Delphia Knitting Mills Co. v. Richards , 1915 Pa. Super. LEXIS 388 ( 1915 )

Opinion by

Kephart, J.,

The assignments of error present but one important question. Was there sufficient evidence of fraud to warrant the trial judge in submitting to the jury the bona fides of the transfer of personal property to the appellant, as against the claim of the appellee, a creditor of Wolf, the transferor? Had a transfer been made by Wolf directly to his wife, there is no question but that it would have been inoperative as against the creditor.' Wolf, however, transferred the property to a corporation organized in Delaware; through, him the charter of incorporation was procured. The consideration for the transfer of the property to the corporation was the issuance of forty shares of its capital stock as follows: ten shares to the incorporators living in Delaware, and thirty shares to Wolf’s wife. No other stock appears to have been issued. No money appears to have been paid on account of any stock sales. The company, while doing business in this State, does not appear to have been registered as required by law. No minutes are submitted evidencing a completed organization. It does appear that Wolf continued in absolute control of the business affairs of the company, bought and sold goods, employed and discharged the workmen from the date of the transfer of the property until the levy by the sheriff. He was the only one interested in the business. “When individuals or corporations transfer their property to a new corporation, substantially owned and controlled by the transferrers, the new corporation takes the property subject to the claims of the nonassenting creditors of the transferrers”: Montgomery Web Co. v. H. Dienelt, et al., 133 Pa. 585; The Pennsylvania Knitting Mills of Reading v. Bibb Manufacturing Company, 12 Pa. Superior Ct. 346. It is not so much a question of notice of fraud being brought home to the new corporation, as it was that Wolf was in reality the corporation, owning under another name, practically all its stock, and the property. That the stock stood in his wife’s name would not alter the case. The property conveyed by Wolf constituted the bulk of the corporation’s assets, for which the stock was issued to the wife. This only served to more specifically charge the appellant with notice of the character of the transfer, and as to creditors this transaction would have the same effect as though the property had been transferred to the wife directly. The corporation would of necessity be affected with notice of what Wolf did, if that were necessary. The cloak of legality cannot be placed on the transaction because an agreement of sale evidenced the transfer of the property. The court will examine the real facts on which the agreement is based. If it is founded on fraud, tbe paper will not long remain as a barrier to prevent a creditor from obtaining bis rights, of wbicb be is unjustly deprived. Tbe corporation knew that no money passed for tbe sale of tbe property to it. It furthermore knew that the property as conveyed constituted tbe bulk of its property. Tbe value of tbe property transferred, according to tbe evidence, amounted to from twenty-five hundred to three thousand dollars, and tbe property remaining in tbe bands of Wolf, after this transfer, was scarcely sufficient to have liquidated appellee’s claim, and it was sold by Wolf shortly after tbe incorporation of tbe appellant company. In stating tbe amount that could be found for tbe appellant, tbe court did not commit error. It in no manner prejudiced plaintiff’s case and it was entirely proper for tbe court to suggest this amount to tbe jury.

Assignments of error are overruled, and tbe judgment is affirmed.