author: Moore, J.,

text:
    Wey et ux. v. Ben Avon Borough School District.

      John M. Gallagher and Linus P. McGuiness, for plaintiffs.

      Doty & Thornton, for defendant.
    May 10, 1930.
   Moore, J.,

In. this proceeding complainants are seeking an injunction restraining the defendant school district from taking any further steps toward condemning or appropriating complainants’ real estate which lies in Emsworth Borough, in an effort to enlarge its athletic field, a portion of which original field has been appropriated by Allegheny County in connection with the building of the Ohio River Boulevard.

The case was heard substantially upon bill and answer, and by stipulation with the same force and effect as if upon final hearing.

By resolution the defendant school district provided for the condemnation of complainants’ real estate in the adjoining borough for the purpose aforesaid, and the complainants contend the defendant’s condemnation ordinance is void, and that, therefore, the restraining order should issue.

The attempted condemnation is under the provisions of the Act of April 27, 1925, P. L. 348, amending section 602 of the Act of May 18, 1911, P. L. 309, as amended by the Act of May 20, 1921, P. L. 970, the so-called public school system acts of Pennsylvania, the second paragraph of which last amendatory enactment contains, inter alia, the following provision:

“When the territory of any school district entirely or partially surrounds the territory of another school district, or where any part of the territory of any school district is so located that access thereto can be had only by passing through some other school district, or where there is vacant land suitable for school purposes in another school district adjacent or near to any district, or where an existing school building, private or public, not required for school purposes by the district in which the same is located, is conveniently located for use, the board of school directors are authorized, for the conyenience of attending pupils, to acquire, by purchase, lease or condemnation, any such school building or any real estate in such other district for the erection thereon of school buildings. . . .”

The third paragraph of the said amending Act of 1925, among other things, provides:

“The board of school directors of any district is hereby vested with the necessary power and authority to acquire in the name of the district, by purchase, lease, gift, devise, agreement, condemnation or otherwise, for school or playground purposes, any school building or other real estate situated in another school district and to erect thereon school buildings. . . .”

From the evidence we make the following

Findings of fact.

1. Defendant, School District of the Borough of Ben Avon, is a school district of the fourth class.

2. Defendant, School District of the Borough of Ben Avon, at a meeting of the directors thereof, held on Feb. 10, 1930, adopted a resolution reciting the necessity that additional land be secured for the athletic field of the said defendant; selecting for school purposes, inter alia, the real estate in the Borough of Emsworth owned by complainants; directing that the board of school directors of said school district enter upon, take possession of and occupy said described real estate, and mark the boundary lines thereof, and use the same for school purposes as aforesaid; that the school district present a petition to the Court of Common Pleas of Allegheny County, Pennsylvania, asking for the appointment of a board of viewers to estimate and determine what amount of damages, if any, had been sustained by the owners of said premises by reason of the taking of the said land by the school district, and to whom payable, etc., all of which more fully appears by a copy of said resolution attached to the bill of complaint in this case, and marked Exhibit “A.”

3. Defendant has duly and in order complied with the following procedure for condemnation of said property:

(1) The selection of the site;

(2) Been unable to agree with the complainants as to the price to be paid therefor;

(3) Decided on the amount of land and the location thereof, as appears by the resolution set forth by complainants as Exhibit “A.”

(4) Entry, taking possession and occupancy, being one and the same act, concurrently performed by going upon the land;

(5) Designating and marking the boundary lines upon the land. It is the intention of said defendant school district to take and use the property described in the bill as an addition to its athletic field, making proper payment therefor, under the power of eminent domain.

4. The costs of acquiring said property will not increase the indebtedness of defendant school district beyond what is permitted by law.

5. For several years defendant, the School District of the Borough of Ben Avon, has owned and maintained an athletic field in the Borough of Ems-worth, adjoining the property here in dispute. The County of Allegheny has taken a portion of said athletic field for the construction of the new Ohio River Boulevard. In view of the said taking of a portion of defendant’s athletic field by the County of Allegheny, it is vitally necessary for the use of said athletic field that the property here in dispute be immediately added to the athletic field, as without it the athletic field is too small for use, and the public funds there invested are being wasted. In order that said athletic field may be available for use of school athletics for the year 1930, it is essential that work on the property be commenced at once. The granting even of a preliminary injunction in this case would work irreparable injury to the defendant in delaying the work on said athletic field, with the result that the entire investment of public funds, not only in the property in dispute but in the entire existing area of defendant’s athletic field not taken by the County of Allegheny for the Ohio River Boulevard, would be wasted for the entire year 1930.

6. The defendant school district has been using its athletic field, and intends to continue its athletic field as restored by the taking of the complainants’ property under the power of eminent domain, for the pupils of grade and high school, that they may have grounds upon which the common athletic games current among schools of such kind can be played, under reasonable rules and regulations adopted by said school district regarding the management and control of such exercises, athletics and games taken part in or played by the pupils as member of and in connection with such schools of defendant.

7. Defendant school district has on the existing athletic field, for the restoration of which complainants’ property has been condemned, a building containing dressing rooms for the use of pupils of the school, and shower baths, and similar facilities for use in connection with the use of said property as an athletic field. Defendant does not have, and does not mean to have, upon said athletic field a building used for the mental instruction of the pupils alone, such facilities being already provided by the School District of the Borough of Ben Avon in its existing buildings for the mental instruction of its pupils not contiguous to said athletic field. The said school district has no intention of erecting any building exclusively for the mental instruction of the pupils upon said athletic field, which would not only be unnecessary, but would destroy the availability of said property as an athletic field, for which it is needed.

8. It would not be possible for defendant school district to obtain an athletic field contiguous to the property owned by it on which buildings are erected exclusively for mental instruction, within the boundaries of the School District of the Borough of Ben Avon, at any reasonable price, as all property surrounding said existing buildings for mental instruction is improved with buildings of high value.

Discussion.

The defendant’s right to condemn complainants’ property must, therefore, be found in the foregoing provisions of the controlling act of assembly. Complainants’ contention is that, while the act vests authority in the school board to acquire property in another school district “for school or playground purposes,” the last said provision of the third paragraph of the act requires that such condemnation can only be made when the purpose thereof combines an intention to “erect thereon school buildings.” In other words, the complainants contend that under this act the defendant school district has no authority to condemn the complainants’ property for playground purposes alone, and that such condemnation will only lie where the purpose of the same, if for playground purposes, also includes the purpose of the erection of a school building.

Under the admitted facts in this case, what the defendant school district has in the adjoining borough is an athletic field, and while the complainants contend that an athletic field does not come within the term “real estate for playground purposes,” as defined in the act, we think that an athletic field is fairly embraced within the provisions of the act in referring to “playground purposes.”

School districts being creatures of statute are strictly confined to the powers granted by statute: see Mulligan v. School District, 241 Pa. 204.

Complainants stress the unnecessary interpretation of the aforesaid act to the effect that real estate acquired by school districts in territory beyond its limits is of necessity exempt from taxation.

Discretionary acts on the part of a school board will be enjoined where it appears that the discretion vested in the school board was not properly used: Lamb v. Redding, 234 Pa. 481, and Gemmell et al. v. Fox et al., 241 Pa. 146.

From the pleadings, which practically embrace the record in this proceeding, we find the issue to be between the foregoing contention of the complainants and the contrary contention of the defendant school district, to the effect that under the controlling statute a school district is given the power in the alternative to acquire real estate for either school or playground purposes, and that it is clothed with the additional power to erect thereon school buildings.

We cannot mark as reasonable complainants’ contention that the statute requires that any school district acquiring land for playground purposes shall, in condemning property in an adjoining borough, be required to erect thereon a school building.

We believe it is clear that the legislature intended to allow school districts to acquire land in adjoining school districts by condemnation for school buildings or playground purposes.

From the facts in the case we make the following

Conclusions of law.

1. By virtue of the condemnation proceedings had, the title to the property here in dispute has become and is vested in the School District of the Borough of Ben Avon, defendant in this case.

2. The Board of School Directors of the School District of the Borough of Ben Avon may lawfully acquire real estate, by condemnation or otherwise, for school or playground purposes, including use as an athletic field, although situated in another school district and beyond the corporate limits of the Borough of Ben Avon.

3. The Board of School Directors of the School District of the Borough of Ben Avon may prescribe, adopt and enforce such reasonable rules and regulations as it may deem proper regarding the management, control or prohibition of exercises, athletics or games of any kind taken part in or played by any pupils as members of or in connection with their school, and under such power may provide suitable playgrounds, including athletic fields, for the use of the pupils of the school.

4. The physical development of a child is as essential to his well-being as is his mental development, and physical development cannot be had without a suitable place for recreation and exercise. To acquire such grounds is, therefore, within the province of the public schools, and is a school purpose.

5. An athletic field where the common athletic games usual among grade and high school pupils may be played is a playground.

