Pairpoint Manuf'g Co. v. Philadelphia Optical & Watch Co.

• Decision Date: 02 April 1894
• Docket Number: 419
• Citation: 28 A. 1003,161 Pa. 17
• Parties: Pairpoint Mfg. Co. et al. v. Phila. Optical & Watch Co. et al. Keystone Watch Case Co.'s Appeal
• Court: Pennsylvania Supreme Court

28 A. 1003

161 Pa. 17

Pairpoint Mfg. Co. et al. v. Phila. Optical & Watch Co. et al. Keystone Watch Case Co.'s Appeal

No. 419

Supreme Court of Pennsylvania

April 2, 1894

Argued March 19, 1894

Appeal, No. 419, Jan. T., 1894, by the Keystone Watch Case Company, a creditor, from decree of C.P. No. 3, Phila. Co Dec. T., 1893, No. 993, restraining sheriff's sale of property of the Phila. Optical & Watch Co. et al. at suit of Pairpoint Mfg. Co. et al. Reversed.

Bill to restrain sheriff's sale. Before FINLETTER, P.J.

From the record it appeared that, on Jan. 10, 1894, judgment was entered by confession against the Phila. Optical & Watch Co. in favor of the Keystone Watch Case Co. On Jan. 20, 1894, a bill in equity was filed to the same term and number, by common creditors, praying for an injunction to restrain the execution which had issued upon the judgment confessed, and for the appointment of a receiver. Under this bill the Guarantee Trust & Safe Deposit Co. and James Work were appointed receivers. Subsequently, to the same term and number, the receivers filed a petition in which they set forth their own appointment by the Court of Common Pleas No 3, and by the chancellor of New Jersey. The petition further averred:

"That the Philadelphia Optical & Watch Co. was a New Jersey corporation and had for some time carried on business in the city of Philadelphia and elsewhere. That on Jan. 10th a foreign attachment had issued against the Philadelphia Optical & Watch Co. at the suit of Charles C. Harrison, and the property of the said company at its place of business No. 916 Chestnut street, Philadelphia, had been attached; and that a rule to dissolve the attachment was pending.

"That on Jan. 10, 1894, a judgment was entered by confession in favor of the Keystone Watch Case Co., and a fi. fa. thereon issued and levy made by the sheriff.

"That on Jan. 10, 1894, sundry other judgments and fi. fas. against the Philadelphia Optical & Watch Co. were entered and issued in the Court of Common Pleas No. 3, of Phila. Co.; and that sundry additional writs of foreign attachment had also issued upon the above-mentioned judgments. That the sheriff had advertised for sale the goods levied upon by him.

"That the petitioners had been notified by the plaintiffs in the bill in equity under which they were appointed receivers that certain, if not all, of the above judgments effected preferences, and as against other creditors of the Philadelphia Optical & Watch Co. were fraudulent in law; and that should a sale of the property be allowed to proceed the same would be sacrificed and the proceeds thereof would be distributable in violation of the rights of said creditors."

The petition prayed, (1) That the appellant and the other judgment creditors be restrained from further proceeding with their executions. (2) That the property be sold by the receivers. (3, 4) That the judgment and attaching creditors stand unprejudiced so far as entitled to come in on the proceeds of said sale; and that distribution be made of such proceeds under direction of the court.

The court entered a decree enjoining the sale, and directing the sheriff to deliver the property levied upon to the receivers, and directing the receivers to sell the property.

Error assigned was decree as above.

The assignment of error is sustained, and the decree of the court of common pleas of February 16, 1894, is reversed and set aside, with costs to be paid by the appellees.

B. H. Lowry, for appellants. -- In Pennsylvania an insolvent corporation has power to prefer particular creditors: Dana v. Bank, 5 W. & S. 223. A preference of a creditor in Pennsylvania by confession of judgment will be sustained: Lake Shore Banking Company v. Fuller, 110 Pa. 156.

