much of the fund as was necessary to pay the appellant's judgment should have been awarded to him. The decree is reversed, at the cost of the appellee, and the record is remitted, in order that distribution may be made in accordance with this opinion.

In re POWEL'S ESTATE.

Appeal of BRISBIN et al. (Supreme Court of Pennsylvania. Oct. 1, 1894.)

ASSIGNMENT FOR CREDITORS ACCOUNTING-REMOVING ASSIGNEE COSTS PAYING AUDITOR AND MASTER AGREEMENT BY CREDITORS ESTOPPEL-RES JUDICATA-COMPENSATION.

1. An auditor to settle an account of an assignee for creditors has only to pass on the issues raised by the litigants, and need not suggest new subjects of contention to counsel.

2. Though an assignee for creditors took credit in his first account for payment of more cash than he had in his hands, he cannot correct this in his second account by charging himself with the appraised value of the unconverted assets, less the amount of such excessive credit, as this is an appropriation of assets not yet converted.

3. An assignee's account is misleading and false where it enters on the debit side sums as monthly receipts which are the proceeds of sales of assets at prices below the appraised value, without any correction on the credit side, thus apparently augmenting the assets.

4. Where an estate is not in peril from insolvency of the assignee, action on petitions for his removal should be suspended pending hearing on exceptions to the auditor's report on his account, distinctly raising the questions of the assignee's negligence and mismanagement.

5. Under Act June 14, 1836, § 11, providing that, when it shall appear in a court of common pleas that an assignee is mismanaging the estate, the court may cite him to appear before it to show cause why he should not be dismissed from his trust, the court may appoint an examiner to reduce the evidence to writing, but cannot appoint a master to pass on the facts; and error in so doing is not cured by the evidence coming to the court with the master's opinion.

6. An assignee is not guilty of mismanagement in disposing of the assets for what they are worth. however great may have been the overvaluation by appraisers.

7. Petitioners for the removal of an assignee for mismanagement should not be charged with costs, though the weight of the evidence is with the assignee, where the findings and report of the auditor on his account were sufficient ground for the petition.

8. While an auditor or master, who has devoted months to the matter of an assigned estate, without the end being in sight, has a right to a direction of the court for a proportional part of his compensation, he should not take pay from the assignee without such order, or the knowledge and consent of counsel for parties interested.

9. Where a claim against an assigned estate was, in an agreement between the assignee and creditors as to the transfer of property of the estate to a corporation in satisfaction of their claims, represented by a person who professed to own it, the true owner, who knew this, cannot afterwards assert that he was not a party to the agreement.

10. Where a member of a firm which was a creditor of an assigned estate was present at meetings of creditors leading up to a transfer by the assignee of property of the estate to a corporation in satisfaction of claims of credit

ors, and the firm was represented by counsel at the audit of the assignee's account which showed the transfer, and no objection was made to the auditor's report, which gave the assignee credit for the property transferred, or to the confirmation thereof, it cannot afterwards question the validity of the transfer.

11. The objection that certain creditors, because trustees, had no authority to join in an agreement between creditors and an assignee for the transfer of part of the assigned estate to a corporation in satisfaction of the creditors' claims, cannot be raised by the other creditors against the validity of the transfer.

12. Where an assignee, in his first account, takes credit for commissions and counsel fees to an amount in excess of cash on hand, he cannot, on a second account, have credit for such excess, as though it had been finally adjudicated on the first account.

13. Where duties usually performed by an assignee personally are delegated to lawyers and agents, who are allowed compensation for their services, he cannot have compensation therefor, as though performed by him.

Appeal from court of common pleas, Philadelphia county.

In the matter of the assigned estate of Robert Hare Powel & Co. and Robert Hare Powel's Sons & Co. Accounting by the assignee, the Guarantee Trust & Safe-Deposit Company, and proceedings on petitions to remove the assignee. From various decrees and orders in favor of the assignee, George M. Brisbin and others, doing business as the Houtzdale Bank, creditors, appeal. Modified.

