Pramuk's Appeal

Opinion by

Mr. Justice Frazer,

The Shamokin Brewing Company was incorporated in 1903 under the laws of Pennsylvania for the purpose of manufacturing and selling malt and brewed liquors and carried on business in the Borough of Shamokin until April 5,1909, at which time Stephen Pramuk, appellant, was appointed receiver for the company by the Court of Common Pleas of Northumberland County. The company had been losing money steadily all through its operations, and at the time of the appointment of the receiver its indebtedness was between $150,000 and $200,-000. Immediately upon appellant qualifying as receiver, the court upon his petition authorized him to carry on thé business of the company, and for that purpose empowered him to borrow the sum of $25,000 to be used in replenishing stock and supplies, and renewing equipment, all of which appellant alleged was necessary to continue the business as a going concern.

Appellant filed his first account as receiver in 1910, and a second and final account on July 8,1912. By permission of the court which appointed him, Pramuk continued to carry on the business until April 26, 1912, a period of thirty-five months, when the company was adjudged a bankrupt in the United States District Court and trustees appointed by that court.

During the time the Shamokin Brewing Company was engaged in business, appellant was also in the business of selling liquors, and was employed by the brewing company to handle its output on commission. He controlled the sale of liquors through leases and ownership of the properties to a large number of hotels in the surrounding country, his sales reaching four hundred barrels of beer monthly, upon which he received a commission of $1.50 a barrel. In the year of 1907, he was handling a large part of the product of the Shamokin Brewing Company in this manner. He also owned and conducted a wholesale liquor establishment in Shamokin Borough, which business he continued after his appoint-men as receiver; his time being divided between his own business and the duties incident to the receivership.

Prior to appellant’s appointment as receiver, an offer of $68,000 was made to him by another brewing company for the purchase of the business which he controlled. This offer he communicated to the Shamokin Brewing Company, and in order to retain the business to itself that company agreed to pay appellant in lieu of commissions a monthly salary of $600.00. This arrangement remained in force until the time of the receivership. Following his appointment as receiver, appellant continued to pay to himself out of the funds of the company the monthly sum of $600.00 during the time he conducted the business as receiver — the sum thus paid amounting to $21,000. Appellant attempts to justify this action on the ground that it was to the interest of the company to receive the benefits of the business thus procured, and therefore continue the contract between the brewing company and himself.

Appellant, as receiver, paid out of the receivership funds the fee chargeable for his own wholesale liquor license and also took credit for a greater amount of salary than his contract called for, to the extent of $6,600. This latter item was entered by mistake; and, as to it, appellant seems to admit it to be a proper item of surcharge. Nor is the propriety of surcharging an item of $2,168.85, which had not been carried over from the prior account, questioned. The principal matters for determination raised by the assignments of error are: (1) The surcharge of $21,000 above referred to (2) the surcharge of the sum of $1,008, the amount paid for appellant’s individual wholesale liquor license, (3) the right of appellant to pay a claim of $109.33 to his brother for wages due prior to appellant’s appointment as receiver, and (4) the refusal of the auditor to allow other Avage claimants to participate in the distribution of the funds in the receiver’s hands for labqr done within six months immediately preceding the appointment of the receiver.

The auditor found the property of the company was made valuable during the administration of the receiver by various additions and improvements, and by the increase of stock Avhich he turned over to the trustees, in bankruptcy. It was also found the property of the corporation was in a better state of preservation and more valuable generally than at the beginning of the receivership, and that there were outstanding accounts due the receiver which were collected by the trustees in bankruptcy. A receiver is an officer of the court; and,, by accepting such appointment, he accepts the responsibilities of his office, which involves the exercise of his best business experience and influénce for the benefit of the company in the same manner as if he were the sole owner of the business. For these services the law recognizes the justice of compensation measured by the circumstances of the case. Beyond such compensation, the receiver may not profit by his position to the detriment of the creditors or owners of the business. The very fact of his ability to control trade or his familiarity with the business might have been and probably was the inducement for appellant’s appointment by the court as a person most likely to successfully wind up the affairs of the corporation, especially where, as here, the purpose was to keep it a going concern. If appellant could not afford to undertake the duties required by the appointment at the compensation usually allowed under such circumstances, the time to make this known was when the appointment was made by the court; not having done so and having accepted the appointment, his duty to the court required of him the excercise of his utmost ability and influence in closing the business, for which service he would be entitled to receive the compensation usually allowed receivers. In view of the fact, that his entire time was not employed in the performance of his receivership duties, the compensation of $15,000 allowed him by the auditor was both ample and reasonable under the circumstances, and the surcharge of the $21,000, which he paid to himself under his contract with the company at the time of his appointment as receiver, was entirely proper.

As to the item of $1,008.00, paid out of the funds of the company for the wholesale liquor license fee for carrying on appellant’s individual business, there can be no justification whatever for this payment. Whatever may be the custom in Northumberland County of brewers with respect to the payment of such fees to the persons or companies who handle their products, it is highly improper for an officer of the court to use trust funds for such purpose. Such practice may well be criticised as contrary to public policy as indicated in the Act of June 9, 1891, P. L. 257, Sec. 4, 2 Purd. 2335, which forbids the holder of a wholesale liquor license from being pecuniarily interested in the profits of the business at any other place in the county where liquors are sold or kept for sale. Without passing on this question, however, the payment by the receiver of his individual liquor license out of the receivership funds was highly improper, and the surcharge is sustained.

The surcharge of $109.33, for wages paid appellant’s brother for services rendered prior to appellant’s appointment as receiver and allowed by him, may be considered in connection with the other claims for wages presented to the auditor. The Act of May 12,1891, P. L. 54, Sec. 1, 4 Purd. 5039, provides that money due for labor and services for an amount not in excess of $200.00, and for a period not exceeding six months “preceding the sale or transfer of the real or personal property” of any person or company “by execution or otherwise, on account of the death or insolvency of such employer or employers, shall be a lien upon said real or personal property......to the extent of the interest of such employer or employers in said property, and shall be preferred and first paid out of the proceeds of the sale of such real and personal property.” This act by its terms creates a lien on the property for the benefit of wage claimants, and requires such claims to be first paid “out of the proceeds of the sale” of such property. There can, however, be no proceeds until a sale takes place: Wilkinson v. Patton, 162 Pa. 12; Mettfett v. Mohn, 171 Pa. 395. Had the property been sold by tbe receiver appointed by tbe Court of Common Pleas, undoubtedly tbe wage claimants would have been entitled to preference upon distribution of tbe fund. Tbe effect of tbe bankruptcy proceedings in tbe Federal court, however, was to suspend tbe State court proceedings, under wbicb appellant was appointed receiver, and instead of a sale, tbe property was rightly transferred to tbe trustees in bankruptcy. No fund having been created by sale tbe wage claimants must, therefore, await a sale of tbe property and distribution of tbe fund realized in tbe Federal court.

In view of this conclusion, appellant was properly surcharged with tbe claim of bis brother for wages. There appears no good reason why tbe services of a particular driver of a wagon was of such importance that tbe successful continuation of tbe business depended upon bis retention in tbe employ of tbe receiver, as was argued by appellant’s counsel.

Appellant also complains of tbe refusal to allow an item of $1,700.00, claimed to be due him on an open account and wbicb the auditing judge disposed of on tbe ground that tbe claim was not presented before tbe auditor and not sustained by competent proof. Without passing on tbe correctness of this conclusion, it is sufficient to say that tbe matter is not in any way referred to in tbe statement of questions involved, and is, therefore, not properly before us.

Tbe decree is affirmed at tbe cost of appellant.