secured by a mortgage upon certain of the Company's property. The Butler County Trust Company of Butler, Pa., was trustee for the bondholders. No default under the mortgage existed on January 14, 1931.
14. On January 14, 1931, the Butler County Oil Refining Company was indebted to a considerable amount to wage claimants, vendors of oil, and others.
15. Of the accounts receivable of the refining company, $41,365.84 had been collected prior to hearing upon the petition herein by the receivers.
16. The receivers took possession of the tanks and cars of oil and other products set forth in the said assignment of January 14, 1931, and the products therein were not separately inventoried or appraised, but were mingled with the whole stock of goods then on the premises or thereafter manufactured by the receivers.
Conclusions of Law.
I. The assignment of accounts receivable and other personal property of the Butler County Oil Refining Company, dated January 14, 1931, and prior assignments, set forth in the petition of J. T. Kessler, did not create a valid, equitable lien upon the property described in said assignments in favor of J. T. Kessler.
II. The said assignments were designed to create an invalid preference of J. T. Kessler over other creditors of the Butler County Oil Refining Company.
III. The petition of J. T. Kessler must be dismissed.
J. T. Kessler's petition claims an equitable lien upon accounts receivable, raw material, and manufactured products of the Butler County Oil Refining Company at the time of the appointment of receivers, in the amount of $48,092.37, with interest from January 15, 1931, and prays the court to order the delivery to him of the property covered by his lien, or to transfer the lien to the fund obtained by the receivers from said property. The receivers have denied the claim, and also certain creditors have intervened in opposition to the petition.
The finding of fact, supra, to the effect that the refining company was insolvent when the final assignment was made on January 14, 1931, and on August 30, 1930, when the agreement as to the pledge of accounts receivable was made, is tantamount to a refusal of the petition. The testimony shows that, prior to the agreement of the company on January 14, 1931, that receivers be appointed, certain accounts receivable had, from time to time, been marked upon the company's books as assigned to J. T. Kessler, and certain cars of oil had been placarded as the property of Mr. Kessler; but it also shows that Mr. Kessler exercised no control whatsoever over the accounts or cars of oil. The company collected the money due from its debtors for oil and placed it to its own credit and used if for operating expenses. When a car of oil was ordered from the company, the card showing ownership in Mr. Kessler was removed, and the car shipped to the consignee, who remitted to the company. It is plain that the assignment of accounts and cars was designed to give Mr. Kessler an equitable lien upon them as against a levying creditor, but not as against the company. On the day following the agreement of the company to go into a receivership, and preceding the appointment or receivers, employees of the company worked from dawn to dusk in putting cards upon practically all of the personal property of the company, including a number of tanks of crude oil and other property not theretofore placarded or assigned. It is plain to us, under the circumstances detailed, that Mr. Kessler had never been given the exclusive possession of the accounts and property of the refining company at or about the time of the creation of the alleged debt, as is required by the Act of June 4, 1901, §§ 1, 2 (Purdon's Penna. Statutes, Annotated, tit. 39, §§ 151-154 [39 PS Pa. §§ 151-154]). To grant his petition would mean the approval of an obviously invalid preference, as the refining company, at the time of the last assignment, was heavily indebted for labor and to vendors of crude oil and others. The petition will therefore be denied.
In addition to their assertion of the invalidity of the transfer of the assets of the refining company to J. T. Kessler as a preference, those in opposition to the petition also contend that Mr. Kessler was not the actual owner of the funds which were turned over to the refining company, and upon which the claim is founded, but that those funds actually belonged to the refining company. They allege that Lewis P. Litzinger, president and principal stockholder of the company, and nephew of J. T. Kessler, had deflected the moneys of the ostensible loan from the company, and had deposited it in the Butler County National Bank in the name of Mr. Kessler, but keeping the control of it in his own hands. In other words, it is asserted that Mr. Kessler was a mere man of straw in so far as the bank account was concerned.
The testimony furnishes some ground for the suspicion, if not for a finding by the court, that the fact was as claimed by the opponents of the petition, but, in view of our finding that the assignment of the accounts and property, discussed supra, was invalid, it is unnecessary that the matter be determined -- at least prior to distribution of the fund in the hands of the receivers.
The petition will be refused.
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