J. W. M. Newlin, for appellants. Wm. W. Wiltbank and John G. Johnson, for appellee.

DEAN, J. On 29th August, 1887, the partnerships of Robert Hare Powel & Co. and Robert Hare Powel's Sons & Co. made assignments for the benefit of creditors to the Guarantee Trust & Safe-Deposit Company. The assets of the assignors were made up principally of iron-ore lands, coal lands, collieries, one large blast furnace in operation, and another approaching completion. These properties were located in Allegheny, Westmoreland, Bedford, Clearfield, and Huntingdon counties. The assets, with some others of less value, were appraised by appraisers appointed by the court at $4,300,000. The liabilities, principally liens on real estate and maturing negotiable paper, were, approximately, more than $1,500,000. Apparently, the value of the assigned estate was sufficient to pay at least twice the indebtedness. But, after three years' administration of the trust by the assignee, the accounts filed showed such a dwindling from the appraised value that all the unsecured debts, in the most sanguine view, were in peril. On January 24, 1889, the assignee filed its first account, to which exceptions were filed by several of the creditors; among them, the Houtzdale Bank, this appellant. The balance, as shown by the account filed, was $3,780,755.93. The auditor did not sustain any of the exceptions to the account, nor did he make any distribution, except to counsel for fees, agents for commissions, costs and expenses of audit, amounting to $7,146.47, which, added to appraised value

of properties conveyed by assignee to Powelton Iron Company, $2,313,318.89, left an apparent balance of $1,460,390.57 on this first account still in hands of accountant. The basis of this large credit to the assignee, as stated by the auditor, was as follows: "The firm of Robert Hare Powel's Sons & Co., prior to the assignment, had conducted the business of the manufacturing and sale of iron, and the firm of Robert Hare Powel & Co. had carried on the business of mining and shipping coal. The affairs of both firms, particularly the latter, were upon an extremely large scale. The assignment occurred on the 29th day of August, 1887. Shortly afterwards the creditors of the two firms organized, and appointed a committee to represent them in advising the conduct of the assigned estates. A number of meetings were held by this committee to assist the judgment of the assignee. In pursuance of their recommenda tions the business of both firms was continued by the assignee through the medium of the partners, as agents, until the end of the year 1888. The creditors were of two classes. Two sets of loans, aggregating nearly $500,000, issued by the iron firm, and secured by mortgages upon the iron plant, were outstanding at the time of the assignment. There were also several mechanics' liens filed in Bedford county. One class of creditors were the holders of these bonds and of the said liens. The second class was unsecured. It consisted of the other creditors in general. The property assigned consisted of a large iron manufacturing plant and extensive coal lands and leases. At length the following arrangement was reached, and was joined in by all the creditors who could be ascertained: The assured creditors agreed to an extension of five years upon the terms of their loans and mechanics' liens. The unsecured creditors formed a corporation under the laws of Pennsylvania, to which they give the name of the Powelton Iron Company, with a capital of $1,000,000. To this company $100,000 in cash was to be paid, and a transfer made of the iron plant and various other properties which belonged to the assigned estate, estimated to be worth not less than $900,000 above the mortgage. This stock was to be taken by the creditors in proportion to the amounts of their claims. It was to be divided into 20,000 shares of $50 each. These shares were to be accepted, dollar for dollar, for all unsecured claims, all odd amounts of which, less than $50, were to be paid in cash. The remaining portion of the stock was to be transferred to the Guarantee Trust & Safe-Deposit Company, to be held in trust for the assignors."

