Wilkinson v. Patton

Opinion by Mr. Justice Fell, The question in this case is whether, under the act of May 12, 1891, P. L. 54, a creditor for wages has a lien on personal property transferred in good faith by an insolvent debtor inpayment of his debts. Wm. Clegg, Jr., rented a mill and its machinery to Nau'lty, Evans & Co. They became indebted to him for rent, and in settlement thereof transferred to him all their personal property [15] on the premises. At the same time they surrendered their lease and delivered exclusive possession of the property transferred and of the demised premises. A month later they confessed judgment to some of their workmen for wages, and the sheriff levied on the personal property which had been transferred to Clegg. A feigned issue was awarded, in which Charles Benjamin Wilkinson, who had become assignee for the benefit of creditors of Clegg, was plaintiff, and the execution creditors for wages of Naulty, Evans & Co. were defendants. While there were other questions involved, the case was taken from the jury by a peremptory instruction to find for the defendants on the ground that Naulty, Evans & Co., being insolvent, the transfer of their property in payment of the claim for rent was subject to the lien of debts for wages. Whether, if subject to such liens, they could be enforced in the manner indicated in the charge, it is unnecessary now to consider, as we are of opinion that no liens existed. The Act of May 12,1891, P. L. 54, is amendatory of the Act of June 13, 1883, P. L. 117, which act is an amendment of the Act of April 9, 1872, P. L. 47. Each successive act enlarges the class of persons intended to be benefited, but in other respects no material change has been made in the legislation upon the subject. The Act of 1891 provides that moneys due for wages of certain enumerated persons, within limits as to time and amount, shall be liens upon real or personal property sold by execution or otherwise on account of the death or insolvency of the employer, and shall be first paid out of the proceeds of the sale of such property. Omitting the parts that are descriptive of the classes of persons and kinds of property included, the effective portion of the act is : “ . . . .all moneys due for labor . . . . for any period not exceeding six months preceding the sale of the real or personal property . . . . by execution or otherwise on account of the death or insolvency of such employer, shall be a lien on such real or personal property . . . and shall be preferred and first paid out of the proceeds of such sale.” The jury were in effect instructed that the sale by the tenant to the landlord, while not fraudulent in fact or in law, was an act of insolvency, and that the creditors for wages had liens upon the goods sold which could be enforced by a lev}' under judgments subsequent^' obtained. [16] This places a construction upon the act which we think was not contemplated by the legislature, and which cannot be sustained. It was not intended that there should be a specific lien on the property in the hands of the owner or of the vendee. By a sale or transfer by execution or otherwise on account of the death or insolvency of the employer is meant a sale caused by operation of law by reason of death or insolvency — as a sale by an administrator or executor, by an assignee for the benefit of creditors, or by a receiver, and not a sale by the employer. This construction is indicated by the language of the act, and is in harmony with the settled legal policy of the state. The method provided for the enforcement of the claim for wages is that “ it shall be preferred and first paid out of the proceeds of such sale.” This evidently refers to a sale effected by legal process, where a fund is raised for distribution, and not to a sale made by the owner. Money in the possession of a vendor of property is not the proceeds of a sale on which a claim can be preferred and first paid. The construction placed upon the act by the learned judge would create a class of liens of the most dangerous and obnoxious character. No one could purchase property without assuming the risk of .the insolvency of the vendor. The principle is the same whether the sale is of a part or of the whole of the debtor’s property, and whether the sale is in payment of a particular debt or to realize funds for general use, either in the payment of debts or the conduct of business. It is the established rule in this state that a debtor may prefer a creditor, and it was as lawful for Naulty, Evans & Co. to transfer their property to one creditor as it would have been to sell it to a stranger. The first assignment of error is to the admission of testimony which went to the good faith of the transfer, and which was properly received. This assignment is overruled, and the remaining assignments are sustained. The judgment is reversed and a venire de novo awarded.