act-1901-0-231•Pennsylvania Act 1901-231 — INSOLVENCY ACT
Act text
INSOLVENCY ACT
Act of Jun. 4, 1901, P.L. 404, No. 231 Cl. 39
AN ACT
Relating to insolvency; embracing, among other matters,
voluntary assignments for the benefit of creditors, and
adverse proceedings in insolvency by creditors; forbidding,
also, certain preferences; providing for the distribution of
the insolvent's estate, and in certain contingencies
relieving him, and others liable with him, from further
liability for his or their debts.
Section 1. Be it enacted, &c., That if any person, persons,
firm, limited partnership, joint-stock company or corporation,
being insolvent or in contemplation of insolvency, with a view
to give a preference to any creditor or person having a claim
against, or who is under any liability for, such insolvent,
shall procure, suffer or permit any judgment to be entered, by
confession or otherwise, or any execution to be levied, or any
attachment or sequestration to be made of any part of his, their
or its real or personal property, or shall make any payment,
pledge, assignment, transfer, conveyance or encumbrance thereof,
either absolutely or as collateral security for a debt then
existing, whether due or not, such judgment, execution,
attachment, sequestration, payment, pledge, assignment,
transfer, conveyance, or encumbrance shall inure to the benefit
of all the creditors of such insolvent, if an assignment for the
benefit of creditors be made or proceedings in insolvency be
commenced within four months after such judgment, execution,
attachment, sequestration, payment, pledge, assignment,
transfer, conveyance, or encumbrance shall have been entered,
issued, commenced, made or recorded, and in the case of personal
property exclusive possession given.
Section 2. If any person, persons, firm, limited
partnership, joint-stock company or corporations, being
insolvent or in contemplation of insolvency, with a view to give
a preference to any creditor or person having a claim against,
or who is under any liability for, such insolvent, shall
procure, suffer or permit any judgment to be entered, by
confession or otherwise, or any execution to be levied, or any
attachment or sequestration to be made of any part of his, their
or its real or personal property, or shall make any payment,
pledge, assignment, transfer, conveyance, or encumbrance
thereof, either absolutely or as collateral security for a debt
then existing or about to be created, and if the aforesaid be
known to such creditor, who thereby collusively attempts to
obtain for himself or others a preference over other creditors,
such judgment, execution, attachment, sequestration, payment,
pledge, assignment, transfer, conveyance, or encumbrance shall
inure to the benefit of all the creditors of such insolvent, if
an assignment for the benefit of creditors be made or
proceedings in insolvency be commenced within four months after
such judgment, execution, attachment, sequestration, payment,
pledge, assignment, transfer, conveyance, or encumbrance shall
have been entered, issued, commenced, made or recorded, and in
the case of personal property exclusive possession given. A
presumption of such knowledge and intention shall arise, by
reason of the fact of such insolvency, if the consideration be
grossly inadequate, or if such judgment, execution, attachment,
sequestration, payment, pledge, assignment, transfer,
conveyance, or encumbrance shall not have been entered, issued,
commenced, made or recorded, and, in the case of personal
property, exclusive possession be not given at or about the time
of the creation of the debt, or if the transaction shall have
not have been made in the usual and ordinary course of the
business of such insolvent. But nothing herein contained shall
in any manner affect any judgment, payment, pledge, assignment,
transfer, conveyance, or encumbrance taken in good faith,
without such knowledge or intention, when a debt is created or
about to be created, if entered, made or recorded, and in the
case of personal property exclusive possession be given at or
about that time.
Section 3. Any person, persons, firm, limited partnership,
joint-stock company or corporation may make an assignment of
his, their or its property to one or more disinterested persons,
as assignees, not exceeding three, for the benefit of his, their
or its creditors; but, except as herein otherwise provided, all
preferences or conditions therein contained shall be wholly
void, and such assignment shall unconditionally inure to the
benefit of all the creditors accepting a dividend, as in this
act provided. An assignment of a portion of such property in
trust, for the benefit of the creditors, or any of them, however
expressed, shall be deemed an assignment of the whole estate,
and shall be recorded in the same counties, with the same
effect, as a general assignment; but a debtor may assign any
part of his estate to certain creditors, or in trust for them,
if at the time of so doing he be solvent, or the same be not in
contravention of the other provisions of this act.
Section 4. Any member or members of a partnership, limited
or otherwise, except the associations created under the act of
second June, one thousand eight hundred and seventy-four, and
its supplements, or any one or more joint, or joint and several
debtors, may make an assignment of the assets in which he or
they are interested with others, for the benefit of their
creditors, in the manner and with the effect herein provided;
but any other person or persons jointly, or jointly and
severally, interested in such assets, may, within fifteen days
after notice thereof, upon petition to the court and with notice
to the assignors, give security to indemnify and save harmless
the assignors, and to pay all debts, or to obtain the release of
the assignors therefrom, within such time as the court shall
designate, not exceeding six months; whereupon the assignees
shall forthwith transfer to those entering such security all the
assets passing by the assignment, freed and clear of all claims
upon the part of the assignors and assignee, but the rights of
the creditors shall remain as if no assignment had been made.