6. Defendant school district has a right to acquire real estate by condemnation or otherwise, although situated in another school district and not physically contiguous to the acquiring school district, and the additional statutory power to erect thereon school buildings is discretionary and not mandatory, it not being required that any such school district acquiring land for a playground purpose, including use as an athletic field, shall thereon erect unneeded buildings exclusively for mental instruction, thereby destroying the availability of the property for the playground purpose for which it was acquired.

7. Preliminary injunction should be refused.

8. Permanent injunction should be refused.

9. The bill must be dismissed, at the cost of the complainants.

Decree.

And now, May 10, 1930, upon consideration of the foregoing case, it is ordered, adjudged and decreed as follows:

The preliminary and permanent injunctions for the purpose of enjoining and restraining the defendant School District of the Borough of Ben Avon, its officers, agents or employees, from taking any further steps towards condemning or appropriating the property of the complainants are refused and the bill of complaint is dismissed, at the costs of the complainants.

From 'William J. Aiken, Pittsburgh, Pa.


source: Caselaw Access Project

author: Reno, P. J.,

license: Public Domain

text:
    Gibson v. Gibson.

      Butz, Rupp & Welty, for libellant.
    June 16, 1930.
   Reno, P. J.,

When we read the testimony it seemed probable that the respondent had not attained the age of twenty-one when the libel was filed. At least, the record did not affirmatively show that she was then an adult. Upon our request, the master made a supplementary investigation and ascertained that respondent was born June 22, 1909. Hence, on March 4, 1930, when the libel was filed, respondent was less than twenty-one years old. No guardian ad litem was appointed for respondent at any stage of the proceedings. For that reason the record will not support a decree. It is a fair question whether, apart from this defect, the record shows a case of merit.

Now, June 16, 1930, decree refused and the libel is dismissed, without prejudice to right of libellant to institute another suit for the same cause of action.

From Edwin L. Kohler, Allentown, Pa.


author: Crane, J.,

text:
    Carbone v. Stockholders Realty Company, Inc.

      A. A. Goodman, for plaintiff; E. H. Cushman, for defendant.
    March 5, 1931
   Crane, J.,

A brief summary of the facts admitted by the pleadings or established by the evidence will operate as an index to the legal principles involved in the present controversy: On Dec. 24, 1927, a blanket mortgage was executed and delivered to the plaintiff by James Berlingieri and Myer Brenner to secure a loan of $10,000 on ten dwelling houses, Nos. 1504-1506-1508-1510-1512-1514-1533-1535-1537 and 1541 South Corlies Street in the City of Philadelphia. Said mortgagors acquired title to the aforesaid premises from the defendant, to whom they reconveyed title immediately after the creation of said mortgage. The defendant defaulted in the payment of taxes upon the aforesaid premises for the years 1928 and 1929. Plaintiff having obtained a judgment on the bond, a writ of fieri facias was issued thereon, and on Dec. 2, 1929, said mortgaged premises were sold by the sheriff, who, on Dec. 16, 1929, conveyed said premises to the plaintiff as purchaser at sheriff’s sale by deed poll duly recorded. City and school taxes for the years 1928 and 1929 were assessed upon the mortgaged premises in the name of defendant, and upon default of payment thereof by said defendant, plaintiff paid the taxes for both years, amounting to $2159.06, the amount of the claim in the present suit.

The defense interposed against plaintiff’s claim was that defendant was not the real owner of said premises during the years 1928 and 1929', disavowing any beneficial interest therein, merely holding title under a declaration of trust for the specific purposes set forth therein.

The principle of law applicable to the instant case will be found in Bergdoll v. Pitts (No. 1), 41 Pa. Superior Ct. 257. Paraphrasing this authority, the party who at law is responsible for the payment of taxes assessed on real estate is its real owner. Prima faide, he who holds a deed to the land which has been registered and recorded is the real owner. The fact that he is out of possession and that another is enjoying the rents, issues and profits of the property is no reason why its real owner should escape paying the taxes on it. The deed to the mortgaged premises in the present case was admittedly registered and recorded in the name of the defendant, and, therefore, prima fade, defendant is to be regarded as the real owner. Of course, a bare trustee, who holds the record title to land for another, would not be liable for the payment of taxes on it, but it is incumbent on such trustee, if he would escape taxation, to show affirmatively his exact relation to the property and demonstrate that he has no personal interest in it. Failing in this, his responsibility for the taxes becomes fixed. The right of the mortgagee to maintain an action for the recovery of taxes paid by him under such circumstances as those present in this case arises by way of subrogation. Plaintiff becomes subrogated to the right of the city to look to the terre tenant in whose name the taxes were assessed for their payment. Consequently, no defense is valid against him that would not be effective to bar the city’s claim. The precise terms of the trust on which defendant claims to hold the mortgaged premises must be shown in order to enable the court to determine whether or not the defendant is as bare of interest in said property as he asserts. For a registered owner of real estate to assert that the real ownership is in another is a conclusion of law.

The important proposition of law presented by the present record is whether the registered owner of real estate is protected from the payment of taxes where he holds title by fee simple deed, under claim of the existence of a trust under which he alleges he has no beneficial interest, especially where no sufficient notice of the trust has been given to a subsequent transferee of title, who is obliged to pay all taxes.

In the case of Theobald v. Sylvester, 27 Pa. Superior Ct. 362, it was held that when a new owner has been compelled to pay taxes for which his predecessor in title was legally and personally liable, he may recover of the latter the amount so paid in an action of assumpsit.

Referring to the operation agreement dated Aug. 11, 1926, defendant’s Exhibit No. 1, we initially observe that neither plaintiff nor defendant is a party thereto. While this agreement provided that the mortgaged premises in suit, inter alia, were to be conveyed to the defendant in trust, it is to be observed in the twenty-first paragraph thereof that the trust was not to be expressed on the face of the record, but by a separate declaration of trust. This proviso is pregnant with significance. The declaration of trust (see defendant’s Exhibit No. 2) was never recorded, and, moreover, the operation agreement was likewise unrecorded, and being offered in evidence discloses a covenant not to express the terms of the trust on the face of the record. It clearly appears that every legal ingenuity was resorted to for the purpose of keeping from public knowledge the existence of the trust under which defendant claims to have held title during the two years the taxes in question were assessed.

.The affidavit of defense is devoid of any averment that plaintiff received actual notice of the unrecorded operation agreement and declaration of trust. Paragraph 11 of the supplemental affidavit of defense charges plaintiff with constructive notice that title was held in the name of defendant as trustee for the respective subcontractors and materialmen named in paragraph 10, duplicate originals of the contracts pledging said premises as security for the payment of debts for labor and material having been duly filed of record in the office of the Prothonotary of Philadelphia County on Aug. 23, 1926, as of C. P. No. 3, June Term, 1926, M. L. D. An examination of the building contracts thus recorded in the mechanics’ liens docket reveals no mention of any collateral agreements showing the trust relationship relative to the title of the premises in question. In fact, one contract, namely, that of James Berlingieri and Myer Brenner, contractors, recorded as of C. P. No. 3, June Term, 1926, No. 2909, M. L. D., contains a waiver of liens in favor of the Stockholders Realty Company, Inc., defendant herein, as owner.

Under the authority of Berg-doll v. Pitts, swpra,, even if the plaintiff knew that defendant was never the real owner, this fact would not preclude his right to recover taxes paid by him. For further authorities see Neilson v. Equitable Trust Co., 18 Pa. Superior Ct. 635, and the recent case of Metropolitan Trust Co. v. Real Estate-Land Title & Trust Co., 12 D. & C. 73.

A trustee who accepts an absolute conveyance of land, registers and records his deed, and under some secret trust assumes the performance of active duties, such as conveying land and accepting reconveyance thereof after intermediate mortgages have been created, cannot escape liability for taxes by the mere assertion that he is a dry trustee. It appears in the testimony that the president of the defendant company was likewise the president of the Equitable Bond & Mortgage Company, party to the operation agreement, identified as defendant’s Exhibit No. 1. The language of Judge Porter in the case of Neilson v. Equitable Trust Company, supra, is peculiarly appropriate to the present case, to the effect that when a responsible company holds itself out to the world as the absolute owner of land by accepting and registering of record a deed, all parties who deal with the title have a right to assume that the registered and recorded owner is legally liable for the taxes unless they have notice to the contrary. The facts of the case at bar do not bring it within the scope of the decision in the ease of Rawle v. Renshaw, 15 Pa. Superior Ct. 488, in which case there was a written declaration of trust of which the plaintiff had express notice.

After a careful consideration of the entire record in this case, we conclude that plaintiff, as purchaser at sheriff’s sale, is entitled to recover taxes he was obliged to pay which had previously been assessed against the premises in the name of defendant, particularly in view of the fact that he possessed neither actual nor constructive notice of the existence of the trust under which defendant alleges he held title.

We accordingly find in favor of the plaintiff in the sum of $2299.40.


author: Van Dusen, J.,

text:
    Keen’s Estate.

      Maurice Stern and James A. Walker, for exceptants.

