author: Mr. Justice Green

text:
    Freeland versus Pennsylvania Central Insurance Company.
    1. In an action by a, mutual insurance company for assessments upon premium notes given by a policy holder, the defendant contended that the contract should not be enforced against him, because the act conferring upon the company the power to insure was unconstitutional: Held, that the defendant, as a member of the company, could not make this defence: Held, further, that the validity of the charter could not be thus inquired into collaterally: Held, farther, that defendant could not make defence on the ground that the contract was ultra vires, by reason of want of power to insure, as this was tantamount to questioning the validity of the charter.
    2. It seems, that a corporation contract is ultra vires when it is beyond the powers conferred, but when the power is conferred, whether rightfully or not, and the contract in question is within the very letter of the act, it cannot be said that it was ultra vires within the proper meaning of that expression.
    3. Where suit has been brought in the wrong name, advantage must be taken thereof by pica .of misnomer.in abatement, and where no such plea has been made and defendant has gone to trial under the general issue, it is too late to make such a defence. The want of a charter must also be so pleaded.
    4. The decree of the court changing the name of the corporation cannot be impeached by this defendant in this collateral proceeding.
    5. The special remedy provided in the charter of this company did not preclude it from suing at law.
    6. Where the representations of the agent of the company were carefully reviewed by the court and left to the jury with proper instructions, and they found against defendant, this court will not review their act.
    May 21st 1880.
    Before Mercur, Gordon, Paxson, Trunkey, Sterrett and Green, JJ. Sharswood, C. J., absent.
    • Error to the Court of Common Pleas of Dauphin county: Of May Term 1879, Nos. 205 and 206.
    These were actions of assumpsit brought by the Pennsylvania Central Insurance Company against James Freeland, to recover assessments upon notes, alleged to be premium notes, given by defendant upon his application for insurance of his real property against loss by fire.
    The Act of May 5th 1854, Pamph. L. 563, incorporated the Lykens Valley Mutual Fire Insurance Company, and granted it powers as á fire insurance company. The Act of March 27th 1869, Pamph. L. 570, enlarged these powers of the Company, for the purpose of insuring live stock.
    On November 27th 1869, the court of Schuylkill county incorporated the Pennsylvania Cattle Insurance Company, located at Pottsville, enabling said company to insure live stock. The Act of May 10th 1871, Pamph. L. 670, granted to the Pennsylvania Cattle Insurance Company'the same rights, powers, &c., as the Lykens Valley Mutual Fire Insurance Company, under the above Acts of May 5th 1854, and March 27th 1869.
    On July 17th 1871, a petition was presented to the court of Schuylkill county to amend the charter and change the name of the Pennsylvania Cattle Insurance Company to the Pennsylvania Central Insurance Company, and on September 4th 1871, a decree was entered of record changing the name.
    On October 27th 1871, the auditor general was notified of the change in name as required by the Act of April 20th 1869, Pamph. L. 82, Purd. Dig. 285.
    On December 27th 1871, an Act of Assembly was approved (Pamph. L. 1872, p. 1385), entitled “An Act to incorporate the Pennsylvania Cattle Insurance Company.” The first section provides that the company of that name, incorporated by the Schuylkill Court of Common Pleas, November 27th 1869, “shall possess all the powers and privileges, and be subject to all the restrictions and limitations which are hereby granted to and imposed upon it.” The second section then provides that the corporators named, and their associates, “ shall be a corporate body by the name of ‘ The Pennsylvania Cattle Insurance Company.’” .Twelve succeeding sections regulate the management of the company in the exercise of the only power thus far conferred, viz.: of “ making contracts of insurance against loss or damage by death, theft or accident.” The fifteenth section then provides “ the said company shall have the power to connect an additional branch of insurance, with the privileges hereinafter specified, which shall he called by the name, style and title of ‘ The Fire Insurance Branch of the Pennsylvania Cattle Insurance Company,’ and by that name have perpetual succession, sue and be sued, &c.”
    The sixteenth section empowers “ The Fire Insurance Branch of the Pennsylvania Cattle Insurance Company,” to insure against fire on all kinds of merchandise, buildings or property. In pursuance of this legislation a general fire insurance business was transacted upon the mutual plan. The applications and policies were made generally in the name of “ The Pennsylvania Central Insurance Company.”
    About April 1st 1873, the agent of the company, one Berkheimer, solicited the defendant to insure his houses and buildings in said company. Freeland testified that Berkheimer, when he solicited the insurance, said : “I have a good, sound, solvent company at Pottsville. I replied I wont insure in any mutual company ; I will insure in a cash company. He then road to me different grades of insurance from a book out of his pocket, and he says, ‘ Go into a mutual.’ I said I would rather go into a cash company. But through his persuasion I said, ‘ If you will agree that the company is sound and solvent, and that I shall not be called upon for an assessment, then you may .insure me.’ He said, ‘ I will guarantee that the company has $30,000 to $40,000 in advance of all liabilities that may be necessary for five years.’ He also said that the company was going into bank [rig, and would loan money. By these representations he got my application. I thought I was signing an application for insurance, and not premium notes.”
    These statements were contradicted by Berkheimer.
    The three notes given by Freeland, one for $48, one for $680, and another for $800, were in the following form:
    $800 Pottsville, April 1st 1873.
    One day after date I promise to pay to the order of the Pennsylvania Central Insurance Company of Pottsville, Pa., such amount of money as I may from time to time be called on to pay, to increase the capital stock or cash assets of said company, not, however, exceeding the amount of $800, for value received, with release of errors.
    James Freeland.
    On January 12th 1874, and February 26th 1874, the company made assessments upon these notes, aggregating about thirty-three per cent., to pay alleged losses. These suits were to recover these assessments. At the trial, before Pearson, P. J., the plaintiff gave in evidence the decree of the court of Schuylkill county and the Act o'f Assembly above referred to for the purpose of showing its corporate existence, name, and power to insure against loss by fire. It also proved the signing of the notes and the making of the assessments thereon. The defendant then moved for a compulsory nonsuit upon the ground, inter alia, that the company had- no power to make a valid contract of indemnity against loss by fire, and notes given therefor were without consideration and could not be collected.
    Testimony was then offered showing the representations made by the agent as above set forth, and that defendant was induced thereby to sign the notes in suit, and that at that time there was no money in the company’s treasury, and it was, in fact, indebted to the treasurer.
    Defendant contended that, by reason of these false statements, his applications and notes were fraudulently procured; that neither were of'any validity as against him; that he had, therefore, never become a member of the company; that, independently of this, the company had no authority to make a valid contract of insurance against loss by fire, and his notes were, therefore, without any consideration ; and that fhere never was any such corporation as The Pennsylvania Central Insurance Company capable to contract or bring suit.
    The material questions raised will be found in the assignments of error set forth hereafter. The verdicts were for plaintiff, and after judgments thereon defendant took this writ and alleged that the court erred:
    I. In its answer to defendant’s first and second points as follows:

      1. The Act of December 27th 1871, Pamph. L. 1872, p. 1385, creates two distinct corporations, with distinct names and powers, and is, therefore, unconstitutional and void.
    2. The Act of December 27th 1871 is entitled “An act to incorporate the Pennsylvania Cattle Insurance Company,” and there being no reference in the title to any other subject, the provisions of the act relating to the insurance of buildings and other property against loss by fire are unconstitutional, and the company never thereby acquired any right to insure buildings, &c., against loss by fire.
    Ans. “ It is urged that this is creating two corporations in one act, and even if it is not, it embraces more than one subject, which' is not clearly expressed in the title. If left to my own judgment I would say that this law in substance, if not in form, creates two distinct corporations, within the prohibition of the Constitution, and also that it is very clear that the most important branch of this forked corporation is not alluded to in the title, yet it is quite as much so as the Forest County Capital case, in 3 P. F. Smith 391. But that, as also a good many more decisions, on the construction of that- branch of the Constitution, has been almost uniformly condemned by the legal profession. On the 26th of February 1872, by a proceeding in the court of Schuylkill county, the name, and many of the powers of this corporation, were changed more than a year before the defendant became a member, which was the 1st of April 1873. The invalidity of a charter cannot be inquired into collaterally, and least of all by a member who has enjoyed the benefit of its privileges: Dyer v. Walker, 4 Wright 157. * *•* The title of an act need not be an index to the whole statute: Commonwealth v. Green, 8 P. F. Smith 226; Yeager v. Weaver, 14 Id. 425; Allegheny County Home’s Case, 27 Id. 78. It matters little in the present case whether the original charter was valid, regular or otherwise, one was granted by the court of Schuylkill ■ county, which, even if irregular, was not void, and could not be avoided collaterally.”
    II. The court erred in its answer to defendant’s third point as follows:
    3. The evidence submitted as to the change of the name to “The Pennsylvania Central Insurance Company” shows that'the alleged change was never legally made.; therefore the “Pennsylvania Central Insurance Company” never had any legal existence, and there can be no recovery upon the contracts on which these suits are based.
    Ans. “We do not.consider that the defendant is in a situation to raise the question. If it is a misnomer, it should have been pleaded in abatement; and if the company has no legal existence, it should have been pleaded in bar. Neither one nor the other has been taken advantage of at the right time.