In case of such an assignment, the assignee shall forthwith give
written notice to the other person or persons jointly, or
jointly and severally, interested in such assets, and shall file
of record an affidavit thereof, and the fifteen days shall be
computed from the time of such filing. If the assignment be set
aside, the costs incurred, including the reasonable expenses and
the fees of the assignees, shall be paid as the court shall
direct.
Section 5. Any person arrested on civil process may make an
assignment for the benefit of his creditors in the manner herein
set forth and may thereupon present his petition to the court
issuing the same, accompanied by the assignment, inventory,
schedules, and oath required, or copies thereof, if the process
was issued by a different court from that which has jurisdiction
of such assignment, and praying a rule to show cause why he
should not be discharged from arrest. The court to which the
petition is presented shall grant the rule, returnable at some
convenient time, unless the case is one requiring the
petitioner's imprisonment, shall discharge the petitioner
pending the hearing of said rule, upon his paying the fees due
the jailer, if any, and upon his entering such security for his
appearance, surrender, and compliance with the decrees of the
court, and his requirement of this act, as the court shall deem
requisite. Actual notice of the rule shall be given to the
plaintiff in the process, or his counsel of record, and to all
creditors whose addresses are known to the petitioner; and
publication thereof shall be made twice in a weekly newspaper
published in the county, and twice in a daily newspaper
published in the county, if there be any, and once in the legal
periodical, if any, designated by the court, and an affidavit of
such service and publication shall be filed in the cause at
least three days before the day fixed for the hearing. Notice to
creditors non-resident in the county may be made by registered
letter. Upon the hearing of the rule, which shall be at the bar
of the court, and at which the petitioner shall answer all
questions put to him, and shall produce all papers and books
required of him, if it shall appear to the court that the
petitioner has duly assigned all his property for the benefit of
his creditors, that he has not violated any of the provisions of
this act, and that all the claims against him would be
discharged by the creditors accepting a dividend, as by this act
provided, the court shall forthwith discharge him from arrest;
and he shall not thereafter be liable to arrest in said
proceedings, or upon any claim existing at that time, unless
upon petition to said court, and with notice to the insolvent,
it shall afterwards be made to appear that, under this act, he
should have been or should be imprisoned. If, however, he shall
refuse to answer relevant questions, or to produce his books and
papers, or it shall appear that he has violated any of the
provisions of this act, or that any of the claims against him
would not be discharged by the creditors accepting a dividend,
as by this act provided, he shall be discharged from arrest only
upon undergoing such imprisonment not exceeding ninety days, as
the court shall require. If the petitioner fails to give notice
as required, or to appear, or to surrender himself within forty-
eight hours, or to comply with the decrees of the court or the
provisions of this act, his bond shall thereby be forfeited; and
recovery may be had thereon by the assignee, for the use of all
the creditors of the insolvent, and he may be rearrested by an
alias or pluries writ. A surrender, to be valid, must be
accompanied by a certified copy of the order of the court, or of
the writ under which the arrest was originally made. The
assignment, once made, shall proceed in the usual course. The
benefits of this section shall not extend to any person who has
been attached for failure to comply with an order or decree
requiring him to make an assignment, execute a conveyance, or to
do any other specific act, until he shall, in fact, have done
so, nor shall it in any manner affect the liability of the
petitioner to imprisonment for crime.
(5 amended Jun. 9, 1911, P.L.728, No.301)
Section 6. The court of common pleas of any county, in which
any person may be confined by sentence or order of any court of
this Commonwealth until he restore any stolen goods or chattels,
or pay the value thereof; or in which any person may be confined
for the non-payment of any fine or of the costs of prosecution,
or upon conviction of fornication and bastardy, and for no other
cause, shall discharge such person from confinement on his
making application and conforming to the provisions herein
directed in the case of insolvents, who have been arrested on
civil process: Provided, That where such person shall have been
sentenced to the payment of a fine, or after a conviction of
fornication and bastardy, he shall not be entitled to make such
application until after he shall have been in actual confinement
for a period of not less than three months, except in case of a
fine not exceeding fifteen dollars, exclusive of costs, in which
event the actual confinement need not exceed thirty days.