Presumably, and by a note appended to the account, the balance of the estate was made up of what was left of the inventory: Sterling coal mine No. 2; Crisfield tract of coal land; lands in Belmont county, Ohio; coal land in Allegheny county; coal land in Westmoreland county; Powelton estate land

in Center county; unpaid book accounts: proceeds of sale of Sterling coal mine No. 1; Ramey coal lease. By the terms of his appointment, the auditor was to "audit, settle, and adjust the account filed," but an examination of his report shows that he really settled by hearing and adjudication only eight distinct matters of contention: (1) He determined that the assignee was rightfully entitled to a credit of nearly $26,000. (2) For $15,000 paid to Mrs. Amy Powel as rentals. (3) That certain boats used in transportation of coal were advantageously disposed of. (4) That the assignees had diverted no money paid for coal to payment of illegal commissions. (5) That R. B. Wigton was entitled to $2,510 as commission on sale of Sterling No. 1 mine. (6) That part of exceptants' costs and counsel fees should be paid out of the assigned estate. (7) That an allowance of $2,154.91, commissions on sale of coal cars, should be made. (8) That the property conveyed to the Powelton Iron Company was free from the trust created by the assignment. As the first account showed still a very large portion of the assigned estate undisposed of, and there would necessarily be another accounting, the investigation of the claims of the assignee for compensation and counsel fees, at this audit, was not very thorough, nor does it seem to have been so considered by any of the parties in interest. The principal object seems to have been to settle by an adjudication that the Powelton Iron Company was not answerable to the assignee for the administration and management of the property conveyed to it under the arrangements with the creditors, and that thereafter the creditors must look to the board of directors of that corporation, as alone answerable for the assets transferred. We have no doubt the auditor, on the facts before him, performed his full duty in respect to the authority conferred upon him, and the confidence reposed in him by the court. The contending parties were represented by able counsel. It was not the duty of the auditor to suggest new subjects of contention to them. He was to pass upon the issues of fact and law raised by the litigants, and not upon those which might suggest themselves to him during the progress of the hearing.

The report of the auditor was filed August 12, and confirmed absolutely August 20, 1889. On September 6, 1889, the second account of the assignee was filed. This was also excepted to, and the account referred to Mr. Miller as auditor. It appeared from this account that in its first account the assignee had taken credit for payment of $62,586.06 more cash than it had in its hands. A correction of this error in the second account was made by charging itself with the appraised value of unconverted assets, less that amount. The auditor properly held this was wrong, as it, in effect, was an appropriation of assets not yet converted. Further, it

appeared at the second audit audit that the that the amounts with which the assignee was charged in the account, although apparently collections, in the ordinary course of business, were in large part the proceeds of sales of assets at prices far below the appraised value. In such cases the amounts realized were added to the debit side of the account, thus swelling the appraised value by the amount of proceeds of sales, until the aggregate reached nearly $7,000,000, while the large difference between the appraised value and the price realized by conversion, even at that period of the management, showed there would not be enough money to pay the unsecured creditors. The auditor pertinently says: "The vice of this mode of presenting the assignee's operation consists,

**

not merely in formal error, but in radical and vital injury to the creditors. *** A very careful examination of the whole ac.count, in connection with the facts appearing at the audit, shows that these monthly items of receipts include the entire proceeds of assets sold at an enormous depreciation from the appraised value." That is, apparently, the appraised value of $4,311,579 of the assets, as shown by the inventory, had been augmented by the monthly receipts from operating the plants, month by month, during a period of 17 months, until they reached $6,877,969.27. There is but obscure intimation in the account that these monthly receipts were, to a large extent, from the sale or conversion of assets. This is the form of the charge for the first month of the 17: "1887. Sept. 30th. To amount of receipts for this month, $149,213.15."

