The opinion
Dissenting Opinion by
Me. Justice Horace Stern:
Wurzel, defendant, was, as the jury found, hopelessly insolvent; the testimony indicates that his assets were $543 and his liabilities, $893,356. Apparently a friend was willing to finance a settlement for him in the sum of $500 with the plaintiff Saving Loan and Building Association to which, together with other obligors, he was indebted on a $30,000 bond. While the amount accepted in settlement by the Association was obviously small in comparison with the amount of the debt, settlements of that nature are constantly made by receivers and liquidating trustees of failed institutions if, in their judgment, a small or even a nominal sum is the best that can be obtained under the circumstances.
The majority opinion holds that the settlement was absolutely void and of no effect either because (1) of fraud, or (2) of lack of authority on the part of those who accepted the settlement in behalf of the Association.
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(1) As far as the element of fraud is concerned, I have read and re-read the testimony but fail to find a scintilla of evidence that
Wurdel
was guilty of any fraud, that he had made any misrepresentation of any kind, that he had concealed any assets or in any manner did anything that was illegal or improper. The only fraud upon which the majority opinion relies as to this aspect of the case is that
after
the settlement was made the transaction was not adequately recorded on the books of the Association and that the $500 was not credited on the obligation in the Association’s books; the actual receipt, however, of the $500 by the Association is admitted. Assuming that the officers of the Association, whatever their reason may have been, acted negligently or in any manner improperly in regard to the recording of the transaction I fail to see how such conduct on their part could affect the settlement itself as far as Wurzel is concerned. Incidentally, even if there were any evidence of such fraud, that issue would have to be submitted to the jury and would not justify the court’s present action in directing a judgment for plaintiffs.
(2) Coming to the question of alleged lack of authority on the part of the President and the Secretary to make the settlement in behalf of the Association, the Act of May 12, 1925, P. L. 615, re-enacted by the Business Corporation Law of 1933, P. L. 364, section 305 and the Building and Loan Association Code of 1933, P. L. 456, section 314, provides that the by-laws of a corporation operate merely as regulations among the shareholders and shall not affect dealings with other persons unless such persons have actual knowledge of such bylaws; it further provides that any assignment or other instrument of writing executed or entered into between any corporation and any other person, when signed by the President and the Secretary shall be held to have been properly executed for and in behalf of the corporation. The majority opinion brushes these acts aside by the statement that “the knowledge of Wurzel., , , is
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written all over the transaction”. I fail to see in the record any testimony which gives support to that statement. Wurzel was a member of the Board of Directors in the years 1923 and 1924 but there is nothing to indicate that he was a director after the latter date; the settlement was made in 1933 and the record is clear that he was not at that time a member of the Board. If the President and Secretary did not have the authority to effect the settlement plaintiffs did not prove that Wurzel knew or was bound to know that such was the case.
Much is made of the fact that the President and Secretary effected the settlement in behalf of the Association although they were co-obligors with Wurzel on the bond. As a matter of fact the evidence shows that the settlement was negotiated by Rosen on behalf of Wurzel, not with these two officers, but with the
solicitor
for the plaintiff Association, who carefully investigated Wurzel’s financial condition. Moreover, since Wurzel was insolvent, the interest of the President and the Secretary as his co-obligors was not adverse to their duty as officers of the Association, it being obviously to their own advantage to obtain from Wurzel as much as possible and thus to diminish their own liability; the less they were able to secure from him the greater would be the amount for which they themselves would remain liable:
Freeman, Secretary of Banking v. Sundheim,
348 Pa. 248 , 35 A. 2d 295 . There is, therefore, no place here for the application of the principle of agency that one cannot serve two masters whose interests are conflicting.
I agree with Judge Bore's analysis of the case that the only question for the jury was whether Wurzel was insolvent; if he was, the settlement made was justified unless Wurzel was guilty of fraud in connection therewith, but, as I have already stated, I cannot find an iota of testimony to that effect. . .
• For the reasons stated, I dissent from the reversal of the judgment and from the direction to enter judgment for the, plaintiffs.