Section 7. Any creditor of an alleged insolvent may, in the
court of common pleas of the county where the alleged insolvent
resides or his principal place of business is situate, by
petition, under oath, aver that such person, persons, firm,
limited partnership, joint-stock company or corporation is
insolvent, has not made an assignment for the benefit of his,
their or its creditors, is resident or is carrying on business
in said county, and:--
(1). Has called a meeting of his creditors for the purpose
of compounding with them, or has exhibited a statement showing
his inability to meet his liabilities, or has otherwise
acknowledged his insolvency; or,
(2). Has absconded or is about to abscond with intent to
defraud any creditor, or to defeat or delay the remedy of any
creditor, or to avoid being arrested or served with legal
process, or conceals himself within or remains out of the
Commonwealth, with like intent; or,
(3). Secretes or is about to secrete any part of his estate
or effects, with intent to defraud his creditors, or to defeat
or delay their demands, or any of them; or,
(4). Has assigned, removed or disposed of, or is about to
assign, remove or dispose of, any part of his property, with
intent to defraud, defeat or delay his creditors, or any of
them; or,
(5). Has been actually imprisoned for more than thirty days,
in a civil action, or, being arrested therefor, has escaped from
custody; or,
(6). Has refused or neglected to comply with any order,
judgment or decree for the payment of money, and an execution
therefor has been returned unsatisfied; or,
(7). Has suffered or permitted any attachment or
sequestration to remain against any of his property, without
attempting to dissolve, by rule taken for that purpose, or upon
entering security for a period of thirty days, or having taken a
rule to dissolve which has been discharged by the court, has not
entered security within twenty days thereafter; or,
(8). Has made any pledge, assignment, transfer, conveyance
or incumbrance of the whole or a large part of his stock in
trade or property, without being able to meet his liabilities
and without the consent of his creditors, either in payment of
or as security for a debt then existing, or with the intent to
prefer one creditor to another, or out of his usual course of
business, or for the benefit of himself or family.
Whereupon, the court shall grant a rule to show cause why a
receiver should not be appointed for the estate of such alleged
insolvent, and all legal proceedings there against, if any,
vacated and set aside. Notice of said rule shall be given to the
alleged insolvent and all other persons interested. If the facts
averred are not denied, under oath, the court shall make such
order as the facts averred or shown may require. If they are
denied, testimony shall be taken at the bar of the court or by a
law judge thereof, and the court shall make such order or decree
as the facts found will justify, and may enforce the same by
attachment of the person or sequestration of the property of the
party in default. Any person, without foundation, maliciously
invoking the action of the court under this section, shall be
liable for a sum equal to double the injury actually sustained
by the alleged insolvent.
Section 8. In such proceedings, as soon as the fact of
insolvency be made to appear, the court shall forthwith appoint
a disinterested person as receiver, unless the insolvent has
made an assignment for the benefit of his creditors or has given
security to pay petitioner's debt. Property of a perishable
nature or likely to deteriorate in value may be sold by leave of
the court, the proceeds thereof to be substituted in lieu
thereof.
Section 9. All such assignments shall be acknowledged before
some person authorized to take the acknowledgment of deeds, and
shall be forthwith recorded in the office of the recorder of
deeds, where the debtor shall reside or his principal place of
business is situate. Within five days thereafter a copy of said
deed shall be filed by the assignor in the court of common pleas
of the said county together with: (one), A schedule of all the
assets of said debtor, whether real or personal, and wheresoever
situate, whether in possession, reversion, remainder or in
trust, and whether presently valuable or otherwise, and stating
what evidences there are or should be thereof, the present value
as near as may be, and the liens or claims if any there against;
(two), a list of the creditors, with the amounts of their
claims, the exact addresses of the creditors, how and where the
debts arose, what evidences thereof there may be, and what
security or claims against other persons the creditors may have
for the payment of the same or any part thereof; (three), a full
statement of the cause of his insolvency; (four), a list of all
the judgments confessed, or payments, pledges, assignments,
transfers, conveyances or encumbrances made by him in payment
of, or as security for, a pre-existing debt, or for the benefit
of himself or family, or with intent to prefer one creditor to
another, or out of the usual and ordinary course of his
business, within three months prior to his assignment, and the
consideration therefor. And attached thereto shall be an oath by
the insolvent in the following form:
I do swear (or affirm) that all the schedules above set forth
are in all respects just and true; that I have not at any time,
or in any manner whatsoever, since my insolvency, disposed of or
made over any part of my estate for the future benefit of myself
or my family, or in order to defraud any of my creditors; that I
have, in no instance, credited or acknowledged a debt for a
greater sum that I honestly and truly owed; that I have not
preferred or attempted to prefer one creditor over another since
my insolvency, except as in said schedule set forth; that I have
not withheld, concealed, entrusted, or in any way disposed of or
encumbered, any of my property which should justly be delivered
over for the benefit of my creditors; that I have not changed,
altered or falsified any of my books or papers, but have
delivered the same to my assignees for the purposes of my
estate; and that if any further assets of my estate come to my
knowledge I will forthwith disclose or deliver the same to my
assignee. So help me God (or, and so I do affirm).
Section 10. The assignment or a certified copy of the decree
of the court appointing a receiver shall be recorded in the
county where the insolvent resides, or his principal place of
business is situate, and in every county where he owns real
estate. A failure to record shall not in any manner affect the
assignment; but if the assignee fails to record it within
fifteen days after its delivery, his compensation as assignee
shall shall be reduced by a sum sufficient to pay the costs,
expenses and counsel fees of any creditor, or creditors, who in
ignorance thereof bring suit or proceed with one already
brought, and such sums shall be paid to such creditors. Any
creditor may compel the production and recording of an
assignment, by petition to the proper court of common pleas, at
the expense and cost of the defaulting assignee, including a
reasonable counsel fee to such creditor's attorney.