      III. The court erred in rejecting the evidence offered by defendant, the offer and ruling thereon being as follows:
    It is now offered to give the record in evidence to show that after the company changed its name by the decree it failed to file a copy of the same in the auditor general’s office, and therefore cannot use the name — is prohibited — under the Act of 1869, to use the name; consequently cannot sue in that name until the law is complied with.”
    (This objected to.)
    Per Curiam. — This case is on trial on the general issue. A .matter of this kind must be pleaded in abatement, or in bar, and cannot be done after the general issue. It is not a plea that goes to the merits, or tends to promote justice, and therefore no amendment should be allowed, as it is more than probable that the failure to comply with this act is very general. But that is unimportant. It cannot be taken advantage of in this way. Therefore, the record is rejected, and bill sealed at defendant’s request.
    IV. The court erred in its answer to defendant’s sixth point as follows:
    5. The Act of Assembly relied upon by plaintiff, for its existence and corporate powers, having provided a statutory remedy for the collection of assessments to pay losses, viz., by issuing a warrant to its collector, who is clothed with all the powers of a duly qualified collector of county taxes ; the plaintiff cannot maintain a common-law action for- such assessments, and cannot recover in these cases.
    Ans. “ The eighteenth section of the charter law provides, ‘ that when an assessment is made by either branch of the company, the board of directors shall issue their warrant for the collection of the same, to the collector, with the same power and privileges as county taxes are collected.’ ”
    “ A prior section had provided that members should be bound to pay in. proportion to the losses on their deposit notes, and suits at law may be maintained by the corporation against its members, on their deposit notes, according to the assessment thereon.
    “ The tenth section also contemplates an action at law in such cases, and makes the amount of the assessment prima facie evidence of the sum' to be collected in court.
    “ The whole charter law, like very many of our statutes, is incongruous and extremely contradictory, and the court must so construe them as to do the least injustice. Two remedies are here given, one by resort to an action in a court of'law, after the damages or sum to be collected is assessed in proportion to the losses; the other bv the action of the company alone through its own collector. We cannot help thinking that justice is more likely to be done by the courts than by making the plaintiff both judge and executioner in its own case. The defendant would certainly have better ground of complaint if its first notice of the claim was the amount of the collection than when it has a regular proceeding at law, with full right to be heard at every step. Our construction of the statute is that both remedies are given, and the company may pursue with either, and the one elected is most for the advantage of the defend ant and best insures fair dealing.”
    ■ V. The court erred in its answer to defendant’s ninth point, as follows:
    9. If from the evidence the jury believe that defendant was induced to sign the notes held by plaintiff, by representations of the plaintiff’s agent that the company had a fund of from $30,000 to $40,000 on hand with which to meet its liabilities, and that such representations were incorrect, the notes are not binding upon defendant, and the verdict should be in his favor.
    Ans. “ The law would be so if there was nothing else in the case; but the jury must decide on the whole law and facts of the case as stated in the general charge. You know the general charge referred to the manner and to the declarations; also as to other persons joining, and the policies not being returned.”
    VI. The court erred in instructing the jury as follows, viz.:
    “ Mr. Berkheimer said there was nothing said about $30,000 or $40,000 for losses, but to make loans. He did not go into this plan of insurance at all, and consequently we have nothing to say about issuing a policy of that kind. We are not trying that. We have to try one case at a time. If this had come up, the question might arise as to whether this company had the right to make this kind of insurance at all; but the question here is now upon this mutual insurance, not given on the basis of cash rates, but given on the mutual rates in the ordinary form of the mutual insurance company. If nothing was said in regard to the money being applicable to the mutual rates, I think it has very little to do in the present case, because the insurance was not taken bn that money. He may have taken it in that way. He may have thought this money was available; but the agent says he did not say so — that the $30,000 or $40,000 were for loans on the loan plan. I think, therefore, it has much less weight than given it by counsel in the argument. However, that is for the jury to consider. We have to take the evidence as sworn to. Does it satisfy you that in this mutual insurance this money entered into the contract with Mr. Freeland ? If it did not, he cannot avail himself of it. If there for the purpose of making loans, it has no effect upon his insurance at all, for it was not to come to him in any event. * * *
    “A man might naturally suppose that a company strong enough to loan-out thirty or forty thousand dollars would be a strong company otherwise. But when you draw that inference, and we would all draw that inference likely, that does not protect or help to make safe an insurance in the mutual company, with this money in'the loan company.”
    VII. The court erred in instructing the jury, as follows, viz.:
    “ There is one other matter connected directly with this, and that is this showing from the books the character of the persons who were insured; and Mr. Freeland’s name was there during the year though the company was wound up before he returned his policies. It was wound up to pay off its debts, although it did not do that; but wound up so far as regards doing any businesss. * * *
    “ It is said that many other persons .became members in the meantime; and you will have to consider how far Mr. Freeland, being a member of the company, might influence others to sign; for if a man of prominence and a man of property like him signs into a company of this kind, it would have considerable weight with his neighbors. But there is no direct proof that by Mr. Freeland’s signing others were induced to sign. * *' *
    “ But there is another matter. A man wanting to insure might look over the books, and although he could not see the policies' the defendant had, he could see from the books of the company that his name was among those of A., B. or 0., and he would naturally say, £ I will go in on the strength of his subscription. That tends to secure the company, and tends to secure my property.’ For that reason, if a man is going to return his policies at all, he should”do it promptly, and at once, and make it known to the company that he did not consider himself a member, by thus throwing up his insurance. Otherwise men are misled into the company. You ought to take into consideration, then, the influence to induce others to become members. * * *
    “Were people misled by his not returning, and his having omitted to make his opinions known; and were they induced to insure themselves, and not with reference to his insurance ? Men should be careful how they put their names to papers, or how they induce others to join the same companies. If you find on account of this that Mr. Freeland ought to be held liable on his subscription, then the question is, how much is he liable for ?”
    VIII. The court erred in its answers to defendant’s 7th and 8th points, as follows :
    7. The plaintiff had no authority to issue policies of insurance against loss by fire upon the stock or cash plan; and the policies issued upon said plan, were invalid, and the plaintiff had no right to make an assessment against other policy holders for the payment of their losses.
    This point is answered in the negative.
    8. The only losses shown to have occurred after the date of defendant’s applications, being losses occurring under -policies issued upon the cash plan, the defendant in this case is not bound to contribute to the payment of said losses; his notes are not liable to assessment therefor, and there can be no recovery of the assessments in these cases.
    Ans. “The court declines to so decide. We think he is liable on the notes.”

      Fleming MeOarrell, for plaintiff in error.
    We do not contend that the charter of the corporation was invalid. We admit its validity, and its power to insure cattle, but deny its power to insure buildings, &c. Its policies issued to defendant, pretending to protect him against loss of his buildings by fire, were “ultra vires,” and afforded him no protection whatever. The notes given for these policies were, therefore, without consideration. The conclusion of the court that defendant had “ enjoyed the benefit of its privileges” is, we submit, an assumption of the point in controversy. The only privilege which the corporation could confer, was the protection of defendant from loss of his live stock “ by death, theft or accident.” The defendant never enjoyed this only protection which the company could extend. Having been given no rights as against it, he owed it no duty, and was under no obligation to contribute to its treasury.
    The contracts sought to be enforced here, were made by the corporation in utter disregard of the command of the statute, defining the titles under which it should make contracts, and we respectfully submit that the learned court erred in not declaring that there could be no recovery under these contracts.
    The evidence offered and rejected was intended to show that the corporation had failed to comply with the positive mandate of the law, and therefore had no right to use the name in which it had contracted, and commenced its action.
    Even if a plea in bar was necessary, in order to enable defendant to set up this defence, such plea had been filed, by leave of the court, before ’ the evidence was offered. A statutory remedy having been given for the collection of the assessments, the corporation could not maintain a commonlaw action: Turnpike Co. v. Brown, 2 P. & W. 462; Dorman v. Turnpike Co., 3 Watts 126; Turnpike Co. v. Martin, 2 Jones 361; Kidder v. Boom Company, 12 Harris 194. The false representations of the agent avoided the contracts: Mundorff v. Wickersham, 13 P. F. Smith 87; Greenawalt v. Kohne, 4 Norris 369; Insurance Co. v. Wilkinson, 13 Wall. 222; Lycoming Ins. Co. v. Woodworth, 2 Norris 226.
    The jury was permitted, without any evidence, to infer that other parties were influenced by defendant’s name upon the books, to take insurance in this company, and was instructed that, if they so inferred, the defendant was liable, unless he had “ promptly and at once ” returned his policies.
    The charter of plaintiff shows clearly that members were to give deposit notes, and that assessments were to be made thereon to meet losses and expenses. The company, therefore, nad no right to insure without a deposit note, and the policies issued on the cash plan, were without authority and invalid.
    June 7th 1880.

