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Loux Creamery Co. v. Tice et al. Corporations-Directors-Illegal Dividends Acts of July 18, 1863, P. L. (1864) 1102, and April 29, 1874, P. L. 73.

The liabilities of officers and directors of a cor

poration, delinquent in the performance of their duties as such, must be determined in the mode provided by the Act of July 18, 1863, P. L. (1864) 1102, and April 29, 1874, P. L. 73.

They are not assets of the corporation so as to give a general receiver authority to enforce them through a proceeding in equity.

Motion to change decree.

Wilson M. Loux, a director, book-keeper and the manager of the corporation. While an appearance of wrong doing may be established, this with nothing more, would not be sufficient to establish fraud; that fraud must be proven and cannot be presumed is so evident a legal maxim that a citation of authorities would be superfluous.

It is hardly worth while, however, to pursue the foregoing inquiry any further, as we have legislation in Pennsylvania indicating the proceedure to be followed to establish the liability of the officers and directors of a corporation, delinquent in the performance of their duties as such. Sections 41 and 42 of the Act of July 18, 1863, P. L. 1102, 1864, read as follows: "Sec. 41. No stockholder, or officer in such corporation, shall be held liable for its debts, or contracts, unless a judgment is recorded against it, and the corporation shall neglect, for the space of thirty days after demand made, on execution, to pay the amount due, with the officer's fees, or exhibit to him real or personal estate of the corporation subject to be taken on execution, sufficient to satisfy the

Frank Jacobs and M. P. Schantz for same, and the execution shall be returned plaintiff. unsatisfied.

George W. Aubrey, Butz

Rupp, Ira T. Erdman and Calvin E. Arner for defend

ants.

Sec. 42. After the execution shall be so returned, the judgment creditor, or any other creditor, may file a bill in equity, in behalf of himself, and all other creditors of the corporation, against it, and all persons who are stockholders therein at the time of the commencement of the suit in which judgment was recovered, or against all the officers liable for its debts and contracts, for the recovery of the sums due from said cor

October 2, 1916. GROMAN, P. J. The receiver of the Loux Creamery Company, a Pennsylvania corporation, filed his bill in equity, alleging that certain unearned dividends were paid by the board of directors from time to time, and that other payments were made negligently and by conniv-poration, to himself and such other creditors, ance by the defendants as directors of the corporation.

After taking the testimony of the complainant, the court, under Rule 68 of the equity rules, entered a decree of dismissal without hearing evidence on behalf of the defendants. The plaintiff filed a motion to change the decree dismissing the bill.

for which the stockholders or officers may be personally liable, by reason of any act or ommission, on its part, or that of its officers, as stated in preceding Sections of this act, setting forth the judgment and proceedings. thereon, and the grounds upon which it is expected to charge the officers or stockholders, personally."

The one question going to the marrow of The Act of April 29, 1874, P. L. 73, the controversy, if the jurisdiction lies, is- Section 39, reads as follows: "If the directhave the directors of this corporation, in the ors of any company declare any dividend performance of their duties, exercised reas- when the company is insolvent, or the payonable and ordinary care, skill and diligence ment of which would render it insolvent,. in conducting the business of the corpora- they shall be jointly and severally liable for tion? If they did, there could be no recov- all the debts of the company then existing, ery. During the taking of the testimony, and for all thereafter contracted, so long as it was conceded that certain of the directors they respectively continue in office: Procould not be held liable, but an effort was vided, that the amount for which they shall made to bring home liability on the part of be liable shall not exceed the amount of

such dividend, and if any of the directors Receivers of U. S. District Court may be sued are absent at the time of making the div-without first obtaining leave of Court. idend, or object thereto, at said time, and Affidavit of defence praying that service file the objections in writing with the clerk of statement of claim be set aside and stateof the company, they shall be exempted ment stricken from record.

from such liability."