And this entry, except as to month and amount, is dittoed for each of the following months, up to the date of filing the account, and there is no real correction of this method of accounting for conversion of the assets on the credit side of the account. The Sterling No. 1, appraised at $496,785.72, and sold for $50,000, is itemized thus: "By appraised value of properties sold and account collected and accounted for in the receipts, Stg. on acct., $50,000." It is true, as argued by It is true, as argued by counsel for appellee, the mere fact of entering proceeds of sales on the debit side of the account is not necessarily misleading. They may be so distinguished as to clearly identify them, and then they disclose the truth, however awkward the method. And this is the case as to the charge in first account of appraised value of the Powelton Iron Company property. But, if the sales be entered as apparently monthly receipts from another source than sales, the account is not alone formally wrong; it is false,-not necessarily intentionally so, but false because misleading. In fact, the second account, on both sides of it, by the method of stating it, was misleading. The auditor undertook, to some extent, to reform it, as to the item of $62,586.06, by deducting this sum from a credit of $75,000, counsel fees

and commissions in the first account, on the theory that, as the money to pay that item was not in the hands of the assignee at the date of the credit, it could not have been adjudicated, because not in fact paid. He, therefore surcharges the accountant with the $62,586.06, by adding that sum to the balance brought over from the first account, making the whole $3,843,341.99, instead of $3,780,755.93. In thus treating this item, and leaving it for future adjudication, he was right. The assignee had taken up a note, in the sum of $2,584.50, of the Reading Iron Works, indorsed by the assignors. The drawer became insolvent. This was also surcharged, and the item remains to be passed upon at another hearing. The auditor, for reasons stated by him, disallowed the credit of $2,313,218.89, the appraised value of the property conveyed to the Powelton Iron Company, and surcharged the assignee with this amount,-to be finally adjudicated, however, on settlement of final account. As to the sale of lease of Sterling No. 1, the auditor recommended that the contention as to that item stand over for adjudication in a subsequent accounting. He further surcharged accountant with interest on balance of funds on hand from date of assignment, to the amount of $600, for the reason that the money was mingled with the funds of the assignees' bank, and loaned indiscriminately to customers. On a restatement of the account, and adding surcharges, the balance against accountant was $3,920,029.92. No distribution was made to creditors, for the reason that sufficient notice of audit had not been given, and therefore many claims may not have been proven and presented; and, further, because of some doubt as to his authority to distribute, under the terms of of his appointment. He therefore awarded the balance to accountant, to be thereafter accounted for. A rehearing on exceptions to this report was had before the auditor before it was filed, but, except in some immaterial matters, he adhered to his adjudications, and filed his report, and exceptions were entered by both assignee and complaining creditors.

One thing appears clear; that is, that, so far as concerned all the real questions in contention between the assignee and the complaining creditors, they now were substantially before the court, with the evidence bearing on them. There were also two reports of a competent auditor, of whose ability and integrity neither party had intimated a doubt. The litigation on the important matters tried before the auditor, with so much labor and vexation to all concerned, and at such large expense to the estate and creditors, should have been stopped just at that point, by a final judgment of the court below on the exceptions to these reports. After tracking, step by step, the long course of litigation which followed, it seems to us but little further light was thrown on the im