Section 11. The assignee or receiver shall, immediately
after his appointment, take, subscribe to, and file in the
proper court, an oath or affirmation in the following form:
I, A. B., do solemnly swear (or affirm) that I am legally
qualified to act as assignee (or receiver) of the estate of C.
D., an insolvent; that I am not interested therein or adversely
thereto; that I will faithfully manage said estate for the
benefit of the creditors thereof, in the manner provided by law,
and will fully and accurately account for all the assets. So
help me God (or, and so I do affirm).
Section 12. The assignee or receiver shall, before entering
on the performance of his duties, give bond, with sufficient
sureties, to the Commonwealth, for the use and benefit of all
parties in interest, in at least double the value of the
insolvent's estate, as known to him, conditioned as follows:
The condition of this obligation is such that if the above
bounden A. B., assignee (or receiver) of the estate of C. D., an
insolvent, has discharged and shall faithfully discharge his
duty as assignee, shall faithfully account for all moneys or
assets received or to be received by him, or in which the estate
of said insolvent is in any manner interested, and has
faithfully executed and shall faithfully execute the trust
confided to him, in the manner provided by law, then this
obligation to be void; otherwise, to be and remain in full force
and effect.
If additional assets are discovered after the giving of said
bond, or the assets realize much more than their estimated
value, or the court shall be of opinion that any of the bonds
theretofore given is, for any cause, insufficient, the assignee
or receiver shall give a new bond or bonds and with like
conditions. Suits may be brought thereupon, as in the case of
other official bonds, until the amounts thereof are exhausted;
but neither said suits, nor the exhaustion of said bonds, shall
in any way limit the liability of such assignee or receiver.
Section 13. The insolvent shall forthwith deliver to the
assignee or receiver all his assets; including all vouchers,
notes, bonds, bills, securities or other evidences of debt,
documents, muniments of title, and writings in any way relating
to, or having any bearing upon, or connection with, his estate;
all books of account, patents, copyrights, assignments, leases,
agreements, and generally, everything which relates to the
assets, or will assist the assignee or receiver in collecting
the same, or in ascertaining the true amount due to the
creditors of the estate. The said insolvent shall, from time to
time, at the expense of the estate, make and execute such deeds
and writings, endorse such bills and other negotiable papers,
draw such checks and orders for money deposited in banks and
elsewhere, and do all such other lawful acts and things as the
assignee or receiver may reasonably require, and which may be
deemed useful for confirming the assignment, or to enable the
assignee to demand, recover and receive all the estate and
effects of the insolvent, especially any part thereof which is
without this Commonwealth. The court may, by rule to show cause,
followed by attachments for contempt, compel the insolvent to
comply with its orders in this regard; but his failure or
refusal so to do, either before or after such order, shall in no
wise affect or impair the right of the assignee or receiver to
recover any of the assets by suit, in his own name.
Section 14. Immediately after his appointment, the assignee
shall give written or printed notice to all the creditors known
to him of the fact of his appointment; notifying them that on a
given day and hour, not more than twenty days distant, and at a
given place, particularly designated, a meeting of all the
creditors will be held, for the purpose of selecting an
additional assignee or assignees, if they deem the same to be
necessary. At such meeting a majority in amount of the creditors
present, in person or by proxy,--partnerships or joint creditors
however having but one vote each,--may select as many more
assignees as there were assignees named in the original deed or
assignment. The assignees originally named shall, by deed duly
executed, acknowledged and recorded, transfer to those thus
selected an equal and undivided interest in said estate, and all
the assignees thus named and selected shall thereafter act as
joint assignees, with the same effect as if all were originally
named in the original deed of assignment.
Section 15. The receiver within twenty days after his
appointment, and the assignees within twenty days after the
meeting of the creditors, shall file a sworn inventory of the
estate, with its then present value. For the purpose of enabling
them to do so, or to file any supplementary inventory, they are
hereby empowered to examine the insolvent, under oath, as to any
matter appertaining to such assets, and by leave of the court to
call before them, by subpoena, with or without his books and
papers, or the books and papers of any firm, limited
partnership, joint-stock company, or corporation with which he
is connected; and examine also, under oath, on the same subject,
any person who they have reason to believe has knowledge of
other or further assets of the insolvent's estate, or can give
them information touching the same. No objection to such
examination shall be made on the ground that a disclosure would
tend to bring the witness into contempt, or disgrace or convict
him of crime; but the information thus obtained shall not be
used against him in any other proceeding. Any witness may
decline to answer any question, or produce any books and papers,
which, aside from the foregoing, he would not be required to
answer or to produce in court upon a trial involving the same
questions. Every witness, including the insolvent, shall be
entitled to receive, out of the insolvent's estate, the usual
witness fee and mileage for his attendance for this purpose.