H. Shoemaker and George L. Reed for plaintiffs.

C. H. Bergner for defendants.

February 2, 1917. KUNKEL, P. J.--The defendants have filed their affidavit of de

Relative to the matters under consideration, and having the above legislation in mind, it may be illuminating as well as instructive at this time to quote from Childs v. Adams, 43 Pa. Sup. Ct. 236 fence, in which they pray that the service of (1910), "Where the president and treasu- the statement of claim may be set aside and rer of a corporation are permitted to con- the statement stricken from the record. It trol and manage the whole business of a is urged that there is no provision in the corporation without any interference by the directors or stockholders, and they declare practice act of May 14, 1915, P. L. 483, directing where the statement shall be filed and distribute dividends in good faith out nor authorizing it to be served; that it may of what they suppose is profits, although not be filed and served so as to require an the company is in fact insolvent, they can affidavit of defence before the return day of not be compelled to pay back the sums thus the original writ; and that the service of distributed to the corporation by a bill in the statement, having been made by serving equity filed against them by the general a copy thereof on the defendants, is defecreceiver of the company. Their only liabil- tive. It is also objected that the plaintiff ity is to the creditors who must first have has not obtained leave from the United the amount of their indebtedness adjudi- States district court, whose receivers the decated in an action against the corporation, fendants are, to bring this action against and then file their bill for themselves and other like creditors against the officers who may have made the illegal payments.

The liabilities of the officers and directors of a corporation specially imposed upon them by the statute, are not assets of the corporation so as to give a general receiver authority to enforce them."

The dismissal of the bill must be sustained for want of jurisdiction.

Motion to change the decree dismissing the bill in the above cause, dismissed.

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them.

As to the objection that the act fails to shall be filed it is sufficient to say that the expressly direct where statement of claim act prescribes the procedure to be observedi in actions brought in the court of common pleas. It contemplates the commencement It, therefore, necessarily follows that the or the pendency of an action in that court. an action there commenced or pending. plaintiff's statement of claim is to be filed in Under the statute the statement is the first step in the procedure when the action has been commenced.

It is true there is no express direction in the act that the statement shall be served, but it is provided that an affidavit of defense

shall be filed by the defendant within fifteen

served. Thus service of the statement is days from the day when the statement was recognized and authorized by necessary implication.

It is also true that there is no time fixed when the statement shall be filed. Nothing is said in the act whether it shall be filed before or after the return day; but there is no prohibition against filing it before the return day. Therefore we would not be justified in limiting the act by holding that it may not be filed before that time. But it is urged, that if the act be interpreted to permit this to be done the defendant would

Allegheny Co.

Sweeney v. Allegheny County. Pleading and Practice-Municipal Corporations-Affidavit of Defense-Act of May 14, 1915, P. L. 483.

It would seem that under the Practice Act of 1915, the Legislature intended to require uniformity of pleadings in all actions of assumpsit and trespass regardless of the personality of the parties, whether individual or corporate, except as therein designated, and municipal corporations are not exempt from its provisions.

In re rule to strike off endorsement on

statement to file affidavit of defense.

be compelled to file an affidavit of defense C. P. of
in many cases, as in the present one, before
the return day or before he is in court, pur-
suant to the command of the original writ.
This situation, however, is not without pre-
cedent in the history of legal procedure in
this state. Under the act of June 16, 1836,
a rule of reference may be entered and the
defendant required to
answer before the
return day; Henness v. Meyer, 4 Wharton
358; Fehr v. Reich, 36 Pa. 472. This
decision was placed upon the ground that
there was no prohibition in the act of 1836
against such a practice. Under the act of
April 19, 1901, P. L. 88, regulating the
practice in replevin, the defendant may be
required to file his affidavit of defense to the
plaintiff's declaration even though the statut-
ory time for filing the affidavit expires be- |
fore the return day of the writ, and judgment
for want thereof before the return day is
not premature; Griesmer v. Hill, 225 Pa.
545. And under the act of May 25, 1887,
P. L. 271, relating to procedure, $$4 and
6, the plaintiff's statement is permitted to be
filed before the defendant is in court in
answer to the command of the summons,
but by express enactment the defendant is
given until the return day to file an affidavit
of defense. The practice act of 1915 would
be no advance in speeding litigation upon
the act of 1887 or prior legislation on the
subject if we were to hold that nothing can
be required of the defendant toward this
end before the day on which he is com-
manded to appear.

The service of the statement of claim was made by serving a copy thereof on the defendants. In the absence of any provision in the act prescribing the manner of service we no reason why a service which followed the usual practice should not be sustained.

see

The right of the plaintiff to commence and maintain this action against the receivers of the district court, without first obtaining the court's leave, is fully warranted by the act of congress of August 13, 1888; Hallowell v. Williams, 217 Pa. 501.

Rody P. & M. R. Marshall for plaintiff. Beatty, Magee Martin for defendant. fendant has taken the following rule on the February 23, 1917. DAVIS, J.-The defendant has taken the following rule on the plaintiff, viz: "To show cause why the endorsement on the statement of claim filed by plaintiff in this case requiring the defendant to file an affidavit of defense within fifteen days should not be stricken from the record, proceedings to be stayed in the meantime pending the disposal of the rule."

