Meckley's Appeal

Mr. Justice Clark delivered the opinion of the court, May 7th 1883. The money for distribution arises from a sheriff’s sale of the real estate of Jonas Christman. The sale was made 26th August 1881, under a fieri facias issued upon a judgment in favor of his wife, Henrietta Christman. The amount paid into court is $1,201.20, which is the sum realized from the sale of lot number 2 to Lewis Meckley for $1,275, less the costs marked on the writ, $73.80, retained by the sheriff. Lot number 1 was sold on the same day and writ, to Lucy A. Weidnerfor $1,580. This sum the sheriff, on the 3d day of October 1881, paid to Henrietta Christman, the execution creditor, who receipted therefor, without making any specific appropriation, however, to any particular one or more of the several judgments held by her. On the 12th day of December 1881, “ by agreement of counsel, an Auditor was appointed to make distribution of the money realized upon the sale of the defendant’s real estate, among the lien creditors.” Under the Act of 28th June 1871, Pamph. Laws 1376, the parties, by their attorneys, having consented to the appointment of an auditor and a distribution of the entire fund, we must, therefore, consider the whole fund as for distribution; not only that paid into court, but that also which has not been paid in. The Auditor’s distribution was in fact made upon this basis. Although the schedule reported appears only to embrace the $1,201.20, yet this schedule is made upon an appropriation of the balance of the fund, which appropriation in fact forms part of his report and distribution. At [541] the time of the sale, judgments had been entered against Jonas Christman, the defendant in the execution, as follows, viz.: I. Charles Geyer, No. 1650, January term 1879, entered April 1st 1879, balance, $146.40 ; costs $1.60. II. Henry A. Christman, in trust for Henrietta Christman, No. 447, April term 1879, debt $1,800, entered May 9th 1879 ; credit, May 31st 1879, $600.84, money made from sale of personal property. III. David Heffner, to the use of Henrietta Christman, No. 473, April term 1879, debt $427, entered May 19th 1879, assigned to Henrietta Christman, 10th of November 1879. IV. Daniel H. Siegfried, to the use of Henrietta Christ-man, No. 488, April term 1879, debt $319.50; assigned to Henrietta Christman May 18th 1880. V. Lewis Mecldey, No. 141, September term 1879 ; balance debt and interest $573.67, and costs entered January 2d 1880. After payment of expenses of the audit and the defendant’s exemption, the judgments are entitled to participate in the distribution in the order named, unless that order is broken by proof of matters affecting their right to thus participate. The only judgment which gives occasion for controversy is the judgment of Henrietta Christman, No. 447, April term 1879. The plaintiff in this judgment is the wife of Jonas Christman, the defendant therein. At the hearing before the auditor the attorney, representing the judgment of Lewis Meckley, maintained and sought to prove that this judgment was collusive, given without consideration to hinder, delay or defraud creditors, and that for that reason it should be post - poned in the distribution. Mrs. Christman was called upon to disclose the consideration of the bond upon which her claim was founded and the circumstances of its execution and delivery. The Auditor was certainly right in his determination that a collusive judgment may be inquired into collaterally, as a reference to the authorities cited in his report abundantly shows. Judgments entered or maintained by collusion or fraud of both parties are to be distinguished, however, from judgments obtained by the fraud of the plaintiff; the former are void as to creditors only, and may be attacked in any collateral proceeding by them, whilst the latter can be attacked by the defendant alone, directly and in the proper court. “ When a collusive judgment comes into collision with the interests of creditors they may avoid the effect of it by showing it to be a nullity as to themselves; and in so doing they do not impair its obligation between the original parties, upon whom it is undoubtedly binding ; a fraudulent judgment like a fraudulent deed being good against all but the interest [542] intended to be defrauded by it. But they cannot call upon the court to vacate it upon the record, which would annul it as to the whole world Dougherty’s Estate, 9 W. & S. 189; to the same effect is Thompson’s Appeal, 7 P. F. Smith 178; Clark v. Douglass, 12 P. F. Smith 415, and many other cases. It is equally true that creditors can attack a judgment collaterally for collusion only: Lewis v. Rogers, 4 Harris 18; Sheetz v. Hanbest’s Ex’rs, 31 P. F. Smith 102. In the case of the appeal of the Nat. B’k of Titusville, 4 Norris 531, the question is elaborately discussed by Paxson, J.,who after reference to the authorities says — “ All the cases say that the mere fact that the debtor has been overreached and a fraud perpetrated upon him by the creditor gives no right to other creditors to attack the judgment collaterally. So long as it stands as a'valid judgment against the defendant, it is good against them. They have no right to complain of a fraud upon him. In such