Pennsylvania Knitting Mills of Reading v. Bibb Manufacturing Co.

Opinion by William W. Porter, J., This interpleader was framed to determine the rights in certain personal property, originally owned by the firm of Zieber, Herbine & Company. The property was transferred by them to one Schultze. The plaintiff corporation was then erected. Schultze transferred the property to this corporation for $49,500 of its capitalization of $50,000. The plaintiff company now claims the property under this title. The defendant company claims, as judgment execution creditor of the firm of Zieber, Herbine & Company, that the property is subject to levy. The first three assignments allege that error was committed by the court below in permitting an inquiry into the charter [351] and ownership of the plaintiff corporation and in excluding the same line of inquiry as to the defendant corporation. It was competent to show that the plaintiff company was, in effect, but Schultze trading in other guise. When individuals or corporations transfer their property to a new corporation, substantially owned and controlled by the transferrers, the new company takes the property subject to the claims of the nonassenting creditors of the transferrers: Montgomery Web Co. v. Dienelt, 133 Pa. 585; Rice’s Appeal, 79 Pa. 168. Therefore the inquiry permitted by the court below was legitimate. If Schultze held no title, his transferee, being a company of which he was practically the only stockholder, took no title as against execution creditors of the original owners of the property. There was no issue which involved the defendant company in an inquiry as to its ownership and control. It was plaintiff in a judgment. Its rights against the defendants therein were determined. The interpleader issue involved only the right to execute the judgment against particular property. We pass to a consideration of the ninth assignment. The learned trial judge charged the jury, in effect, that the transfer by the original firm to Schultze was inoperative as against other creditors of the transferring firm. This is said to be error. The agreement between Schultze and the debtor firm did not contemplate the payment of all their debts. The cash consideration of the bill of sale was $1,000. This, under the evidence, was palpably inadequate. The testimony shows that a material part of the consideration to the members of the transferring firm was the agreement by Schultze to give them employment. The transfer of property by an insolvent debtor for an inadequate price and in consideration of an undertaking to pay a portion only of his debts, and of a reservation of benefit to himself is void as against his creditors, nonassenting: Low v. Ivy, 10 Pa. Superior Ct. 32; Downing v. Gault, 8 Pa. Superior Ct. 52; Houseman v. Grossman, 177 Pa. 453; Hennon v. McClane, 88 Pa. 219; Miner v. Warner, 2 Grant, 488; McClurg v. Lecky, 3 P. & W. 83. The defendant company did not assent to the agreement between the debtor firm and Schultze. This the jury has found. Indeed, the only question for them was, whether there had been an attempted compromise between the parties to the inter352 pleader such as would estop the defendants from setting up a right to execution against the property. This subject was submitted in the portion of the charge complained of in the eleventh assignment of error. That which tended to establish the title of the plaintiff company, as against the defendant’s execution, was proof of recognition by the defendant company of Schultze’s ownership. The plaintiff’s evidence on this point was contradicted by the testimony for the defendant. Hence, the issue of fact which was determined in favor of the defendant. We have examined the other assignments and regard it as necessary to discuss only those which relate to the action of the court in molding the verdict. The jury found in favor of the defendant for the goods in controversy (with certain exceptions), assessing the “value of the goods found to the defendants at $1,718.25.” This gave the defendants a verdict in excess of the amount of their execution and costs. The court compelled a reduction in the amount of the verdict to the sum to which the defendants were entitled. The interpleader Act of May 26, 1897, P. L. 95, is not clear in its application, to such a condition of the record. Section 8 provides that “ a verdict and judgment may be entered against the claimant up to the value of said goods and chattels,” the value of which may have been proven in the trial. Section 18 provides that if the goods and chattels be taken by the claimant (as was done in this case), “ a verdict and judgment for the value thereof shall be entered against the claimant and in favor of the 'defendant in the issue.” ■ A literal application of the language of the act would work an injustice in such a case as that at bar. All that the defendant had a right to recover was the amount of his execution and costs. The spirit and purpose of the act is to determine, in direct and equitable manner, controversies between execution creditors and claimants of goods levied upon. We are impelled to give the act a construction consistent with such spirit and purpose, namely, that a verdict and judgment may be entered against the claimant up to the value of the goods, and not exceeding the claim of the defendant for the amount of his execution and costs. The assignments of error are overruled and the judgment is affirmed.