This is an action of assumpsit, and the defendant contends that it cannot be required to file an affidavit of defense under the provisions of the "Practice Act, nineteen fifteen,' P. L. 483; that prior legislation and decisions places the defendant in the class of municipal eorporations which were exempted from filing affidavits of defense in actions of law, and that the "Practice Act does not repeal by implication the acts exempting municipal corporations from filing an affidavit of defense."

Section 25 of the Act, however, provides "all acts or parts of acts inconsistent with the provisions hereof are repealed."

The Act is an Act entitled, "An Act relating to practice in the Courts of Common Pleas in actions of assumpsit and trespass, except actions for libel and slander; prescribing the pleadings and procedure to be observed therein; and giving the courts power to enforce its provisions."

The prayer to set aside the service and to strike the statement of claim from the record is denied. The defendants, under $20 of the act under consideration, may file The Act relates to "pleadings and proa supplemental affidavit of defense to the averments of fact con ained in the statement within fifteen days from this date.

*See. Brownsworth & Co. v. Sulkin, 30 YORK LEGAL RECORD 181, where the opposite view was taken.

ceedings to be observed" by plaintiff and defendant in the two forms of action.

Section 7 defines the nature of the affidavit to be filed by persons who are parties acting in a representative capacity; and section 13 defines in actions of trespass the

Work Legal Record

Vol. XXXI

THURSDAY, MAY 31. 1917

No. 3

effect of not filing an affidavit of defense on the part of the defendant.

mit Silk Company. The defendant refused to throw the remaining three bales, contending that the silk contained in all of the six bales was of a much inferior grade than that agreed upon and could not be thrown at the price fixed by the parties without serious loss to the defendant. The plaintiff issued this writ of replevin to obtain possession of the said remaining three bales and the defendant resisted the delivery thereof, contending that it had a special or qualified property therein It would, therefore, seem under this Act for the value of the work done on the three that the Legislature intended to require uni- bales delivered to the Summit Silk Comformity of pleadings in all actions of assump-pany as aforesaid. The plaintiff disputes sit and trespass regardless of the personality any qualified property or interest whatever of the parties, whether individual or cor- of the defendant in the silk taken by the porate, except as therein designated.

This Act is comprehensive in specifying the only pleadings now to be used in the two forms of action. Sections 3 and 4 abolishes all other pleas and demurrers.

To hold that the defendant does not come within the provisions of this Act leaves all municipal corporations outside of all pleadings in the two forms of action unless required to conform to the provisions of the same. The Act does not exempt them as parties from its provisions, and necessity does not require such exemption.*

C. P. of

Northumberland Co.

Gorli & Co. v. Perfect Silk Throwing Co. Replevin-Lien on personal property for work bestowed thereon-Motion n. o. v. In the absence of a special agreement, a tradesman has a lien for work done on goods deposited

sheriff under the writ: 1st, because, under the terms of the contract, the defendant was not to be paid until after the silk had been thrown and shipped; 2nd, because the three bales seized by the sheriff were a separate and distinct shipment; that any lien that the defendant might have had for work done was special and not general, and therefore, these three particular bales could not be held for previous work done on the other bales.

From the agreement and course of dealing between these parties, as disclosed by the testimony, it appears that after the defendant completed its work in the treatment of the raw silk, the product was forwarded by the defendant to whomsoever the plaintiff directed it should be shipped. When the Where there is a contract to manufacture defendant delivered the finished material it several articles at an agreed price, the tradesman has a lien upon any one or more of the articles in his possession for labor bestowed upon other

with him for manufacture.

articles embraced in the contract.

Where under a contract for finishing goods for manufacture by lots, it is disputed as to whether or not several separate shipments comprise a single lot, the question is for the jury.

Action of Replevin.

Voris Auten for the Plaintiff. J. W. Gillespie for the Defendant. February 26, 1917. MOSER, J.-In this action the plaintiff shipped six bales of raw silk to the defendant to be thrown or twisted at the defendant's throwing plant in Elysburg, this County. Three of the said bales were worked and finished and were subsequently forwarded by the defendant, at the instance of the plaintiff, to the Sum

An amendment to the Practice Act of 1915, approved May 3, 1917, provides that counties, cities, boroughs, townships, school districts and other municipalities shall not be required to file

an affidavit of defense."

sent a bill for the services rendered to the consignee and a duplicate thereof to the plaintiff. The work was paid for thereafter and the settlements at times extended for a period of thirty or sixty days. The plaintiff takes the position that the defendant acquired no special property in said silk under the conditions thus disclosed, by virtue of the doctrine enunciated in Lee v. Gould, 47 Pa. 398, where it was held that "A tanner who contracts to tan hides furnished him by a firm, and to return the leather made from them, in a reasonable time, at a price agreed on for tanning and transportation, payable after delivery, has no property in the leather, after it is finished and ready for delivery, such as will justify its detention by him."

