Pairpoint Mfg. Co. v. Phila. Optical & Watch Co. , 161 Pa. 17 ( 1894 )

Opinion by

Mr. Justice Fell,

On the 10th of January, 1894, the appellant, The Keystone Watch Case Company, caused judgment by confession to be entered on the bond of the defendant, The Philadelphia Optical & Watch Company, for $50,000. On the same day a writ of execution issued and a levy was made on the property of the company.

On the 18th of January a bill was filed by the Pairpoint Manufacturing Company and others, creditors, against the defendant, under which receivers were appointed. On the 16th of February, on petition of the receivers, an injunction was granted restraining the appellant from proceeding with the execution, commanding the sheriff to surrender to the receivers the property levied on, and directing a sale by the receivers without prejudice to the rights of the judgment and attaching creditors as to liens acquired.

The reasons assigned in the petition, and on which the order is based, are that the judgments of the appellant and others effect preferences, and are therefore fraudulent in law, and that a sale by the sheriff would cause a sacrifice of the property and a distribution of the proceeds in violation of the rights of the plaintiffs in the bill and other creditors. The statement that the judgments are fraudulent in law is evidently founded upon an averment in the bill that the defendant is a New Jersey corporation, and that the laws of that state regulating corporations provide (sec. 80) : “ In payment of the creditors and distribution of the funds of any company the creditors shall be paid proportionately to the amount of their respective debts, excepting mortgage and judgment creditors, when the judgment has not been by confession for the purpose of preferring creditors.” No actual fraud is alleged, and the claim that the judgment is legally fraudulent is based entirely upon the fact that it works a preference in a manner forbidden by the statute of New Jersey.

The New Jersey act does not make unlawful the preference of a creditor by an insolvent corporation except when effected by means of a confessed judgment: Wilkinson v. Bauerle, 41 N. J. Eq. 635; Vail v. Jameson, 41 N. J. Eq. 648.

No disability to make a preference is imposed upon this corporation by its charter, and the prohibition by a general enactment can have no extra-territorial effect. Not being forbidden by the organic law of the corporation, the legality of the act must depend upon the law of the state where it is done. In Pennsylvania an insolvent corporation may prefer a creditor by a confession of judgment: Lake Shore Banking Co. v. Fuller, 110 Pa. 156.

The confession of judgment to the appellant being lawful, the only remaining reason presented by the petition for interfering with the writ of execution is that a sale can be more advantageously conducted in the interests of all the creditors by the receivers.

This is not a sufficient reason. The appellant is pursuing the regular and orderly course for the collection of a judgment lawfully obtained for a debt admittedly due. This is its right. The interests of other creditors may be affected thereby, but, until it is shown that their rights are violated, no one has a standing to challenge the appellant’s right to use the means provided by law for the enforcement of its claim.

The assignment of error is sustained, and the decree of the court of common pleas of February 16, 1894, is reversed and set aside, with costs to be paid by the appellees.