      Guy H. Farquhar, Wallace He Witt and William Pearson, for defendants in error.
    As held by the court below, a member of -a mutual insurance company is estopped from questioning the validity of its charter. Nor can the validity of a decree of court be raised in a collateral proceeding: Workingmen’s Building and Loan Association v. Coleman, 8 Norris 428; Rhoads v. Building Association, 1 Id. 180. A misnomer of a corporation must be pleaded in abatement, and the want of an act of incorporation must be pleaded in abatement or in bar, specially : Rheem v. Naugatuck Wheel Co., 9 Casey 358. The company, under the provisions of its charter, clearly had the right to sue at law in addition to its special remedy. The question whether defendant was induced to insure by the representations of the agent, was one of fact for the jury, and they found against defendant.
    It was shown by the books of this company that quite a large number of policies were issued by it after that issued to Mr. Free-land, and before its return. It was also shown that the latter kept his policy for one year. Did he not, in the meantime, hold himself out to all doing business with this company as a member of it ? Did he not lend to the company the assistance of his reputation as a shrewd business, man and a man of wealth, in getting others to insure ? We most earnestly contend that these w'ere questions properly left to the jury, under the evidence. The case resembles that of a person who allows himself to be held out as a partner in a firm, and lends it his name and credit; he thus becomes liable, W'hether actually a partner or not: Collyer on Partnership, sect. 6.
   Mr. Justice Green

delivered the opinion of the court,

The first, second and third assignments of error maybe considered together." The suits were brought upon three promissory notes, alleged to be premium notes, given by a policy holder to an insurance company, for the purpose of recovering certain assessments made by the company for the payment of losses. The corporation was originally created by the Court of Common Pleas of Schuylkill county in November 1869, as a cattle insurance company, and was then called “ The Pennsylvania Cattle Insurance Company.” On September 4th 1871, the same court, on proceedings for that purpose, changed its name to “ The Pennsylvania Central Insurance Company.” The present actions are brought in the latter name. The power to insure property against loss by fire was conferred by an Act of Assembly passed December 27th 1871. By that act the name originally given to the company was restored and it was once more known as “ The Pennsylvania Cattle Insurance Company.” But it notf possessed the power to insure property against loss by fire under an ill-conceived and incongruous provision which authorized'it “to connect an additional branch of insurance,” to be called the “Fire Insurance Branch of the Pennsylvania Cattle Insurance Company,” and by that name to have perpetual succession, and to sue and be sued. By the 16th section of the act the power to insure property against loss by fire was conferred upon this branch. We are strongly inclined to think that thereafter, all policies of insurance on property should have been eifected in that name. By an Act approved May 10th 1871, the legislature had conferred upon the Pennsylvania Cattle Insurance Company the same rights and powers as were possessed by the Lykens Valley Mutual Fire Insurance Company which was authorized to insure property against loss by fire. On February 26th 1872, the Court of Common Pleas of Schuylkill county, made another decree changing the name of the company back to “ The Pennylvania Central Insurance Company.” The defendant’s contract was made with this latter company by that name. He now contends it ought not to be enforced against him because the Act of December 27th 1871, conferring the power to insure property was unconstitutional for two reasons: 1st. Because it creates two distinct corporations - with separate names and different- powers, and 2d. Because the title does not indicate that the creation of a fire insurance company by a distinct name was intended, and the legislature could not thus create a distinct corporation or confer a power. If this were an open question of which the defendant might take advantage, we should be inclined to attribute great weight to it. But he is not in such a position. It is perfectly familiar law that the invalidity of a charter cannot be inquired into collaterally, and least of all by a member who has enjoyed the benefit of its privileges: Dyer & Co. v. Walker, 4 Wright 157. The violation of a charter cannot be set up as a defence to an action on a note given in violation of the charter: Irvine v. Lumbermens’ Bank, 2 W. & S. 204. See also to the same point: Flanders on Fire Ins. 19; Sands v. Hill, 42 Barb. 651; Dyer v. Walker, 4 Wright 157; Workingmen’s Building and Loan Association v. Coleman, 8 Norris 428; Rhoads v. Building Association, 1 Id. 180. But the learned counsel for the defendant reply to this that they do not question the validity of the act; they admit its validity, but deny the power to insure property, and argue, hence, that such a contract is ultra vires. This would be a good defence if it were well taken. But how is it made out ? Simply by alleging that the legislature had not conferred the power by a constitutional enactment, in other words, repeating the objections to the validity of the act. A corporation contract is ultra vires when it is beyond the powers conferred. But here the power ivas conferred, whether rightfully or not, and the contract in question was within the very letter of the act. It cannot be said, therefore, that it was ultra vires within the proper meaning of that expression. If the act itself was invalid in attempting to confer the power, of course the power did not exist. But this defendant cannot be heard to make that objection, and hence the defence on this ground fails.

The defendant says further, however, that the plaintiff has sued in the wrong name, that it could only sue in the name by which it was authorized to contract for the insurance of property. This also would be a good defence, but there is only one way in which it can be interposed, to wit, by plea of misnomer in abatement. No'such plea has been made, and the defendant has gone to trial under the general issue. After that it is too late to make such a a defence.

A misnomer must be pleaded in abatement: Fritz v. Commissioners, 5 Harris 135; Gray v. Monongahela Nav. Co., 2 W. & S. 162. Even the want of a charter or one with great irregularities must be so pleaded. If there is no charter, it must be specially pleaded in bar: Rheem v. Wheel Co., 9 Casey 358, 363-4; Conard v. Atlantic Ins. Co., 1 Pet. 450; Society v. Town of Pawlet, 4 Id. 480. And a plea in bar will not be received if pleaded after the general issue and a full preparation for trial and a hearing on the merits; Zion Church v. St. Peter’s Church, 5 W. & S. 215. It is contended that the decree of the court of February 26th 1872, again changing the name of the company was illegal, because no fresh petition for that purpose was presented and no notice thereof was given to the auditor-general. This may well be, and if the question had come before us on appeal from that decree, it would probably have béen reversed for th-e reasons stated. But it is not here in that way. This defence amounts to a plea of misnomer, and it is introduced in a collateral proceeding by a member of the corporation who has contracted with it in the name in which the suit is brought. It is not possible to entertain such an objection interposed in such a mode and by a person so circumstanced, for the reasons already stated. See further on this subject the case of Association v. Feemar, Leg. Int. of March 28th 1879, p. 124.

This disposes of ’the first three assignments of error.

In the fourth assignment, it is claimed that as by the statute, a special remedy for the collection of assessments was provided by means of a warrant to the collector and a summary seizure of the member’s goods, no other remedy could be pursued. The remedy selected is an ordinary action at law upon the contract, in which action the defendant has a hearing in a court with a full opportunity of defence. The argument is that this kind of remedy has, in reality, been taken away, and thus that while the defendant could not be sued in a court of law, his goods could be arbitrarily taken by a warrant without previous notice, hearing or trial. We certainly should never hold such a doctrine, unless we were absolutely compelled to do so by an irresistible necessity. Fortunately, we are not placed in such a position here. While it is true that the eighteenth section of the act provides that whenever an assessment is made by either branch, the board of directors shall issue their warrant for the collection of the same, it is also true that the eighth section provides that every member shall b'e bound to pay for all losses in proportion to the amount of his deposit note, and “ suits at law may be maintained by said corporation against any of its members for the collection of said deposit notes or any assessment thereon, or any other cause relating to the business of said corporation.” Section ten also contemplates and provides for actions brought for the recovery of assessments in the courts of the Commonwealth. It is argued that these sections are confined to the cattle insurance branch of the company, but we do not agree to that construction. There are no express words establishing .such restriction, and on the contrary, the language of the eighth section distinctly declares that suits may be ■ maintained by said corporation against any of its members for the collection of said deposit notes or any assessment thereon, or any other cause relating to .the business of said corporation. The generality of this language is such that we are not at liberty to restrict it to a particular branch of the corporation, and we are of opinion that the court below was right in its determination of this question.