Section 16. Upon application of the assignee or receiver,
the court shall vacate and set aside all attachments,
executions, sequestrations or other legal proceedings not wholly
completed, and all money in court or in the hands of the
sheriff, by virtue thereof, shall be paid to such assignee or
receiver. The assignee or receiver shall pay, out of so much of
the insolvent's estate as was attached, sequestered or levied
upon, or was received from the court or sheriff, the legal cost
of such vacated proceedings, as a preferred claim if the
creditor's claim is afterwards allowed in the distribution of
the insolvent's estate; and the creditor's claim shall also be
paid thereout, if it shall be decided that, notwithstanding the
provisions of this act, he was entitled to a preference.
Section 17. An assignee or receiver for the benefit of
creditors shall be under the control of the proper court of
common pleas; shall be the representative of the creditors of
the insolvent, and entitled by proper legal steps, in his own
name as assignee or receiver, to have vacated and set aside for
the benefit of all the creditors any judgment, execution,
attachment, sequestration, payment, pledge, assignment,
transfer, conveyance or encumbrance which heretofore could have
been avoided by the creditors, or any of them, or by which it is
attempted to give one creditor preference over another, or
which, by this act, inures to the benefit of all the creditors
of such insolvent. He shall be vested with all the property of
the insolvent, real or personal, which the insolvent could have
sold, assigned or conveyed, or which might have been taken in
execution, or otherwise made liable for his debts or
engagements, or any of them, at law or in equity, including
patents and copyrights, royalties, debts due to or for the
insolvent, liens or securities therefor, and rights of action or
redemption; and, by leave of and subject to the control of the
court, may carry on any business in which the insolvent may have
been engaged. Every beneficial power and the interest of any
person entitled to compel the execution of a trust power, shall
pass to the assignee or receiver of the person in whom such
power or interest is vested. He may, by bill of discovery or
other legal or equitable proceeding, obtain information of, and
sue for and recover, in his own name as such assignee or
receiver, any assets which the insolvent might sue for and
recover, or which any of his creditors might make available in
payment of their claims; and any recovery had shall inure to the
benefit of all, in proportion to their respective demands. And
he shall be liable to suit, in his representative capacity, by
any person seeking to recover specific property, if such
property could have been recovered as against the creditors of
the insolvent levying an execution thereon: Provided,
I. That no purchase or assignment of the real or personal
property of such insolvent, made bona fide and for a valuable
consideration, before the recording of the assignment or of the
appointment of a receiver in the county where such purchase or
assignment is made, by or to any person not having actual notice
or knowledge of such insolvency, or of the assignment or
petition, shall be invalidated or impeached thereby, unless
voidable under the other provisions of this act:
II. That if any person indebted to such insolvent, or having
possession of any of his property, shall bona fide pay the said
debt or deliver the said property to the said insolvent, without
having had actual notice or knowledge of such petition or
assignment, he shall not be liable to pay or deliver the same to
such assignee or receiver.
Section 18. The assignee or receiver within one year after
his appointment, unless the court upon cause shown shall extend
the time, shall collect all the moneys due to the insolvent;
shall sell at public or private sale all the stocks, bonds,
mortgages, evidences of debt and other like property of the
insolvent, and shall sell at public sale the real and other
personal property of the insolvent, unless upon cause shown the
court shall authorize a private sale. After the expiration of
that time the court may, upon cause shown, authorize a public or
private sale of all the assets, of whatever kind or character
the same may be and wherever situate. All sales shall be for
cash unless the court shall otherwise authorize. The purchaser
from the assignee or receiver may maintain any action, regarding
the property purchased, in his own name, or continue any action
already brought to his use, with the same rights and to the same
effect as the assignee or receiver might or could do, but shall
be liable for all costs accrued and to accrue in case of an
unsuccessful issue.
Section 19. An assignee or receiver may compound or
compromise any debt or claim due to the insolvent, if done in
good faith and after proper inquiry; and, upon payment of the
amount due, may require all mortgages, conditional contracts,
pledges and liens, of or upon any real or personal property of
the insolvent, to be satisfied, cancelled or assigned to him, as
he may deem best, or he may sell the property subject thereto.
Where any realty is subject to liens or claims which, under
existing laws would be discharged by a judicial sale, such liens
and claims shall be unaffected by a private sale of such realty;
but a public sale may be made thereof, freed and clear of such
liens or claims, by leave of court, after notice to the
claimants; and the fund realized shall take the place of the
liens or claims, and be distributed on the settlement of the
account of the assignee or receiver, to the parties found
entitled thereto. Executions issued on such liens or claims may
be stayed by the court, to enable the property to be sold by the
assignee or receiver. If a creditor purchases property upon
which he has a lien or claim, he shall, after payment to the
assignee or receiver of all the costs and expenses of the sale,
and the amount of all prior liens or claims discharged by the
sale, if any, be entitled to receipt to the assignee or receiver
to the extent of his lien or claim, upon giving security, to be
approved by the court, conditioned to make good the amount
receipted for if it shall afterwards be made to appear that, for
any cause, he should not be allowed such preference.
