author: Mr. Chief Justice Mitchell,

text:
    Cook v. Carpenter Lipper’s Appeal.
    (No. 1).

      Equity—Jurisdiction—Corporations—Unpaid subscriptions—Remedy at law.

    A bill in equity may be maintained by the assignee of an insolvent corporation against a large number of stockholders of the corporation as parties defendant, to recover unpaid subscriptions to the capital stock, and this is the case although the bill shows that all of the unpaid capital was necessary to pay the debts, and that no accounting was therefore involved.

      Corporations—Stock subscriptions—Statute of limitations.

    On an obligation for the payment of money on demand the statute of limitations begins to run at once. Suit is a sufficient demand and must be brought within six years. Where, however, the contract is to pay on the future performance of a condition, or happening of an event, or at a certain time after demand, there a demand is necessary to a right of action and the statute does not begin to run until demand is made.
    Where a subscription to stock is not presently payable in full, but by its terms is to be payable from time to time as called for by the company, the statute of limitations does not begin to run until a call is made, and it is not necessary that such call should be made within six years from the date of the stock subscription.
    Argued Jan. 11, 1905.
    Appeal, No. 199, Jan. T., 1904, by M. "W". Lipper, from decree of C. P. No. 2, Pbila. Co., March T., 1899, No. 145, on bill in equity in case of Richard Y. Cook and George H. Earle, Jr., Assignees, for the benefit of creditors of the Chestnut Street Trust and Saving Fund Company v. Richard L. Carpenter and forty others including M. W. Lipper, Stockholders.
    Before Mitchell, C. J., Dean, Fell, Brown, Mestrezat, Potter and Elkin, JJ.
    Affirmed.
    Bill in equity to enforce stock subscriptions. Before Sulzberger, P. J.
    The answer to the bill averred that the company incorporated on June 8, 1888, started business with paid in capital of fifty per cent of its authorized capital, and that for upwards of six years thereafter the company remained in a sound financial condition, and there was no necessity for any additional capital ; that there was no call or demand from July 1, 1888, until March 25,1898, when a suit at law (subsequently discontinued) was instituted. The answer set up as defenses : (a) no equitable jurisdiction, and (b) statute of limitations.
    The court entered a decree in favor of the plaintiffs.

      Error assigned was the decree of the court.

      Ellis Ames Ballard, with him Bufus E. Shapley, and John Weaver, for appellants.
    The bill shows on its face that there was an adequate remedy at law and in words admits it: Yeager v. Scranton Trust Co., 14 W. N. C. 296; Citizens & Miners’ Savings Bank v. Gillespie, 115 Pa. 564.
    The claim was barred by the statute Swearingen v. Sewickley Dairy Co., 198 Pa. 68; R. R. Co. v. Byers, 32 Pa. 22; McCully v. R. R. Co., 32 Pa. 25; R. R. Co. v. Graham, 36 Pa. 77; Shackamaxon Bank v. Disston, 4 Pa. County Court Rep. 201; Finkbone’s App., 86 Pa. 368; Smith v. Bell, 107 Pa. 352; Morrison’s Admr. v. Mullin, 34 Pa. 12; Rhines v. Evans, 66 Pa. 192; McKelvy’s App., 72 Pa. 409.

      John G. Johnson, with him P. F. Bothermel, for appellees.
    The present suit is not against subscribers upon their contracts of subscription, but against the holders of shares at the time of insolvency.
    There is a duty upon the stockholders of an insolvent corporation, independently of the duty to pay upon calls and demands of the directors. This duty is to pay, to the extent of the unpaid capital represented by their shares, whatever may be demanded in liquidation of debts. It commences with the occurrence of the insolvency: Swearingen v. Dairy Co., 198 Pa. 68; Sanger v. Upton, 91 U. S. 56.
    A corporation, even though not insolvent, may collect from subscribers, whose contract of subscription has been perfected by their becoming in fact stockholders to whom shares are delivered, the full amount of their unpaid subscriptions within six years of every assessment with notice.
    May 22, 1905:
   Opinion by

Mr. Chief Justice Mitchell,

The preliminary question is the jurisdiction in equity. Appellants insist that there is a plain, full and adequate remedy at law, by suits against the several stockholders defendant, where each can defend upon his own case nntrammeled by differences of fact in the others. That there is a remedy at law by separate actions against the respondents is undeniable, but is it a full and adequate remedy in the sense that it bars the jurisdiction of equity?

The subject of the controversy is the collection and administration of corporate assets as a trust fund for the benefit of corporate creditors. Both the control of corporate matters and trust funds, are in general the subject of equitable jurisdiction. As was said in Lane’s Appeal, 105 Pa. 49 (65) “ when insolvency and exhaustion of assets (of corporations) exist the unpaid capital is not available to any one creditor in satisfaction of his debt, because then the whole amount of the unpaid capital is a trust fund which does not belong to the corporation but to the whole body of its creditors. Hence whether the proceeding originates in the name of one or of several or of all the creditors the result is the same in each. The capital when recovered enures to the benefit of all, and must be distributed among all ratably.” This result, as to collection, and still more forcibly as to distribution, is not reasonably practicable except in equity.

A bill may be filed as in this case by assignees representing the corporation for the benefit of creditors, or, as in Lane’s Appeal, supra, by creditors in their own names in behalf of themselves and others. In the latter case an action at law would present insuperable difficulties, and yet the substantial controversy is the same, and the mere difference in the nominal complainant should not oust in one case the jurisdiction that must be sustained in the other.

It is earnestly argued by appellants that in all the cases where a bill has been sustained, an accounting was part of the relief sought, and that equitable jurisdiction attached on this ground alone, while in the present case no accounting is asked, as the bill avers that the whole unpaid subscription will be insufficient to pay the debts. It is true that the necessity for an account is a large and influential element in equitable relief, but we do not find it said in any of the cases, that its presence or absence is the conclusive jurisdictional fact. In the present case the bill sets up facts that avoid the necessity for an accounting and an assessment. But suppose the answer had denied the averments and thus made the necessity of an accounting and assessment an issue. That would at once have made the case one cognizable in equity. Citizens’ Bank v. Gillespie, 115 Pa. 564, was an action at law in which such necessity was part of the issue, and the ease had to be sent to a new trial for the' reception of incompetent evidence on that point. Whether all the unpaid capital is required for payment of debts, or only part, and if so how much, are matters of judgment on the evidence, and different juries are likely to differ in their conclusions. The result would be that in numerous suits by the assignees some stockholders defendant might have to pay their subscriptions in full while some paid only part and others perhaps nothing at all. This would be incurring certain inconvenience and quite probable injustice, where the relief should not only be certain but uniform. As was well said by the learned judge below “ there are more than forty defendants. Most of them live within the jurisdiction, some do not, and it is quite conceivable that there might be hundreds living without the jurisdiction not reachable by our process at law. The question involved in all the cases is substantially the same, namely, ought the corporation to collect in its unpaid capital ? It is a pure question of law, and may be decided once for all in one suit as well as in a thousand. If the balance should not be collected from all, then it ought not to be collected from any. If, on the other hand, it should be collected, then none should escape.”

In the absence of chancery powers in our courts, equitable relief was afforded wherever practicable, in common-law forms. When later the legislature granted equitable powers it was held that if the subject of a bill was one within the proper and established jurisdiction of chancery the invention of a new remedy in common-law form, or the extension of an old one, would not necessarily oust the equitable jurisdiction: Wesley Church v. Moore, 10 Pa. 273. The question in such cases turns on the completeness, adequacjr and convenience of the remedy at law* and our decisions have begn liberal in the consideration of all these elements: Kirkpatrick v. McDonald, 11 Pa. 387; Bierbower’s Appeal, 107 Pa. 14; Brush Electric Co.’s Appeal, 114 Pa. 574; Johnston v. Price, 172 Pa. 427; Gray v. Citizens’ Gas Co., 206 Pa. 303. In the last case it was said by our Brother Dean, “ The question raised in this case is not alone whether plaintiff has a remedy at law, for that remedy it clearly has, but whether in view of the facts it is an adequate one. It may be conceded that the time is not very remote in our judicial history when a wronged party sought the intervention of equity and he could be truthfully met by the reply, you have a remedy at law in an action for damages, such reply would have been the end of his bill; he would have been turned out of court for want of jurisdiction. But this answer is no longer conclusive as to the jurisdiction; courts now go further and inquire whether under the facts the remedy at law is not vexatiously inconvenient, and whether it is so proximately certain as to be adequate to right the wrong complained of.”

Testing by this standard the numerous actions that would be required at law, and comparing that remedy with the superior certainty, uniformity and convenience of the present bill, we have no hesitation in holding that it is a proper case for equitable jurisdiction.

The remaining question, the substantial issue in the case, concerns the statute of limitations. Stated generally it is whether, when demand is necessary to start the running of the statute, it must be made within six years of the contract. Stated in detail with reference to the particular facts of the case it is well expressed in the twelfth assignment of error, thus, “ the stock subscription having been made in 1888, and all the calls made in 1888 having been paid, and no further call for the unpaid portion of the stock having been made by the directors, and the insolvency of the company having occurred more than six years from the date of the last call and the payment thereof, this action for the unpaid portion of the stock subscription, begun more than ten years thereafter, is barred by the statute of limitations.”