We see no error in the matters complained of in the fifth and sixth assignments. The subject of the representations made by the agent was carefully reviewed by the learned judge in his charge, and was left to the jury with proper instructions, as to whether the alleged representations were made, whether they were influential in inducing the defendant to enter into the contract, and whether they were true or false in the sense that would be necessary for the avoidance of the contract. The jury has found against the defendant on these facts, and their action cannot be reviewed here.

We do not quite perceive the relevancy of the portion of the charge complained of in the seventh assignment, but do not find any positive error in what was said, nor anything calculated to mislead the jury. The court expressly said that “ there is no direct proof that by Mr. Freeland’s signing, others were induced to sign.” The question here is as to the defendant’s liability for the assessments on the note given by him. The influence of his membership in inducing others to join is not very material as to his liability, as that depends upon his written contract. We do not see how the remarks of the court on this subject did or could affect the verdict in any improper way.

We think the court were right in their answers to the defendant’s seventh and eighth points, and hence the eighth assignment of error is not sustained.

Judgments affirmed.


source: Caselaw Access Project

author: Mr. Justice Mercur

license: Public Domain

text:
    Commonwealth versus Pottsville Water Company.
    The original charter of the Pottsville Water Company, granted in 1834, gave it limited powers, and authorized it to commence operations on a capital of $20,000. By the Act of February 18th 1854, the charter was changed in many important particulars, and the company was authorized to enlarge and extend their works, and to increase their capital stock to'$200,000. The act further declared : “ The stock in said company shall be exempt from all taxation whatsoever.” The powers of the company were further enlarged by subsequent acts. The accounting officers of the Commonwealth settled an account against the company for taxes on its capital stock, from 1859 to 1878, contending that the exemption clause in the Act of 1854 was not a contract, but a gratuity, which was repealed by subsequent legislation, and that the company was liable to the tax : Held, affirming the court below, that the exemption was binding on the Commonwealth, and that the tax could not be collected.
    May 21st 1880.
    Before Mercur, Gordon, Paxson, Trunkey Sterrett and Green, JJ. Sharswood, C. J., absent.
    Error to the Court of Common Pleas of Dauphin county: Of May Term 1880, No. 215.
    This was an appeal to the Court of Common Pleas of Dauphin county by the Pottsville Water Company for a settlement made by the auditor general and state treasurer against said company for tax on capital stock for the years 1859 to 1878 inclusive. The case was tried before the court, without a jury, and without any pleadings except the settlement made by the Commonwealth and the appeal filed by the company.
    The court, Pearson, P. J., found the facts as follows:
    “ On the 11th day of April 1834, an act was passed authorizing the Pottsville Water Company to be incorporated with a capital stock of $20,000, letters patent to be issued on $10,000 being subscribed pro ut statute: Pamph. L. 1833 and 1834. p. 274. The water was to be brought for the supply of the town from a spring within the borough. On the 21st day of March 1836, the governor was authorized to incorporate the company, when two hundred shares of $25 each shall be subscribed. See Pamph. L. March 21st 1836. On the 28th day of March 1836, a charter of incorporation was issued by tbe governor. A further supplement was enacted on the 12th of February 1849, by which the company was authorized to increase its capital stock from $20,000 to $50,000, and bring into the borough the water of Mill creek, or its branches. A further supplement was passed on the 18th day of February 1854, by which the original charter was most essentially changed in many particulars. The capital stock was increased to $200,000. The corporation was authorized to borrow $50,000, to greatly extend its waterworks, to supply the boroughs of St. Clair and Port Carbon, and the towns of Palo Alto and Mount Carbon with water, to contract with the boroughs, to pay semi-annual dividends of three per cent, on the additional cost of supplying the boroughs on the same conditions as supplying Pottsville, correct accounts to be kept and supplied, particularly of bringing the water in from Mill creek, to assess taxes on all of these boroughs to pay yearly dividends.
    “ The different boroughs to be supplied are authorized to subscribe stock, and give their bonds so as to make up the annual dividends, and the eleventh section declares ‘ the stock in said company shall be exempt from all taxation whatsoever.’ But when these different boroughs shall be repaid their advances, and pay dividends exceeding six per cent., the excess shall be taxed for state purposes, and the remainder of the dividends suffered to accumulate to meet expenses in repairing or enlarging the works or divided among the stockholders. It is further provided that if the corporation shall not proceed within two years to carry on the work and complete the same within three years, the privileges granted are to cease and revert to the Commonwealth, all of which supplement, in full, we find part of this case: See Pamph. L. 1854, pp. 79 to 85. We further find that by a law enacted on the 12th day of April 1855, the Pottsville Water Company was authorized to borrow $50,000 to carry on its work. We further find that the whole capital stock subscribed in this company was $200,000, of which but $127,975 was paid in, on which alone dividends were declared of six per cent, per annum, and no more, from November 1859 until the end of November 1878. That this stock was subscribed and paid after-the supplement of the 18th day of February 1854, -and under the provisions of the same. The company also extended its works some six miles up Mill creek, to obtain a proper supply of water, and in addition to furnishing the borough supplied the other boroughs and towns mentioned in the supplement, as provided therein. We also find that no notice was given to the company to make report of its dividends till about the year 1878, or notice given that the Commonwealth claimed to tax its stock.”
    The following were the conclusions of law of the. court:
    “ The claim on the part of the Commonwealth is to tax the capital stock of the Pottsville Water Company, under the Act of April 12th 1859, at the rate of one-half mill on each one per cent, of dividend made by it since the date of that act. This is resisted by the company, on the ground that it is exempt from taxation under its charter law, the eleventh section of which declares, ‘ The stock of said company shall be exempt from all taxation whatsoever.’ If this provision was in the original charter, there would be no doubt as to it being clear of taxes, and it would transcend the power of the state to impose it, but it is in the supplement enacted on the 11th day of February 1854. Until 1857 the legislature possessed no control over charters once granted, as has been settled from Dartmouth College v. Woodward, 4 Wheat. 518, through various bank, bridge, railroad and other cases, down to the present time. It is not to be shaken. It is considered part of the contract. On the other hand, where the privilege is a mere gratuity, granted by the legislature without consideration, it is not binding, and can after-wards be revoked, whenever the necessities of the state or the bad faith of the legislature tempts that body to call it in question. We have numerous cases of late between individuals, and between the state and private persons and corporations. It is the settled doctrine, founded on sound principles. The books are full of cases. We need not recapitulate. The question is, have we not before us an intermediate case?
    “ Under the Act of 1834, a very small company was incorporated. The capital stock was only $20,000. The intention was to carry the water of a spring through the borough, the spring being situated within its limits. Only some $5000 were paid in. When 200 shares were subscribed, and $5 paid on each share, it was provided that letters patent might be issued by the governor, which was done on the 28th day of March 1836. Afterwards, under the Act of 1854, the capital vras greatly enlarged, increased to $200,000, the waters of a considerable stream — Mill creek — to be brought in, four other towns to receive a supply of water from the works, the company to commence them within two year's, and complete them within three years from that time, and unless finished, the whole to be forfeited to the Commonwealth. This statute, both in form and substance, creates a new corporation, though not in name. It has within its pages all of the acts required and customary at that time under our statutes to be done — books to be opened, elections to be held, and, in short, all of the duties of a new corporation, and in that law is inserted the provision that the stock shall be exempt from taxation. Under that statute $200,000 was subscribed, $127,975 paid in, the work extended six miles up Mill creek, the towns all supplied, and the waterworks carried on ever since. We had no proof on the trial that any work had been previously done ; but it is fair to presume that the water of the spring had in some way been conducted through the town of Pottsville, but no further. We cannot doubt but that the exemption from taxation was inserted in that statute to induce subsci'iptions, and cause the completion of the waterworks, and the money was subscribed and paid in on the faith of that provision.
    “ It is urged that this promise was without consideration, and, therefore, not binding. That may be conceded, if it was merely gratuitous; but a consideration is- loss to the promisee or benefit to the promiser. Here we have pretty strong evidence of loss to the promisee by the subscription of four times as much stock as was ever taken before, and the payment of more than eight times as much money as was paid at the time the company got its charter. The waterworks, if previously existing at all, were small, of comparatively small service, and made at little cost. This might he compared to a railroad company which had built its road for a hundred miles to its place of destination, and the state would say that, in consideration of your Slaving done this, we will pay you a bonus of $5000 a mile. No one would say such a promise was binding. But if it was said, if you will extend this road two'hundred miles further, to another point, we will pay you a like bonus, and it was done, such promise would be binding, and could be enforced. This case is very similar in principle.
    “ It is also urged that there was no promise made, and nothing required to be done by the company. It is very rare to find corporations bound 4o perfect projected works. The privilege is given to build or to do, and if the charter is accepted and act done, it is considered and held to be a contract. If, in such a charter, a promise is made by the staté,1' it is held binding; why not be equally so, when it is said to an existing corporation, if you will greatly extend your works, expend ten times as much money in doing it, you shall have certain defined privileges? We consider the promise, made under the circumstances and conditions shown in this case, quite as binding as if inserted in the -original charter, and that good faith towards those who subscribed their stock requires that the contract should be carried out, and the taxation attempted to be imposed is a nullity, and cannot be enforced. We do not believe it was ever intended by the legislature, and if so intended, would do great injustice to the corporators. We shall, therefore, find in favor of the defendant. ■ On the facts, as found of record, we find in favor of the defendant.”
    The Commonwealth excepted to the decision of the court alleging that the court erred, inter alia, as follows:
    5. In concluding that sect. 11 of the Act of 1854, which declares that “ the stock of said company shall be exempt from all taxation whatsoever,” created a binding contract which exempted the company from taxation under the several tax laws of April 12th 1859, Pamph. L. 529 ; 1st May 1868, Pamph. L. 109 ; 24th April 1874, Pamph. L. 68; 20th March 1877, Pamph. L. 6.
    6. In not concluding that the company was liable to pay the tax imposed by the fifth section of the Act of 24th April 1874, Pamph. L. 68, and the third section of the Act of 20th March 1877, Pamph. L. 6, even though the company be exempt from taxation under prior laws.
    7. In not deciding in favor of the Commonwealth.
    The court overruled the exceptions and entered judgment for defendant, whereupon the Commonwealth took this writ and alleged that the court erred .in this action.