Section 20. No assignee or receiver shall purchase, directly
or indirectly, any part of the assets of such insolvent except
by leave of court, after notice to all the known creditors; nor
shall he employ any person as manager or attorney who is related
to the assignor, or has any interest, individually or as
attorney, for any particular creditor, or in opposition to an
equal distribution of the whole of the assignor's estate among
all his creditors.
Section 21. The assignee or receiver shall as soon as may be
after receiving any money belonging to the estate, deposit the
same in some bank or trust company in good standing, in his name
as assignee or receiver, and shall, as far as practicable keep
all the assets of said estate separate and apart from his own,
or designated by appropriate marks, so that they may be easily
and clearly distinguished as the property of the insolvent's
estate.
Section 22. The assignees immediately after the meeting of
the creditors aforesaid, and the receivers immediately after
their appointment, shall give written or printed notice to all
the creditors known to them, requiring such creditors, within
six months from the date of such notice, to make a proof of
their claims in the manner hereinafter set forth, or be debarred
from coming in upon the fund. They shall also, at the same time,
advertise such notice in one weekly newspaper in said county,
and in a daily newspaper published in the county, if there be
any, and in such legal periodical, if any, as shall be
designated by the court, once a week for four successive weeks.
(22 amended Jun. 9, 1911, P.L.728, No.301)
Section 23. No claim against the insolvent's estate shall be
allowed unless the claimant, or some one for him if he cannot do
so, shall furnish to the assignee or receiver a statement of his
claim, together with a copy of any book entries appertaining
thereto, or any note or other writing evidencing the same,
verified by an affidavit in the following form:
I, G. H., do solemnly swear (or affirm) that the above is a
true statement of my claim against the insolvent estate of E.
F.; that there are no credits or allowances thereagainst, except
as therein set forth; that I have not directly or indirectly
made or entered into any bargain, arrangement or agreement,
express or implied, to take or receive, directly or indirectly,
any money, property, or consideration whatever, to or for
myself, or to or for any other person, firm or corporation
whatsoever, other than my dividend as a creditor of said estate,
and that there is no collateral security for said indebtedness,
or any part thereof, held by me or any one else, other than as
above set forth. So help me God (or, and so I do affirm).
If such claim and affidavit be in proper form, and the
balance claimed agrees with the amount stated by the insolvent,
or upon consultation between the creditor and the insolvent the
amount is agreed upon, the claim shall be allowed if presented
before the filing or audit of the account, unless objected to in
the manner hereinafter set forth.
Section 24. As soon after the expiration of said year as the
assets shall have been collected, or whensoever thereafter
required by the court, the assignee or receiver shall file his
account, and a list of the claims proven before him, in the
proper court, duly sworn to by him as correct in all
particulars; and if there are no claims remaining unadjusted, he
shall give a written or printed notice to the insolvent and all
the creditors known to him, in the following form:
You are hereby notified that my account and a list of the
claims proven before me has been filed in the court of common
pleas of county, as of Term, eighteen hundred
and , Number , and that said account will be
allowed and distribution of the balance shown thereby will be
made among the creditors therein named, according to their
respective claims, on , the day of ,
eighteen hundred and , unless objections be filed
thereto or to any of said claims, before that time.
Section 25. The time fixed in said notice shall be between
three and five weeks distant from the date thereof; and if there
shall be unrepresented creditors, whose addresses are unknown,
an advertisement thereof shall be inserted in one newspaper,
published in the county, and in the legal periodical, if any,
designated by the court, once a week for three successive weeks,
prior to the time of meeting. On the date fixed, if no
objections have been filed, the account shall be confirmed
absolutely; the assignee or receiver shall prepare a schedule of
distribution, which shall be approved and filed, and shall
distribute the assets in his hands in accordance therewith.
Section 26. If at the time of filing the account and list of
proved claims, there are claims which remain unadjusted, or if
objections be filed, the court shall hear and decide the
disputed matters, or, in its discretion, may appoint an auditor
for that purpose. The court or the auditor shall fix a time and
place for the hearing, of which three weeks' notice shall be
given by the assignee or receiver to the insolvent and all the
creditors known to him, in the following form:
You are hereby notified that the court will (or, I. J. has
been appointed auditor to) audit, settle and adjust my account
as assignee (or receiver) of the estate of E. F., an insolvent,
and make distribution among the creditors of said estate, and
that a meeting for that purpose will be held at in the
of , on the day of , eighteen hundred and
, when and where you may be heard if you so desire.
If there shall have been no advertisement of the filing of
the account, said notice shall be advertised, also in one
newspaper published in the county, and in the legal periodical,
if any, designated by the court, once a week for three
successive weeks prior to the meeting.
Section 27. The hearing before the court or auditor, in case
of objections filed, shall be confined thereto, unless the
court, upon cause shown, shall give leave to file other
objections. If objections be made to any claim duly verified, as
aforesaid, whether upon objections filed or otherwise, express
notice and an opportunity to defend the same shall be given to
such creditor. The costs before the court or auditor shall be
charged upon the fund or against any party appearing, according
to equitable principles.