In New Jersey the sale or transfer of the property of an incorporated company, or the use of such property, to prefer creditors after insolvency, is not now prohibited, except so far as a preference by a confessed judgment is prohibited by the statute: Wilkinson v. Bauerle, 41 N.J. Eq. 635; Vail v. Jameson, 41 N.J. Eq. 648; Berge v. Porpoise Fishing Co., 42 N.J. Eq. 397; Bissell v. Besson, 47 N.J. Eq. 580.

Where a preference is not forbidden, the method of effecting it must be determined by the practice of the state where the preference is given.

While a special disability imposed upon a corporation by its charter may have an extra-territorial effect, yet a general enactment prohibiting certain things cannot: Morawetz on Priv. Corp., 2d ed. § 967; Hoyt v. Shelden, 3 Bosw. (N.Y.) 267; Hoyt v. Thompson, 5 N.Y. 320; Ohio Life Ins. Co. v. Merchants' Ins. Co., 11 Humph. 24; Ellsworth v. R.R., 98 N.Y. 553.

In view of the decision of this court in Artman v. Giles, 155 Pa. 409, it seems unnecessary to do more than call attention to the decision in that case as an answer to the expression of their opinion by the receivers that a sale by them would realize more than a sale by the sheriff. This does not constitute ground on which the court can interfere with the orderly process of the law.

Supposing that the act of May 4, 1893, P.L. 29, can be construed so as to give jurisdiction in the case of disputes between one set of creditors and another set of creditors, yet this cannot mean that where creditors have judgments against the corporation and have issued executions upon those judgments, a court of equity, at the instance of other creditors, with neither judgments nor attachments, and without its being clearly shown that the simple contract creditors will have their legal rights impaired by allowing the proceedings at law to go on, will restrain a sheriff's sale, and will order the goods to be sold by a receiver appointed by the court, simply on the ground that the receiver is of opinion that his sale would realize more than the sale by the sheriff.

Francis E. Brewster, Wm. W. Wiltbank and Henry P. Brown, T. D. Finletter and Samuel M. Hyneman with them, for appellees. -- The common law principle, that one who assumes to have a claim against a debtor, and a consequent right to take that debtor's property in satisfaction, must show a judgment in order to successfully interfere with the act of a creditor whose claim has in some form or other been so adjudicated as to give the latter a right or a lien against property attached, which was stated and applied in Artman v. Giles, 155 Pa. 409, does not apply to the facts of this case. This is because the constructive possession of the receiver involves a title more complete than that secured by a lien.

In the case of an insolvent corporation, the creditors exhibiting the bill in equity, for the intervention of a receiver and allowance of an injunction, need not necessarily be judgment creditors, as is requisite in the technical creditor's bill. The capital stock of a corporation is treated in a court of equity as a fund charged with payment of the corporate debts: Morawetz on Private Corporations, §§ 780, 860, 861; 1 A. &. E. Ency. L. 578.

Defendant being a corporation owing its existence to the sovereignty of New Jersey (and this fact appears all through the record), will be regarded by this court, so far as distribution among its creditors is concerned, as generally liable to the provisions of the law of New Jersey; and whilst, under the law of New Jersey, a judgment confessed is not void, distribution of the assets will not be made so as to operate to cut out those who stand without judgment, but all creditors shall come in according to their several equities: Stratton v. Allen, 1 C.E. Green, 229; Coryell v. Bridge Co., 1 Stockton, 457; Wilkinson v. Bauerle, 14 Stewart, 642; Vail v. Jameson, 14 Stewart, 648; Wells v. Rahway Rubber Co., 4 C.E. Green, 402; Bedford v. Machine Co., 1 C.E. Green, 117; Klinsela v. Bank, 3 C.E. Green, 159; Trust Co. v. Miller, 33 N.J. Eq. 155.

The doctrine that an insolvent corporation may prefer certain creditors at the expense of...