      C. W. Wells, Lyman D. Gilbert, Deputy Attorney-General, and Henry W. Palmer, Attorney-General, for the Commonwealth.
    The exemption in the Act. of 1854 was not a contract but a mere gratuity, and was repealed by the general legislation imposing taxation upon all companies : Commonwealth v. Bird, 12 Mass. 442; People v. Commissioners of Taxes, 47 N. Y. 501; Christ Church Hospital v. Philadelphia, 24 How. 302; Tucker v. Ferguson, 22 Wall. 527: West Wisconsin Railroad Co. v. Supervisors, 3 Otto 595. This last case bears a striking analogy both in fact and principle with the one at bar.
    Seeking to deduce, from the authorities above cited (which are the leading ones establishing the doctrine of gratuity as distinguished from contract), as well as from the large number holding contracts to exist under the facts therein, a principle which may be recognised as the boundary between the two classes of cases granting away the sovereign power of taxation, is no easy task, but we respectfully submit to the court the"following as being possibly the correct distinction between the two classes of cases:
    Where the Act of Assembly creating the exemption from taxation also imposes a reciprocal obligation upon the company, binding it, so soon as the act goes into operation as a law, to do some particular thing to or for the state or the public which it was not already its legal duty to do, then such act, upon the performance by the company of that which it was obliged to do therein, constitutes a contract which the state cannot violate by imposing a tax.
    But where the act does not impose such reciprocal obligation upon the company, but leaves it entirely optional with the company whether it will or will not do that now thing proposed, the legislature did not intend to create a contract absolutely exempting from taxation, but only to offer a gratuity to remain in force so long as it wills, or where the consideration is not to or for the state or the public, but is private in its nature, the consideration is not of that nature which will enable the legislature to make a binding grant of the taxing power.
    It was left entirely optional with this company whether or not it would do any of the things it was authorized therein to do, sect. 14 of the act being of exactly the same character as the clause in West Wisconsin Railroad v. Supervisors, supra, which the court there held to leave the proposal optional with the company to accept or not. There was not even the implied obligation on the company, such as is raised by the acceptance of a charter, authorizing it to execute a projected work, because this company had already, by the Act of 1819, been authorized, and by its acceptance had obliged itself to do the very thing which it is claimed here to constitute the consideration of this exemption, i. e., the building of the Mill creek line.
    We doubt whether a single well-considered case can be found, which will support a contract made upon the consideration found here, to wit, loss to the promisee, but that they all have a consideration either flowing directly to the state, such as bonus, commutation of tax, real estate conveyed, services performed, or benefit to the public at large, such as building bridges, railroads, canals, opening banks. The quantum of consideration is, doubtless for the legislature alone, but is not the quality one as well for the courts.
    May 31st 1880.

      Edward Owen Parry, for defendant in error. —
    'The facts in this case are radically different from those in the cases cited by the learned counsel of the Commonwealth to sustain their propositions. The cases cited may be divided into two classes. First, where the exemption from taxation was granted to an existing corporation without any consideration, and therefore was to be considered not a contract, but a gratuity; and, second, where there was nothing in the act creating the corporation from which it could be implied that it was the intention of the legislature that no other or greater tax should be imposed than the tax mentioned in it.
    Christ Church Hospital, 12 Harris 230, and 24 Howard 300, may be considered as the leading case of the first class, on which the case of Tucker v. Ferguson, 22 Wallace 527, was ruled, and which was followed by the Wisconsin Railroad Case, 3 Otto 595, so much relied on in the argument of the counsel of the Commonwealth, and which was decided on the authority of Tucker v. Ferguson, and so stated by the learned judge who delivered the opinion of the court. The Easton Bank Case, 10 Barr 451, maybe considered as the leading case of the second class, and which was held by the learned judge who delivered the opinion of the court in Menrot v. Wilmington Railroad, 18 Wallace 206, as ruling that case.
    We, therefore, deny that the cases cited for the Commonwealth have any bearing on the question now before the court.
   Mr. Justice Mercur

delivered the opinion of the court,

It is well settled law, that an act of incorporation is a contract between the state and the stockholders. A subsequent grant of additional powers does not necessarily stand on the same high grounds. The original charter of this defendant gave quite limited powers, and authorized it to commence operations with a small capital. At first it supplied the borough of Pottsville with water from a spring within the borough. A supplement increased its capital to $50,000, and authorized it to bring water from outside the borough. Afterwards the Act of 18th February 1854 changed the charter in many important particulars. The capital stock was thereby increased to $200,000, and it was authorized to so enlarge and extend its works as to supply with water two other boroughs, and two other towns; to enter into contracts with those boroughs for the payment by them of specific dividends on the additional cost of supplying them with water. Those boroughs were authorized to subscribe stock and give their bonds to secure the payment of the dividends for which they became responsible. The act further declared “the stock in said company shall be exempt from all taxation whatsoever.” When this act was passed there was no constitutional inhibition against the exemption. The stock now sought to be taxed was subscribed and paid for after the passage of this act of 1854 and under its provisions. Under the powers therein given the corporation extended its works several miles up a stream to procure water, and supplied the boroughs and towns in accordance therewith. The later Act of 12th April 1855 authorized the company to borrow $50,000 to carry on its work. Thus it is shown, the powers of the company inducing large expenditures, were increased and changed by the supplement' of 1854. They were accepted and acted upon. Several other municipalities were brought within the operation of those new powers, and became obligated to the performance of legal duties consequent thereon. The enlarged duties and obligations imposed by the act substantially created a new corporation. It is no answer to say the corpóration was not bound to assume those new powers and duties. That is true, yet it did assume them. Relying thereon it made large expenditures. With as much force it might be said the company was not compelled to accept the original grant of its charter. Its rights are not thus to be determined. Although free to accept or reject, yet having accepted all the rights and exemptions given by the act follow. The learned judge correctly held the stock of the company exempt from taxation.

Judgment affirmed.


author: Mr. Justice Sterrett

text:
    Burkholder’s Appeal.
    1. It has been definitely settled that by the final confirmation of a sale made by an assignee for the benefit of creditors, under the Act of February 17th 1876, the land is converted into money as of that date, and at the same time discharged from all such existing liens as are intended to be divested by the sale ; and that the liens so divested are to be paid out of the proceeds of sale, according to their priority on the day of confirmation, with interest to that date: Carver’s Appeal, 8 Norris 276; Tomlinson’s Appeal, 9 Id. 224; and Herbst’s Appeal, Ibid. 353, followed.
    2. "Where the liens due and payable presently are sufficient in amount to exhaust the purchase-money, the sale should be for cash, unless all parties interested unite in requesting a time sale.
    3. Whore there is a time sale carrying interest, as the instalments of principal fall due, the interest thereon should be divided pro rata among the creditors, in proportion to the amount each was entitled to receive out of the principal.
    4. A compensation of five per cent, to the assignee not considered excessive, under the circumstances of this case.