In that case there was a special agreement, which is not the situation in the case here being considered. The customary and usual business methods ordinarily in vogue in like transactions were pursued in the dealings

had between these parties. The work was it is agreed there never had been any formal to be paid for after it was performed and surrender of the policy in manner required after the silk was delivered in accordance by its terms. Indeed there is only an equi-with the shipping directions of the plaintiff. vocal and uncertain averment of that step In the absence of any special agreement the in plaintiff's statement, met by a distinct defendant did not waive its right to a quali-denial of surrender in defendant's answer; fied property in the goods for the services although the company is not seeking to avoid rendered; Mathias v. Sellers, 86 Pa. 486. liability on that ground. It does, however, Under the instructions given, the jury contend that the fact ought to have weight found by their verdict that the raw silk on the question of interest; and that is befurnished by the plaintiff in the six bales lieved to be true. In other words, to be above referred to was inferior in quality to entitled to damages for detention at the the grade contemplated by the parties in legal rate of interest, plaintiffs would have their contract. The furnishing of this in- the burden of showing surrender in due ferior silk that could be thrown only at a form, or waiver thereof by the company. loss to the defendant was not a compliance They do neither one. The omission is afwith the terms of the agreement entered in- firmatively pleaded by the company with the to between the parties hereto but was a vio- qualification that no advantage is sought to lation thereof; therefore the plaintiff is not be taken of it except in mitigation of damin a position to complain that the defendant ages, so to speak, if the plaintiffs are in waived its right to a lien by virtue of an position to make a valid surrender. agreement which the plaintiff disregarded and which was abrogated by the plaintiff's own conduct.

The circumstances of the case make it an amicable action in everything but form, and suggest that substantial justice would be done by the payment of the principal sum. together with such interest as may be presumed to have accrued to the fund in bank, say three per cent., pending the controversy. Judgment accordingly.

Lackawanna Co.

Cadden v. Equitable Life Assurance
Society

Guardian and ward—Powers of guardian—
Life insurance benefits.

Where beneficiaries named in a life insurance

The jury found that the six bales of silk numbered respectively 1797, 1938, 1932, 1940, 1941 and 1942, comprised what was designated by the parties as one lot, being lot numbered 2438. It is true, as plaintiff contends, that these bales were not received by the defendant in one shipment, but there was ample testimony to sustain the jury's C. P. of finding that both the plaintiff and the defendant regarded the said six bales to be a single lot. That question was squarely submitted to the jury and their verdict is a complete answer to the plaintiff's assertion that the lien of the defendant was special and no general and that the particular bales taken by the sheriff could not be held for previous work done on other bales. So far as this case is concerned, the verdict of the jury established the fact that the six bales referred to comprised one single lot. That being their conclusion from the testimony we are of the opinion, that in the absence of some special agreement, the defendant had a qualified property in, or lien upon the three bales taken into possession by the sheriff under the writ, for the work done on the other three bales.

policy have the option to accept the surrender
value of the policy, a guardian of minor benefici-
aries is authorized by virtue of his office, and
without any order of court, to accept the amount
and give his receipt binding the wards, unless his
powers in this respect are restricted by statute.
the premiums, and accepting the surrender value
As between keeping a policy alive by paying.
at a given time, it is the duty of a guardian to
elect whichever appears to be most beneficial to
the ward.

legal rate of interest, the beneficiary has the
burden of showing surrender of the policy in the
manner required by its terms, or waiver thereof
by the company.

To be entitled to damages for detention at the

Motion for judgment.

R. A. Zimmerman, for plaintiffs.

Warren, Knapp, O'Malley & Hill, for defendant.

The plaintiff's motion for judgment n. o. v. is hereby overruled and an exception noted. The same is believed to be true here and must be deemed decisive in plaintiff's favor. The only doubt in mind goes to the question April 23, 1917. NEWCOMB, J.-The of interest, if any, payable by defendant. action is assumpsit for the surrender value As we understand the argument of counsel, of a paid-up policy of life insurance issued.

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