cases the only person who can impeach the judgment is the defendant himself and this must be done by a motion in the proper court to open it. . . . Where, however, a judgment has been fraudulently given by collusion between the debtor and the plaintiff in such judgment for the purpose of hindering and delaying creditors, it may be attacked collaterally by the creditors intended to be defrauded. As to them, such judgment is void. But they can only have it set aside as to themselves. They cannot impair it as between the parties.” An Auditor is not always bound therefore to distribute to the liens as they appear upon the record. A collusive judgment may be- attacked before him, and, in the absence of a proper application for an issue, that question is one for his determination. In a proper case, and at a proper time, an issue is of right-: Souder’s Appeal, 57 Penna. St. 498; but the right may be waived: Myers’ Appeal, 2 Penna. St. 463; Seip’s Appeal, 26 Ibid. 176. It has been settled by authorities that in a distribution ’an Auditor cannot inquire into the validity of a judgment regular upon its face: Dyott’s Estate, 2 W. & S. 557; Leeds v. Bender, 6 Ibid. 315; Ellmaker v. Insurance Co., Idem. 442; Titusville B’k’s Appeal, 4 Norris 530; if void upon its face he may disregard it: Brunner’s Appeal, 11 Wright 67. He may receive testimony to establish payment: Borland’s Appeal, 16 P. F. Smith 470; but not to show that it is erroneous or a fraud upon the debtor: Hauer’s Appeal, 5 W. & S. 473; Thompson’s Appeal, 7 P. F. Smith 175. The Auditor was right, therefore, at the instance of the creditors, in entering into an investigation of the bona fides of the judgment to determine, whether or not, it was collusive and given to cheat, defraud, hinder-or delay creditors. There was not much if any-conflict in the testimony, and from the report [543] of the Auditor it would appear that Henrietta Christman received in and after the year 1856 at different dates and from different sources, in her own right, $1,363; that the husband asked her for the money and, as she received it, she gave it to him and he paid his debts with it; that this made him her debtor to the extent of the money received by him that whilst interest is often mentioned in the testimony of the husband and wife, their appears to be no certainty whether interest was to be paid or not, but he is of the opinion from áll that appeared that at the time of the loan there was no agreement made to pay interest; that the judgment No. 447 April term 1879 for $1,800 was given to cover the loan of $1,363, and that the difference between $1,800 and $1,363 was intended for interest. The Auditor further, finds that Jonas Christman in this testimony was not guilty of actual fraud or falsehood, and that he had no dishonest purpose or intent to cheat or defraud his creditors, by giving to his wife what he knew did not belong to her. Speaking of Jonas Christman and his wife the Auditor says, that he does “ not desire to convey any impression that these unfortunate people are designedly wicked or corrupt, but rather careless and negligent.” Inasmuch, however, as $437 was charged for interest on the loan, the Auditor determined that the judgment was necessarily collusive. Whilst we agree with the Auditor, in his finding of the facts, we must disagree with him in his deductions therefrom. It is doubtless true, as said by Mr. Justice Sharswood, in Clark v. Douglass, 12 P. F. Smith 415, that “ a judgment confessed voluntarily by an insolvent or indebted man for more than is due is prima facie frandulent within the statute of 13 Eliz. c. 5but then it is only prima facie fraudulent, and as the Auditor has specifically and expressly found from the evidence that in fact, there was no dishonest or fraudulent purpose to cheat or defraud, delay or hinder the creditors, that prima facie presumption is by the Auditor’s finding fully rebutted. If the parties had no fraudulent purpose or intent, then the judgment was not collusive, and the powers of.the Auditor over the judgment were at an end. If the wife had no right to interest, and the husband by mistake and in ignorance of the law .embraced interest in the bond the judgment was erroneous not collusive or fraudulent. For mere mistake, however, as we have said, the judgment cannot be set aside by an Auditor, as the question in a contest with strangers is not whether the judgment is erroneous, but whether it is fraudulent: Hauer’s Appeal, 5 W. & S. 473. In Bergey’s Appeal, 10 P. F. Smith 408, Thompson, C. J., says, * We think the Auditor, even if he might set aside the judgment for fraud, had no sufficient evidence in any of the consi [544] delations noticed, and certainly not in the fact that the judgment was for too large an amount by the sum of the interest included in it; that was an easy mistake to make, and was not a ground for setting aside the judgment.” The distribution made by the Auditor and confirmed by the court, although made under a mistaken view of the law, is nevertheless a correct one. We do not therefore find fault with the schedule of distribution thus made, and having stated what we conceive to be the correct principle of the law from which such a distribution results, the decree is affirmed.