portant points in controversy; and the questions raised at the second audit continued, to the end, almost the only ones of merit in dispute. It is not alone the duty of courts to decide disputed points. It is also their manifest duty to so control the course of procedure before them that, consistent with fair hearing, as speedily as possible, there shall be an end of strife in final judgment. But while the exceptions were pending before the auditor on the second account, on June 7, 1890, the Houtzdale Bank presented its petition for the removal of the assignee; and this was followed on January 10, 1891, by a like petition by the Harrisburg Bank and other creditors. The petitions preferred 15 distinct charges of mismanagement and dishonesty against the assignee. All were answered by a distinct denial, of record. On July 8, 1890, just a month after the first petition for removal of assignee was preferred, the second report of the auditor was presented, to which exceptions were filed by both accountant and creditors. These exceptions raised distinctly the questions of negligence and mismanagement. Unless the estate was in peril from the insolvency of the trustee, which was not even intimated, it is very clear, action on the petitions should have been suspended to await the event of the judgment on the exceptions to the auditor's report; but judicial action on the reports was suspended, and the new line of litigation, having for its object the removal of the assignee, was taken up, and pursued for nearly two years with an acrimony seldom exhibited in the records of courts. Thomas J. Worrell, Esq., was appointed examiner, and it was directed that all the testimony theretofore taken by the auditor be laid before him. Afterwards the same gentleman was appointed master. In the opening language of his report he says: "By the examiner's report it appears that the entire record of the Powel assigned estate in this court, and the proofs taken at the several audits, shall be treated as before him, in order to help him in finding the facts, and in forming his opinion upon the case; so that every paper filed in the cause is now practically before the master for his determination, and accordingly he proceeds to pass upon them as directed." The master, then, in a most elaborate report. proceeds to state his findings of fact on the issues raised by the petitions and answers for removal. In the course of the report he undertakes to review, pass upon, and condemn some of the findings of fact and conclusions of law by the auditor on the first and second accounts. He points out where, in his judgment, the auditor committed grave errors in both his facts and law. During the course of the proceedings before him the auditor had prepared what is termed an "interlocutory report" for the court. It was intended by the suggestion in this paper to move the court to direct a form of notice to be given creditors as to the audit. As

counsel immediately agreed upon the form of notice, this report was not presented, but is here upon the record as one of the exhibits of the cause. While vindicating the integrity, it reflects somewhat severely on the business management of the assignee. The master regrets this paper was not withdrawn and destroyed at the time counsel agreed upon the form of notice, as it only tended to encourage litigation. He says of this paper: "It was unfortunately violent in its insinuations, and, as it was soon shown, unwarranted by the facts of the case, the improvident statements of which had been derived somewhat from sources beyond the regular course of the audit. *** The proposed interlocutory report was due to a misconception of matters of fact, and to mistaken conclusions upon matters of suspicion." The master further characterizes the litigation as experimental; speaks in a tone of disapproval of the complaining creditor for calling the respondent and its agents as witnesses, and interrogating them with a view of discrediting their answers to the petitions. After Larrating the course of management, he announces this conclusion: "The master has. without difficulty, reached the conclusion that the assignee has done nothing to bring it within the provisions of the act of June 14, 1836, whereby neglect or mismanagement of a trust estate are declared to be grounds for dismissal. It has not been seriously contended at the argument that any offense greater than neglect and mismanagement could be charged. The proof is overwhelming that an extraordinary degree of care, and conscientious and remarkable skill in management, are to be ascribed to the assignee." He then recommends that the petitions be dismissed at the costs of the petitioners. The decree suggested by the master was adopted by the court. The material exceptions by the assignee to the report of the auditor on the second account were sustained, and the report set aside, and the second account confirmed absolutely. From the different formal orders of the court below the Houtzdale Bank takes no less than 12 appeals. All the questions raised by them are embraced in, and can be considered in disposing of, the decree overruling exceptions to auditor's report, and confirming absolutely the first and second accounts, which is appeal No. 12; and from the decree overruling exceptions to the report of the master, and dismissing the petitions for the removal of the assignee, which is appeal No. 11.

The petitions for removal were presented under the eleventh section of the act of 14th June, 1836, which enacts that: "Whenever it shall be made to appear in a court of common pleas having jurisdiction *** that such assignee or trustee is wasting, neglecting or mismanaging the trust estate ** it shall be lawful for such court to issue a citation to such assignee or trustee to appear before the court at a time to be therein named;

to show cause why he should not be dismissed from his trust. On the return of such citation, the court may require such security, or such other and further security, from such assignee or trustee as they may think reasonable, or may proceed at once to dismiss such assignee or trustee from the trust." Under this act the petitions of these appellants for the discharge of the assignee were presented. This was after two accounts had been filed by the assignee. Then followed, on January 10, 1891, petitions by other creditors for the discharge. As before noticed, in the meantime, the two accounts by the assignee, to which exceptions were filed, had been referred to E. Spencer Miller, Esq., as auditor, for adjudication. He had made two reports, --in the last one, had surcharged the assignee with $2.313,218.89,-and exceptions were filed to this report, which were pending when, on January 24, 1891, Thomas J. Worrell, Esq., was appointed an examiner to take testimony. By an order of the court made the same day, all the testimony and exhibits produced before the auditor were directed to be treated as evidence before the examiner. Then, afterwards, the examiner is appointed master, and as such passes on all the evidence, and reviews the findings of the auditor.