In Swearingen v. Sewickley Dairy Co., 198 Pa. 68, the law was thus stated, “ The general rules are first, that on an obligation for the payment of money on demand the statute begins to run at once. Suit is a sufficient demand and must be brought within six years: Andress’s App., 99 Pa. 421; Milne’s App., 99 Pa. 483; Boustead v. Cuyler, 116 Pa. 551.

“ Secondly, where the contract is to" pay on the future performance of a condition, or happening of an event, or at a cer- ‘ tain time after demand, there a demand is necessary to a right of action, and the statute does not begin to run until demand is made: Smith v. Bell, 107 Pa. 352; Eichman v. Hersker, 170 Pa. 402; Taylor v. Witman, 3 Grant, 138.

“ Whether there is a third rule that if demand is necessary it must be made within six years from the contract, has been both affirmed and denied in our cases, which are much at variance on the question. It was asserted in Laforge v. Jayne, 9 Pa. 410, and expressly held in Pittsburg, etc., R. R. Co. v. Byers, 32 Pa. 22; McCully v. Pittsburg, etc., R. R. Co., 32 Pa. 25; Pittsburg, etc., R. R. Co. v. Graham, 36 Pa. 77, and Franklin Savings Bank v. Bridges, 20 W. N. C. 43. On the other hand, it was denied generally in Taylor v. Witman, 3 Grant, 138, and expressly rejected in Girard Bank v. Bank of Penn. Twp., 39 Pa. 92; Smith v. Bell, 107 Pa. 352, and other cases.”

; The case then before us did not call for a decision on the last question, and it was accordingly passed with only the foregoing incidental reference. In the present (jase, however, the same point is squarely presented and is now to be met.

The cases as already said are much at variance, and require critical examination. In favor of the rule, and as-contended for by appellants, are Laforge v. Jayne, 9 Pa. 410; Pittsburg, etc., R. R. Co. v. Byers, 32 Pa. 22; McCully v. Pittsburg, etc., R. R. Co., 32 Pa. 25; Pittsburg, etc., R. R. Co. v. Graham, 36 Pa. 77, and Franklin Savings Bank v. Bridges, 20 W. N. C. 43; and some other cases, such as McKelvy’s Appeal, 72 Pa. 409, in which the foregoing have been cited though generally arguendo and obiter.

Laforge v. Jayne, 9 Pa. 410, was an action of assumpsit on a duebill for “ one hundred and seventy-two dollars in Pike county cheeks, which I promise to return on demand.” Suit being brought after six years was supported by the plaintiff on the ground that “ Pike county checks ” were a specific kind of personal property and therefore demand for their return was a necessary preliminary to suit. But this court held that the obligation was to pay money on demand and therefore the statute began to run from the date. In the opinion Coulteb, J., refers to Codman v. Rogers, 27 Mass. 112, the leading case on the view that where demand is necessary it must be made in a reasonable time and where no cause for delay is shown such' time is measured by the period of the statute. But the case was decided on the other ground, and therefore is not really in point in the present discussion.

In Franklin Savings Bank v. Bridges, 20 W. N. C. 43, the syllabus is that six years is a bar to an action by a corporation on a subscription when no call or assessment has been made in that time, but there the corporation had been insolvent for more than six years and the decision was put explicitly on that ground which is now well settled. The case therefore is not in point.

Pittsburg, etc., R. R. Co. v. Byers, 32 Pa. 22, and McCully v. Pittsburg, etc., R. R. Co., 32 Pa. 25, are the main authorities in appellant’s favor. Both were actions by the corporation to recover the amount of subscriptions to the stock, and in each, the call on which the action was based was made more than six years after the subscription. This court citing Codman v. Rogers, 27 Mass. 112, held that the statute of limitations was-a bar. But it is notable that the defense was not rested on the mere lapse of time, but also on the abandonment of the corporate enterprise. In the Byers case, WOODWAKD, J., says, the act “ contemplated an early commencement and completion of the road. ... It is not reasonable to suppose the legislature meant that subscribers to such a stock should be indefinitely bound. The road was to be promptly commenced and vigorously maintained.” And in the MeCully case the same judge still more explicitly said we have held in the case against Byers that “ the company were bound from analogy to the statute of limitations to call in payments on stock subscriptions within six years after their date; or if the delay was not satisfactorily accounted for subscribers would be at liberty after that lapse of time, to consider the enterprise abandoned and their subscriptions canceled. The presumptions of abandonment in such cases are very reasonable and necessary. . . . But this case is not left to stand on presumptions of abandonment. We have direct and conclusive evidence of it in the testimony of Addison, Kelly and Robinson. Not only was the project abandoned, but the money of many subscribers was refunded to them and they released from all further obligations to the company.” Special attention was called to this feature iii Hanover Junction, etc., R. R. Co. v. Haldeman, 82 Pa. 36 (46) and some other cases which will be referred to later on.

It must be conceded, however, that notwithstanding the references to the peculiar facts the court put the cases fairly on the principle that the action for subscriptions to stock must be brought within reasonable time, and unless cause for delay be shown, such time is measured by the statute of limitations.

Morrison’s Admr. v. Mullin, 34 Pa. 12, was an action by the sheriff on a refunding receipt stipulating to repay “ if on settlement of the liens, it should (appear) that I am not entitled to this money.” Suit was brought twenty-three years after the date of the receipt, and the point made by the plaintiff that until a settlement of the liens was shown the statute did not begin to run. But the court on the authority of R. R. Co. v. Byers, 32 Pa. 22, held that the plaintiff not having shown a settlement within a reasonable time, the statute was a bar. It is notable that two of the five justices dissented on this point, one of them being Woodward, J., who wrote the opinions in the Byers and McCully cases. And in Girard Bank v. Bank of Penn Township, 39 Pa. 92 (102), the suggestion is made that this case can be sustained on the presumption of payment after twenty years.

Pittsburg, etc., R. R. Co. v. Graham, 36 Pa. 77, was an action by the same railroad under substantially the same facts as R. R. Co. v. Byers, 32 Pa. 22, and McCully v. R. R. Co., 32 Pa. 25, except that the subscription was conditional “ that the construction of said road is prosecuted.” This element gave additional force to the defense of abandonment, and the previous cases were naturally followed.

The cases holding the other view may be said to begin with Sinkler v. Turnpike Co., 3 P. & W. 149, where it was held that on a subscription to stock payable at such times as the managers may determine, the statute of limitations does not begin to run until a call is made. The defense was that the action was brought more than six years after the subscription, though within six years from the call. The call, however, was within six years from the subscription and this fact is referred to in the Byers case (32 Pa. 22) as sustaining a distinction. But the court in Sinkler v. Turnpike Co., 3 P. & W. 149, puts its decision plainly on the other ground. “ No action,” said Kennedy, J., “could have been maintained for defendant’s subscription, or any part of it until the managers had fixed a time for the payment of it. . . . The statute of limitations does not begin to run before the plaintiff has a right to bring his suit.” The decision was cited as authority for this principle in McCarty v. Selinsgrove, etc., 11. R. Co., 87 Pa. 332; and again in Smith v. Bell, 107 Pa. 352.

Sinkler v. Turnpike Co., 3 P. & W. 149, was decided before the Byers and McCully cases, and though antagonistic in principle, did not expressly pass upon the distinction set up in those cases. With the next case in order of time, however, Girard Bank v. Bank of Penn Township, 39 Pa. 92, the conflict really began. That was an action by the holder of a certified check, against the certifying bank, more than six years after the date of the check, the date of the certification not appearing. The court held that the holder of such check stood upon the same footing as a depositor, and as the contract of the bank with its depositor was not to pay absolutely and immediately but when payment should be required, a demand was necessary and the statute did not begin to run until it was made. The Byers aud McCully cases were cited, but the court, per Strong, J., distinguished them on the ground of their special facts, saying “ the contract of subscription was a peculiar contract; the legislature had fixed five years as the limit within which the construction of the road should be commenced. It was the duty of the company to commence it and to prosecute it vigorously, and of course to make the calls without delay.” He then cited Morrison v. Mullin, 34 Pa. 12, and after suggesting that in that case “ the twenty years presumption stood in the way of recovery ” said “ in delivering the opinion of the court Mr. Justice Thompson referred to the rulings in Codman v. Rogers, 27 Mass. 112, and Railroad Co. v. Byers, 32 Pa. 22, but without laying down or intending to assert a general doctrine that where demand is necessary under a simple contract before bringing an action it must in all cases be made within six years from the date of the contract.” This case is a clear adjudication that though the Byers case and those which follow it may be sustained on their peculiar facts, they are not authorities for a general principle. No case has since questioned the soundness and authority of this decision. On the contrary, in Finkbone’s Appeal, 86 Pa. 368, the.court, after speaking of Laforge v. Jayne as countenancing a different principle (although as shown supra there is no real conflict in that decision), say, “We feel warranted in adopting the later case not only because it was the more carefully considered, but also because it accords better with the general rule that the statute cannot begin to run until the cause of action has accrued.” And Finkbone’s Appeal itself is cited approvingly in Humphrey v. County Nat. Bank, 113 Pa. 417, and Hartranft’s Estate, 153 Pa. 530.

In Taylor v. Witman, 3 Grant, 138, the exact tenor of the note in suit does not appear in the report, but the principle that, “ where an actual demand or other act of the promisee is necessary before suit, such demand must be made or that act done within six years from the date of the promise or the statute will begin to run from the date,” was clearly stated and distinctly repudiated, Strong, J., referring to Girard Bank v. Bank of Penn Township, 39 Pa. 92, as having settled the law to the contrary.