      May 25th 1880.
    Before. Mercur, Gordon, Trunkey, Sterrett and Green, JJ. ■ Sharswood, C; J., and Paxson, J., absent.
    . Appeal from the Court of Common Pleas of Mifflin county: Of May Term 1880, No. 195.
    ■ Appeal of Margaret Burkholder, administratrix, and Thompson G. Sigler, administrator of Joseph Burkholder, deceased, from the decree of the court, confirming the report o'f the auditor to distribute the funds in the hands of George Bates, assignee of John Taylor.
    On September 29th 1876, John Taylor made an assignment for the benefit of creditors to George Bates. At the next term of court he procured an order of the court to sell the real estate of the assignee, consisting, of a valuable farm. It was sold on December 23d, the day it was advertised to be sold, without any adjournment, to Dr. Hale, whose lien came second after appellants’ judgments. The sale was confirmed January 8th 1877. The purchase-money was $17,011.74, one-third cash and balance in two equal annual payments with interest. On December - 13th 1878, the assignee filed his account to January Term 1879, charging himself with $17,01T.74, principal of sale, and $1441.74, interest on same, and claiming credit for $807.57 interest on payments made to various creditors, and also a credit for $850, for his commission on selling the farm. Exceptions were filed by Dr. Hale and appellants to the payments to the different judgment-creditors, and to the assignee’s compensation. The court at first reduced the compensation of the assignee to $500, and referred the amount in assignee’s hands to Joseph W. Parker, Esq., for distribution. The auditor reported to April 7th 1879, giving the assignee $500 for his services, and making distribution on the basis that interest on claims ceased on the day of sale, and the amount of sale, after deducting costs, was distributed as far as it would go to the judgment-creditors in the order of priority, and the interest on the deferred payments, together with the interest on the different payments made to the different creditors, up to the filing of the account of the assignee, was distributed 'pro rata to the judgments reached. Exceptions were filed to this mode of distribution, and to the reduction of assignee’s compensation. The court referred the matter back to the auditor, who reported, allowing the assignee $850 for his compensation, and making distribution on the principle of allowing interest on the different judgments up to the confirmation of the assignee’s account; also submitting another schedule of distribution, allowing interest on the different judgments up to confirmation of sale, and appropriating the interest on the deferred payments pro rata to the judgments reached. The appellants filed exceptions to this report: 1st. That interest should have ceased on the day of sale, and the accrued interest should have been distributed pro rata to all the claims reached. 2d. That the compensation allowed assignee was excessive. The court overruled the exceptions and confirmed the report.
    The appellants, whose judgments were not reached, took this appeal, and alleged that the court erred as follows:
    1. In confirming the report of the auditor.
    2. In overruling the 3d exception to auditor’s report, to wit: The auditor adopted the wrong plan of distribution, the interest should cease on the claims on the day of sale, or at furthest at confirmation of sale, and the accrued interest on the fund should have been distributed pro rata to all the claims reached.
    3. In overruling the 4th exception to auditor’s report, to wit: The auditor allowed too much compensation to the assignee and accountant, and erred in overruling the exceptions thereto.

      A. Reed, for appellants.
    The sale of the farm by the assignee under the urder of the court was a judicial sale. The uniform decisions of this court in the case of judicial sales have been that the interest on liens thereby .discharged ceased at the time of sale. In Ramsay’s Appeal, 4 Watts 71, it is said: “ A sale under an order of Orphans’ Court is a judicial sale,” and assimilates it to a sheriff’s sale, where the interest ceases on the day of sale. To the same effect is the decision in O’Hara’s Estate, 4 Leg. Gaz. 130. In sales by the sheriff the rule and custom are the same : Walton v. West, 4 Whart. 221; Siter, James & Co.’s Appeal, 2 Casey 178; Bachdell’s Appeal, 6 P. F. Smith 389.
    Any other rule would make the amount of the claims against the debtor that would be paid by such sale depend upon the promptness or delay of the assignee in collecting the purchase-money and filing his account; and it would be difficult for a creditor to know when his claim was reached by a sale. We contend that interest ceases at day of sale, and the interest on the deferred payments and all other interest made out of purchase-money, goes pro rata to all claims reached. The charge of $850 is excessive, it being five per cent, on the sale. On sales of real estate two and one-half per cent, is the usual compensation : Carrier’s Appeal, 29 P. F. Smith 230; Duval’s Appeal, 2 Wright 112. In this case there was no great labor or care involved.

      D. W. Woods and John A. McKee, for appellees.
    We do not dispute the proposition that in sheriff’s sales, and all other .judicial sales, where the property is sold for cash, that interest on the judgments or other liens stops on the day of sale. What we contend for is, that when the property is sold on credit and the deferred payments are drawing interest, that the interest realized out of the fund raised by the sale of the real estate up to its distribution shall be paid to the judgment or lien-creditors in proportion to the amount of their judgments. Any other rule would work injustice to the prior liens.
    June 14th 1880.
    If the amounts due the prior lien-creditors could receive no part of this interest, then in all cases of sale, where by law time would be given, it would be the policy of the junior lien-creditors to have the time extended as long as possible, and thus deprive the prior lien-creditors from being paid promptly, lose all interest on their claims, and often thus have junior lien-creditors paid whose judgments were not reached on day of sale by the simple accumulation of interest at the- expense of prior liens.
   Mr. Justice Sterrett

delivered the opinion of the court,

• It has been definitively settled that by the final confirmation of a sale, made by an assignee for the benefit of creditors under the Act of February 17th 1876, the land is converted into money, as of that date, and at the same time discharged from all such then existing liens as are intended to be divested by the sale ; and that the liens so divested are to be paid out of the proceeds of sale, according to their priority on the day of confirmation, with interest to that date: Carver’s Appeal, 8 Norris 276; Tomlinson’s Appeal, 9 Id. 224; Herbst’s Appeal, Id. 353. In two of these cases, it is expressly ruled that interest on the liens divested should be computed to the day of confirmation only, and not to the date of payment of the purchase-money. "When the liens, due and payable presently, are sufficient in amount to exhaust the purchase-money, the sale should be for cash, unless all parties interested unite in requesting a time sale. In the case before us, the state of the liens was not such as to justify a sale on time; but no objection was interposed by any of the creditors whose claims were due, and the sale was made, as directed by the court, for one-third cash and the residue in two equal payments in one and two years with interest.. The sale having been thus made and confirmed, the hand-money, less expenses, &c., should have been applied to payment of the oldest liens, in their order, as far as it would reach. The second payment should have been distributed to the liens next in order, and in addition thereto, the interest on that instalment should have been ' divided pro rata among the same creditors in proportion to the amount each was entitled to receive out of the principal; and, in like manner, the last instalment should have been distributed to the lien creditors next in order, and the two years’ interest thereon divided among them in proportion to their respective shares of the principal. In this way the second and third classes of creditors would have received the interest which accrued on the respective instalments as a compensation or equivalent for the delay in payment of their respective claims. But, instead of thus paying some of the creditors in full, according to the priority of their respective liens as they existed at the date of the confirmation of sale, the assignee made payments to the older creditors on account, leaving comparatively small balances due some of them.

In the schedule of distribution reported by the auditor and adopted by the court, interest appears to have been computed on the respective liens to January 8th 1879, two years after the sale was confirmed. In this there was error, and the case must be remitted for re-distribution of the fund in accordance, as nearly as may be, with the principles above indicated, taking into consideration, however, the respective dates and amounts of the payments made on account. The interest collected by the assignee justly and equitably belongs to the creditors who are entitled to the principal from which it accrued, and it should be distributed among them in proportion to the amount of their respective distributive shares and the length of time the payment of these shares is respectively postponed on account of the deferred instalments of purchase-money. Those who received nearly the full amount of their claims out of the hand payment, will be entitled to a relatively small proportion of the accrued interest, and those who received nothing until the last instalment matured, will be entitled to more relatively than those who received a portion of the second instalment.

The manner in which the assignee stated his account is not to be commended. The items of expense, &c., pertaining to the execution of the trust, and payments to creditors on account of their distributative shares, are blended together. This should never be done, The account should exhibit, on the one side, the several sums realized from the trust estate, and on the other, the expenses incurred in executing the trust, so that the full net balance for distribution may appear. To this may be appended a schedule giving the dates and amounts of payments to creditors on account of distribution. '

If the items of interest amounting to $808.63 for which the assignee has taken credit in his account were-not paid to the respective creditors, he is not entitled to credit for the same. In the schedule reported by the auditor, the amount distributed among the creditors is about $7284, from which it appears that the assignee has been allowed credit for the items of interest referred to. This is not correct, unless the interest was actually paid by him.

