Reed v. Penrose's Executrix

• Citation: 36 Pa. 214
• Parties: Reed versus Penrose's Executrix.
• Decision Date: 01 January 1860
• Court: United States State Supreme Court of Pennsylvania

Page 214

36 Pa. 214

Reed versus Penrose's Executrix.

Supreme Court of Pennsylvania.

ERROR to the District Court of Philadelphia.^*

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Gerhard and Meredith, with whom was Marshall, for the plaintiff in error.—1. As the fund claimed under the attachment was money received by the Erie Canal Co. for tolls and water-rents of their canal, it is not liable to an attachment in the hands of its treasurer, nor in

the hands of Charles M. Reed, who was merely the depository of the treasurer. Money so deposited is virtually in the treasury, and not subject to an attachment-execution: Buckley v. Eckert, 3 Barr 368; Crossen v. McAllister, 2 Penn. L. J. 199; Pierson v. McCormick, 2 Penn. L. J. 201.

2. Under the Act of June 16th 1836, an attachment-execution cannot be sustained at all against an insolvent corporation; the Act of 20th March 1845, does not alter the law as to insolvent corporations: Ridge Turnpike Company v. Peddle, 4 Barr 490; Monongahela Company v. Ledlie, 3 Penn. L. J. 179.

If an attachment-execution can be sustained against an insolvent corporation, and funds seized and taken in execution that may be absolutely necessary to keep up the improvement, it is an end to all such corporations. No matter how much the public may be interested in the maintenance of the improvement, one creditor, no more meritorious than one hundred others, can close up the improvement: Ammant v. The New Alexandria and Pittsburgh Turnpike Road, 13 S. & R. 210; Hawley v. Lumberman's Bank, 10 Watts 230; Fretz v. Heller, 2 W. & S. 400.

E. Spencer Miller, for the defendant in error.

PER CURIAM.

A majority of us regard each of the points decided in this cause, as having been rightly decided by the court below. But we differ considerably in the reasons of our conclusions, and considering that only three of us sat at the hearing, or could sit, we think that no public utility would be subserved by our entering into any discussion of the various questions involved in the cause.

Judgment affirmed, and record remitted.

Gerhard, for the plaintiff in error, moved for a rehearing; the motion was set down for argument, and it was ordered that the argument should be confined to the merits of the defence below, founded on the liability of the original defendant's effects to the process of attachment-execution; and to the right of the garnishee to set-off his claim.

Gerhard and Meredith, for the motion.—I. Does the attachment in execution, issued in this case, lie against the funds of the Erie Canal Company, which have been attached under it?

It appears from the answers of the garnishee and from the accounts which were in evidence, that the moneys in the garnishee's hands are tolls collected on the canal. The canal of the defendants, by the 12th section of their charter, is declared to be a public highway. Toll on a highway is a compulsory payment, exacted from those who use the highway. It is against common right: 2 Roll. Abr. 522; Fitzh., title "Toll," pl. 3. It can be levied only by virtue of prescription or grant: Cro. Eliz. 710.

Whether by prescription or grant it must (1.) Be founded on a consideration moving from the party who levies the toll, to the public who use the highway, — such as keeping the road, bridge, &c., in repair: 3 Lev. 37; 2 Roll. Abr. 585; Cro. Eliz. 711. (2.) It must be reasonable. The question whether a toll be reasonable is a judicial question, unless it has been ascertained by a statute: 2 Inst. 220; Cro. Eliz. 559. A reasonable toll is one which is not more than an equivalent for the consideration on which it is founded. In the case of an artificial highway (as a canal), constructed by a corporation under authority of law, and the maximum rate of tolls on which is regulated by statute, the toll is founded on two considerations, viz.: (1.) The repair and maintenance of the work for the use of the public. (2.) Compensation for the capital invested in its construction and completion.

The first objects to which the tolls received are by law to be applied, are the repair and maintenance of the work: the surplus only (if any) which remains after these objects have been fully provided for, goes towards the compensation for the capital invested. That this is the order in which the tolls are to be applied appears evidently by the following considerations: —

1. The corporation is subject to a public trust to repair and maintain the work, and so far as the tolls are received on that consideration, they are held by it in trust for those purposes.