Allibone v. Hager, 46 Pa. 48, was a suit by a creditor against subscribers to the stock of a manufacturing company under the Act of April 7, 1849, P. L. 563, for unpaid subscriptions, and it was held that though no call had been made for eleven years the statute of limitations were not a defense, the court saying that the Byers, McCully and Graham cases, where the work had not been prosecuted as required by the act of incorporation, did not apply.

The next case, Smith v. Bell, 107 Pa. 352, was an action against a former policy holder in the mutual insurance company, more than six years after his policy had expired and he had ceased to be a member. His contract, however, was to pay Ms share of losses when an assessment should be levied by the directors. It was held that the right of action did not accrue, nor the statute begin to run until such assessment, and he was, therefore, liable, although the loss occurred more than six years before he ceased to be a member. R. R. Co. v. Byers, 32 Pa. 22, and Morrison v. Mullen, 34 Pa. 12, were referred to by the court but set aside with a citation of Girard Bank v. Bank of Penn Township, 39 Pa. 92, as governing the case.

Smith v. Bell, 107 Pa. 352, was reaffirmed and followed in the latest case on the subject, Eichman v. Hersker, 170 Pa. 402, although as our Brother Dfan called attention to in the opinion, “the assessment was not made within six years from the date of the policies and the premium note, nor within six years from the date of the losses, the payment of which had created the debt now sought to be satisfied by assessment.” Distinctions based on the wording of the charters or the statutes under which they were conferred were repudiated and the decision put explicitly on the general principle that the obligation was not to pay at once but upon a future event, the levying of an assessment by. the directors, and the statute did not begin to run until such assessment.

This detailed review of the cases shows clearly that while they are in some apparent conflict yet there has been a uniform trend in the later ones to rest on the correct application of a general principle admittedly sound. The rules, as stated in Swearingen v. Sewickley Dairy Co., 198 Pa. 68, already quoted, are first, that on an obligation for the payment of money on demand the statute begins to run at once. Suit is a sufficient demand and must be brought within si5c years. Secondly, where the contract is to pay on the future performance of a condition, or happening of an event, or at a certain time after demand, there a demand is necessary to a right of action, and the statute does not begin to run until demand is made.

The question is then suggested whether there is a third rule that if demand is necessary it must be made within six years from the contract. On this our cases Avere said to be much at variance, and the review of them has to some extent confirmed the statement. It will not be amiss at this point to consider on principle the foundations of rules first and second.

Negotiable instruments payable on demand were originally classed together, and held like checks and bills of exchange necessary to be presented Avith due diligence according to the residence of the parties: By les on Bills, *213. “ But a common promissory note payable on demand is very often originally intended as a continuing security .... and is not necessarily to be presented the next day after it has been received in order to charge the indorser.” But the terms payable on demand import that the debt is already due, and, therefore, the statute of limitations begins to run from the date : Byles, *347. The obligation to pay in such case is absolute and present; the only element not fixed with certainty is the time of payment, and as that is at the option of the creditor, and the debtor must be prepared eo instanti, the time of payment, and with it the statute, begins to run at once.

If, however, the debt is not absolutely or presently due, but either the obligation to pay or the time of payment is contingent on the performance of some act, the happening of some event or the lapse of a specified period of time, then the happening of the event is a condition precedent to the present obligation to pay and the debtor is not in default, nor the creditor entitled to call for performance until the condition is fulfilled and the statute cannot begin to run until that time.

These principles are of uniform application and lie at the foundation of all our cases. Applying them to the present case |it is plain that where a subscription to stock is not presently payable in full, but by its terms is to be payable from time to time as called for by the company, there is no substantial basis for the existence of a third rule, as queried in Swearingen v. Dairy Co., 198 Pa. 68. Until such call, there is no obligation on the stockholder to pay. It may never be made. If the enterprise is successful and profitable from the start, or the provision for capital has been larger than actual needs require, the duty of payment is only a reserve duty foj' possible contingencies, and until they happen, either by calls by the corporation on the subscriptions, or by the rights of creditors, there is no duty of the subscriber to pay, no right of action against him for nonpayment, and no starting point for the statute of limitations.

As already said, the principles at the basis of the decisions are clear and undisputed, and the later and more authoritative cases have tended distinctly to rest upon them. We conclude, therefore, that R. R. Co. v. Byers, 32 Pa. 22; McCully v. R. R. Co., 32 Pa. 25; R. R. Co. v. Graham, 36 Pa. 77, and the cases which have followed them, are not authorities for a gem eral rule in cases of subscriptions to corporate stock, but must be sustained, if at all, as-exceptions resting on their own peculiar facts of abandonment of the corporate enterprise, which released the subscriber’s contract to pay further. The court below was right in applying the general rule to this case.

Decree affirmed.


source: Caselaw Access Project

license: Public Domain

text:
    Cook v. Carpenter McCord’s Appeal.
    (No. 2).

      Corporations—Transfer of stock—Liability for unpaid stock subscription.

    Where an act under which a corporation is chartered provides that shares shall be transferable on the books of the company “subject to such regulations as the by-laws may prescribe,” and the by-laws provide that no transfer shall be made while the books are closed, a stockholder who sells his stock at public auction while the books are closed, and by reason of the closing of the books does not get the stock transferred to the purchaser, the insolvency of the company happening in the meantime, is not relieved from liability for the unpaid amount due on the original subscription to the stock. The principle of the decisions is that the transfer must be complete and in accordance with the by-laws of the corporation to fix the liability of the transferee and release the transferror.
    Argued Jan. 11, 1905.
    Appeal, No. 225, Jan. T., 1904, by James S. McCord, Jr., from decree of C. P. No. 2, Phila. Co., March T., 1899, No. 145, on bill in equity in case of Richard Y. Cook et ah, Assignee, v. Richard L. Carpenter et al.
    Before Mitchell, C. J., Dean, Fell, Blown, Mesteezat, Pottee and Elkin, JJ.
    Affirmed.
    Bill in equity to collect the unpaid subscriptions to stock of a corporation.
    The facts are stated in the opinion of the Supreme Court.

      Error assigned was the decree of the court.

      J. H. Erinton, for appellant,
    cited as to the question of transfer: West Phila. Canal Co. v. Innes, 3 Wharton, 198; Finn v. Brown, 142 U. S. 56 (12 Sup. Ct. Repr. 136); Merrimac Mining Co. v. Levy, 54 Pa. 227; National Bank v. Watsontown Bank, 105 U. S. 217; Whitney v. Butler, 118 U. S. 655 (7 Sup. Ct. Repr. 61); Hayes v. Shoemaker, 39 Fed. Repr. 319; Young v. McKay, 50 Fed. Repr. 394; Webster v. Upton, 91 U. S. 65; Bank v. Lanier, 78 U. S. 369; Johnston v Laflin, 103 U. S. 800; Earle v. Carson, 188 U. S. 42 (23 Sup. Ct. Repr. 254); Bank v. Kortright, 22 Wend. 348; Sargent v. Ins. Co., 25 Mass. 90.

      John Gr. Johnson, with him P. F. Bothermel, for appellees,
    cited: Whitney v. Butler, 118 U. S. 655 (7 Sup. Ct. Repr. 61).
    May 22, 1905:
   Opinion by

Mr. Chief Justice Mitchell,

This appeal raises the same questions as Cook v. Carpenter, ante, p. 165, opinion filed to-day, with the additional point that at the time of the assignment by the trust company to the plaintiffs for the benefit of its creditors, the appellant had sold fifty of the shares charged in the bill of complaint as held by him and-was no longer the owner.

The facts, which are somewhat peculiar, are thus stated by the learned judge below : “ It appears that these fifty shares were sold at auction by Barnes & Lofland and that Carpenter was the buyer and paid for them and that under the rules they were not deliverable until early in January because the transfer books of the company were closed after the declaration of the dividend. The transfer therefore was never actually made nor did Carpente.r, the buyer, ever receive a certificate so far as the evidence shows.”

He also further ‘found that “ it was claimed that some or all of the shares of stock in the name of Herman B. Chambers, Joseph Louchheim and James S. McCord, Jr., had been assigned. This claim was not established by proof. There was no transfer of the shares of either of these persons upon the books of the company. They were holders at the time of the insolvency of the shares respectively hereinafter stated in detail to have been.held by them.”

If we accept this finding as conclusive of the facts it would put an end to appellant’s case. But he claims that the finding is not as full as the facts appeared, and as his contention in this respect is not disputed, it would seem that h.e should be entitled to the benefit of the complete statement. During the month of December, 1897, after the books of the company had been closed for the annual election, but before its insolvency was known, appellant through his brokers sold fifty shares of his stock at public auction to one Carpenter. The purchaser paid the auctioneers and thereupon the latter sent the certificate of stock, with a blank power of attorney to the trust company, and a clerk made an entry on the books transferred by James S. McCord_ to Richard L. Carpenter fifty shares of stock.” But later on, apparently the same day, the auctioneers were informed that the books were closed. The transfer was not further recognized and no certificate was issued to Carpenter, the purchaser, nor any further change made on the company’s books before the insolvency and the assignment for creditors. The good faith of the sale does not seem to be questioned.