The third assignment is not sustained. The learned judge at first reduced the compensation of the assignee to $500, but after-wards referred the matter to the auditor, who reported in favor of allowing the amount claimed. In view of the circumstances stated by the auditor, it is by no means clear that the court erred in adopting his recommendation.

The first assignment is very general and not in accordance with the rules of court requiring each error to be particularly specified.

Decree reversed at the costs of the appellee, and record remitted to the court of Common Pleas with instructions to distribute the fund in accordance with the foregoing.opinion.


text:
    Parker, Executor of Wright, versus Sulouff.
    1. W. conveyed seven tracts of land to S., and took from the latter four bonds and mortgages upon four of the tracts, to secure the payment of the balance of the purchase-money. The interest on the mortgages was at usurious rates. S. conveyed one of the tracts to K., in consideration of a sum named, and the payment of the mortgage to W., the deed further reciting that the purchaser was to hold “subject to the payment of the lien of ■ mortgage of W. to S.” In a scire facias on the mortgage against D. and EL. as terre-tenant, the other three mortgages having been paid, the defendants offered to set off the usurious interest paid on said three mortgages: Held, that the set-off was properly allowed.
    2. As S. was' personally liable on the bond for the whole amount mentioned therein, if any deficiency arose on the sale of the land he would be obliged to make it good, and should, therefore, be permitted to reduce the amount of his liability in an action against himself on the mortgage given to secure the bond on which his liability remained.
    May 25th 1880.
    Before Mercur,, Gordon, Trtjnkey, Green and Sterrett, JJ. Sharswood, C. J., and Paxson, J., absent.
    Error to the Court of Common Pleas of Juniata county: Of May Term 1880, No. 200.
    Scire facias sur mortgage issued by Ezra D. Parker, executor of John Wright, deceased, against David P. Sulouff, with notice to Jacob Sulouff, Keziah Sulouff, his wife, and Turner Sulouff, terre-tenants. The defendants pleaded “payment.”
    At the trial, before Junkin, P. J., it appeared that on August 26th 1869, the plaintiff’s testator, Wright, conveyed to David P. Sulouff seven tracts of land, and as security for the purchase-money took from him four mortgages, accompanied by bonds, upon four of the tracts of land thus conveyed. The mortgage in suit was one of these four, and was for $3175.30, payable on April 1st 1873, and covered a farm containing '332 acres. On all these mortgages the interest was at the rate of eight per cent, per annum.
    On the 25th of January 1872, David P. Sulouff and wife conveyed by deed the land bound by the mortgage sued on to Keziah Sulouff, and this deed recited that it is given “ in consideration of the sum of $1000, and the payment of the mortgage to John Wright by David P. Sulouff,” and further recited, that the conveyance was made “subject to the payment of the lien of mortgage of John Wright by David P. Sulouff.”

      Defendants offered to show that, in 1869, David P. Sulouff, the defendant., was indebted to John Wright, the plaintiff’s testator, in the sum of $12,441.41, or thereabouts, and to secure the payment thereof, he took from the defendant four several mortgages, on as many separate tracts of land, and payable in different sums and at different times, to wit: On the 1st of April 1870, and annually thereafter till 1st April 1875, inclusive; that interest on the several payments as aforesaid, was counted from the date of the mortgage till .the maturity of each payment, at the rate of eight per cent, per annum ; that three of the mortgages have been paid and satisfied, including more than $1000 of usurious interest. These facts to be proved by agreements in writing between the parties and other proper writings, and for the purpose of claiming such excessive interest as a credit on the mortgage in suit; and further, to show that the said four mortgages were given for parts of one and the same debt, and that they constituted one transaction.
    Objected to. Objection overruled, and evidence admitted.
    In the general charge, the court, inter alia, said:
    “ The next question is, can David P. resist the payment of the mortgage on grounds of. usury, after having conveyed the property bound by it to Keziah Sulouff, the terre-tenant ? The case of The Miners Trust Co. v. Rosenberry, 31 P. F. Smith 309, is relied on as teaching that a purchaser who has assumed the payment of a lien as part of his purchase-money, into which usurious interest has entered, cannot set up that as a defence to its payment. This is clear enough, when the original debtor, as in the case cited, openly appears and expresses his wish that the debt be paid notwithstanding the usury. But it is too clear for argument, that where the original debtor is made a party defendant, though doing so was unavoidable, and even though the proceeding is in rem, as in this case, and although no personal liability may spring out of a judgment against him, he is entitled to set up all the defences (not having estopped himself), which would have been available, had he continued the owner of the land bound by the original obligation. This proposition is so manifest that the mere statement of the principle becomes the axiom of sufficient proof.
    [“ The last question is, can David P. Sulouff recoup the usurious interest paid by him on the satisfied mortgages, against this proceeding to recover the balance due on the fourth mortgage ? The answer to this depends upon how we view the mortgages. Were they segregated securities for an aggregated debt ? or, in other words, did David P. Sulouff owe to John Wright a debt of $13,441.43, as an entirety for seven parcels of land, and four tracts were mortgaged for the whole, in such manner that each should secure a portion according to its value ? We think that there was but one original debt as purchase-money of seven parcels of land, sold by Wright to David P. Sulouff, and that the senaration of the whole into fragments, to adapt the charge to the ability of the four parcels of land to pay the whole, had not the effect of rendering each fragment an independent, individuated liability, so as to prevent the recoupment of excessive interest paid upon three, available in a sci. fa. issued on the fourth. This conclusion cannot be avoided under the reasoning in Heath v. Page, 13 P. F. Smith 108 ; Campbell v. Sloan, 12 Id. 481; Rheem v. Rosier, 22 Id. 54 ; Overholt v. Bank of Mt. Pleasant, 1 Norris 490; where it is held that neither renewals, nor splitting up a debt, nor any device that ingenuity can invent, will enable the lender to evade the statute. The provision in the Interest Act of 1858, which provides, ‘ that it shall, be lawful for such borrower, or debtor, at his option, to retain and deduct such excess from the amount of any such debt,’ instead of suing to recover back such excess, is based upon the well-known dominion 'which the lender exercises over his borrower and' how reluctant he is to give umbrage to his creditor while he continues in his power, and hence the statute permits him to defer recoupment until final payment would release him. With this clear purpose expressed' in. the statute, it would ill accord with the spirit of the act, to hold that when an entire liability was divided into fragments, each would run its course as an independent, separate obligation, compelling the debtor to raise a controversy with his creditor at the final payment of each branch of the indebtedness, thus exposing him to the mercy of his creditor.
    “ This view of the case allows David P. Sulouff a credit, on the mortgage sued upon, for all excessive interest paid by him on the other three satisfied mortgages. Thus :
    Balance due on mortgage, 23d February 1878, . $2139 64
    Interest from 23d February 1878, to 23d February 1879,........ 123 37
    Amount due,.......$2263 01
    Credit.or deduct the illegal interest and its interest, 1463 01
    Plaintiff should have a verdict for, . . . $800 00”]
    Verdict and judgment accordingly, when plaintiff took this writ, alleging that the court erred in admitting the above evidence, and in the portion of the charge included in brackets.