      Thomas Raeburn White, contra.
    Jan. 21, 1931.
   Van Dusen, J.,

1. We have read the opinion of the Supreme Court [293 Pa. 267] carefully with the exceptants’ argument in mind, and are of the opinion that the case was sent back to this court only for reconsideration of the distribution ordered. It is not to be supposed that the Supreme Court intended that we should review the whole case again without any guide, because of error found in one part of it. For this reason we cannot pass on the merits of any exceptions, except so far as the error in distribution affects them.

2. One set of exceptions is to the refusal to disallow commissions to the accountant. All the reasons given have already been considered by us except that it is now argued that the mingling of Keen and Pleasonton accounts led to the error in distribution, aggravated by the failure of the accountant to call attention to the fact that there were still Pleasonton funds on hand. Counsel for the accountants replies that he said nothing because the error seemed to him harmless. The present writer, as auditing judge, was the originator of the error. There is no way of telling whether this court would have seen and corrected it if the facts had been known after the adjudication. The effect of what was done in the trustee’s lifetime in the way of mingling funds does not appear any different now from what it was at the first audit; and the policy of the trustee's representatives after his death, even if mistaken, in resisting a bitter contest in which unquestioned actual distribution was disputed on technical grounds, ought not to affect the trustee’s compensation.

3. But such policy may have a great deal to do with the compensation of counsel payable out of the estate. At the first audit, counsel for the accountant was allowed a fee of $400 for services to the end of that audit, apportioned to that part of the attack upon the trustee which was unsuccessful, following Price’s Estate, 81 Pa. 263. After hearing before the court en banc, and the appeal to the Supreme Court, and the re-hearing before the auditor, counsel asked $3500 additional for services to the end of that audit. The auditor allowed $3250, remarking that the appeal was “barren of result” to the exceptants. There will be more to say in the Pleasonton opinion (filed herewith) [14 D. & C. 699] about the difficulty of applying Price’s Estate. As the services all appear on the face of the record and nothing depends upon the credibility of witnesses, we are in as good a position as the auditor to fix the fee, and we do not think he gave due weight to the reversal by the Supreme Court. In part, the exceptants’ position was sustained, and in fact the application of payments to Keen or Pleasonton has become material in the Pleasonton Estate in considering possible uninvested balances. Exception No. 8 is sustained so far as to reduce the counsel fee of $3250 to $2600.

4. The trustee held a mortgage which was in default. He took a deed in his own name and later sold the property and took another mortgage, which was paid off. At the first audit the exceptants asked a surcharge for the loss of interest which was suffered but not on the ground that the deed was taken in the trustee’s own name, or at least not clearly on that ground. This was refused. Before the auditor the claim was renewed and the ground mentioned was clearly stated. The auditor refused it because the matter was raised at the first audit, at which time all possible grounds should have been presented. In passing on exceptions to his draft report, the auditor gave as an additional reason for his action the failure of the exceptants to give this particular reason in the written objections filed with him. In this the auditor was mistaken, but his action was correct for the reason he first gave.

The exceptants also objected before the auditor to the credit for taxes on the property, part of which accrued before and part after the trustee took title; but the exceptants did not reject the debit for rents collected and accounted for by the trustee while he held title. This objection was properly not sustained because it should have been made at the first audit. It is worthy of consideration also whether the exceptants may accept part and reject part of the transaction under Carr’s Estate, 24 Pa. Superior Ct. 369, and Freas’s Estate, 231 Pa. 256.

We notice these exceptions specially, though they fall within our general conclusion that such matters are not now before us, because of the auditor’s error, and because of the shifting of the ground of objection.

All the exceptions are dismissed except No. 8, which is sustained so far as to reduce counsel fee from $3250 to $2500; and as so modified, the auditor's report is confirmed absolutely.


text:
    Pleasonton’s Estate.

      Maurice Stern and James A. Walker, for exceptants.

      Thomas Raeburn White, of White, Parry, Schnader & Maris, and John Cadwalader, Jr., contra.
    Jan. 21, 1931.
   Van Dusen, J.,

One set of exceptions attack the trustee’s commissions. Most of the reasons have been considered and rejected in the Keen Estate [14 D. & C. 697], where the facts were substantially the same, and they need not be referred to further. Some reasons, however, are new, namely:

(a) That no account was filed for thirty years. There was a life tenant until 1907, and thereafter the remaindermen were absolutely entitled. One of them, Mabel, was feeble-minded. During most of the time her next of kin was her sister Beatrice, who was entitled to the other part of the estate. By common consent, this account ran on until 1920, together with the Keen account and the Atlantic City real estate account, for the practical benefit of the parties. In that year Beatrice withdrew what she was satisfied to accept as her share, and the administration of the trust continued for the benefit of the other sister. In the absence of any request for termination of the trust on behalf of the beneficiaries, we cannot say that the failure to close the matter or to file interim accounts is ground for denying commissions.

(b) That the active executor filed a petition for discharge of his co-executor on the ground that all the duties of the trust had been performed at a time when there was considerable money still in the possession of the trustees. The record before the auditor does not disclose this contention or any facts on which to base it.

(c) That the accountant contested the jurisdiction of the court. This he is entitled to do without being penalized in ease of failure.

(d) That the account on its face shows uninvested principal and undistributed income. We conclude below that there are no such uninvested balances shown to us as to lead to a surcharge for loss of interest. If so, there should be no loss of commissions for that reason.

The whole conduct of the trustee is to be taken together in judging his right to compensation, and it does not appear to be different in substance from that which was passed on in the Keen Estate, except that we are more fully aware of the difficulties which arise from the failure of the trustee to apply payments in distribution as he made them to the Keen or the Pleasonton account. But this is not sufficient to change our general opinion.

The auditor, following Price’s Estate, 81 Pa. 263, allowed fees to counsel for the accountant for general services and also fees apportioned to the unsuccessful parts of the attack upon the accountant’s administration. He excluded future services, and no request is now made for any more. The application of that decision has become difficult, as the auditor remarks. The court is called upon not only to value services but to weigh the proportionate merits and plausibility of the various contentions. Our opinion on the merits may not be the same as that which may be arrived at on appeal. The general rule in this state is that each party should pay his own lawyer. On the other hand, while a trustee is not obliged to serve, he is not altogether a volunteer and is acting primarily for the benefit of another. A case may easily be imagined where a trustee would be unmercifully harassed by unfounded attacks, and the expense of defending himself would consume all his just compensation. The courts will have to do the best they can and need not be disturbed if a rule of thumb is the best that can be found. The auditor itemized the allowances as well as he could, and we see no reason to disturb his conclusions in the light of the results to which we also come.

Two points are now made on the general subject of counsel fees to which the auditor does not refer. One is the long delay in bringing the trust to an end. What we have said in this connection as to the trustee’s compensation applies also to counsel fees. The other is that the trustee took a release from Beatrice for what was supposed to be her full share, whereas it is now admitted that there was more due her. But there was no contest over this paper, and it does not enter into counsel fees one way or the other.

The trustee claimed credit for 3 per cent, commissions for sale of No. 1226 Walnut Street and 1 per cent, agent’s commissions for making the sale. The exceptants objected before the auditor to the 3 per cent., which was prima facie proper, but not to the 1 per cent., and now, somewhat disingenuously, put the two together and argue that the trustee cannot charge the estate with 4 per cent. We do not feel called upon to amend the objection. The commission is also now objected to because the sale was for $52,000 and the purchase money mortgage was $50,000. This was indeed a large mortgage, but it was eventually paid in full, and we need not consider what the result might have been if there had been a loss.

When the trustee gave money to Beatrice in supposed settlement of her share, he charged her 2 per cent, for the expense of converting securities of the estate into cash. To this she specifically agreed in writing. So much of this sum as was actually paid to another estate of which the accountant was trustee, and to which he transferred the mortgages, was allowed by the auditor as a payment in distribution for Beatrice’s account. So much as was claimed to have been paid, but not proved, was disallowed. The trustee properly kept the fund invested, and while the beneficiary had a right to demand it at any time, composed as then invested, she could not ask that it be liquidated into cash immediately; and if she wanted cash, there was nothing out of the way in getting her to pay the expense of it. It is true that there was a little more due her than she actually got or knew she had a right to get; but this fact does not affect the expense of turning into cash what she did get.

Another question raised by the exceptants is thus stated: “Should not the fiduciary be surcharged with the difference in the loss of interest between current rate and the rate he obtained where a fair calculation shows that the average earning of the estate was approximately 3 per cent.?”