The act of 1874, under which the company was chartered, provides that shares shall be transferable on the books of the company subject to such regulations as the by-laws may prescribe,” and it is; admitted that the by-laws of the company prescribed that no transfer should be made while the books were closed. It is argued by appellant that while this by-law may prevent the issue of a new certificate to the purchaser as evidence of his title,-such certificate is not an indispensable requirement to the change of ownership of the stock, and the corresponding rearrangement of rights between the seller and the buyer.

However this may be as between the parties, it does not reach the question here which is between the stockholders of record on the company’s books and the company’s creditors. The insolvency of the company fixed the rights of the creditors, and the company’s books are not only recognized in all the cases as the best evidence of the responsible ownership of the stock at that time but the tendency is to treat them as conclusive on that point. Thus in Allibone v. Hager, 46 Pa. 48, the defendants had signed the certificate for the purpose of incorporation, as subscribers for á certain number of shares. In a suit by a creditor it was held that it was no defense that they had subscribed for only a portion of the shares in their own right and for these they had paid up in full, while the subscription to the remaining shares was as agents for the corporation itself, for purposes of sale for its benefit. The certificate, said Thompson, J., “shows that all the original stock was subscribed by and for the defendants. Whatever might be the law between them and the corporation, as between them and the public the certificate is conclusive.” And in Bell’s Appeal, 115 Pa. 88, it Avas said, “ it does not appear that any certificate was ever issued to the assignee for the share attempted to be transferred or that the transfer was recognized by the company in any way. As there does not seem to have been any actual bona fide completed assignment of this share Bell’s liability as owner of it Avould not be discharged.”

The facts are a little stronger in appellant’s favor and the law a. little harder upon him than any case brought to our attention. But Ave do not think the difference is sufficient to invoke a different rule. If the sale and the order to the company to make the transfer had been given while the books Avere open, we do not say that the mere neglect or even refusal of the company to make the actual entry would have been effective to preArent the release of the 'appellant. But here the refusal of the company Avas based upon a by-law, the validity of Avliich is not attacked. The principle of the 'decisions is that the transfer must be complete and in accordance with the by-laAVS of the corporation to fix the liability of the transferee and release the transferor. To begin the recognition of irregular or incomplete transfers would be to open the door to contests over colorable or disputed facts and subject the rights of creditors to endless litigation.

The decree is affirmed.


text:
    Cook v. Carpenter, Appellant
    (No. 3).
    Argued Jan. 11, 1905.
    Appeals, Nos. 220, 221, 224 and 226, Jan. T., 1904, by Catharine Gallagher and James Gay Gordon, Executors of P. F. Gallagher, deceased; John F. Reardon, Franklin S. Dengler, Sherman T. Moyer and Robert Patterson, Executors of Daniel S. Dengler, deceased, and Samuel S. Fretz, from decree of C. P. No. 2, Phila. Co., March T., 1899, No. 145, on bill in equity in case of Richard Y. Cook and George H. Earle, Jr., assignees for benefit of creditors of the Chestnut Street Trust and Saving Fund Company v. Richard L. Carpenter, Daniel S. Dengler and Samuel S. Fretz et al.
    Before Mitchell, C. J., Dean, Fell, Brown, Mestrezat, Potter and Elkin, JJ.
    Affirmed.

      William S. Stenger, Rudolph M. Schick and James H. Wolfe, for appellants.

      John G-. Johnson, with him P. P. Rothermel, for appellee.
    May 22, 1905:
   Opinion by

Mr. Chief Justice Mitchell,

These appeals raise the same questions as No. 199, in which an opinion is filed herewith, ante, p. 165. For the reasons there given the decree is affirmed in each of these cases.


author: Mb. Chief Justice Mitchell,

text:
    Pepper v. Deakyne
    (No. 1).

      Sheriff’s sale—Resale—Defaulting bidder—Measure of damages—Damages.

    A defaulting bidder is liable for a loss occasioned by his failure to comply with the terms of a sheriff’s sale, and the measure of damages is the difference of price on a resale fairly conducted upon terms not less advantageous to the purchaser than the first.
    A defaulting purchaser at a sheriff’s sale is not liable to respond in damages for loss on resale of the property if it appears that under the first sale he would have acquired a more valuable title than that which passed to the purchaser at the last sale, or that the terms of the first sale were more advantageous to the purchaser than those of the resale; and it is immaterial whether a change in the terms is by act of the sheriff, the plaintiff, or the court. Singerly v. Swain’s Admrs., 33 Pa. 102, distinguished.
    Such cases belong to the class in which the certainty of the legal rule fixing the rights of parties is more important than the theoretical perfection of the rule itself.
    Argued Jan. 20, 1905.
    Appeal, No. 147, Jan. T., 1904, by Robert G. McDougal, from order of C. P. No. 1, Phila. Co., Dec. T., 1901, No. 2187, dismissing exceptions to auditor’s report in ease of Joseph W. Pepper, successor of John W. Pepper and H. H. Pigott, guardian of the estate of minor children of J. Howard Gibson, deceased, v. William F. Deakyne, mortgagor, and the Arlington Hotel, and Improvement Company, real owner.
    Before Mitchell, C. J., Dean, Fell, Brown, Mestrezat, Potter and Elkin, J J.
    Reversed.
    Exceptions to report of Henry B. Patton, Esq., auditor.
    The auditor reported the facts substantially as follows :
    On March 26, 1901, the property known as the Childs’ Mansion, standing at the southeast corner of Twenty-second and Walnut streets, Philadelphia, was transferred by William F. Deakyne to the Aldington Hotel Company.
    Deakyne had previously, in February and in August, 1900, placed two mortgages upon the property.
    The first of those mortgages, hereinafter known as the Pepper mortgage, ivas conditioned upon the payment of $65,000, and the second, hereinafter known as the Bond mortgage, upon the payment of $6,000.
    These mortgages were subsequently reduced to judgment, the Pepper mortgage as of December Term, 1901, C. P. No. 1, No. 2187, and the Bond mortgage as of June Term, 1901, C. P. No. 1, No. 4100.
    Upon the Pepper judgment a writ of levari facias issued on February 5,1902, returnable to the first Monday of March, 1902; this writ was stayed.
    On March 13, 1902, a writ of alias levari facias issued, returnable the first Monday of April, 1902.
    At the sale, the property1- was bid in by George Gluyas Mercer, attorney, for $110,500 and $50.00 paid down, but the terms of sale were not complied with.
    Thereafter, in answer to the petition of the plaintiff, the court, on May, 5, 1902, made an order increasing the deposit, or down money, to be required by the sheriff from any purchaser at the sale, to $1,000.
    On May 7, 1902, a writ of pluries levari facias issued, returnable to the first Monday of June, 1902; this writ was stayed.

      On June 12, 1902, a second pluries levari facias issued, returnable to the first Monday of July, 1902.
    At the sale, the property was bid in by W. S. Divine, attorney for Wm, F. Deakyne,-for $84,000, and'$1,000 was paid down, but the terms of the sale were not complied with.
    Thereafter, upon petition of the plaintiff, the court, on Aug. ust 9, 1902, increased the down money to $2,000.
    A third pluries levari facias then issued, returnable to the first Monday of September, 1902.
    At the sale, the property was bid in by John Sparhawk, Jr., attorney for Robert McDougal, for the sum of $88,050, and $2,000 was paid down, but the terms of the sale were not complied with.
    On November 6, 1902, the court, upon petition as before, increased the down money to $5,000. Subsequently, writs of fourth and fifth levari facias issued, returnable respectively to the first Monday of December, 1902, and March, 1908, but both of these writs were stayed, and no further steps have been taken under the judgment. Thus the sum of $3,050, forfeited deposits, was left in the sheriff’s hands.
    On April 6,1903, the property was sold by the sheriff, under a writ of pluries levari facias issued upon the Bond judgment. The purchaser was John Sparhawk, Jr., attorney for Robert G. McDougal, and the purchase price was $10,550, subject to the Pepper mortgage.
    Not until the morning of the sale, to wit: the morning of April 6, 1903, was the down money of $5,000, directed by the court to be paid, reduced to the sum of $3,000.
    Christine Bond, the plaintiff in the above-named cause, having notified the sheriff to pay the proceeds of the sale into court, the city of Philadelphia, on June 15, 1903, filed its petition for a rule upon the sheriff and the various parties in interest to show cause why the sheriff should not pay the $3,050, forfeited deposits in the Pepper case, into court. This petition was based on the allegations that the petitioner was entitled to receive taxes from the property in question to the amount of over $5,000, that the sum of $10,500, proceeds of the sale under the Bond writ, was not sufficient to pay the aggregate of taxes in full, and also to pay the amount of the Bond judgment] that Christine Bond, the plaintiff in that judgment, intended to resist the payment in full to the petitioner of the claim for taxes out of the said fund, on the ground that the $3,050, realized by the sheriff’s sales under the Pepper writs, should first be appropriated to the petitioner’s claim before it should be allowed to come in upon the fund realized by the Bond sale; that if the petitioner did take its satisfaction out of the fund realized by the Bond sale, the said Christine Bond would be entitled to subrogation to the rights of the petitioner in regard to the fund realized by the Pepper sale, and that the Pepper mortgage had been assigned to Ivins, Dietz & Metzger Company, who did not intend to offer the property at present for sale again thereunder.
    To this petition an answer was filed by William F. Deakyne, one of the defaulting purchasers, and mortgagor, denying that the city of Philadelphia had any claim Avhatever upon the fund realized by the sales under the Pepper writ, and alleging that the $1,000 paid to-the sheriff by the respondent was not forfeited, but should be repaid to him by the sheriff, ending with the prayer that the petition be dismissed.
    An answer was also filed by Christine Bond, confirming the averments contained in the petitions, and joining in the .prayer of the same.
    . The matter was subsequently heard by the court, and thereafter the court granted the prayer of the petitioner, and made an order requiring the sheriff to pay the $3,050 into court.
    The auditor awarded the fund to the city of Philadelphia on account of its claim for taxes and water rent.
    Exceptions to the auditor’s report were dismissed by the court.

