Reber's Estate

Opinion by Beaver,. J., A corporate indebtedness, as was very properly found by the auditor and approved by the court below, was created by the note dated February 24, 1887, drawn by T. H. Purdy, president, Lemuel Shipman, secretary, and Cyrus Dreisbach, treasurer, payable to and indorsed by Lemuel Shipman, B. F. Kelly, John Beber and T. H. Purdy and discounted by the Lewisburg National Bank, and the proceeds carried to the credit of C. Dreisbach, treasurer of the Lewisburg Furniture & Planing Mill Company. This note was renewed from time to time until March 26, 1892, when a note was given in final renewal, signed by T. H. Purdy, president, Lewisburg Furniture & Planing Mill Company, which was indorsed, as was the original, by the four joint indorsers named. What the rights of the holder of the note might have been in a suit against Purdy as drawer as to his personal liability as such need not now be considered. No such suit was brought and the lengthy discussion as to his personal liability as drawer is rather academic than practical. The cases upon the general subject of such liability, showing a great variety and contrariety of views, are very fully collected [128] in a note in Matthews v. Mattress Co., 19 L. R. A. 676, but the rule in Pennsylvania undoubtedly justifies the finding upon this subject in the court below. The holder brought suit against the four joint indorsers, obtained judgment against three who were served, received payment from Purdy and assigned the judgment to him. Reber, one of the joint indorsers who was not served, died, and in the distribution of his estate, Purdy seeks contribution for. the one half of the amount paid by him to the holder of the note, the other indorsers, as is distinctly found by the auditor, being insolvent. The immediate, practical question, therefore, was and is, what were the obligations of these joint indorsers to the holder and what their rights and duties to and among themselves ? It is distinctly admitted that each one of the indorsers was liable to the holder for the entire amount of the note. By the assignment of the judgment obtained by the holder, Purdy stands in some sense in its place. Without such an assignment, however, he could, under the law of Pennsylvania, have been subrogated to the rights of the holder and would in that case, as in the case of the assignment, have been permitted to claim the amount paid by him, subject only to deduction of what he was bound to pay by virtue of the equities subsisting between him and his coindorsers. The appellant contends that in no event has he the right to call upon the decedent’s estate for more than the one fourth. If this be true, however, Purdy was only bound to pay the one fourth and, if he stands in the sloes of the holder, would be entitled to receive from any one of the other indorsers, the remaining three fourths. This, however, would be inequitable for, as is clearly pointed out in Steigerwalt v. Smeych, 9 Pa. Superior Ct. 363, the relation of cosureties, which these joint indorsers practically were, is one of mutual trust and confidence, and from this springs their liability to contribute equally to the payment of the principal debt. In equity the solvent sureties are liable to contribute inter se as to the whole amount. To the same effect is Pomeroy v. Sterrett, 183 Pa. 17. As between Purdy and Reber, therefore, the other two indorsers being insolvent, they were each bound to contribute the “one half of the note, unless there be some other ground upon which Purdy is liable to pay the whole. [129] The appellant insists that such ground does exist from the fact that at the time the original note was given the amount of capital stock paid in to the corporation, which was the principal debtor, was $7,000, and its indebtedness $13,488.19, and not thereafter reduced, and that Purdy, being the president and a director of the company, was, therefore, by virtue of the provisions of clause 6, section 39, of the Act of April 29, 1874, P. L. 73, personally liable for the entire debt, and could not for that reason claim anything from the decedent’s estate. Admitting the facts, does the conclusion follow ? How can the appellant take advantage of a possible liability on the part of Purdy to the holder of the note for this reason in this proceeding? If the judgment paid by Purdy had been recovered against him as an unfaithful director by the holder of the note, we would have a very different question. No question of this kind, however, is raised. The claim is against the joint indorsers, and the effort is to work out the equities existing among them. The claimant does not attempt to seek contribution from the decedent’s estate, on the ground of his liability as a co-wrongdoer. If that were the case, the doctrine of Hill v. Frazier, 22 Pa. 320, might apply. It seems to us that the doctrine of this case, if applicable, rather operates against the contention of the appellant. Admitting that Purdy was a wrongdoer, as director at the time the original note was given and the joint indorsement made, the appellant was a director at the same time and would seem to have had more intimate knowledge of the company’s affairs than Purdy. His contention then is that he is not liable, as joint indorser with Purdy, because Purdy was a wrongdoer, when making the note, and that the appellant is, therefore, freed from his obligation as coindorser. If Purdy was a wrongdoer in making the note, the appellant undoubtedly had knowledge of the wrong and was, to a certain extent at least, a co-wrongdoer. They were jointly and severally liable as directors under the provisions of the act. He seeks to set up the possible liability of Purdy to the holder of the note, an innocent creditor, as a wrongdoer against an actual liability as indorser. But Purdy does not claim contribution as a wrongdoer against his fellow. The appellant raises the question of personal liability, in which he was a sharer, and seeks to avoid a legal liability thereunder. This he cannot do. [130] The authorities referred to by the appellant, in which it is held that an officer of a corporation, who had paid the debt of the corporation, under a statute charging him with liability for the debt of the corporation because of official defaults, etc., has a remedy against the stockholders for contribution, do not apply. This is not an attempt to compel contribution on the part of stockholders. The liability of the joint indorsers of the note of the corporation began with the original note and was never changed. As among themselves, the renewals do not change their legal status. Whilst it is true that, so far as the holder was concerned, he could have elected to recover either upon the original note or upon the last renewal, if he accepted prior renewals as payments, this principle does not apply as among the indorsers. As among them there never was any pretense of payment. The attempt of the appellant to set up the judgment obtained by him as administrator against the corporation is likewise futile. He claimed it as a debt of the corporation. He secured a judgment against the corporation. He cannot now claim that it was the debt of another person for the purpose of making it a set-off against a legal liability. The allegation that the claimant was liable for the debt represented in the judgment applies, so far as we can see, to the appellant as well as to the claimant and, inasmuch as it is the appellant who seeks contribution from his codirector for this indebtedness by making it a set-off against a legal liability, it would seem as if the doctrine in Hill v. Frazier, supra, should apply, if it has any application in the case. As to the basis of computation, the doctrine of Hess’s Estate, 69 Pa. 272, is so firmly established that it would'be folly for us to question it. There is no difference in principle as to the rights of creditors in this regard, between an assigned estate and a decedent’s estate. In the one case the assignee is the trustee for the creditors and in the other the administrator is trustee. In both cases the estate belongs in fact to the creditors. This is plainly pointed out in Hess’s Estate and cannot be questioned by us. A slight error was committed by the court in calculating the amount due Purdy, in using the judgment obtained against the cointlorsers as a basis for the calculation of interest, instead of [131] the nóte upon which the suit was brought, Reber not having been served and no judgment having been obtained against him; but this was practically righted by the final decree which directed the costs to be paid by the administrator and deducted from Purdy’s pro rata share of the fund. This reached substantial justice and was better for both sides than the costs of a re-reference. This case has been presented by the counsel for the appellant in an elaborate argument, in a paper-boot which is a model. We have followed the argument with great interest and have given much time to its consideration. We are satisfied, after careful investigation, however, that the court below reached a right conclusion, based upon legal grounds. The appeal is, therefore, dismissed and the decree affirmed.