The auditor refused these surcharges. Among other reasons given by him was that the yield of the estate as a whole was satisfactory, to wit, 5.2 per cent., citing Cuyler’s Estate, 5 D. & C. 317; Kipp’s Estate, 286 Pa. 90. A witness for the accountant testified that the yield was 5.2 per cent. This was evidently based upon the principal shown by the account and not on any undistributed income in addition. As the mortgages earned from 5 per cent, to 6 per cent, and no personal property tax was paid, this is not unlikely. Upon exceptions to his draft report, the auditor received from the exceptants the report of a certified public accountant. This report calculated the Pleasonton yield as 3.314 per cent. But it is apparent from this exhibit and from Exhibits A, B and AB that these calculations persistently ignore the credit for excess distribution noted in the Keen account and brought over into this account, in spite of the warning of the auditor not to do so (see below). By doing this the calculations of Exhibit AB make the Keen yield 7.466 per cent.; and when the two are put together in Exhibit AF, that is to say, when allowance is made in the Pleasonton figures for what is left over from Keen (compare the item of $20,481.76 “average overpayments of income” in Exhibit AB), the result is 4.85 per cent., which substantially corroborates the auditor’s finding of 5.2 per cent. The 3 per cent, yield which is the basis of exceptants’ argument is not the true fact.

The exceptants claimed income on uninvested balances on hand consisting either of principal or income, or both, and presented quantities of figures on the subject. The calculations first offered to the auditor were based on the face of the account as filed, refusing to allow credit in distribution for excess distribution brought over from the Keen account as discussed below. The auditor was unable to use these calculations for that reason, but gave leave to submit others. Upon the hearing of exceptions, the report of the certified public accountant above mentioned was then presented. The auditor thought that the error had been abandoned, but we find on inspection that in those tables which deal with Keen and Pleasonton separately it has not. The tables which deal with Keen and Pleasonton jointly do thereby eliminate this error, but they contain another one. Uninvested balances were presented by the method of averages, that is to say, daily balances of principal and income were ascertained, all were added together and the sum was divided by the number of days. On this average balance interest was calculated for each year and compounded from year to year.

These figures, also, the auditor was unable to use because, as he said, “a trustee cannot make every penny instantly productive.” The problem is specific and not general. The method of averages will show average yield and will show uninvested balances; but it will not show how long a particular sum was idle or how large it was, and that is the information which is needed. As it is not given, no surcharge can be made. It is true that the method of calculation used by the exceptants appears to show uninvested- balances, even when the Pleasonton figures are put together with the Keen figures, the latter showing at times an overinvestment. The exceptants were given two opportunities to give the proper figures to the auditor, and in the interest of ending litigation they should have no more. Moreover, the average yield, discussed above, is such that, “under the circumstances of -the case,” no surcharge on this account would be made: Cuyler’s Estate, supra,; Kipp’s Estate, supra,. The amount cannot be great. It will serve no purpose, therefore, to determine whether in arriving at such balances undistributed income should be considered as well as principal.

The accountant made distribution to the beneficiaries without designating the money as coming from the Keen or the Pleasonton fund. He claims to apply his payments first to Keen income and then bring over the excess to the Pleasonton accounting and apply it there. This the auditor allowed, and we understand that it is the method of procedure which the Supreme Court had in mind when it sent the Keen Estate hack to us to be heard in connection with the Pleasonton Estate, though it cannot be said that the Supreme Court actually had the question before it. We agree with the auditor for the reasons he has given. Bluntly stated, the exceptants’ argument is that if the trustee paid a dollar, but did not say whether it was a Keen or a Pleasonton dollar, he cannot now have credit for it in either account.- In the absence of any element of prejudice to the recipient (of which we see none), it cannot be that such a position would prevail.

The trustee also filed an exception to the refusal to allow credit for distribution of $1500 out of principal to the life tenant. His argument is that no statute required her to give security for the proceeds of the sale of real estate and that she was entitled to custody of the same, just as a life tenant of personal estate was entitled at common law. This fund was raised by the exercise of a power of sale of real estate by executors, and they were expressly directed as follows: “The proceeds of any real estate so sold, however, shall be held and applied for the same purposes and for the same persons as has been provided as to such real estate.” To carry out this trust the executors must retain the purchase money, and there is no analogy to the situation of a legal life tenant of personal estate.

Interest is asked by the exceptants on this amount. During Mrs. Keen’s lifetime it cannot be charged, as it would only go to the benefit of the person who got the money: Bateman's Estate, 21 Dist. R. 475; Dobbin’s Estate, 1 D. & C. 787. The auditor allowed the sum against Stella Keen’s income which might be due her, and it will be partly consumed thereby. If there is any balance, interest should be allowed on the same at 5.2 per cent, from March 3, 1907 (date of Stella Keen's death), to March 11, 1925 (the date of accountant’s death), and debited to income account, and to this extent exception No. 29 is sustained. In this instance, we think “the circumstances of the case” call for it in spite of the generally satisfactory yield. It is not money idle through lack of care, but a wrong application of money.

The exceptions of the accountant and of the distributees are dismissed, except exception No. 29 of the distributees, which is sustained as indicated above, and as so modified the auditor’s report is confirmed absolutely.


author: Gest, 3.,

text:
    Strawbridge’s Estate.

      Franklin E. Barr, for exceptions.

      Benjamin B. Hoar and Robert T. McCracken, contra.
    Jan. 9, 1931.
   Gest, 3.,

The testator by his will provided as follows: “Item Second: I give and bequeath the sum of Fifty Thousand Dollars ($50,000) to my wife, Mary R. Strawbridge, absolutely. Item Third: All the rest, residue and remainder of my estate, real, personal and mixed, I give, devise and bequeath unto my wife, Mary R. Strawbridge, for and during all the term of her natural life, and I direct that the same shall be transferred to and held by her without her entering security therefor.”

At the audit of the executor’s account the Auditing Judge awarded “to Mary R. Strawbridge $50,000 absolutely and the residue to her for life without security.” Mary R. Strawbridge having died, this account is filed by her executor in the estate of William C. Strawbridge, the testator, and as of the same term and number. The Auditing Judge held in his adjudication as follows: “After the adjudication upon the account of the executor of William C. Strawbridge’s estate, and the award to the widow, and payment made to her consequent to such award, the assets ceased to be part of the estate of William C. Strawbridge, and became the property of his widow. She thereby became the debtor to the remaindermen for the amount so awarded. The remaindermen are entitled to receive in cash the full amount of the estate according to the value that it had at the time of the award to Mrs. Straw-bridge. Any loss that may have occurred must be borne by her estate; any enhancement is not shared in by the remaindermen. See Reiff’s Appeal, 124 Pa. 145; Letterle’s Estate, 248 Pa. 95; Weir’s Estate, 251 Pa. 499; Kirkpatrick’s Estate, 284 Pa. 583.” And, consequently, the Auditing Judge refused to audit the account and directed that the same be returned to the clerk’s office marked “Not Audited.”

The Auditing Judge was undoubtedly correct in his ruling, and it is not necessary to repeat what was said in his adjudication. It cannot be doubted that under the decisions of the Supreme Court the assets so awarded to Mary R. Strawbridge for life became her own to be accounted for by her executor with other assets of her estate, and the question is not merely a technical one of procedure, as in Letterle’s Estate, 23 Dist. R. 471, 248 Pa. 95, where the assets held for life had increased in value, but here it is important in that it appears that the assets held by her have depreciated in value and this loss must be borne by her estate.

We entirely agree with the opinion of the Auditing Judge that the widow was not a trustee. There is nothing in the will to support this theory, and the letter written by the testator to his executor, and considered as having been formally offered in evidence, gives it no aid. Even if it be considered as testamentary in its nature, yet its marginal note refers to a will dated Feb. 25, 1903, which was necessarily superseded and revoked by the last will, which was dated May 6, 1903. In our opinion this letter has no bearing on the question before us.

The will of the testator expressly relieved the life tenant from giving security, and some reference was made at the argument to the effect of a bond in cases like the present. We, therefore, deem it advisable to state our opinion that the entry of security, or its waiver by the testator, does not affect the rights of the life tenant or remaindermen.

According to the early common law, a life estate in personal property, with remainder over, could not be created, and a gift for life carried the entire estate: 2 Kent Com., 352; Swinburne on Wills (7th ed.), 256, note. But limitations over after a life estate were recognized in equity under wills, even without the intervention of a trustee, though it was always held that the life tenant was entitled to the possession of the thing so bequeathed, and this right carried with it the power to make his possession valuable, according to circumstances. Consequently, he could convert the property into another form or change the investments, not as trustee, however, but by virtue of his title, though it necessarily followed that the life tenant or his estate would be liable to the remaindermen for any depreciation. This is the principle underlying what was said by Judge Hanna in Reiff’s Estate, affirmed by the Supreme Court, in 124 Pa. 145, that the result was in effect to make the sum received by the life tenant a part of his individual estate. In this case, and in others that followed it, such as Letterle's Estate, 23 Dist. R. 471, 248 Pa. 95, a bond had been given by the life tenant, and the court laid some stress on that fact; but whether such security be entered or not, it seems to us that the title of the life tenant to the res, the thing which is the subject of the bequest, is not affected. That title is given by the will; the entry of security is only a requirement to be complied with in order that the life tenant may gain possession, and by which the remaindermen are enabled to enforce a liability which existed independently. In Westcott v. Cady, 5 Johns. Ch. 349, Chancellor Kent said: “Formerly the cestui que trust or legatee entitled in remainder after an estate for life was allowed to call upon the legatee for life, not only for an inventory, but for security that the goods should be forthcoming at his decease: Vachel v. Vachel, 1 Ch. Cas. 129; Hyde v. Parratt, 1 P. Wms. 1; Slanning v. Style, 3 P. Wms. 334. But the rule of practice has since been altered, and in Foley v. Burnell, 1 Bro. 274, Lord Thurlow observed that the courts do not now require the tenant for life to give security, but only to exhibit an inventory to be filed.” In this latter case, however, it was further stated by Lord Thurlow that the court would require security in cases of danger. See Story on Equity, § 1162.