      Louis JE. Atkinson, for plaintiff in error.
    This was a proceeding in rem, and David P. Sulouff had no interest in the thing proceeded against, and payments made by him on other mortgages on other lands should not have been admitted in evidence against the claim of the plaintiffs. Nor was he in any condition to resist this claim. It is true he was a party to the record, but this was unavoidable, and he was merely a nominal, party. He could not be affected personally by the judgment, nor was his liability on his mortgage-bond influenced by the result. It was therefore error to admit evidence, of usurious interest paid by-him on other mortgages : Wilson v. McCullough, 7 Harr s 83; Stevens v. N. P. Coal Co. 11 Casey 265; Perkins v. Johnson, 7 Harris 512; Hoffman v. Lee, 3 Watts 354.
    The consideration of the deed from David P. to Keziah Sulouff having been in part the payment of the mortgage in favor of John Wright, and the conveyance having been made “under and subject” to the payment of the mortgage, the fact that the mortgage was a part of the consideration, and the land made subject to the payment thereof is in law an undertaking on the part of the grantee to pay this mortgage. From the time she accepted the land under this conveyance, she was the debtor of John 'Wright; this mortgage which she assumed to pay was “segregated” from its fellows, and. as between her and David P. Sulouff and John Wright as mortgagee, the liability to pay the mortgage rested upon her exclusively, and David P. Sulouff was discharged therefrom: Hoff’s Appeal, 12 Harris 203; Lennig’s Estate, 2 P. F. Smith 139; Townsend v. Long, 27 Id. 143; Merriman v. Moore, 9 Norris 78.
    If these mortgages were not “segregated debts” when executed, the mortgage sued on, as between all the parties interested therein, became segregated, separated and distinct from the rest, when she became the owner of the encumbered land upon the terms named in the deed. The true rule in this case is clearly laid down in the case of Macungie Savings Bank v. Hottenstein, 8 Norris 328, in which it is held “the rule that the vicious element in a usurious contract survives in all its transmutations, is confined to cases in which the obligor or promissor remains the same.” In the case in hand the debtor, as we have seen, did not remain the same. Mrs. Sulouff took the place of David P. when the land was conveyed to her. This case is within the principle of Miners’ Trust Company Bank v. Roseberry, 31 P. F. Smith 309, in which it was held that the Act of May 28th 1858 (usury), applies only to the parties to the transaction, and that the purchaser, having bought subject to the judgment, is presumed to have paid as much as the amount of the judgment, less than he would have done, and it does not lie in his mouth to allege previous usurious transactions between the original debtor and his creditor.

      E. 8. Doty and E. 8. Doty, Jr., for defendants in error.
    — None of the cases are inconsistent with the doctrine that- where there is a mortgage-bond, or a personal covenant in the mortgage for the payment of its consideration, the mortgagor, after he has parted with the mortgaged premises, is something more than a nominal party in a suit upon the mortgage, and that, as a defendant therein, he may make any defence that is available in law or equity. It was not essential that Keziah Sulouff, grantee of the mortgagor, should have been a party to the suit upon the mortgage: Mather v. Clark, 1 Watts 491. The Act of 17.05 does not require that the terretenants, or purchasers under the mortgagor, should be made parties to the scire facias on the mortgage: Mevey’s Appeal, 4 Barr 80. But it was essential that David P. Sulouff, the mortgagor, should be a party. The plaintiff in error admits this, but alleges that he was merely a nominal party. He was more than a nominal party. In a suit on the bond which accompanies a mortgage, the verdict on the scire facias would be conclusive of the amount due : Roberts v. Williams, 5 Whart. 186.
    June 7th 1880.
    By the acceptance of the deed Keziah Sulouff did not become the debtor of John Wright. The words in a conveyance “ under and subject to a mortgage” do not import an assumption by the purchaser of the debt, unless there exist special circumstances to raise a covenant to that effect: Moore’s Appeal, 7 Norris 450; Thomas v. Wiltbank, 6 W. N. C. 477; Merriman v. Moore, 9 Norris 78. It was not claimed on the trial that Keziah Sulouff had assumed any personal obligation to pay the mortgage debt. The plaintiff relie,d on the effect of the words in the conveyance. The mortgagee is -not attempting to enforce the promise, and why may not the mortgagor, who is upon the record, defend for the benefit of his vendee ? If he thinks proper to “ donate” the consideration-money to his grantee, he wrongs no one. The jury have found that Wright received $1669.52 illegal interest on the identical debt sued for in this case. That money does not belong to him. He cannot retain it, but holds it for the use of the debtor, whose money it is : Heath v. Page, 13 P. F. Smith 121. But it is contended by the plaintiff in error that the mortgage sued became “separated and distinct from the rest” when Keziah Sulouff accepted the conveyance under and “subject to the payment of the lien of mortgage of John Wright by David P. Sulouff.” This position is untenable. There was no change of securities, no substitution. As between John Wright and David P. Sulouff the “ obligor remains the same.” The cases collected in Campbell v. Sloan, 12 P. F. Smith 481, unite in deciding with unmistakable emphasis that the taint of usury cannot be eradicated by the substitution of one security, or one set of securities for another, so long as the original debt survives: Miller v. Irwin, 4 Norris 378; Lucas v. Bank, 28 P. F. Smith 228; Thomas v. Shoemaker, 6 W. & S. 179.
   Mr. Justice Green

delivered the opinion of the court,

This was an action of scire facias on a mortgage brought by the executor of the mortgagee against the mortgagor with notice to terre-tenants. The defence was payment. A considerable amount of the payments given in evidence consisted of moneys paid in excess of legal interest due .by the mortgagor, and claimed to be money of the mortgagor in the. hands of the mortgagee, and therefore to be deducted from the amount due upon the mortgage in suit. In point of fact the present mortgage was one of four originally given to secure payment of a debt of $12,441.43.- Each mortgage was upon a different tract, but the debt was a single indebtedness arising out of various transactions and the amount fixed by an undisputed settlement between the parties. The plaintiff’s testator executed a deed to the defendant, David P. Sulouff, on August 26th 1869, for séve.n tracts of land, the whole consideration being $13,441.43, of which $1000 was paid about the time of the conveyance. On the same day the grantee, Sulouff, executed four mortgages to the grantor Wright, upon four of the tracts for the payment of different sums -at different times, but aggregating the sum of $12.441.43. The mortgage in suit was one of these four, and was for $3175.30, payable on April 1st 1873, and covered a farm containing three hundred and thirty-two acres. On this mortgage usurious interest was paid, the amount of which is undisputed, and being deducted leaves a balance due February 23d 1878 of $2139.64. This sum, together with interest to the date of the verdict, was claimed asj;he amount due the plaintiff. - But the court permitted other payments of excessive interest upon the other mortgages to be deducted from the amount due upon the mortgage in suit, leaving a balance due of $800, and for this amount a verdict was entered by the direction of the court. The question is upon the correctness of the action of the court in allowing credit for the usurious interest paid upon the other mortgages. It would hardly be pretended that there was any error in the ruling of the court below if the parties had remained the same throughout, and the payments had all been made directly by the original mortgagor to the mortgagee. But the plaintiff claims, and it was the fact, that the parties did not remain the same, and that the payments were not all made by the mortgagor. On January 25th 1872, D. P. Sulouff and wife conveyed the land bound by the mortgage in suit to Keziah Sulouff in consideration of $1000, “ and the payment of the mortgage to John Wright by David P. Sulouff.” In the habendum clause of the deed was the provision that the property was to be held “subject to the payment of the lien of mortgage of John Wright by said David P. Sulouff.”

It is claimed that after this conveyance, Keziah Sulouff became the debtor for the mortgage of -Wright, that she was bound to pay the whole of it, and that no credit could be allowed for the usurious interest paid on the other mortgages by D. P. Sulouff. It is argued that D. P. Sulouff was free from all liability in relation to the mortgage, and could have .no possible interest in an action brought against the land, and further, that the sci. fa. on the mortgage was a proceeding in rem against the land alone. We cannot agree to the conclusions drawn from these premises. D. P. Sulouff, the original mortgagor, is one of the defendants in the suit. He gave a bond, the payment of which was secured by this mortgage, and, of course, he is personally liable, on the bond for the whole amount mentioned therein. If any deficiency should arise after the land is sold under the sci. fa., he would he obliged to make it good. He is,- therefore, directly interested, first, as an actual defendant on the record, and secondly, as being personally liable for the same debt and bound to respond for any deficiency resulting from the sale of the land. It would be very strange if-he could not be permitted to reduce the amount of his liability in an action against himself on the mortgage given to secure the payment of the bond upon which his personal liability remained. Moreover, although it may be very true that as between D. P. Sulouff and Keziah Sulouff, she was bound to pay the mortgage, that obligation on her part could not relieve him from his personal liability to Wright, the mortgagee. Again, it must be observed that Keziah Sulouff did not agree to pay any particular sum as representing the amount due upon the mortgage. It is not stated in the deed that she is to pay a specific money consideration, the aggregate of the mortgage and the $1000 to be paid to D..P. Sulouff. She is to pay him that $1000, and she is to pay also “the lien of the mortgage,” which means the amount due on the mortgage. What that amount is must be ascertained outside of the deed. As that sum was the amount legally due by D. P. Sulouff 'to John Wright, the state of the indebtedness between them becomes not merely a legitimate but a necessary subject of inquiry. It is too plain for argument that as between them the payments of usurious interest upon the other bonds and mortgages, the whole representing one original debt, may be deducted from the amount of the mortgage in suit. It follows that the court below was right in permitting the deduction of the amounts of excessive interest paid upon the other bonds given by the defendant, D. P. Sulouff to Wright, and therefore,

,The judgment is affirmed.