J. Francis Hock & Co. v. Strohm

Urner, J., delivered, the opinion of the -Court. In a distribution by receivers of the Thomas A. Strohm Company, 3no., a dividend was allowed by the audit to the appellee on her claim for money advanced to the corporation in amounts aggregating $4,025. Exceptions by other creditors to that allowance were overruled, and the exceptants have appealed. , The appellee, Mrs, E. Florence Strohm, owns sixty-five shares of the company’s stock, while ten, shares, are Feld by Louis C. Praeger, its president, and four shares by Thomas A. Strohm, Jr., its secretary and treasurer. -There are no other stockholders'of the company. The-money advanced to it by Mrs: Strohm 'was used for the purposes, of' the printing business in which it was engaged.

The advancements covered a period-of five years preceding the receivership. They were simply entered oh the cash book of the corporation, but according to the evidence'they were made and accepted as loans. In opposition tó.' théir recógiiition' as' debts upon a basis of equality with the claims of other creditors, it is urged that the money advanced by -the appellee was for the benefit of a' corporation óf which she was. practically the owner. Support for the exceptions is also< said to be.found in the.fact that no reference to any indebtedness to the appellee was made, ih reports to two* bankings institutions, for credit purposes-, of the corporation’s assets and liabilities.

But those ²⁵⁵ reports were made without the appellee’s knowledge, and they induced none of the credits extended-by the objecting claimants.- The only bank debt which now appears to- be owing by the company is one for which the appellee is obligated as surety. It has not been presented as a claim in the receivership proceeding. The printing business conducted- by the- corporation had been in operation for many years, and the- appellee had been actively connected with it prior to the last ten years of its existence-. During that period she- had been prevented by illness from performing any duties at its place- of business-, but was consulted about twice a week in regard to its affairs.

In compensation for her services, and as “interest” -on her stock, no dividends being declared, the appellee received from the company weekly payments of $25, to- which amount they liad been reduced from $40 -and $35 paid at earlier periods. Those- payments are said to- indicate that the appellee was thus being reimbursed for her advancements. But that- theory is not sustainable- in view o-f the evidence, including proof of the fact- that the weekly payments were being made -long before the appellee made the first of the loans on which her claim is based. While the amount realized from the assets o-f the corporation- is insufficient for the payment of its creditors in full, the appointment of receivers was no-t in consequence of any allegation or proof of insolvency. - The receivership was procured for the purpose of preserving equality for all creditors as against the effort of one to obtain priority by legal action.

The last, financial statement of the- corporation, made shortly before the receivership, showed as-sets sufficient to -satisfy fully all of its .creditors. A valid-loan can be made to a corporation by one who owns the greater -part or even all of