259 Pa. 378 | Pa. | 1918
Opinion by
The auditor surcharged the receiver, inter alia, with the amount paid by him on the unauthorized certificates and also with the amount expended by him in repayment of the money borrowed in 1910; those items making a surcharge of $22,287.16, including interest paid; and as to that amount allowed the receiver to pro rate with his general creditors. As to this Ave fully agree with the auditor, for where the business is being conducted at a loss a receiver cannot take advantage of his position and pay himself in full at the expense of other creditors, as his equity is not superior to theirs. In such case the debts can only be paid pro rata, and, if paid in full,; the receiver will be personally liable: 4 Cook on Corporations, Sec. 878; Gutterson and Gould v. Lebanon Iron &
The auditor also made the further surcharge: “To amount of loss in operating plant......$53,651.50.”
This amount is less than the actual loss sustained after February 1, 1910, in the conduct of the business and the winding up thereof, and is fixed at that sum seemingly to create a fund sufficient to' meet the deficiency and enable the receiver to pay all the outstanding debts and expenses of the receivership. In effect it makes him personally liable for such debts and expenses. In our opinion the facts found by the auditor do not justify such conclusion.
The order to continue the business implied the authority to purchase supplies necessary for that purpose: Alderson on Receivers, Sec. 245. As a general rule a receiver is not personally liable for debts contracted by him in the conduct of the business, except in case of personal misconduct or negligence: 3 Cook on Corporations, Sec. 878; High on Receivers, Sec. 272 ; 34 Cyc. 294; 23 Am. & Eng. Enc. of Law (2d Ed.) 1096.
True, he conducted the business several months at a loss, but he had had good months and bad months previously and it probably could not be determined at the end of one or two unfavorable months that the business would prove disastrous. The owners of the plant had operated it for six years at a loss and were not discouraged, and at this time were strenuously urging the receiver to keep it a going concern. He was then doing
A receiver is not personally liable merely because the business may have been conducted temporarily at a loss, especially where he acted in good faith, and the loss did not result from his misconduct or negligence: See McDowell’s App., 4 Penny. 384. While the receiver will be held to a rigid accountability, nothing more is required of him than that he act in good faith, and exercise the discretion and prudence of ordinarily careful men in pursuits of similar character: 34 Cyc. 253. The auditor fails to find how much earlier, or when, the plant should have been closed, and we are unable to do so from the evidence. To say arbitrarily that the plant must close because its operation for one or two months indicates a loss, might stop the business before it got fairly started, or at any period of depression. We agree with the auditor that the receiver was chargeable with knowledge of the actual condition of the business as shown by the books, and also that he should be surcharged with so much of the loss as might have been prevented by proper care and attention to the business, but there is no finding as to how much of the loss if any could have been so prevented, and nothing to indicate want of proper care and attention, except that the business was for a time conducted at a loss.
On the question of closing out the business, the auditor finds that “some of the expense thus incurred might have been eliminated by winding up the business at once instead of continuing for so long a period,” but makes no finding as to the amount of loss thereby sustained, and there is no sufficient evidence upon which such finding
The decree of the court below confirming the auditor’s report, is reversed, the surcharge of the receiver, “To amount of loss in operating plant, $58,651.50,” is set aside, and the record is remitted that redistribution may be made in accordance with this opinion, without prejudice to any right the receiver may have against the plant for the balance of his claim under the order of court making it a charge thereon. The costs of this appeal to be paid out of the fund for distribution.