      Errors assigned were in dismissing exceptions to auditor’s report..

      Charles H. Edmunds, for appellant.
    The change in the conditions of the sale did release the purchaser at sheriff’s sale: Smith v. Wilson, 152 Pa. 552; Hare v. Bedell, 98 Pa. 485; Ramsay v. Hersker, 153 Pa. 480; Weast v. Derrick, 100 Pa. 509; Freeman v. Husband, 77 Pa. 389.

      K. Spencer Miller, with him William 3. Wilson,- assistant citj'- solicitor, and John L. Kinsey, city solicitor, for appellee.
    The case is ruled by Tindle’s App., 77 Pa. 201.
    May 22, 1905:
   Opinion by

Mb. Chief Justice Mitchell,

Passing b}r some preliminary questions as to the authority of the court to appoint the auditor, and the jurisdiction of the latter to distribute a fund paid on a previous sale, on a different writ and apparently to a different sheriff, the substantial question is whether there was such a variation in the terms of sale, to the disadvantage of appellant, a defaulting purchaser, as released his hand money already paid to the sheriff and discharged him from further liability on his bid.

A defaulting bidder is liable for the loss occasioned by his failure to comply with the terms of the sale, and it is equally well settled that the measure of damages is the difference of price on a resale fairly conducted upon terms not less advantageous to the purchaser than the first: Bowser v. Cessna, 62 Pa. 148. That was not the case of a sheriff’s sale, but the same rule applies as will appear later on.

The point has been frequently before this court, and the law laid down ivithout substantial variation. It is fully and accurately stated by the late Chief Justice Stebbett in Hare v. Bedell, 98 Pa. 485, as follows: “It is very clear that a defaulting purchaser at sheriff’s sale is not liable to respond in damages for loss on resale of the property, if it appears that under the first sale he would have acquired a more valuable title than that which passed to the purchaser at the last sale, or that the terms of the first sale were more advantageous to the purchaser than those of the resale. The obvious reason of this is, that the inferior quality of title or the less advantageous terms of sale, would naturally effect a reduction of price, and we would be left without any reliable standard by which to measure the loss sustained by the refusal of the purchaser at the first sale to malee good his bid.”

The same rule was expressed previously in Freeman v. Husband, 77 Pa. 389, where it was said: “ If the terms were materially altered upon the resale he (the purchaser) was thereby released ; for he cannot be held to conditions that did not form part of his contract.”

In the. last case the change in the terms of sale was made by the sheriff on his own motion or at the instance of the plaintiff, and it is argued' that a change by order of the court should stand on a different footing. But on the reason of the rule as declared in the opinions above cited, that the release of the purchaser is because of the change of the conditions of his contract, it can make no logical difference whether the change was by act of the sheriff, the plaintiff or the court. The more onerous conditions tend to lessen the price likely to be bid at the second sale, and thereby render inapplicable the settled measure of damages. And it is expressly so held in Weast v. Derrick, 100 Pa. 509, where it is said: “ Sales, public or private, are precisely what the contract of the parties make them, and a sale in pursuance of an order of the court is governed by the prescribed terms, the same as the accepted terms of a sale made without judicial order. When the resale is for a less price, upon other terms than the first, the vendor cannot compel the first purchaser to make good the loss. The basis is shifted. To refer such a case to the jury, Would introduce an uncertain measure of damages, whereas the only measure is the difference between the price of the first and second sale. . . . The fact that the court prescribed the terms of the second has no bearing upon the question at issue. Those terms were made upon the plaintiff’s motion, but no matter how made, it is-essential to his case that the second sale was not loaded with heavier terms than the first.”

This rule has been followed in Ramsay v. Hersker, 153 Pa. 480, and Connell v. Shryock, 167 Pa. 483, and must be accepted as the settled law.

The only case in conflict Avith this principle is Singerly v. Swain’s Admrs., 33 Pa. 102. That was a sale under order of the orphans’ court, and the change in the terms was made by the court after two defaults by the same purchaser, the plaintiff in error. The court, after referring to its recent consideration of the nature of orphans’ court sales with reference to the power and duty to prescribe terms, said: “ When Mr. Singerly tAvice purchased this property and refused to comply, he was bound to take notice that the orphans’ court had power to alter the terms of the next sale. He ran the risk of a change of terms that would depress the price.” Sales under orders of the orphans’ court differ materially from other judicial sales in that they are subject not merely to the legal jurisdiction of the court but also to its discretionary approval, and are not complete until confirmation. Whether this is a sufficient foundation for a different rule as to the responsibility of a purchaser may be left to decision when the question shall arise directly. But as to ordinary sheriff’s or other sales it is clear that they belong to the class of legal problems in which to have a fixed rule by which all parties may clearly and readily know their rights and responsibilities, is more important than the theoretical perfection of the rule itself.

On the conceded facts the appellant was entitled to the return of his deposit money, less the proper charges and expenses of the sale in which such deposit was made.

Decree reversed at the costs of the appellee.


author: Per Curiam,

text:
    Pepper v. Deakyne,
    (No. 2).
    Argued March 21, 1905.
    Appeal, No. 55, Jan. T., 1905, by William F. Deakyne, from order of C. P. No. 1, Phila. Co., Dec. T., 1901, No. 2187, dismissing exceptions to auditor’s report in case of Joseph W. Pepper, Successor of John W. Pepper and H. H. Pigott, Guardians of the Estate of Minor Children of J. Howard Gibson, Deceased, v. William F. Deakyne, Mortgagor and the Arlington Hotel and Improvement Company, Real Owner.
    Before Fell, Brown, Mestrezat, Potter and Elkin, JJ.
    Reversed.

      William S. Divine, for appellant.

      JE. Spencer Miller, with him John L. Kinsey, city solicitor, and W. K. Wilson, assistant city solicitor, for appellees.
    May 22, 1905:
   Per Curiam,

The questions presented by this appeal were decided in Pepper v. Deakyne, ante, p. 181. Both appeals are from the same order confirming the report of an auditor appointed to award distribution of money paid by purchasers at a sheriff’s sale, and the rule governing them is the same.

The decree is reversed for the reasons stated in the opinion of the chief justice in No. 147.


text:
    Miles, Appellant, v. Bradley.
    Argued Jan. 19, 1905.
    Appeal, No. 274, Jan. T. 1904, by plaintiff, from order of C. P. No. 3. Phila. Co., March T., 1904, No. 1881, dismissing exceptions to auditor’s report in case of James L. Miles, High Sheriff of Philadelphia County, v. Anna R. Bradley.
    Before Mitchell, O. J., Dean, Fell, Brown, Mestrezat, Potter and Elkin, JJ.
    Affirmed.

      Alex. Simpson, Jr., for appellant.

      F. B. GHllinder, for appellee.
    May 22, 1905 :
   Per Curiam,

This case presents the same question of the liability of a defaulting bidder at a sheriff’s sale for a deficiency in price at a subsequent sale that was considered and determined in Pepper v. Deakyne, ante, p. 181, opinion filed herewith. For the reasons there expressed this order is affirmed.


author: Mr. Justice Potter,

text:
    Christ, Appellant, v. Zehner.

      Bankruptcy—Federal act—Preference—Bill of sale—Delivery of possession.

    Where a bill of sale of a stock of goods is given for money loaned and to be advanced without possession of the goods being taken, but more than four months afterwards, and within four months from the institution of bankruptcy proceedings against the vendor, there is indorsed on the bill of sale a statement to the effect that the loan is still due, and that possession is hereby given, the title to the goócís will be deemed to have passed by the original bill of sale without any unlawful preference.

      Argued Feb. 14, 1905.
    Appeal, No. 204, Jan. T., 1904, by-plaintiff, from order of C. P. Schuylkill Co., May T., 1908, No. 300, refusing to take off nons-uit in case of Charles E. Christ, Trustee of the Estate of Emma C. Kintz, trading as Kintz & Co., v. Jacob Zehner.
    Before Dean, Fell, Mestrezat, Potter and Elkin, JJ.
    Affirmed.
    Assumpsit to recover money alleged to have been derived from an unlawful preference. Before Marr, J.
    The facts are stated in the opinion of the Supreme Court.
    The court granted a compulsory nonsuit which it subsequently refused to take off.

      Error assigned was order refusing to take off nonsuit.

      Wesley K. Woodbury and John E. Whalen, for appellant.
    A bill of sale without transfer of possession is a fraud in law and void against creditors : Stephens v. Gifford, 137 Pa. 219; Weller v. Meeder, 2 Pa. Superior Ct. 488.
    Transfers before four months in fraud of creditors vest property in the trustee: Act of Congress, 1898, sec. 70, clause 4; In re Charles D. Adams, 1 Am. Bank Rep. 94; In re Julius Grahs, 1 Am. Bank Rep. 465; In re Gray, 3 Am. Bank Rep. 647.
    The question of intent is for the jury: Collier on Bankruptcy, 4th edition, 35; In re Bloch, 6 Am. Bank Rep., 300, 109 Fed. Repr. 790.
    . This case is ruled by Crawford v. Rumpf, 205 Pa. 154.