The decisions in Pennsylvania prior to the acts of assembly upon the subject recognize in general the procedure adopted by the Court of Chancery: King v. Diehl, 9 S. & R. 409, 423; Lippencott v. Warder, 14 S. & R. 115; Bitzer v. Hahn, 14 S. & R. 232, 238; Kinnard v. Kinnard, 5 Watts, 108. The Report of the Commissioners to Revise the Civil Code (appointed in 1830), 2nd Report, page 59, in order to remove any doubt regarding the power of the court, recommended to the legislature section 49 of the Act of Feb. 24, 1834, P. L. 70, 83, 1 Purd. 1133, providing that an executor should not be compelled to pay or deliver the property so bequeathed until security should be given. The later Act of May 17, 1871, P. L. 269, provided that upon such security being given, the fiduciary must deliver the bequest. The former act was for the protection of the accountant and of the remainderman; the latter confirmed the rights of the tenant for life, but there is nothing whatever in these acts or in the subsequent revised act, section 23 of the Fiduciaries Act of 1917, that qualifies or in any manner affects the title of the legatee, unless, under the provisions of the Act of 1917, a trustee is appointed.

The result is that on common law principles the legatee for life of personal property was the virtual owner and could do with it as he pleased. In equity, however, the rights of the remaindermen became gradually recognized: Fearne on Contingent Remainders, 402, etc.; which the chancellor protected by requiring security to be entered. The respective rights of the tenant for life and the remaindermen, however, are the same whether security is entered or not.

The exceptions are dismissed and the adjudication is confirmed absolutely.


author: WICKERSHAM, J.,

text:
    Commonwealth ex rel. Baldrige v. The Lancaster Insurance and Deposit Company of Pennsylvania.

      H. D. Saylor, Deputy Attorney-General, and. Paul C. Wagner, Deputy Attorney-General, for plaintiff.

      Bernard J. Myers, for defendant.
    June 4, 1930.
   WICKERSHAM, J.,

It is suggested by the Attorney-General that the Inland Safety Mutual Insurance Company was incorporated by an act of the general assembly of the Commonwealth of Pennsylvania, approved April 4, 1854, P. L. 260, a copy of which is attached to the suggestion; that by the Act of May 5, 1854, P. L. 551, a copy of which is also attached to the suggestion, the location of the principal place of business of said Inland Safety Mutual Insurance Company was changed, and section 4 of said Act of April 4, 1854, prohibiting the said corporation from issuing bank notes and exercising banking privileges, was repealed. That, in addition to the powers, rights, privileges and franchises granted to it by the said act of assembly, the said Inland Safety Mutual Insurance Company was granted all the privileges and powers conferred upon the Mutual Deposit Insurance Association of Philadelphia, incorporated by the Act of April 29, 1853, P. L. 660, and said corporation was also granted by the said act all of the privileges and powers conferred upon The Girard Fire and Marine Insurance Company of Philadelphia, incorporated under the Act of March 26, 1853, P. L. 242. That on or about April 30, 1855, the name of said Inland Safety Mutual Insurance Company was duly changed to Inland Insurance and Deposit Company by decree of the Court of Common Pleas of Lancaster County; that on or about June 23,1892, the property, charter and corporate franchises and rights of said Inland Insurance and Deposit Company were sold at public sale by Franklin Hall, assignee, for the benefit of its creditors, to J. Gus Zook et al.; that thereafter, on or about July 23, 1892, the said Zook and his associates, who purchased the property, charter and franchises of said Inland Insurance and Deposit Company, attempted to organize a corporation under the name of Lancaster Insurance and Deposit Company of Pennsylvania, the above named defendant corporation, under authority and requirements of the act of assembly of the Commonwealth of Pennsylvania approved May 25, 1878, P. L. 145, as supplemented and amended, inter alia, by the Act of May 81, 1887, P. L. 278; and the said Lancaster Insurance and Deposit Company of Pennsylvania filed in the office of the Secretary of the Commonwealth the certificate of organization provided for and required by section 2 of said Act of 1878, but did not, on said date or at any other time thereafter, file its acceptance of the provisions of article xvi of the Constitution of said Commonwealth, provided for and required by section 3 of said Act of 1878, and no such acceptance is now on file or ever has been on file in the office of the Secretary of the Commonwealth.

It is further suggested that the Lancaster Insurance and Deposit Company of Pennsylvania has failed to exercise its corporate privileges for a period of two years; that the said defendant corporation is under the supervision of the Secretary of Banking of the Commonwealth of Pennsylvania by virtue of the provisions of the Banking Act of June 15, 1923, P. L. 809, and has been returned by the Secretary of Banking to the Attorney-General for appropriate proceedings under the provisions of section 17 of said act, as amended by Act No. 400, approved May 5, 1927 [P. L. 762], That the said defendant corporation has and owns no property or assets of any kind or description, has failed to exercise its corporate powers, rights, privileges and franchises for a period of at least more than thirty-five years, by reason of which it has abandoned its corporate powers, rights, privileges and franchises which have been and are forfeited and have become null and void.

The Attorney-General suggests that a writ of quo warranto be issued by this court against the said defendant company to appear and show by what authority it claims to have and use the powers, rights, privileges and franchises of the corporation or any of the powers, rights, privileges and franchises conferred by the said Act of 1854 and its supplements, and why it should not be ousted therefrom.

To the suggestion of the Attorney-General, the defendant filed an answer admitting paragraphs one to seven, inclusive; the succeeding paragraphs of the suggestion are denied for reasons set forth in the answer.

To the answer of the defendant, the Attorney-General filed a replication, and by stipulation it was agreed that trial by jury be dispensed with and that the same be submitted to the decision of the court, to be heard and determined under the Act of April 22, 1874, P. L. 109.

The case came on to be heard in open court June 19, 1928, at which time testimony, oral and documentary, was received by the court. Because of the illness of Deputy Attorney-General Wagner, the case was not argued before the court in bane until April 8, 1930.

After carefully considering the evidence in this ease and the several acts of . assembly to which reference has been made, we find the following

Facts.

1. The Lancaster Insurance and Deposit Company of Pennsylvania was originally known as the “Inland Safety Mutual Insurance Company,” being incorporated by a special act of the general assembly, with the power and authority to make contracts of insurance of various kinds.

2. On or about June 23, 1892, the property, charter and corporate franchises and rights of said company were sold at public sale to individuals for the benefit of the company’s creditors.

3. On or about July 23, 1892, the individuals purchasing the said property, charter and corporate franchises and rights of the “Inland Insurance and Deposit Company” prepared and filed with the Secretary of the Commonwealth a certificate of organization of a new corporation, styled “The Lancaster Insurance and Deposit Company of Pennsylvania,” under the provisions of the Act of Assembly of May 25, 1878, P. L. 145, and its supplements and amendments.

4. The said incorporators did not comply with the provisions of the said Act of 1878 and the amendment of May 31, 1887, P. L. 278, in that they did not at any time on or after July 23, 1892, file an acceptance of the provisions of artivle xvi of the Constitution of the Commonwealth of Pennsylvania.

5. The defendant corporation has failed to exercise its corporate privileges for more than thirty-five years, to wit, since on or about July 23, 1892.

6. The defendant corporation has abandoned its corporate powers, rights, privileges and franchises.

7. The defendant corporation has and owns no property or assets of any kind or description.

8. The defendant corporation possesses the power to conduct a general insurance business and also the powers bestowed by acts of the legislature upon banking companies.

9. The defendant corporation comes under the supervision of the Secretary of Banking and of the Insurance Commissioner of the Commonwealth.

10. The defendant corporation is not registered with either the Secretary of Banking or the Insurance Commissioner of the Commonwealth.

11. The defendant corporation has not transacted any business under its reorganization from 1892 to this date.

12. The defendant corporation has not engaged in the banking business since 1892.

13. The defendant corporation has not engaged in the insurance business since 1892.

14. The defendant corporation is not a member of any fire insurance rating bureau, and has not filed any rates with the Insurance Department.

15. The defendant corporation has no assets.

Discussion.

Counsel for the defendant have not filed a brief, nor have they filed any requests for findings of fact and conclusions of law.

It was agreed by the parties to these proceedings that the powers of the said defendant corporation include not only those of a general insurance character, but also those imposed upon banking companies.

