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May 25, 1955


Appeal, No. 329, Jan. T., 1954, from judgment of Court of Common Pleas No. 2 of Philadelphia County, March T., 1942, No. 3808, in case of Commonwealth of Pennsylvania v. Hoffman-Henon Company and J. Sergeant Price, Jr., et al. Judgment reversed.


Theodore Voorhees, with him Christopher Branda, Jr., and Barnes, Dechert, Price, Myers & Rhoads, for appellants.

Hyman Zuckerman, with him David D. Goff and Goff & Rubin, for appellee.

Before Stern, C.j., Stearne, Jones, Bell, Chidsey, Musmanno and Arnold, JJ.

Author: Jones

[ 382 Pa. Page 214]


The Commonwealth issued a scire facias sur lien for capital stock and corporate loan taxes settled against the defendant, Hoffman-Henon Company, a Pennsylvania corporation, summoning the substituted executors and trustees of the estate of Eli Kirk Price, deceased, as terre-tenants. The terre-tenants answered that the Commonwealth's asserted lien was discharged by a judicial sale of the property upon the foreclosure of a mortgage given by a predecessor in title and that the terre-tenants had acquired the mortgaged property at the sheriff's sale free of the lien of the Commonwealth. The court below gave judgment for the Commonwealth in the aggregate amount of the liened taxes with interest from dates of settlement, and the terre-tenants took this appeal.

The real question involved is whether a straw man, to whom a corporation conveys its property for the purpose of having him mortgage it to secure a loan

[ 382 Pa. Page 215]

    for the corporation's use and who thereafter reconveys the property to the corporation, subject to the mortgage, is a predecessor in title within the meaning of Section 1401 of The Fiscal Code of 1929, P.L. 343, as amended by the Act of June 3, 1933, P.L. 1474, 72 PS ยง 1401.

The circumstances under which the question arose are as follows. The defendant corporation acquired title to premises at 156-162 North 20th Street, Philadelphia, by four separate conveyances during the period 1926 to 1928. On June 8, 1931, Paul J. Henon, Jr., and Daniel T. Henon, respectively president and secretary of the corporation, made a written application in their individual names to the executors and trustees of the Price Estate for a mortgage loan in the amount of $40,000 on the premises above mentioned, reciting in their application that they would become "bondsmen and future owners in fee" of the property. By deed dated June 17, 1931, the corporation conveyed its realty to the Henons, in fee simple. The corporate acknowledgment of the deed recited that it was executed and delivered "in pursuance of a resolution of said corporation made June 17, 1931." On the same day the Henons executed a bond to the Price Estate in the sum of $40,000 secured by their mortgage of the premises in question. The Henons at once transferred the proceeds of the loan to the corporation. Approximately three weeks later, viz., on July 11, 1931, the Henons reconveyed the property to the company subject to the mortgage to the Price Estate. Between August 25, 1932, and September 22, 1936, the Commonwealth settled against the defendant corporation the capital stock and corporation loan taxes here involved.

Early in 1935, the mortgage then being in default, the trustees of the Price Estate foreclosed it and

[ 382 Pa. Page 216]

    bought in the property at the sheriff's sale, held on February 4, 1935, for a bid of $50. At the request of the Secretary of Revenue, one of the executors and trustees of the Price Estate executed an affidavit on May 1, 1935, reciting the giving of the mortgage by the Henons to the Price Estate, the subsequent conveyance of the premises by the Henons to the Corporation under and subject to the mortgage, the foreclosure and sheriff's sale of the mortgaged property and the execution and recording of the sheriff's deed to the Price Estate. On May 7, 1935, the Secretary of Revenue notified the sheriff of Philadelphia County by letter that, since the amount bid at the sheriff's sale was not sufficient to cover the amount of the mortgage debt, the Commonwealth had no claim against the real estate for the unpaid corporation taxes. The letter closed with instructions to the sheriff to disregard the Commonwealth's claim for taxes due by the defendant corporation insofar as it related to the particular execution. Compare Home Owners' Loan Corporation Tax Case, 149 Pa. Superior Ct. 440, 27 A.2d 688. Almost ten years later, viz., on January 18, 1945, the Commonwealth instituted the present scire facias proceeding.

In order not to complicate the broad basic question involved with facts special to the instant case, we shall pass over the evidence which the appellants urge as capable of supporting a finding that the conveyance by the corporation to the Henons was for value and therefore not a straw transaction - a conclusion which the learned hearing judge drew but which the court en banc overruled. Also, we shall assume for present purposes that the ...

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