Kennedy v. McCloskey

• Decision Date: 07 October 1895
• Docket Number: 121
• Citation: 33 A. 117,170 Pa. 354
• Parties: John M. Kennedy, Appellant, v. John J. McCloskey et al
• Court: Pennsylvania Supreme Court

33 A. 117

170 Pa. 354

John M. Kennedy, Appellant, v. John J. McCloskey et al

No. 121

Supreme Court of Pennsylvania

October 7, 1895

Argued February 6, 1895

Appeal, No. 121, Jan. T., 1895, by plaintiff, from decree of C.P. Montgomery Co., Oct. T., 1893, No. 6, on bill in equity. Reversed.

Bill in equity to compel a transfer of stock in a corporation.

The names of the parties as they stood upon the record were as follows: John M. Kennedy v. John J. McCloskey, William Johnston, William A. Flanagan, David S. Brown, George L Schofield, William Brown and Murrill A. Furbush.

The facts are fully stated in the opinion of the Supreme Court.

Error assigned was in dismissing bill.

The decree of the court below is reversed and set aside; the report of the master is confirmed absolutely, and the decree suggested by him as herein modified is adopted. The costs of this appeal to be paid by appellees.

James M. Beck, Henry M. Tracy and William F. Harrity with him, for appellants. -- If the contract differs from that described in the pleadings it will be established and enforced even if there is some variance between the terms described and those proved, provided the variance does not relate to matters of substance: Harris v. Knickerbocker, 5 Wendell, 638.

The tenor of modern decisions has exploded a rigid and technical construction of bills and proceedings in equity: Mayo v Merchy, 3 Munf. 358; Bispham Equity, sec. 384.

The doctrine of lis pendens is certainly applicable to the Woodstock Mills Company; they were affected with notice and will be bound by any decree made here: Green v. Rick, 22 W.N.C. 321; Murray v. Winter, 1 Johns. C.R. 566.

Every shareholder of the Woodstock Mills Company (and their charter was offered in evidence by defendants' counsel) was a party to the answer filed to this bill. All of them were joined as parties defendant except Crosby M. Brown, and he came in and defended by making himself a party to and one of the signers of the answer filed.

A trust in personalty is provable by parol, as the statute of frauds only affects trusts in real estate and not the proceeds of the sale: Reed on Stat. of Frauds, sec. 857; Maffitt's Admr. v. Rynd, 69 Pa. 380.

Admitting for the sake of argument that the agreement was for an interest in the real estate, yet it would not come within the statute of frauds and perjuries.

The real estate had been assigned to Andrew Flanagan, as assignee, for the benefit of the creditors, of whom Kennedy was one, and this sale was being made by the assignee for the creditors, consequently Kennedy at the time, as a creditor of J. Morton Brown & Co., had an interest in this land: Cowperthwaite v. First Nat. Bank, 102 Pa. 397; Beegle v. Wentz, 55 Pa. 369; Boynton v. Housler, 73 Pa. 453.

The class of cases cited in the opinion of the court below, viz: Barnet v. Dougherty, 32 Pa. 371; Kemmil v. Smith, 117 Pa. 183; Kistler's App., 73 Pa. 393, are cases where the plaintiff had no interest in the land, and there was nothing more than a breach of a parol contract, and it came within the statute of frauds.

Montgomery Evans, Louis M. Childs and Henry Freedley with him, for appellee. -- The plaintiff's bill was rightly dismissed because of substantial variance between the contract charged and contract proved: 1 Daniel's Chancery Practice, 860; Boone v. Chiles, 10 Pet. 177; Foster v. Goddard, 1 Black. 506; Piatt v. Vattier, 9 Pet. 405; Harrison v. Nixon, 9 Pet. 483; Thompson's App., 126 Pa. 367; Moria's App., 4 Penny. 398.

The plaintiff's bill was dismissed because the agreement proved by him was a mere voluntary promise to admit him into a partnership in which he had no interest and to which he contributed nothing. He gave no consideration for the promise. It was future and contingent, and neither the time had come nor the contingency happened upon which it was to be executed.

Equity will not decree specific performance of a contract if the consideration be lacking. A mere voluntary agreement is not to be enforced unless it be already executed: 22 A. & E. Ency. 1030; Bodine v. Glading, 21 Pa. 50; Meason v. Kaine, 63 Pa. 335.

The plaintiff's bill was rightly dismissed because the contract alleged by him is within the statute of frauds and perjuries: Barnet v. Dougherty, 32 Pa. 371; Kellum v. Smith, 33 Pa. 158; Jackman v. Ringland, 4 W. & S. 149; Bennett v. Bank, 87 Pa. 382.