      J. 0. Ulrich, for appellee.
    There was no unlawful preference : Miller v. Shriver, 197 Pa. 191; Furth v. Stahl, 205 Pa. 439.
    May 22, 1905:
   Opinion by

Mr. Justice Potter,

Previous to July, 1901, Emma C. Kintz, trading as Kintz & Company, carried on a general store business at Tamaqua,Pennsylvania. Her husband, David Kintz, managed the store under a general power of attorney for his wife. In July, 1901, Kintz & Company owed considerable money, and were alleged by plaintiff to have been insolvent. On July 5, 1901, Mrs. Kintz gave her judgment bond to Jacob Zehner, the defendant, for the sum of $1,200, the date of payment being left blank. This was not entered of record. On the same date she also gave to Zehner a bill of sale for the entire contents of her store for the consideration of $1,200 “ to have and to hold the said goods and chattels for the use, ownership and behoof of the said Jacob Zehner until he is paid the sum of $1,200 this day borrowed from him. To secure this loan this bill of sale is made.” The following writing, also dated July 5, 1901, and signed by Mrs. Kintz, was indorsed on the bill of sale: “To secure Jacob Zehner for a loan $1,200 made me this day, I have executed in his favor an assignment of a judgment against Matilda Kintz of Weatherly, Carbon county, Pennsylvania, etc. Also a bill of sale of the goods, etc., of Kintz & Company and a judgment bond, all of even date, and to be returned, assigned and canceled on the full payment of said loan.”

The testimony of David Kintz, who was called as a witness by plaintiff, showed that a consideration of $1,200 for the bond, bill of sale, etc., was paid by Zehner at or about the time they were executed, and that Zehner had also indorsed a note of Kintz & Company, for $545 which was held by the bank. Zehner did not take possession of the business or of the contents of the store at the time the bill of sale was executed and delivered, but the same remained in the possession of Kintz & Company and the business went on as before under the management of David Kintz.

On January 25, 1902, Mrs. Kintz, trading as Kintz & Company, executed and delivered to Zehner a writing which was indorsed on the original bill of sale as follows : “ Whereas the above mentioned sum of $1,200 due Jacob Zehner is still due and unpaid, and whereas the said Jacob Zehner has indorsed notes amounting to $545 in favor of Kintz & Company, which notes Kintz & Company cannot pay at maturity; therefore, full possession of the stock, goods and fixtures of Kintz & Company is this day given to Jacob Zehner absolutely as full owner thereof.”

At this date Kintz & Company were admittedly insolvent. No money was paid by Zehner when this last power was executed. Zehner at once took possession of the store. The signs were changed, and the business was continued in Zehner’s name. David Kintz remained as manager, and the other employees were retained. The business was conducted in this way until January 25, 1903, after which the store was closed for a couple of months, when it was transferred to David Kintz individually, he having meanwhile obtained a discharge in bankruptcy.

On May 17, 1902, a petition in involuntary bankruptcy was filed against Emma C. Kintz, trading as Kintz & Company, and on February 11, 1903, she was duly adjudicated a bankrupt. Charles E. Christ was appointed trustee, and as such trustee brought the present suit against Jacob Zehner to recover the sum of $2,200.78 (alleged to be the value of the stock of goods turned over to Zehner on January 25, 1902, and $299.22 collected by him from book accounts of Kintz & Company turned over to him at the same time), on the ground that the transfer of the goods and books constituted, under the bankrupt law, a preference given less than four months before the filing of the petition.

Upon the trial of this case a compulsory nonsuit was entered which the court in banc refused to take off. The refusal to take off the nonsuit is assigned as error.

In the opinion filed the court below held that the title to the goods sold to the defendant passed with the delivery of the bill of sale of July 5, 1901, more than four months before the institution of the bankruptcy proceedings, and at a time when defendant had no knowledge nor reason to believe that Kintz & Company were insolvent, and that the bill of sale, therefore, did not constitute an unlawful preference. It is claimed by appellant that the title to the goods did not pass until the delivery of possession on January 25, 1902, which was within the four months and after the defendant had knowledge of the insolvency of Kintz & Company. In so far as the bill of sale of July 5, 1901, is concerned, it clearly did not constitute a preference. It was outside the statutory period of four months. Nor is there any evidence that defendant had reasonable cause to believe that a preference was intended. The consideration for the bill of sale was not an antecedent debt, but it was money paid at the time and to be paid in the future.

The only question remaining, then, is as to when the title to the property of the bankrupt actually passed. Was it when the bill of sale was executed and delivered, or when possession of the goods was actually given ? The authorities cited by the trial judge seem to fully sustain his conclusion that the property was transferred when the bill of sale was executed and delivered. In addition to the cases cited, the decisions of the supreme court of the United States seem to meet the identical question involved. In the case of Sawyer v. Turpin, 91 U. S. 114, it was held that an exchange of a chattel mortgage within four months of the filing of a petition in bankruptcy, for a bill of sale given by the bankrupt more than four months prior to that date for the same articles, was valid against the assignees in bankruptcy, although the bill of salé was not recorded and possession was not given thereunder. Justice Strong there said, on page 118 : “ The conveyance was by a bill of sale absolute in its terms, having no condition or defeasance expressed, but it was understood by the parties to be a security for the debt due. It was, in substantial legal effect, though not in form, a mortgage. Having been executed more than four months before the petition in bankruptcy was filed, there is nothing iit the case to show that it was invalid. True, it was not recorded, and it may be doubted whether it was admissible to record. True, no possession was taken under it by the vendee ; but for neither of these reasons was it the less operative between the parties. It might not have been a protection against the attaching creditors, if there had been any; but there were none. It was in the power of Turpin to put it on record any day, if the recording acts apply to such an instrument, and equally within his power to take possession of the property at any time before other rights against it had accrued. These powers were conferred by the instrument itself, immediately on its execution.” So also in Stewart v. Platt, 101 U. S. 731, it was held that an assignee in bankruptcy took the property of the bankrupt subject to chattel mortgages, executed and delivered by them more than four months before the filing of the petition, but not recorded as required by law. This was followed in Hauselt v. Harrison, 105 U. S. 401, and in Adams v. Collier, 122 U. S. 382. In the case last cited, Justice PIarlan said (p. 391) that the conveyance which was attacked, being good between the parties, “ in the absence of fraud, could not be questioned by the assignee, who took only such rights as the bankrupt had.”

In Collins’s Appeal, 107 Pa. 590, Justice Gbeen (p. 605) collects the cases showing that possession, of the subject of pledge is not necessary to protect the pledgee’s title “ where tiie possession of the pledge is by the agreement of the parties to remain with the pledgor.”

We can see nothing in the evidence in this case which would constitute an unlawful preference, or which in any way violates the provisions of the bankrupt law¡ The specifications of error are overruled, and the judgment is affirmed.


author: Mb. Justice Mestbezat,

text:
    Myers, Appellant, v. Consumers’ Coal Company.

      Mines and mining—Royalties—Change of methods—Accounting—Lease.

    Where on a bill in equity for an accounting of royalties under a coal lease, it appears that by a change in the machinery and methods of preparing coal used at the time of the lease and for some years thereafter, the amount of larger royalty coal was greatly diminished and the amount of waste and smaller sizes of coal, paying a lower rental, was largely increased, it is imperative upon the court below to find as a fact the proportion of the mine product which was royalty coal under the former as well as the later methods of preparing the coal. Absence of such finding is ground for reversing the decree. The evidence taken in the case and the decision in Wright v. Warrior Run Coal Company, 182 Pa. 514, establish that such a finding is possible.
    Mitchell, C. J., and Potter, J., dissent.
    Argued April 10, 1905.
    Appeal, No. 122, Jan. T., 1904, by plaintiffs, from decree of G. P. Luzerne Go., March T., 1900, No. 2, on bill in equity in case of E. Oscar Myers et al. v. The Consumers’ Coal Company et al.
    Before Mitchell, C. J., Fell, Mestbezat, Potteb and Elkin, JJ.
    Reversed.
    Bill in equity for an accounting of coal royalties.
    The opinion of the Supreme Court states the case.

      Error assigned among others was (3) in finding that at the date of the lease there was no customary standard of proportion governing production of the various sizes, but that such proportion depended upon the will of a particular operator with reference to his particular market from time to time.

      Alexander Farnham and Edmund W. Burke, with them Henry A. Fuller and Gteorge B. Bedford, for appellants,
    cited: Wright v. Warrior Run Coal Company, 182 Pa. 514.

      Henry W. Palmer and Samuel. Hickson, with them Felix Ansart, for appellees.
    May 22, 1905 :
   Opinion by

Mb. Justice Mestbezat,

The rulings of the learned trial judge on the controlling questions in this case are at variance with the decisions of this court and cannot be sustained, and therefore the decree entered by him must be reversed.