It is the contention of the Commonwealth that, despite the filing of the certificate of organization aforesaid in the office of the Secretary of the Commonwealh, there was no compliance by said incorporators with the provisions of the Acts of 1878 and 1887, in that the incorporators did not, on July 23,1892, or at any time thereafter, file their acceptance of the provisions of article xvi of the Constitution of the Commonwealth, provided for in and required by section 3 of the said Act of May 25, 1878, and that, accordingly, the said corporation never properly functioned as such thereafter.

It is the further contention of the Commonwealth that the defendant company failed to exercise its corporate privileges for at least more than thirty-five years; that it has abandoned its corporate powers; that it owns no property or assets, that it is under the supervision of the Secretary of Banking and the Insurance Commissioner of the Commonwealth, although it has not registered as required by law with either of said departments, and that by reason of the aforesaid, the charter and corporate powers, rights, privileges and franchises of the defendant company have been and are forfeited and have become null and void. With these contentions we are in accord.

It is the contention of the defendant that it has not failed to exercise its corporate privileges for a period of two years or more, and that it has, on the contrary, written insurance on plate glass and one fire insurance policy, has filed various reports with the Auditor-General, and has kept alive its corporate charter. With this contention we cannot agree, as it is not supported by the evidence.

We have found as a matter of fact that the contention of the Attorney-General has been sustained by the testimony. Defendant did not comply with the provisions of the said Act of 1878, section 3 of which reads as follows:

“The provisions of this act shall not inure to the benefit of any corporation unless such corporation shall, before claiming or using the benefits of this act, file in the office of the Secretary of the Commonwealth, an acceptance of the provisions of article 16 of the Constitution of this Commonwealth, which acceptance shall be made by resolution adopted at a regular or called meeting of the directors, trustees or other proper officers of such corporation, certified under the seal of the corporation; and a copy of which resolution, certified under the seal of the office of the Secretary of the Commonwealth, shall be evidence for all purposes.”

The said Act of 1878 was finally amended by the Act of June 20, 1911, P. L. 1092, which provides that whenever the property of any corporation created by or under any law of this state is sold or conveyed, under and by virtue of any process or decree of any court of this state, the person or persons for or on whose account the said property is purchased, shall be and are constituted by virtue of this act “a body politic and corporate, and shall be vested with all the right, title, interest, property, possession, claims and demand in law and equity,” of, in and to such property, together “with all the rights, powers, immunities, privileges and franchises of the corporation as whose the same may have been sold.”

Applying the statutory requirements to the facts as we have found them to be from the evidence, it appears that the persons who purchased the assets of the defunct Inland Insurance and Deposit Company did not comply with all the requirements of the Act of 1878, as amended, and thereby did not legally organize themselves into a body politic and corporate. It follows that all acts performed by them thereafter were done in violation of the laws of the Commonwealth. The result was, therefore, that the purchasers of said defunct corporation had no corporation and such business as they attempted to perform, on or after July 23, 1892, was illegally consummated.

It is further established by the evidence that the powers granted to the Inland Safety Mutual Insurance Company and passing to its successor, the defendant herein, under the provisions of the Act of 1878, included those of a general banking nature as well as insurance company powers. It is admitted by the defendant that it has not for some time past engaged in the business of banking; but defendant contends it is not under the supervision of the Secretary of Banking. With this contention we cannot agree. Section 4 of the Act of 1923 [P. L. 809] provides:

“The said supervision, duties and powers shall extend and apply to the following corporations now or hereafter incorporated under the laws of this state or under the laws of any other state and authorized to transact business in this state; namely, all such corporations having power to receive and receiving money on deposit or for safe-keeping otherwise than as bailee, including all banks, banking companies, cooperative banking associations, trust, safe deposit, real estate, mortgage, title insurance, guarantee, surety and indemnity companies, savings institutions, savings banks and provident institutions. The said supervision, duties and powers shall also extend and apply to mutual savings funds, building and loan associations and corporations doing a safe-deposit business only.”

It is very clear, therefore, that the defendant institution having the “power and authority to receive on deposit specie, bullion, bank notes and other property,” “to loan the funds and money on deposit,” “to issue scrip in payment of dividends, or any paper, bill or note, to be circulated as bank notes,” and to exercise banking privileges generally, does come under the supervision of the Secretary of Banking.

Furthermore, section 17 of the Banking Act of 1923, as amended, states that whenever any corporation under the supervision of the Department of Banking has failed to exercise its corporate privileges for two years, it shall be returned by the Secretary of Banking to the Attorney-General, who shall proceed by quo warranto against such corporation, to the end that it may be ousted from its charter rights and its corporate privileges be declared null and void. It clearly appears that the defendant corporation has not exercised its banking privileges or any of its banking powers, at least since 1892, and, therefore, the Commonwealth is entitled to a decree of ouster.

Relative to the insurance powers of the defendant corporation, the evidence in support of the contention of the defendant is rather nebulous and very unsatisfactory. It was testified that for a brief period of time somewhat prior to the institution of these proceedings individuals who held the charter of the defendant corporation, in a desultory fashion, wrote a certain number of so-called policies insuring plate glass, and, in one case, a fire insurance policy covering a chicken coop. This, we think, does not constitute such a user of its powers as to entitle the defendant to a dismissal of these proceedings. The defendant company did not have any fixed rates of insurance, and no schedule filed with the Insurance Department, did not belong to a fire insurance rating bureau, and, so far as the record shows, did not actually use policy forms in writing this so-called insurance. Furthermore, the company was not registered with the Insurance Department, and if it did an insurance business, it violated the Act of May 17, 1921, P. L. 682. We think the Commonwealth is entitled to an ouster decree. Section 339 of the Act of 1921 [P. L. 712] provides: “. . . If any insurance company shall cease for two years to make new insurances, its corporate powers and existence shall cease, and the court, upon petition of the Attorney-General, may fix by decree the time within which it shall settle and close its affairs.” What such time should be was stated by President Judge Hargest in his opinion for the Department of Justice, dated July 28, 1909, reported in 36 Pa. C. C. Reps. 450. This opinion held that quo warranto proceedings lay against a railway company, and the following words conclude the opinion:

“The records in the office of the Secretary of the Commonwealth show that this company was chartered in 1871, and, in view of the fact that the legislature has fixed two years as the time within which certain other corporations are required to exercise their charter rights, this department is of the opinion that quo warranto proceedings will lie.”

That the defendant corporation was incorporated by special act of the legislature is no reason for exempting it from the institution of quo warranto proceedings, nor for exempting it from the regulations of an administrative department of the state government: Chincleclamouche Lumber and Boom Co. v. Com., 100 Pa. 438; Terrett v. Taylor, 9 Cranch. 43, 3 L. Ed 650; Mumma v. The Potomac Co., 8 Pet. 281, 8 L. Ed. 945; Com. v. The Commercial Bank of Penna., 28 Pa. 383.

We think, therefore, the charter of the defendant company should be declared forfeited and null and void.

Conclusions o>f law.

1. The defendant corporation has not complied with the requirements of the law, in that the incorporators organizing it in 1892 did not file, nor have they since filed, with the Secretary of the Commonwealth an acceptance of the provisions of article xvi of the Constitution.

2. The incorporators of the defendant corporation after reorganization, not having fully complied with the requirements of the law by failing to accept the provisions of the Constitution, are not a proper corporation or body politic.

3. The defendant corporation in having sold what purported to be policies of insurance on plate glass without any fixed rate of insurance, without having filed a schedule of rates with the Insurance Department, and without belonging to a fire insurance rating bureau, did not legally conduct an insurance business.

4. The defendant corporation, not being registered with the Insurance Department, could not legally conduct an insurance business.

5. The defendant corporation has violated the law, in that it has attempted to conduct an insurance business in a desultory fashion without being licensed by the Insurance Commissioner, as required by law.

6. The defendant corporation has not exercised any of its banking powers or privileges for a period in excess of two years prior to the institution of these quo warranto proceedings.

7. The charter of the defendant corporation has been forfeited for mis-user and non-user.

8. The charter of the defendant corporation is declared forfeited and null and void, and all the corporate powers, rights, privileges and franchises of said defendant corporation have been and are forfeited, and are declared forfeited and null and void.

9. The costs of these proceedings are to be paid by the defendant.

Judgment.

Judgment is directed to be entered against the defendant. We give judgment that such defendant be ousted and altogether excluded from holding the franchises, privileges and powers which it claims to hold and have under its charter of incorporation; and we direct that the costs be paid by the defendant.

A formal decree will be signed when prepared by the Attorney-General, unless exceptions be filed within the time allowed by law.

From Homer L. Kreider, Harrisburg, Pa.


author: Groff, J.,

text:
    Wright et al. v. Steward.

      F. Lyman Windolph and E. M. Gilbert, for plaintiff.

      H. Edgar Sherts, for defendant.
    Sept. 26, 1930.
   Groff, J.,

In the above action the defendant filed an affidavit of defense raising a question of law:

“1. Plaintiff’s amended statement shows that the real parties plaintiff are Charles Wright, Jr., and Nathaniel Wright, minor children of Charles F. Wright, Sr., and that the action is for wages for the services of said children, alleged to be due on a contract made by their father with the defendant.

