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decided: April 18, 1967.


Appeal from order of Court of Common Pleas of Allegheny County, Jan. T., 1967, No. 3153, in case of David A. Vinocur v. The Brummage Corporation.


John L. Laubach, Jr., with him Kenney, Stevens, Clark & Semple, for appellant.

Thomas M. Kerr, Jr., with him Edward J. Mihalic, for appellees.

Musmanno, Jones, Cohen, Eagen, O'Brien and Roberts, JJ. Opinion by Mr. Justice Musmanno. Mr. Justice Cohen dissents.

Author: Musmanno

[ 425 Pa. Page 138]

David A. Vinocur, the plaintiff in this case, was the sole shareholder of The Brummage Corporation, which operated a private business school in Pittsburgh known as the Grace Martin School. On December 19, 1966, Vinocur filed a petition, on the equity side, in the court of common pleas, averring that the corporation was unable to meet its debts, that suits were pending against the corporation, and that if creditors were permitted to levy on the corporation's assets, the corporation would suffer irreparable loss. He prayed that an order be made to wind up the affairs of the corporation pursuant to the Act of May 5, 1933, P. L. 364, § 1107, 15 P.S. § 2852-1107, and that a receiver pendente lite be appointed.

The court appointed Hillard Kreimer receiver and empowered him to seize the assets of the corporation and continue the operation of the school for a reasonable time. The receiver immediately found a prospective purchaser in Duff's Business Institute which offered to purchase the assets and continue operation of the Grace Martin School. In the school, there were 87 students who had already paid their tuition. If the school disintegrated, they would have a claim for refund of their tuition fees. Duff's Institute offered to complete the education of these students at an estimated cost of $60,000. Under this offer, the students would not be required to pay any further tuition and, in addition, would receive a stenotype machine with their certificates of graduation. It appears that the machine went with the education. The stenotype machines, however, did not belong outrightly to The Brummage Corporation but were merely held on bailment lease. Duff offered to take over this liability, with all other liabilities, assume administration expenses of the receiver from December 19, 1966 and pay $1,000 to the receiver.

[ 425 Pa. Page 139]

The receiver thereupon petitioned the court for permission to make the sale. On December 22, 1966, the court set December 30, 1966, as the date for confirmation of the private sale petitioned for by the receiver and for the purpose of receiving any higher or better offer, the receiver to give notice of the hearing to all creditors and to advertise the hearing in accordance with court order.

On December 30, 1966, R. L. Brummage, creditor, objected to the sale to Duff's stating that insufficient opportunity had been allowed to permit other prospective purchasers to make intelligent bids and requesting that the sale be postponed. The receiver replied that he had no funds with which to pay salaries, rents or other expenses of administration. The school was due to reopen after the Christmas vacations on January 3, 1967. Immediate action was imperative if the entire school enterprise was not to be ensnarled in extended litigation over equipment, property and tuition. No other bid was made on December 30, 1966, and the court accordingly confirmed absolutely the sale of the Grace Martin School to Duff's Business Institute.

R. L. Brummage appeals, arguing that the students were given a preference over other creditors. The students were indeed creditors but they were the very stuff of the enterprise. A school cannot operate without students any more than a flour mill can operate without wheat. Time here was of the essence. The school could not reopen on January 3, 1967 without a sale being effected because, as indicated, the receiver was without funds with which to operate the establishment. Without the sale, the Grace Martin School would have been a school with empty seats, an empty treasury and a vacant future. If the ship of the enterprise was not to sink beneath the waters of bankruptcy into the mud of inextricable insolvency, immediate action was needed. The appellant argues there should have been

[ 425 Pa. Page 140]

    a delay, but the delay would have meant waiting for phantoms because there was not the slightest suggestion on the horizon of any ...

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