pa. | 1903
Opinion by
The principal and important question in this appeal is raised by the second assignment of error wherein the appellant complains that the auditor and court below erred in finding that his judgment was not a preferred claim and was not entitled to preference in the distribution of the fund in the hands of the receiver. The position of the appellant is stated in the assignment as follows: “ The claim of the exceptant having been re
The American Vault, Safe & Lock Company was incorporated in 1891 and engaged in the manufacture and sale of vaults and safes in Allegheny county. In'August or September, 1892, the directors of the company borrowed $10,000 of the Central Bank of Pittsburg on a note of the company indorsed by them. The'amount of the note was subsequently reduced to $8,000. On a bill filed by an unsecured creditor the court, on October 11, 1893, appointed Josiah Speer, receiver, reciting in the order that “ upon consideration of said bill and answer (of defendant company) the court find that the defendant company is in an insolvent condition.” The receiver took possession of the property, real and personal, and continued to operate the plant until September 24, 1894, when, under an order of court, he sold it at public sale. The proceeds of this sale are in court for distribution and Lewis McMullen, trustee, the appellant, claims that his judgment given to secure the directors for the indorsement of the company’s note should be paid in full out of the fund. The board of directors adopted a resolution on June 12,1893, authorizing the execution of a judgment note to cover the claim of S. O. Rhodes, P. T. B. Shaffer, T. W. Martin, B. W. Applegate, C. H. Underwood, C. F. Sheriff and Josiah Speer, directors of the company, for money theretofore raised by them to pay a note of the company. At a directors’ meeting on September 4, 1893, the secretary of the company was directed to place in the hands of Mr. McMullen a judgment note for $8,000 for the use of the indorsers on a note of the Central Bank for that amount. Pursuant to the action of the board of directors the judgment note, the subject of this con
The facts found by the learned auditor are clearly deducible from the evidence. It is equally apparent from the testimony that at the time the judgment note was authorized to be executed, the directors knew the insolvent condition of the corporation. The auditor and court below were, therefore, right in holding that the appellant was not entitled to have his claim paid in full out of the fund for distribution. There is no equity in the claim of the appellant that would sustain a contrary conclusion on the facts disclosed by the evidence. The indorsement of the company’s paper was made by the directors in 1892. They were not induced to assume this liability by reason of any misunderstanding or agreement that they should be protected by the company. The company at that time was presumably solvent and fully able to meet its obligations. The credit of the directors was not used to assist it in an emergency nor to protect the corporate property from sacrifice. Several months after they became indorsers to the Central Bank, the directors undertook to secure themselves against the liability they had incurred the previous year, and by resolution authorized the execution of the judgment note upon which they claim a preference here. In the meantime conditions had changed and the corporation had become hopelessly insolvent. After this was known to the directors they directed the secretary of the company to deliver the note to their trustee. One of the directors, who was also the receiver, gives the circumstances under which the note was made and clearly discloses the unfairness of the transaction. He testifies : “ I was in charge, and also being an interested party on that indorsement my recollection is that I was told to watch
The first assignment is based on a misapprehension of the facts. The wage claims were not allowed a preference out of the fund produced by the sale of the real estate, as the appellant claims, but as distinctly stated by the auditor they were held to be a lien and payable out of the proceeds of the personalty with which the auditor surcharged the receiver.
The other assignments need no special consideration. The claims which are the subject of these assignments were prop
The assignments of error are dismissed and the decree is affirmed.