The creditors had averred against the assignee illegal payments of the trust money to itself; concealment of the true value of the assets; favoritism towards the assignors, in employing them at large salaries; excessive charges for commissions and counsel fees; reckless sales, at grossly inadequate prices, of portions of the assets; and other charges. Whether the evidence sustained all or any one of these averments was solely for the court to determine from an impartial consideration of it. We are very decided in our opinion that under the act the duty of consideration of the testimony, and the formation of opinion upon it, cannot be delegated by the court to any appointee. It is doubtless within the power of the court, and properly so, to appoint an examiner to reduce to writing the evidence offered in support of the petition, that it may be presented in an orderly form for the consideration of the judge who passes upon it; but the right to act through another, by appointment, extends no further. The petitioning creditor, then, has the right to the best judgment of the court on his proofs, uninfluenced by the opinion of any other person on the same proofs. Here, the gentleman appointed master passes on the evidence touching every averment, discusses its relevancy and significance, and in no doubtful terms gives his opinion as to the truth or falsity of the charges. He may have been a very capable officer, and in every respect fitted to exercise the judicial function attempted to be conferred upon him; but his opinion is not what these appellants had the right, under the law, to ask on their complaint. It is the opinion of an officer wholly

unknown to the law, which has prompted and framed the judgment. Nor does the fact that the evidence on which the opinion of the master was based was afterwards submitted to the scrutiny of the court help the matter. This evidence went before the court, accompanied by inferences, argument, and a judgment as to the fact, by one who stood as a disinterested officer. Necessarily, from the very composition of the human mind, the tendency is to give weight to the opinion which comes before us as the result of an impartial and disinterested deliberation. The petitioners' case was prejudged before it reached the court, which alone, under the statute, had the duty of determining whether the complaint was well founded. It was error to ask the opinion of a master on a matter which was solely for the opinion of the court on the facts; to invite another to suggest a judicial decree which the law, in effect, declared must originate in the mind of the court. As the master had no authority to tell the court what to do in reference to the discharge of the assignee, much less had he power to review the findings and conclusions of the auditor then pending for consideration in court. Therefore, we eliminate and put to one side his opinions, and take the facts bearing on the issue raised by the petition and answers. As to the auditor's report, and exceptions thereto, they must stand on the facts developed at the audit, and be adjudicated accordingly.

The prominent fact, and the one which, without doubt, suggested, and to a great extent stimulated, this litigation, is the gross disparity between the assets, when converted, and their appraised value. The appraisement of the property passing into the hands of the assignee was greatly in excess of any probable realization. The amount of the inventory was $4,311,579.15. The actual indebtedness approached $1,700,000, made up of liens. by mortgage, judgment, and mechanics' liens, about $700,000, and unsecured debts of nearly $1,000,000. As indicating how unreliable was this appraisement as a basis of value for payment of debts, we note the Sterling No. 1: Appraised value...... Selling price ... Ramey lease appraised

value Surrendered to discharge a debt of...

$50,000 00

$496,495 23

268,998 05

16,000 00 $66,000 00 $765,493 28

These two properties had been disposed of before the second account was filed, and not two years after the assignment, for less than 9 per cent. of their appraised value,a loss of about 91 per cent. The blast furnaces and all the coal and ore lands appurtenant, with improvements, were valued by the appraisers at $2,313,218.19. They were transferred to the Powelton Iron Company for $900,000, a little over 40 per cent. of the