Wright v. Warrior Run Coal Company, 182 Pa. 514, was a bill filed in the court of common pleas of Luzerne County for an accounting of royalties which the plaintiffs alleged were due them from the defendant company on an anthracite coal lease. The lease was dated November 28, 1864, was- for ten years with the right of extension, and the consideration was a shifting price per ton, from fifteen cents to ten cents, and a minimum quarterly payment of $1,250. Chestnut coal was to be one-half price. The defendant company accounted and paid for all the coal mined and removed under the lease except pea and buckwheat, smaller sizes than chestnut, and coal burned under the boilers on the premises. The bill was filed against the company to compel it to pay for the pea and buckwheat and coal used under the boilers. The bill averred, inter alia, “ that defendant by changes in machinery and methods of preparing the coal for market, has largely increased the quantity of chestnut coal, for which the lower royalty is paid, and further, largely increased the quantity of pea and buckwheat coal, for which it denies its liability to pay any royalty.” One of the prayers of the bill was that defendant account for all coal re-broken for the purpose of increasing the product of chestnut and smaller sizes.” This averment and prayer raised the principal contention in the case. The case was most carefully and ably considered in the common pleas of Luzerne county. It was found that at the time of the lease there were seven sizes of coal produced in the anthracite coal region, and that the production of chestnut coal (the smallest size) was at that time about fifteen per cent of the output of the mine, and that subsequently the two largest sizes ceased to be marketable and the lessee was compelled to broak these kinds into smaller sizes. Later, two new kinds of coal, known as pea and buckwheat, both smaller than chestnut, had a market value, although at the date of the lease they went into the culm bank as worthless. The lessee largely increased the production of chestnut coal and sold large quantities of pea and buckwheat, the production of which was largely increased and upon which he refused to pay royalties. It was held that the lessors were entitled to royalties upon all chestnut, pea and buckwheat coal in excess of fifteen per cent of the product of the mine. While this was the principal question in the case, the court also determined that, under the facts there presented, the lessors’ representatives by accepting the royalties paid by the lessees had not waived their right to recover the full royalty price for the chestnut and smaller sizes of coal in excess of “the fifteen per cent of the mine product, for the reason that “ there is no proof of knowledge on their part that the production of chestnut coal was in excess of that within the meaning of the contract.” It was also held that “ by the terms of the lease and invariable custom,” the parties to the contract did not contemplate any per ton royalty for coal that might be used under the lessees’ boilers.

Hoyt v. Kingston Coal Co., 203 Pa. 509, was a bill filed in the common pleas of Luzerne county for an accounting for coal mined and removed by the lessee under an anthracite-coal lease, dated April 10, 1867. The plaintiffs’ claim was for royalties on the excess of coal caused to pass through a screen by a change in the methods of preparation over the amount of coal passing through the screen by the methods in vogue at the date of the lease. The decree first entered was in favor of the plaintiffs, but on appeal it was vacated and the record remitted to the trial court that requests for findings of fact and law might be answered as required by the equity rules. The case has been reheard by the court below, and a decree entered again in favor of the plaintiffs has been affirmed in an opinion handed down herewith. We hold that, in the disposition of the questions arising'in the case, the trial court followed the rulings in Wright v. Warrior Run Coal Company, 182 Pa. 514. The term in the Hoyt case was for twenty years with the right of extension. The rental was fifteen cents for each ton of coal which would pass over a screen the meshes of which were five-eighths of one inch square, the lessee to pay a minimum yearly rental of 14,500. The lease provided that the premises should be worked in a careful and skillful manner without waste. The case was first heard by the late president judge of the common pleas of Luzerne county (Woodward) and he entered a decree for an accounting. The rehearing of the case was before Judge Halsey, who found that by the methods used in the preparation of coal at the time of the lease, a percentage of .10655 of all the mine product passed through the screen of five-eighths inch meshes; and that by the present methods the percentage is .26522, and that therefore there was a percentage of .15867 of the former royalty coal now passing through the screen. He allowed a credit against this of .0359 for bad coal reclaimed, and entered a decree that the defendant account to the plaintiffs for .12277 of all the coal mined at the rate of fifteen cents per ton. At both trials the defendant unsuccessfully claimed a credit against the excess of production of royalty coal for coal now screened and sold but under former methods permitted to remain in the mine, and also for coal now mined and marketed from certain seams which, at the time of the lease, was of such character as to be valueless. In passing upon the right of the defendant company to a credit for this coal, Judge Halsey in his opinion says : “ The coal that was thrown into the gob which passed through the rakes and which subsequently was loaded into the mine car and passed over the five-eighths inch square mesh for which the plaintiffs were paid royalty, was coal that in part constituted the consideration for which the sale under the indenture of lease was made. Until it was taken from the mine and passed over the five-eighths inch square mesh, it could not be used in liquidation of the consideration for the grant under the indenture of lease. To the same effect is the coal contained in the veins which were not worked at the time of the execution of the lease. The coal in the veins was the consideration for the payment of the grant to the lessees under the terms of the indenture of lease and could not operate in a discharge of' the obligation of the consideration until it was moved from the mines and passed over the five-eighths inch square mesh and sent to market. We cannot see how the defendant can be entitled as against the claim of the plaintiffs to have the coal that now is taken from the mines which formerly went into the gob and which has now been determined royalty coal and that which has been taken from the veins which were not worked at the time of the execution of the lease as an offset against the plaintiffs’ claim. All the coal in the mine which would pass over a five-eighths inch square mesh was the consideration which moved the grantors in the indenture of lease to execute it on April 10, 1867.” It was held against the contention of the defendant company that under the terms of that lease the company was not entitled to a credit for royalty coal formerly used for generating steam on the premises, and that the plaintiffs’ acts and conduct did not estop them from making the claim for the un-' paid royalties.

The present case was a bill filed also in the common pleas of Luzerne county for an accounting for royalties alleged to be due under a lease of anthracite coal in that county, dated January 26,1863, and for the termination of the lease by reason of the nonpayment of rentals. The lease demised all the coal under certain tracts of land in Luzerne county for a term of twenty years and for such other-time as the lessee should continue to pay the rent stipulated in the instrument. The lessee was to pay an annual rental of $5,000 in quarterly installments, for which he was permitted to “ mine and remove coal of the siz,es below named (and larger than No. 5 coal) as those for which rent is payable, to the amount of 50,000 tons .... and for all coal mined and removed prior to the first day of April, 1864, or in any one year, over and above the said 50,000 tons shall pay the rent of ten cents per ton for every ton .... of the size which will correspond with sizes known as numbers one, two, three and four, numbers three and four being stove coal, and for a}l larger sizes ; and, for all such coal mined and removed as aforesaid, of the size known as number five, the sum of five cents per ton ; but no charge shall be made for any coal smaller than number five coal; except that the party of the first part, the party of the second part and the party of the third part shall, each party, be entitled, for home use, to an amount of number five coal not exceeding fifty tons per annum; for which, no rent shall be charged.”

The principal and most important claim for an accounting in this case is the same as the one presented and allowed in the two cases cited above, viz.: that by a change in the machinery and methods of preparing coal used at the time of the lease and for some years thereafter, the amount of larger royalty coal was greatly diminished and the amount of waste and smaller sizes of coal, paying a lower rental, was largely increased, and that the lessor is entitled to an accounting for the same percentage of higher royalty coal as was produced by the methods of preparation in use at the date of the lease. The lessee in this case, as in those referred to, claims a credit on the royalty coal for coal on which, under the former methods of mining and conveying to the breaker, the lessor received no royalty and which is now screened and accounted for. The lessors, however, contend that the gain from this source, being disconnected with the methods of preparation in the breaker, cannot be considered against the loss resulting from those methods. It is, therefore, apparent that it was vitally important that the trial court should ascertain, as was done by the same court in similar cases, the proportion of the mine product which was chestnut and other royalty coal under the former as well as the later methods of preparing the coal. Upon this branch of the case, the learned judge (Ferris) of the court below found as follows : “ We are unable to conclude from the evidence that, at and before the date of this lease, the quantity of chestnut coal marketed in the region bore any fixed or recognized proportion to that of other sizes. ... At the date of the lease there was no customary standard of proportion governing the production of the various sizes, but that such proportion depended upon the will of the particular operator with reference to his particular market from time to time.” The learned judge recognizing the importance of this finding and apparently its conflict with the decision of his own court, affirmed by this court, says: “ As this finding is one of great if not controlling importance as bearing upon the question whether the preparation of coal according to the modern instead of the old method has been hurtful to the lessors, we have given to it the most careful consideration—the more so as we were under the impression that the learned master and judge in Wright v. Warrior Run Coal Company, 182 Pa. 514, had arrived at a different conclusion, viz.: that at this time the, customary production of chestnut was about fifteen per cent of the output of the mine.”

We agree with the learned judge that his finding of fact on this question “ is of great if not controlling importance ” in the determination of the issues involved in this case. Without a finding on this question in favor of the plaintiffs, the basis of their claim is gone and their right to an account must be denied. But we are clearly of opinion that his finding cannot he sustained and that it is not only contrary to the evidence but to former adjudications of the learned judge’s own court which have been affirmed by this court. His finding is in direct conflict with the finding of his own court in the Wright ease. There, after a most careful consideration of a large amount of testimony on the subject, the late Judge Bennett, acting as master and subsequently as judge of the court, found that “ under the system of rollers and appliances for breaking and preparing coal at that time—even when all the lump and steamboat sizes were passed through the rollers •—-the total production of chestnut did not exceed fifteen per cent of the product of the mine, including in such product not only the chestnut and sizes above that, but also still smaller coal, equivalent to nine per cent of the mine product which went to the dirt bank in sizes that later came into use as pea coal.” This court approved the finding and the master’s other findings relative to the methods of preparation of coal in the anthracite region at the date of the lease involved in that litigation.

