Kurtz v. Philadelphia & Reading Railroad

Citations

• 187 Pa. 59
• 40 A. 988
• 1898 Pa. LEXIS 770

Syllabus

<p>Corporations — Mortgage—Judicial sale — Fraud.</p> <p>While a court of equity has jurisdiction in a collateral proceeding to set aside a judicial sale made under a decree of another court, which had been obtained by fraud, it will not interfere where there are no averments of fact in the bill which would warrant the inference of fraud in obtaining the decree under which the sale was made.</p> <p>On a bill in equity filed in the court of common pleas by a general creditor of a railroad company against the company and a firm of bankers who were depositories of a fund raised under a reorganization plan, it appeared from the bill that the company had defaulted on all of its securities, and had been in the hands of a receiver appointed by a federal court for several years. The trustee in one of the mortgages began foreclosure proeeedings in the circuit, court, which were opposed, but resulted in a decree directing the trustee to sell the properly covered by the mortgage, and the receivers to sell all the other property. The purchasers at the sale were a reorganization committee of the security holders. It appeared that the security holders who were thus represented had openly announced their scheme, had invited all who were interested to join, had secured sufficient assents and money, and after the sale had organized a new company. Plaintiff averred in his bill that the decree authorizing the sale was the result of an agreement between the corporation, the receivers and the security holders, and that such an agreement was in fraud of his rights. The plaintiff did not participate in the reorganization plan. The bill prayed that plaintiff’s claim should be paid out of the fund raised by the reorganization committee. Held, that the bill was properly dismissed on demurrer.</p>