“(a) In such case, the right to the wages of the minor children is in the father, and he, in his own right, and not in the right of the children, is the only proper party plaintiff.

“(b) In such case, if there be any right of action in the children, the right is several and not joint, and separate actions in assumpsit must be brought by each child.”

As to paragraph 1 and 1 (a), the statement says that “Charles Wright, Jr., was to receive the sum of $1.50 a day for every day that he worked on said farm, and by agreement, the younger boy, who was then about twelve years of age, was to be paid for his services whatever they were reasonably worth,” and then sets out that Charles Wright, Jr., had worked a certain number of days, earning $865.50, and that Nathaniel Wright had worked a certain number of days at 25 cents per day, earning $171.25. If this is true, and the minors were to receive the sums alleged in the statement, it would seem to us that they would be emancipated, so far as those sums were concerned, and would be entitled to receive the same.

In the case of McCloskey v. Cyphert, 27 Pa. 220, 225, Mr. Justice Black, delivering the opinion of the court, said:

“The right of an infant to be the owner of property is as clear and as well protected as that of a person who has arrived at full age. When anything is given to an infant to be held by him in his own right, he has the title to it, and the parent, guardian, or master has in law no more right to take it . . . than a stranger. . . .

“This emancipation of the son from the father’s control may be as perfect when they both live together under the same roof as if they were separated. The father’s renunciation of all legal right to the son’s labour is not the less absolute, because other family ties continue unbroken, and the son’s security in his rights of property would not be at all increased by turning his father out of doors.”

If the father in this case desired to encourage his sons to labor by giving them their own earnings, under a contract with the defendant they would have a right to recover and retain the same.

The case of Kauffelt v. Moderwell, 21 Pa. 222, cited by the defendant, is, in our opinion, not at variance with the above conclusions. In that case, in the opinion, at page 224, the court said:

“The law implies contracts according to the facts appearing to the minds of the parties. When a minor is permitted by his father to make his own contract for service, it is fair to presume that he is allowed also to receive the wages for himself, and so the law implies the contract until a contrary purpose appears.”

In the same case, in the syllabus, we find that “Where a father makes a contract for the services of his minor son, without giving notice that the wages are to be paid to the son, the right of action for the wages belongs to the father.”

In this case it is alleged that the sons were to receive the wages.

In Davis et al. v. Investment Land Co., 296 Pa. 449, 452, Mr. Justice Simpson, delivering the opinion of the court, says:

“In determining whether or not such a judgment [meaning judgment on a question of law] should be or should have been entered, two rules must always be applied: (1) The question to be decided is not whether the statement of claim is so clear in both form and specification as to entitle plaintiff to proceed to trial without amending it, but whether, upon the facts averred, it shows with certainty that the law will not permit a recovery by plaintiff; and (2) where a doubt exists as to whether or not summary judgment should be entered, this should be resolved in favor of refusing to enter it.”

A fair consideration of the statement in this case does not show with certainty that the law will not permit a recovery by the plaintiffs upon the facts averred. There is, at least, a doubt as to whether or not summary judgment should be entered, and, as Mr. Justice Simpson says, this should be, and we do resolve it, in favor of the plaintiffs.

Now, as to 1 (b) — “In such case, if there be any right of action in the children, the right is several and not joint; and separate actions in assumpsit must be brought by each child.”

At common law it was held that a misjoinder of parties plaintiff need not be pleaded in abatement, but was fatal to the maintenance of the action, and could, therefore, be raised in bar: 47 Corpus Juris, 215, § 413.

Under our Practice Act of May 14,1915, P. L. 483, § 3, we find that:

“Pleas in abatement, pleas of the general issue, payment, payment with leave, set-off, the bar of the statute of limitations, and all other pleas are abolished. Defenses heretofore raised by these pleas shall be made in the affidavit of defense.”

Section 4. “Demurrers are abolished. Questions of law heretofore raised by demurrer shall be raised in the affidavit of defense, as provided in section twenty.”

Therefore, examining the Practice Act of May 14, 1915, P. L. 483, we find that the improper joinder of plaintiffs, which would naturally be raised by a plea in bar at the common law, should now be raised in the affidavit of defense, as provided in section 3 of the Practice Act above referred to, and not by an affidavit of defense raising a question of law, as provided in section 4 of the said Practice Act.

It is the opinion of the court, for the above stated reasons, that the question of law raised by the defendant does not dispose of the whole, or any part, of the claim, and the court decides the question of law so raised against the defendant, and permits him to file a supplemental affidavit of defense within fifteen days from the filing of this opinion.

From George Koss Eshleman, Lancaster, Pa.


author: Maxey, J.,

text:
    Dunmore Borough v. Dunmore School District.

      J. W. McDonald, Borough Solicitor, for plaintiff.

      F. M. Walsh, for defendant.
    June 23, 1930.
   Maxey, J.,

This is a proceeding to strike off a municipal-lien covering the costs of constructing a sidewalk in front of a property owned at that time by the School District of the Borough of Dunmore.

In support of the contention of the counsel for the petitioners he cites section 631 of the Act of May 18, 1911 [P. L. 309], commonly known as the School Code. This act was modified by section 5 of the Act of May 16, 1923, P. L. 207, which allows the municipality to file a municipal claim “for the recurbing, paving, repaving or repairing the footways in front thereof.”

In the opinion of Mr. Justice Sadler in the case of Wilkinsburg Borough v. School District, 298 Pa. 193, 197, he says in part:

“Property of municipal subdivisions of the state cannot be assessed unless some statute expressly so provides, and no exemption law is needed to relieve lands held for public purposes from such charges. ... To justify a municipal claim in such instances, express statutory authority must be shown. There is no presumption of an intention to permit such charge, but a clear direction to this effect must appear. ... In the present case the school district is liable only where expressly charged by the statute, which is to be strictly construed and is limited to the building of . . . sewers and sewer connections.”

The learned justice in the above case apparently concedes that the school district will be liable for the cost of the sewers and sewer connections, and refers to the Act of 1923, supra.

In view of the express authority given by the legislature to file a municipal lien against a school district for sewers and sewer connections or the paving, repairing, etc., of a sidewalk, we are of the opinion that the lien in this case being for the construction of the sidewalk in front of one of the buildings of said school district is a valid one.

Therefore, now, to wit, June 23, 1930, the rule to show cause why the lien in the above entitled case should not be stricken off is discharged.

From "William A. Wilcox, Scranton, Pa.


author: Finletter, P. J.,

text:
    Cameron, Secretary of Banking, v. Bankers Trust Company.

      Ernest'Lowengrund, Assistant City Solicitor, and Augustus Trask Ashton, City Solicitor, for petitioner, City of Philadelphia.

      David Wallerstein, for petitioner, Fireside Building and Loan Association.

      Ruby R. Vale, for petitioner, Baily.

      Robert vonMoschzisker, for Secretary of Banking.
    March 3, 1931.
   Finletter, P. J.,

The Secretary of Banking has taken possession of the business of the Bankers Trust Company under section 21 of the Banking Act of 1923. The record does not show whether the Secretary is continuing or has suspended the business of the company, and it is of no importance in this connection. The fact which does concern us is that the Secretary has not yet filed his account. This being so, we are of opinion that all of the above mentioned petitions are premature.

The petition of the City of Philadelphia asks for the repayment to it of a deposit of $200,000 received by the officers of the trust company when, it is alleged, they knew that the company was insolvent. Upon this state of facts a trusteeship ex maleficio would arise; and it is upon this basis that the petitioner makes its claim.

The other two petitions are those of depositors, who are also debtors, of the trust company. They pray for a decree permitting the set-off of their deposits against their debts.

It will be observed that all of the petitions raise questions affecting the distribution of the trust fund in the hands of the Secretary.

A reading of the Banking Act discloses its purpose to be to create a method for the winding up of insolvent banks in close analogy to that of a receivership in equity. Indeed, the act provides (section 29) that the Secretary shall have all the powers of a receiver in equity. He ousts and supersedes receivers who may have been appointed by the courts.

The analogy of the machinery provided by the act to that of an equity court is complete. The inventory and appraisement of the fund, possession of the property, the right to sue and be sued, the filing of an account, the presentation of creditors’ claims at the audit of the account, the disposition of them by the court are all provided for, in close analogy to the methods of a court of equity in cases of receiverships. Helpful methods of proof of claims and disposition of funds belonging to express trusts are added, but these do not affect the general scheme we have referred to.

The relationship, then, of the Secretary (receiver) to the creditors is that of stakeholder to the owners of the fund. The duty of the Secretary is to collect and conserve the fund as a whole and to resist on behalf of the cestuis que trustent attacks upon it. He has no voice or power over distribution or over the allowance or assessment of claims of creditors. Whether or not a certain claim shall be allowed or reduced is a question which interests only the other creditors whose claims will be ratably affected. The allowance of a claim is a matter for the court at a time when all distributees can be heard, and from the decree then pronounced the distributees “alone have the right to appeal:” Cameron v. Carnegie Trust Co., 292 Pa. 114, 117. If they alone have the right of appeal, it follows that they alone have the right to be heard in the Common Pleas.