Section 28. All claims shall be made as of the date of the
distribution of the fund, interest being allowed or discount
being made to that time. A creditor having a claim for which the
insolvent is primarily liable, and others secondarily, may prove
for his whole claim; but, if the insolvent is only secondarily
liable, the value of the liability of the primary debtor shall
be adjusted between the creditor and the assignee; or, if the
valuation cannot be agreed on, the same shall be submitted to
the appropriate tribunal, and a dividend shall only be awarded
to the creditor on the difference between such value, so
determined, and the amount of his claim. In like manner, any
collateral security held by any creditor for his debt shall be
valued by said tribunal, and if the security be retained by the
creditor his dividend shall be on the difference between his
claim and the value of his security, so ascertained: Provided,
That the creditor shall have the right to surrender his
security, and take a dividend on his whole debt. If such
creditor refuses to have his security valued or surrender the
same, he shall be excluded from participation in the fund.
Section 29. Any creditor who shall, upon such distribution,
present a claim, whether in judgment or otherwise, which shall
be so largely in excess of that which is actually due as to be
fraudulent and collusive, or shall assist others in so doing; or
shall collude with the insolvent to hinder, delay or defraud his
creditors, or any of them; or shall have received a preference
from the insolvent, in violation of the provisions of this act,
and shall not voluntarily surrender the same to the assignee or
receiver, shall be postponed to all other creditors on the
distribution of the insolvent's estate.
Section 30. At the time of receiving his dividend in case of
a voluntary assignment, each creditor shall sign triplicate
releases in the following form:
The undersigned creditors of E. F., an insolvent, for and in
consideration of the sums of money set opposite our respective
names, and received by us from A. B., assignee of the estate of
E. F., as insolvent, do hereby release the said E. F. from any
and every debt, demand and liability which we had or may have
had against him, at the date of his assignment, on the day
of , Anno Domini eighteen hundred and , whether due
or not; and hereby agree that no suit, action or execution shall
be maintained for or by reason of such debt, demand, or
liability, reserving, however, to ourselves the right to avoid
this release, upon showing any of the matters or things which,
under the insolvent laws, shall entitle us to retain our
respective claims against said insolvent, notwithstanding our
participation in the settlement of his estate.
Witness our hands, the dates set opposite our respective
names. One of said releases shall be filed in court, one shall
be retained by the assignee, and one shall be delivered to the
insolvent.
Section 31. An insolvent shall be entitled to the same
exemption out of the assigned estate as he would be, had an
execution been issued against him. Any lien or claim for wages,
for rent, of mechanics or material men, or otherwise, which by
virtue of any act of Assembly would be preferred in case of an
execution, shall retain its preference in case of an assignment,
and to the same extent. Rent accruing after the date of the
assignment, and wages necessarily incurred in service rendered
to or for the assignee or receiver, shall be paid as part of the
expenses appertaining to the assignment. Except as herein
otherwise provided, all and every interest, claim, and estate in
the property shall be discharged or divested by an assignee's or
receiver's sale, if it would have been discharged or divested by
a sale under an execution at the time of the assignment, and not
otherwise.
(31 amended Jun. 19, 1911, P.L.1069, No.817)
Section 32. Any person who shall discover to the assignee or
receiver any secreted property, real or personal, in the
possession or control of a third party, and in which the
insolvent estate has an interest, shall receive out of the
proceeds thereof, for so doing, an amount, to be fixed by the
court or auditor, at least equal to the commission of the
assignee or receiver in regard thereto.
Section 33. Nothing in this act shall be taken or understood
as discharging an insolvent from liability to such of his
creditors as do not choose to exhibit their claims, or who,
before the schedule of distribution is made or filed, withdraw
their claims; but, with respect to creditors who exhibit their
claims before a voluntary assignee, or an auditor appointed in
such case, and do not withdraw them as aforesaid, they shall be
wholly debarred from maintaining afterwards, by suit, action,
execution or otherwise, any claim existing at the time of the
assignment, whether due or not, unless he shall aver and prove:
(1). That said action is founded on the actual force, fraud,
malice, or deceit of the insolvent; or,
(2). That said action is founded on the embezzlement or
malfeasance of the insolvent; or, for libel, slander, malicious
prosecution, conspiracy, seduction or criminal conversation; or,
(3). That such action is founded on the purchase by the
insolvent of real or personal property, on credit and without
security therefor, when he had reasonable cause to believe that
he would not be able to pay therefor; or,
(4). That such insolvent has willfully sworn falsely in any
material fact appertaining to the settlement of his estate, or
has failed and refused to make all necessary conveyances to
enable the assignee to speedily and effectively settle the same;
or,
(5). That such insolvent fraudulently secreted, altered,
injured, defaced or destroyed any part of his estate; or any
books, documents, muniments of title, or writings appertaining
thereto, or permitted the same to be done; or has secreted,
conveyed or incumbered any part of his property, for the benefit
of himself or family; or has collected and retained any of the
assets of the assigned estate; or, in contemplation of
insolvency, has failed to keep the books of account and papers
usually kept by him in his business; or,
(6). That such insolvent has made any promise of future
advantage to any creditor, or has knowingly permitted others to
do so, to induce any creditor to participate in the settlement
of the assigned estate, and has failed to disclose the same to
the complaining creditor; or,
(7). That such insolvent, while knowingly insolvent or in
contemplation of insolvency, has in any manner preferred or
attempted to prefer one creditor to another, or permitted such
preference to be obtained by judgment, execution, attachment,
sequestration, or otherwise; or,
(8). That such insolvent has knowingly permitted a false or
exaggerated claim to be made against said estate; or,
(9). That such insolvent has absented himself or concealed
his property, to avoid an execution; or,
(10). That the insolvency arose from losses by gambling, or
in the purchase of lottery tickets; or,
(11). That such insolvent has previously been an insolvent,
and obtained a release of his debts under the provisions of the
insolvent laws.
