Shapiro v. Wilgus - 287 U.S. 348 (1932)
U.S. Supreme Court
Shapiro v. Wilgus, 287 U.S. 348 (1932)
Shapiro v. Wilgus
Argued November 10, 1932
Decided December 5, 1932
287 U.S. 348
1. To prevent disruption of his business by suits of hostile creditors and to cause the assets to be nursed for the benefit of all concerned, a debtor in Pennsylvania, where the law permits appointment of a receiver for the business of a corporation but not for that of an individual, caused a corporation to be formed in Delaware and conveyed to it all of his property in exchange for substantially all of it shares and its covenant to assume payment of his debts. Three days later, joined with a simple contract creditor, he sued the corporation in a federal court in Pennsylvania, invoking jurisdiction on the ground of diversity of citizenship, and, with the consent of the corporation, obtained on the same day a decree appointing receivers and enjoining executions and attachments.
(1) That the conveyance and the receivership were fraudulent in law as against nonassenting creditors. P. 287 U. S. 353.
(2) A creditor who, shortly after the decree, brought an action resulting in a judgment against the debtor in a Pennsylvania state court was entitled to an order either for payment out of the assets held by the receivers or for leave to issue execution. P. 287 U. S. 357.
(3) Refusal to grant relief in either of these forms was an abuse of discretion. Id.
2. A conveyance made with intent to hinder and delay creditors, though with no intent to defraud them, is illegal under the Statute of Elizabeth (13 Eliz., c. 5) and under the Uniform Fraudulent Conveyance Act, adopted in Pennsylvania. P. 287 U. S. 354.
3. In any case not covered by the Uniform Fraudulent Conveyance Act, in Pennsylvania, the Statute of Elizabeth is still the governing rule. Id.
4. It is a general rule in the federal courts that a creditor who seeks appointment of receivers must first reduce his claim to judgment and exhaust his remedy at law. P. 287 U. S. 355.
5. Departures from this rule, though allowed in some cases where the defendant acquiesces, are to be jealously watched. P. 287 U. S. 356.
55 F.2d 234 reversed.
Certiorari, 286 U.S. 538, to review the affirmance of an order refusing permission to levy an execution from a state court upon property in possession of receivers appointed by the federal court.