The consent of the Secretary or his agreement upon the subject of distribution is, therefore, beyond his functions and of no importance. The only opportunity that the parties really interested in distribution have for presenting their views is at the audit of the Secretary’s account.

We cannot, therefore, pass upon the merits of the claims of the petitioners in these cases because the persons who would be affected by our judgment are not parties to the proceeding and have had no opportunity to be heard.

The argument that the Secretary, as receiver, represents them is not sound. He does not represent any particular creditor. He represents the whole fund. His duty is to collect, conserve and administer, not to distribute.

We have spoken above without reference to any particular section of the act. It is suggested that the Secretary is empowered to enter into an agreement on the subject of distribution by the terms of section 30 of the act, or rather that he has the right to appeal to the court for instruction upon that subject. Supposing that were so, the court would not act unless it had all persons interested, i. e., all distributees before it, as is not the fact in the instant case. Section 30 [as amended] provides:

“The court having jurisdiction shall have power to make and enforce any and all orders necessary and appropriate to enable the secretary to discharge his duties in connection with the business, property and affairs of any corporation or person taken into possession by the secretary under the provisions of this act, upon petition of the secretary, acting personally or through his duly authorized deputy, setting forth the facts; and the court shall also have the power, upon petition of the secretary, acting personally or through his duly authorized deputy, to order and direct other corporations or persons in possession of assets or property belonging to the corporation or person in possession of the secretary to transfer or convey said property or assets to the secretary, and to execute and deliver any and all necessary instruments in writing to accomplish that purpose.”

We are of opinion that this section was not intended to apply to questions of distribution, but only to questions which may arise in the administration of the estate. Where there are presented to the Secretary situations in> which he is obliged to choose between two methods of administration, he may have the advice of the courts. One such case is mentioned in the act, that of the abandonment of worthless or costly assets. Another, no doubt frequently presented, problem is the settlement of cases brought by the Secretary in behalf of the fund. It was the purpose, we think, of section 30 to permit the Secretary to do what the ordinary receiver frequently does, apply to the court for its advice in such and analogous situations. Proposed sales of assets are another example. We are, therefore, of opinion that section 30 does not empower either the Secretary or the court to pass upon questions of distribution in advance of the audit of the Secretary's account.

In Cameron v. Carnegie Trust Co., 292 Pa. 114, 118, Mr. Justice Simpson says: “This [section 40] is the only section of the act which provides for a preliminary determination regarding any claim on the funds in the hands of the Secretary, and, hence — expressio unius est exelusio alterius — excludes the idea of a right to so proceed in any other instance.”

It is perhaps unnecessary to point out that the application to the court (under section 30) to “make and enforce” orders is limited to “orders necessary and appropriate to enable the Secretary to discharge his duties in connection with the business, property and affairs of the corporation.” This, it will be observed, adds nothing to his duties, which do not, as we have elsewhere pointed out, include distribution.

What we have said disposes of the petitions of the Fireside Association and Robert M. Baily.

The petition of the city presents an additional question, which is, whether or not section 40 permits us at this time to pass upon the subject therein raised, that is, whether a trust ex maleficio is within the terms of that section, which provides:

“(a) Taking Possession by Secretary. — Whenever the secretary takes possession of the business and property of a corporation or person in accordance with the provisions of this act, he shall also take possession of all funds, property and investments held by such corporation or person in any fiduciary capacity, but shall keep the same separate and apart from the assets thereof.”

“(c) Settlement Without Accounting. — In any instance where there shall be no dispute as to the amount or identity of such funds, property or investments, and all parties in interest are sui juris and so request in writing, the secretary may, without filing of an account, transfer, pay over and deliver to such substituted fiduciary all funds, property and investments of the particular trust, taking from parties and such substituted fiduciary a receipt and release in full, which shall discharge the secretary and such corporation or person from any further liability in the premises.

“(d) Jurisdiction of Disputes as to Identity of Trust Fund. — In any instance where there shall be a dispute as to the identity of alleged trust funds, property or investments, either because the same have become or are alleged to have become mingled with other funds, property or investments, or otherwise, the court having jurisdiction of the liquidation proceedings shall have exclusive jurisdiction to determine such dispute.

“(e) Accounting. — In all other instances, the secretary shall, with the least possible delay, prepare and file in the courts having jurisdiction thereof the accounts of such corporation or person in such fiduciary capacities, and shall transfer, pay over and deliver the balances, determined upon such accounts to be due, in accordance with the orders and decrees of such courts.”

In deciding the question before us, we have the benefit of the opinion of Mr. Justice Simpson, in Cameron v. Carnegie Trust Co., 292 Pa. 114, 117. The Sppreme Court, through him, there said: “Section 40 of the Banking Act of 1923 . . . obviously refers only to technical and continuing trusts, for it prescribes that substituted fiduciaries shall be appointed, in place of the insolvent banking institution, to take over and thereafter administer the trust.”

In the case cited the petitioning creditor had deposited a check solely for collection in the insolvent bank. The latter collected the proceeds and mingled them with its own moneys. It had, of course, no right to do so. At most, it could have collected and then set apart the- proceeds.

After stating the effect of section 40, as above quoted, the writer of the opinion then proceeded: The relation between the bank [the petitioner] and the trust company was not the ordinary one of debtor and creditor, but that of principal and agent . . . and the trust is an express one.” He added that a trusteeship ex malefi'cio arose out of the misappropriation. The claim of the petitioner was allowed.

It is to be noted that in the cited case the account of the Secretary had already been filed and the claim of the petitioner made at the audit. In addition, a petition was presented. In this state of the case counsel for the Secretary and for the insolvent company asked the Supreme Court “to decide the case on the merits, irrespective of the procedural points;” that is, whether the time to raise the issue was the settlement of accounts, and whether the Secretary had any standing to appeal the case. While the Supreme Court regarded itself as “excused from deciding these points,” it went on to state what was the proper procedure. “It may be well to state that the proper procedure on questions affecting a distribution of the funds collected by the secretary is to present a claim when his account has been filed and is before the court, at which time all the distributees can be heard, and from the decree which follows they alone have the right to appeal,” citing Cameron v. City Bank of York, 284 Pa. 187. The discussion of section 40, which we have quoted above, follows.

We infer from the emphasis with which Mr. Justice Simpson quotes and comments upon the limitation of section 40 to “technical and continuing trusts,” and from his care in pointing out that the “relationship of principal and agent” arose from the delivery of the check for collection only, and from his statement that the trust was an express one, that he regarded an express trust as coming within section 40. Certainly a trust ex maleficio is not an express trust, but one arising in pais, out of facts.

That the trustee appropriated the trust fund to its own use added nothing to the relationship of trustee which already existed. The agent was as fully a trustee before he misapplied the fund as he could be. His misapplication added nothing to his status as trustee. The reference, then, to his becoming a trustee ex maleficio by .his subsequent act neither adds to nor subtracts from his status as trustee. If he came within section 40 as an express trustee, the court had jurisdiction to hear the petition under that section.

It is also, we think, apparent that section 40 is not limited to such formal trusts as those arising out of deeds or wills. The language is: “He shall take possession of all funds . . . held by such corporation in any fiducia/ry capacity.” The provision cited by Mr. Justice Simpson for the appointment of substituted trustees then follows. The net effect of the provisions of the act and the interpretation of it by the Supreme Court is to limit the effect of section 40 to that which Mr. Justice Simpson gives it; that is, to all express trusts.

It seems to us, therefore, from a reading of the act and of the case cited, that trusts ex maleficio do not come within the provisions of section 40. We think the other distributees have a right to be heard upon the subject of the existence of such a trusteeship, and that in their absence, as parties to these proceedings, we may not pass upon the question.

Coming to the facts of the city’s position, no question of agency or express trust exists. The city and the trust company were depositor and bank. In the absence of other facts, the bank had a right to mingle the deposited check with its own funds. But on the facts proven in the testimony, to wit, the receipt of the deposit after 12 o’clock on Saturday, Dec. 20, 1930, when the officers must have known the insolvent condition of the bank, within the meaning of insolvency as used in Com. ex rel. v. Tradesmen’s Trust Co., 237 Pa. 316, 319, a trusteeship ex maleficio certainly arises. And if these facts are proved at the settlement of the Secretary’s account, the city will be entitled to recover the full deposit.

We may also add our opinion that, on the facts shown in the other two petitions and answers, the petitioners are clearly entitled to set off their deposits against their debts. The reciprocal claims, in our opinion, are mutual.

We must not, however, decide this, because we have not heard all the interested parties.

For these reasons, we must now dismiss the petitions without prejudice to the right of the claimants to present their claims at the audit of the Secretary’s account.