Green v. Philadelphia Inquirer Co.

• Decision Date: 03 January 1938
• Docket Number: 356,357,358,355
• Citation: 196 A. 32,329 Pa. 169
• Parties: Green et al., Appellants, v. Philadelphia Inquirer Company, et al
• Court: Pennsylvania Supreme Court

196 A. 32

329 Pa. 169

Green et al., Appellants, v. Philadelphia Inquirer Company, et al

Nos. 355, 356, 357, 358

Supreme Court of Pennsylvania

January 3, 1938

Argued December 9, 1937

Appeals, Nos. 355-358, Jan. T., 1937, from decree of C.P. No 5, Phila. Co., Sept. T., 1935, No. 3967, in case of John Green et al., coadministrators d.b.n.c.t.a. of Estate of James Elverson, Jr., deceased, v. Philadelphia Inquirer Company et al. Decree affirmed.

Bill in equity.

The opinion of the Supreme Court states the facts.

Preliminary objections sustained and decree entered dismissing bill opinion by LAMBERTON, J. Plaintiffs appealed.

Error assigned, among others, was final decree.

The decree is affirmed at the cost of the appellants.

John J. McDevitt, Jr., with him Joseph M. Leib and Francis Shunk Brown, for appellants.

Benjamin O. Frick, for appellees.

Robert T. McCracken, with him Charles R. Hindley and Ulric J. Mengert, for appellee.

Before SCHAFFER, MAXEY, DREW, LINN, STERN and BARNES, JJ.

OPINION

MR. JUSTICE DREW:

James Elverson, Sr., died in 1911, owning all the outstanding capital stock of The Philadelphia Inquirer Company, a Pennsylvania corporation, and publisher of The Philadelphia Inquirer newspaper. By the terms of his will these shares formed a part of the residuary estate which was bequeathed to his widow for life. Upon her death the shares were given to his son James Elverson, Jr., in trust "to pay unto himself one-half and unto [testator's] daughter Eleanor Louise Patenotre . . . the other one-half of the dividends earned thereon which shall be computed and declared upon the basis of the net earnings." The trustee was given "full power . . . to manage and control" the corporation. The will provided that the trust should end upon the death of the trustee, that, if he should die without issue, the "whole of the shares" should go to testator's daughter.

The widow died in 1923, leaving a will giving all of her estate, after a few pecuniary legacies, to her son and daughter in equal shares. James Elverson, Jr., died in 1929, without issue, leaving the residue of his estate to his wife. The latter died within three months thereafter leaving her residuary estate to John Green, her brother-in-law.

Shortly after the death of James Elverson, Jr., the stock of The Philadelphia Inquirer Company, a Pennsylvania corporation, was issued to his sister. Heretofore this corporation had owned all the real estate, machinery and other equipment used in publishing the newspaper. She now proposed a plan whereby the ownership of the real estate should remain in the Pennsylvania corporation, but that the newspaper, together with all machinery and equipment should be transferred to a new corporation of the same name, organized under the laws of Delaware, the new company to be the future publisher of the newspaper. The Delaware corporation was formed and the ownership of the newspaper, machinery and equipment was transferred by the Pennsylvania corporation, the latter receiving in return 109,000 shares of preferred stock of the new corporation and 191,000 shares of common stock, being all the stock then or ever issued by the Delaware corporation. These shares of the Delaware corporation stock, upon receipt by the Pennsylvania corporation, were declared as a dividend, and transferred to Mrs. Patenotre as the sole stockholder.

Later in the same year, 1929, Mrs. Patenotre sold 109,000 shares of the preferred stock of the Delaware corporation and 40,000 shares of the common stock, to a firm of bankers. No further history of these shares appears. In 1930 Mrs. Patenotre gave her son Raymond all of the shares of the Pennsylvania corporation, together with 151,000 shares of the common stock of the Delaware corporation. A few days thereafter he sold both blocks of stock to the Curtis-Martin Newspapers, Inc., now the Public Ledger, Inc., payment being made in cash and notes. The entire capital stock of the Pennsylvania corporation is now owned by the Delaware corporation. In conjunction with the foregoing transactions, Mrs. Patenotre and her son formed the Elverson Corporation, a Delaware corporation, and became the owners of all of its capital stock. The notes given by the Curtis-Martin Newspapers, Inc., were transferred to the Elverson Corporation. In 1934, Public Ledger, Inc., as successor to the original maker of the notes, defaulted, and transferred 136,000 shares of the common stock of the Delaware corporation to the Elverson Corporation, retaining 15,000 such shares. In 1936, M. L. Annenberg acquired from Mrs. Patenotre and her son all of the capital stock of the Elverson Corporation.

To summarize, the Delaware corporation now owns all of the stock of the Pennsylvania corporation. M. L. Annenberg owns all of the capital stock of the Elverson Corporation. The Elverson Corporation owns 136,000 shares of the common stock of the Delaware corporation. Public Ledger, Inc., owns 15,000 such shares. The remaining 40,000 shares of common stock of the Delaware corporation together with the entire issue of 109,000 shares of preferred, disposed of by Mrs. Patenotre to a banking firm, are not presently accounted for.

The present bill in equity is brought by the administrators of the estate of James Elverson, Jr.; named as defendants are the two Inquirer Companies, Elverson Corporation, Public Ledger, Inc., Mrs. Patenotre, her son, and M. L. Annenberg.

During the years from the death of James Elverson, Sr., in 1911, until the death of his son and the termination of the trust in 1929, only a very small portion of the net earnings of the corporation were distributed in the form of dividends. It is plaintiffs' contention that the widow of James Elverson, Sr., was, during her life estate, entitled to all of the net earnings of the company, that these earnings were far in excess of the dividends declared, that the undistributed earnings passed under her will to her son and daughter, that her son's share passed under his will to his wife, and under her will to her brother-in-law, John Green, who is now entitled thereto. By a similar process they contend that John Green is also entitled to the undistributed earnings that James Elverson, Jr., might have received. The bill seeks an accounting, and a declaration that the respective transferees, because they were cognizant of the situation, be declared trustees of their different shares in an amount represented by the undistributed earnings.

The Philadelphia Inquirer Companies, the Public Ledger,...