Maffitt v. Rynd, 69 Pa. 380, has no application, for the reason that there has been no conversion of the land and subsequent declaration of a trust as to the proceeds.

The plaintiff's bill was rightly dismissed because it does not clearly appear that McCloskey, the agent of the syndicate, agreed to admit Kennedy with the consent of all parties, but on the contrary, some refused to admit him: Henrici v. Davidson, 149 Pa. 323.

The plaintiff's bill was rightly dismissed because he testifies that at the real estate sale he was guilty of fraud in endeavoring to deter bidding, and a plaintiff in equity must come in with clean hands.

An agreement between creditors not to bid at a judicial sale, without the knowledge and consent of the defendant, is contrary to public policy and void: Hay's Est., 159 Pa. 381; Barton v. Benson, 126 Pa. 431.

Before STERRETT, C.J., GREEN, WILLIAMS, MITCHELL and DEAN, JJ.

OPINION

MR. DEAN, JUSTICE

J. Morton Brown & Company owned and operated the Woodstock Mills, a woolen factory in Norristown. On August 3, 1893, being financially embarrassed, they confessed a judgment to William Johnston for $151,847.73, in trust for certain creditors, among them the following, for the sums specified:

John M. Kennedy, $1,000; William Johnston, $3,617.53; C. A. Furbush, $14,199.41; William A. Flanagan, $26,058.63; M. A. Furbush, $1,800; M. A. Furbush, representing the M. A. Furbush Machine Co., $2,974.45; George L. Schofield, $250.

Judgment was entered and execution issued same day, and levy made upon all the personal property on the mill premises. The property consisted of raw materials and partly manufactured goods. Afterwards, on the same day, Brown & Company assigned to Andrew Flanagan for benefit of creditors. This assignment included the mill property and other real estate.

The sheriff made sale of the personal property on August 15, 1893, for the price of $7,659.51, to John J. McCloskey, one of defendants, who afterwards sold at a profit. On October 12, 1893, the assignee sold the mill property to the same purchaser for the sum of $600, subject to two mortgages, aggregating $35,000. On October 25, 1893, McCloskey made a declaration of trust, in which he declared he held the mill property in trust for Flanagan, Johnston, M. A. Furbush and George L. Schofield, as their interest might appear, and under their direction to convey the same to a corporation thereafter to be organized. On 1st of December, 1893, the Woodstock Mills Company was organized, and McCloskey and wife, on same day, for the consideration of $50,000 conveyed the property to it, subject to the mortgages of $35,000. The capital stock of the corporation was stated in the application for charter to be $75,000, in 3750 shares, each share of the par value of $20.00, and that ten per cent, or $7,500 had been paid to the treasurer; and that the subscribers to the stock are:

William A. Flanagan, 2097 shares; William Johnston, 824 shares; David S. Brown, 533 shares; Crosby M. Brown, 75 shares; George L. Schofield, 20 shares; Murrill A. Furbush, 201 shares; total 3,750 shares.

The articles of association set forth that $25,000 of the subscribed capital is to be paid in cash, and the remaining $50,000 is represented by the Woodstock mill property, subject to the mortgages; the last named stock to be nonassessable, and to be issued to the parties subscribing, as follows:

William A. Flanagan, 1398 shares; William Johnston, 550 shares; David S. Brown, 355 shares; Crosby Mr. Brown, 50 shares; George L. Schofield, 12 shares; Murrill a. Furbush, 135 shares; total, 2500 shares.

While all the stock has been thus allotted, none of it has been issued.

It will be noticed, that while the plaintiff's name appears in the list of beneficiaries in the trust judgment along with Johnston, Furbush, Flanagan and Schofield, it does not appear in the list of those to whom stock is allotted; he says in his bill it ought to be there, and for these reasons:

That he, Flanagan, William Johnston and C. A. Furbush, before the sale of the personal property on 13th of August, 1893, they being among the largest creditors, agreed to form a syndicate to buy in the personal property, and also the real estate when it should be sold; that afterwards, but about the date of the sale of the personal property, M. A. Furbush and George L. Schofield were admitted as members, parties to the same operation. That he attended the sale of the personal property, and saw a large quantity of his own wool in the original packages, which he had delivered to the insolvent partners, sold, yet refrained from bidding, although this and other property was knocked down at prices greatly below its market value; that he refrained, only because of the agreement made between him and the other creditors; further, that after the sale of the personal property, and before the sale of the real estate, it was again agreed it should be purchased by McCloskey for the syndicate; and the day after the sale, it was further agreed among them a company should be formed with a capital of $80,000, of which he was to have an allotment of stock to the amount of $3,300. He therefore prays for a decree directing said allotment, and for general relief. The defendants having denied all the material averments of the bill, the case was referred to Henry C. Boyer, Esq., as master, to find the...