But the benefits of this section shall not apply in favor of
any insolvent who was forced into the hands of a receiver by the
action of his creditors.
Section 34. In cases where the insolvent is primarily liable
for a claim proved against his estate, a discharge of that
liability, by the creditor accepting a dividend under this act,
shall not operate to release or discharge any person secondarily
liable for the same debt, contract, engagement or other
liability, if the participating creditor shall have given such
third party written notice and an opportunity to purchase the
claim and subrogate himself to the rights of such creditor; but,
in that event, such secondary liability shall remain, in like
manner as if such discharge had not taken place; but, if the
creditor does not give such notice, the discharge of the
insolvent from primary liability shall also operate to discharge
from liability the party secondarily liable.
Section 35. Whenever a majority in number and value of the
creditors of an insolvent, who has made a voluntary assignment
for the benefit of his creditors, shall consent in writing
thereto, it shall be lawful for the court, upon application of
such debtor, and notice thereof given to all undischarged
creditors, in the manner hereinbefore provided for giving notice
of the meeting of creditors, to make an order that the estate
and effects which such insolvent may afterwards acquire shall be
exempted, for the term of seven years thereafter, from
execution, for any debt contracted or cause of action existing
previously to such assignment; and if, after such order and
consent, any execution shall be issued for such debt or cause of
action, it shall be the duty of any judge of the court from
which such execution issued to set aside the same, with costs.
Section 36. If any such insolvent or his legal
representative shall satisfy the undisputed claims of his
creditors, and shall give security, to be approved by the court,
to pay those which are disputed, the court shall order his
estate and effects, not sold, to be restored to him or his legal
representatives; and he shall, by virtue of such order, be
seized and possessed thereof as of his former estate and title
thereto; and if, upon the final settlement of accounts by the
assignee or receiver, there shall be a surplus, after payment of
all the claims presented and allowed, the same shall be paid to
such insolvent or his legal representatives.
Section 37. Any creditor may, by petition, move the court to
discharge any assignee or receiver for dereliction of duty,
incompetency or other reason affecting the estate; or the
assignee or receiver may voluntarily petition for his own
discharge; and if the court shall be of the opinion that the
interests of the estate will be conserved by the appointment of
some other person in his place or stead, it shall grant the
prayer of such petition, and appoint a new assignee or receiver,
with like powers and duties as the one removed, upon entering
security as in the case of the original assignee; but such
removal shall be without prejudice to all claims upon said
assignee or receiver and their securities, growing out of their
performance or nonperformance of duty. The assignee or receiver
thus removed shall remain under control of the court, for the
purpose of compelling him to make all necessary transfers of the
assets of the insolvent estate to his successor or any others
interested therein, or to give needed information and assistance
in the settlement of the estate. If the assignee removed be the
one selected by the creditors, the new appointee shall be
selected in like manner.
Section 38. Any creditor may, in case of a vacancy in the
office of assignee or receiver, petition the court for the
appointment of a new assignee, whenever he may have reason to
believe that there are assets of the assigned estate that have
not yet been collected, or that any duties appertaining to the
office remain unperformed; and such appointment shall be made by
the court with the same effect as in a case of the original
appointment.
(39 repealed Jun. 3, 1971, P.L.118, No.6)
Section 40. If any insolvent shall be convicted of perjury,
in respect to any oath or affirmation taken by virtue of this
act, he shall be liable to arrest and committal on mesne
process, and to be charged in execution, in the same manner as
if he had not before been arrested or taken in execution, or as
if he had not made application for the benefit of the insolvent
laws; and, moreover, such person shall never afterwards be
entitled to his discharge as an insolvent debtor by virtue of
this act.
Section 41. A person shall be deemed insolvent, within the
provisions of this act, whenever the aggregate of his property,
exclusive of any property which he may have conveyed,
transferred, concealed or removed, or permitted to be concealed
or removed, with intent to defraud, hinder or delay his
creditors, shall not at a fair valuation be sufficient in amount
to pay his debts.
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