In Hoyt v. Kingston Coal Company, 203 Pa. 509, the lease was similar to the lease in this case and the accounting was asked for on substantially the same grounds as here. A great deal of testimony was taken before Judge Halsey. The leading counsel for the plaintiff there was also of counsel for plaintiffs here, and one of the counsel who represents the defendants here represented the defendant there and insisted “that there is no testimony in the case to show with any degree of accuracy how much coal went through the five-eighths mesh in the earlier years neither is there any testimony from which the fact can be accurately ascertained how much more coal went through the five-eighths mesh in the later years.” Judge Halsey, however, found without any apparent difficulty “ the customary standard of proportion governing the production of the various sizes ” of coal by the methods used in the preparation of coal .at the date of the lease in April, 1867, and decreed an accounting for a certain percentage of the mine product during the operation of the mine by the .defendant company. The testimony introduced in this and other cases referred to is of the same general character and amply sufficient to warrant a finding as to the proportionate, quantity of the different sizes of coal produced by the former and present methods of preparation. In view of this fact and of the decisions of his own court on coal leases of this character, all executed ivithin a few years of each other, and the approval by this court of those decisions, we are compelled to sustain the third assignment of error and reverse Judge Fekbis’ finding and decree.

It will certainly appear anomalous that there should be two appeals heard by this court at the same term from two conflicting decisions of the same court on the same question. On an examination of the records of the two cases (tins case and the Hoyt case), it will be seen, however, that the decrees appealed from were not entered by the court but by two different judges of the court. Of course, there is no authority for such a proceeding. Appellate courts hear and determine appeals from the judgments and decrees of inferior courts, not from the judgments and decrees of a judge of those courts, unless jurisdiction is specially conferred. Luzerne county is a separate judicial district and elects four judges learned in the law who sit in and compose the court of common pleas of that county. While there are four law judges of the common pleas of that county, there is but one court and the concurrence of a majority of the'judges is a prerequisite to the entering of a valid decree. When exceptions were filed to the findings of the judge who heard this cause, the court in banc should have heard the argument on the exceptions and, after consideration, should have disposed of the exceptions and entered a decree. There would then have been a decree of the court from which only an appeal lies. In view of the former rulings of the common pleas of Luzerne county and of this court on the questions involved in this appeal, it is not at all probable that there would have been the apparent inconsistency of two conflicting decrees entered in the same court on similar testimony in two different actions. As neither party has raised any objection to the course of procedure, we have considered the cause as heard by the court and the decree as entered by it. But as the ascertainment of the percentage of the quantity of royalty coal produced by the earlier and later methods of preparation, the important question in thjs case, requires the examination and consideration of over 1,500 pages of testimony, we will not, in reversing the trial judge on this finding, perforin this task, but let the court below ascertain the fact which can be reviewed on exceptions by the court in banc and subsequently here, if desired.

What has been said indicates the principles, announced in our decisions, on which this ease should be tried and shows that some at least of the several assignments of error must necessarily be sustained. We will, however, formally sustain only the third assignment and, before disposing of the questions raised by the other thirty-six assignments, await a decree made by the court below, whose rulings may not be in accord with those of the single judge who entered this decree, after a trial had in accordance with the views expressed above.

The third assignment of error is sustained and the decree is reversed with a procedendo.

Mitchell, C. J., and Potteb, J., dissent.


author: Mb. Justice Potteb,

text:
    Holland, Appellant, v. Flick.

      IAbel—Damages—Employment or trade.

    Any written words are libelous which, in any manner are prejudicial to another in the way of his employment or trade.
    Where words are spoken of another, in the way of his or her profession or trade, special damage need not be averred in the statement.
    A publication charging a detective with cowardice is libelous.

      Argued April 11, 1905.
    Appeal, No. 258, Jan. T., 1904, by plaintiff, from order of C. P. Luzerne Co., Dec. T., 1897, No. 484, refusing to take off nonsuit in case of Charles R. Holland v. Lidclon Flick and R. J. Flick.
    Before Mitchell, C. J., Fell, Mesteezat, Pottee and Elkin, JJ.
    Reversed.
    Trespass to recover damages for libel. Before Lynch, P. J.
    At the trial it appeared that the libelous article was as follows:
    “ Brave Men These.
    “ Held Up by Highwaymen on Carey Avenue, Monday Morning.
    “It is seldom that highwaymen attempt these dastardly acts in. the precincts of this well protected city, yet if the story of Detective Charles Holland, George Dewey and the well-known actor, Bart W. Wallace, is to be believed, they did invade Carey avenue early Monday morning in search of game, Messrs. Holland, Dewey and Wallace being detained in this city by important business until long after the street cars had ceased to run Sunday night. As they jogged along over the asphalted streets Mr. Holland, the terror of the Beach Haven evildoers, related startling tales of adventure which he had participated in along Hunlock’s Creek and valorous arrests of desperate criminals he had made on the Delaware, Lackawanna & Western. While in the midst of one of these thrilling recitals the sudden 'cry of ‘ halt ’ rang out from the roadside and the cab stopped short. Detective Holland was the first to divine the meaning of the order and without waste of time he industriously began to hide himself uiider the seat, but owing to the fact that he is a large man and the hiding place was so small he had squeezed only part way in, when he stuck fast and could move neither way. In the meantime Wallace had struck the theatrical attitude of retreat and Dewey, with upraised hands, was left alone to face the music. Rapidly the bandits plundered the pockets of the trio, and finishing in disgust pronounced the whole outfit ‘busted.’ They were allowed to pursue their way in peace towards Plymouth, the journey being taken up in extricating Holland from his uncomfortable situation.”

      The court entered a nonsuit which it subsequently refused to take off.

      Error assigned was refusal to take off nonsúit.

      William S. McLean, with him Gustav Hahn, for appellant.
    Written or printed words which are injurious to a person in his office, profession or calling, or which impeach the credit of any merchant or trader, by imputing to him insolvency, or even embarrassment, are libelous: McIntyre v. Weinert, 195 Pa. 52; Price v. Conway, 134 Pa. 340; Hayes v. Press Co., 127 Pa. 642.
    It is always a question for the jury whether the words were spoken of the plaintiff in the way of his calling : Townshend on Slander & Libel (2d ed.), 270, note 2; Odgers on Libel & Slander, *568.

      Thomas E. Earrell, for appellee.
    This failure to connect the words with plaintiff in his special character and to claim damages for injury thereto is absolutely fatal to plaintiff’s case : Barnes v. Trundy, 31 Me. 321.
    The rule in Pennsylvania, deduced from all of the decisions on this branch of libel, is, that it is absolutely essential to aver in the declaration that the words were spoken or published of plaintiff in his calling or business and that they injured him in such character: Phillips v. Hoefer, 1 Pa. 62; Hook v. Hackney, 16 S. & R. 385; Wildee v. McKee, 111 Pa. 335; Price v. Conway, 134 Pa. 340; McIntyre v. Weinert, 195 Pa. 52; Naulty v. Bulletin Co., 206 Pa. 128.
    The quality of an alleged libel, as it -stands on the record, either simply, or as explained by averments or innuendoes, is purely a question of law for the court: Pittock v. O’Niell, 63 Pa. 253; Collins v. Dispatch Publishing Co., 152 Pa. 187; Meas v. Johnson, 185 Pa. 12.
    An action for libel will not lie for a harmless bit' of pleasantry : Press Company v. Stewart, 119 Pa. 584.
    May 22, 1905:
   Opinion by

Mb. Justice Potteb,

In his opinion in this case, filed upon the motion to take off the nonsuit, the learned trial judge says; “ In substance plaintiff’s statement sets out, that he is a citizen of good fame, sobriety and bravery in the line of his duty as a detective and as an officer of the peace of a railroad company, and defendants being officers of the Wilkes-Barre Times, a newspaper published daily in Wilkes-Barre, on May 11, 1897, well knowing the premises and maliciously intending to cause it to be suspected that he had been guilty of drunkenness, of night brawling and of cowardice, published the words complained of, thereby meaning, the plaintiff in a drunken frenzy, had been bragging of his daring exploits as a detective and as an officer of the peace. The publication was not denied.” But the court held that the words in themselves were not libelous, and in the absence of any averment or proof of special damages, there could be no recovery. We think the trial judge was in error in holding that "the words were not published of the plaintiff in the way of his office. The publication refers to the plaintiff twice, as Detective Holland, and states that when attacked by bandits who plundered the pockets of the plaintiff and his friends, he, Detective Holland, showed great cowardice and ignominiously attempted to hide himself under the seat of the vehicle. The tendency of the words certainly was to injure the plaintiff in his calling as a detective, and to hold him up to scorn and contempt. The charge brought against him, was, if true, such as would disqualify him, and render him unfit, to fulfill the duties of the office of detective, or guardian of the peace. Courage is essential to the proper discharge of the duties of a detective.

Any written words are libelous which in any manner are prejudicial to another in the way of his employment or trade: Odgers on'Libel and Slander, 19. This principle was cited with approval by this court in McIntyre v. Weinert, 195 Pa. 52, as was also the principle laid down in Odgers on Libel and Slander, and cited in Price v. Conway, 134 Pa. 340, that, where words are spoken of another, in the way of his or her profession or trade, special damage need not be averred in the statement.

It was also suggested that the publication was only intended as “good-natured raillery.” Possibly it was. But that would be a matter for the jury to determine, and not for the court.

The specification of error is sustained, and the judgment is reversed, with a procedendo.