2. The obligation to repair and maintain the work is absolute, and if it be not kept in navigable order, (1.) The right to collect toll ceases. (2.) The corporate franchise is subject to forfeiture: People v. Turnpike Co., 23 Wend. 254. (3.) The corporation or its members are indictable for the neglect: 1 Mod. 559; Kyd on Corp. 225, 226; Regina v. Railway Co., 9 Car. & P. 469; Kane v. People, 8 Wend. 203, 363.

3. The part of the tolls which is applicable as compensation for the capital invested, enures to the private profit of those who invested it, whether stockholders or bond-holders of the company. (The plaintiff below belongs to the latter class.)

4. Those who so invested their capital, whether as stock or bondholders, were under no obligation to do so. Their investment was made with a view to their private gain, and if they be disappointed in the result, that gives them no right to indemnify themselves at the public expense.

The principles above stated are not, and cannot be, denied to be firmly established by the common law. The only question is, whether they have been abrogated by statute. It is not pretended that any statute has given the corporation the right (still less imposed on it the duty) of diverting the tolls or water-rents from the repair and maintenance of the work, and applying them to payment of its bond-holders or to dividends among its stockholders, or to any other private use. Nor is it pretended, that any statute has relieved the corporation or its members from liability to indictment, if the work be not kept in navigable order.

The real question therefore is, whether any statute has reduced the law of Pennsylvania to the position of authorizing a bondholder (against the true sense of his contract) to seize the tolls for his private use, and then punishing the corporation and its members as guilty of a crime, in not applying those very tolls to the repair and maintenance of the canal: those tolls being levied for that purpose, and being, with the water-rents, notoriously and legally the appropriate and only means for affecting that purpose. The legislature might as well authorize the road-tax to be attached for the private debts of the supervisor.

It is proposed to show that the legislature of Pennsylvania has not been guilty of this outrage, by which the public interests and all the principles of justice would have been sacrificed in order to give to bond-holders or other creditors, the security of a public fund to which they had never looked, and a preference in payment to which they were not entitled.

The Act of 29th March 1845, is the statute relied on by the plaintiff below to support his proceeding. While that Act does extend the process of attachment of stocks, deposits, and debts in execution, to all cases of judgments against private corporations, it does expressly provide for proceeding on such process "in the same manner and under the same rules and regulations as are directed against corporations by the Act of 1836."

These rules and regulations are, 1. That the assets of a corporation (execution against which had been returned "nulla bona"), shall be distributed rateably among its creditors. 2. That the tolls and revenues of a public work shall not be diverted from its repair and maintenance. It is clear, therefore, that the legislature did not intend to commit the act of destruction which is attempted to be imputed to it. The court is asked to do that by construction.

II. Supposing that the attachment will lie, is the garnishee entitled to set-off against the funds in his hands, the debt due to him by the company?

This debt far exceeds in amount all the funds of the company which the garnishee has or ever had. His right to set-off is resisted, on the ground of an alleged implied contract, that he would not exercise it; and such a contract is (in the opinion of the court below) held to be implied, (1.) From the tenor of his receipts. (2.) From his relation as banker to the company.

1. One of his receipts states that the money therein receipted for, was appropriated by the company to the rebuilding of certain aqueducts mentioned in the receipt. Either that created a trust to apply the money to the public purpose of repairing and maintaining the highway in the manner designated, or it did not. If it did, it has been already shown that the plaintiff below cannot attach the fund. If it did not, then it does not bar the garnishee's right of set-off.

2. There is nothing fiduciary in the relation between banker and depositor; their relation is purely and simply that of debtor and creditor respectively: Grant on Banking 1, 2, 3.

In practice, set-off is constantly made by banks against deposits; every debt which falls due, on whatever account, from a depositor, is usually charged against his deposit. In no case has it ever before been pretended that a contract to waive the right of set-off can be implied from the relation of banker and depositor, or banker (borrower) and lender. Though cases have often arisen in which that point would have been material: Bank of United States v. Macalester, 9 Barr 475; Bosler v. Exchange Bank, 4 Barr 32; Grant on Banking 336-339; Beckwith v. The Union Bank of New York, 5 Selden 211. There was, therefore, no circumstance from which a contract to waive the right of set-off could be implied; but if there had been, it would...