Provident Trust Co. of Philadelphia v. Lukens Steel Co.

• Decision Date: 22 March 1948
• Docket Number: 2475
• Citation: 359 Pa. 1,58 A.2d 23
• Parties: Provident Trust Company, Exr., etc., et al., Appellants v. Lukens Steel Company
• Court: Pennsylvania Supreme Court

58 A.2d 23

359 Pa. 1

Provident Trust Company, Exr., etc., et al., Appellants v. Lukens Steel Company

No. 2475

Supreme Court of Pennsylvania

March 22, 1948

Argued January 19, 1948

Appeal No. 12, Jan. T., 1948, from decree of C.P., Chester Co., in Equity, No. 1012, in case of Provident Trust Company of Philadelphia, Executor and Trustee, Estate of A. F. Huston deceased, et al. v. Lukens Steel Company. Decree affirmed.

Bill in equity. Before SWENEY, J., specially presiding.

Adjudication filed finding for defendant and final decree entered dismissing plaintiff's bill. Plaintiff, and intervening parties, appealed.

Decree affirmed, costs to be paid by appellants.

Thomas C. Gawthrop , with him J. B. Colahan, Joseph Head, Jr. William E. Parke, W. H. Lathrop, J. Barton Rettew, Townsend Elliott & Munson, Duane, Morris & Heckscher and Montgomery McCracken, Walker & Rhoads , for appellants.

Wm. Barclay Lex , with him W. Perry Tyson and Norris, Bell, Lex, Hart & Eldredge , for appellee.

Before MAXEY, C.J., DREW, LINN, STERN, PATTERSON, STEARNE and JONES, JJ.

OPINION

MR. JUSTICE LINN

This is a suit to determine the ownership of 10,000 shares of the common stock of Lukens Steel Company issued in the name of A. F. Huston, Trustee.

In 1917 Lukens Iron and Steel Company (hereafter called Iron Company) was a Pennsylvania corporation with 5,000 shares of common stock, having a book value of about $2,000 per share. All the stock was owned by 16 shareholders, most of them members of a family named Huston. As there was no ready market for the stock, appellants' brief states that bankers "were consulted with a view to making the capitalization more liquid."

The bankers, on December 7, 1916, made a written proposal to the Iron Company, which, with the addition of a suggested modification, became the contract ultimately performed. The proposal involved the formation of a new corporation with a capital of 60,000 shares, first preferred, par 100; 60,000 shares, second preferred, par 100, and 200,000 shares, common, par 50. At the suggestion of one of the shareholders of the Iron Company the common capital was increased to 210,000 shares. A new corporation, the Lukens Steel Company, was formed and the property of the Iron Company was transferred to it for its shares of stock pursuant to the agreement.

The 10,000 shares, the subject of this suit, constituted the increase over the 200,000 shares of common stock originally proposed by the bankers. It was the subject of the following provision in the bankers' revised proposal to the Iron Company dated December 8, 1916, "The remaining $500,000 par value of Common Stock shall remain in the treasury of the New Corporation, or shall be returned to the treasury of the New Corporation so that it shall be available for purchase by the officers and employees of the New Corporation, from time to time, upon such terms as may be approved by the Board of Directors of the New Corporation." The bankers, on January 22, 1917, agreed with the new company, the defendant: "We further agree to cause to be transferred to the Treasurer of your Company or such persons as you may designate 10,000 shares of the Common Stock so issued, to be held as Treasury Stock and to be sold to employees of your Company upon such terms as your Board of Directors may from time to time determine."

On January 29, 1917, defendant's board "RESOLVED that the 10,000 shares of Common Stock standing upon the books of the Company in the name of A. F. Huston, Trustee, be held as Treasury Stock to be sold and issued to employees from time to time upon such terms as the Board of Directors may determine."

On June 27, 1917, the board adopted the following resolution: "WHEREAS the proposition of [the bankers], dated January 22d, 1917, provided as follows: 'We further agree to cause to be transferred to the Treasurer of your Company or such person as you may designate, ten thousand shares of the Common Stock so issued, to be held as Treasury Stock and to be sold to employees of your Company upon such terms as your Board of Directors may from time to time determine,' has been consummated and the ten thousand shares of Common Stock have been endorsed in blank and are now in the hands of the Secretary. Now, therefore, be it RESOLVED: that the ten thousand shares of Common Stock turned back to the Company by certain stockholders, be issued in the name of A. F. Huston, Trustee, to be held as Treasury Stock and to be sold to employees of the Company upon such terms as the Board of Directors may from time to time determine."

A certificate dated August 15, 1917, for 10,000 shares of common stock was issued in the name of A. F. Huston, Trustee, who endorsed it in blank and delivered it to defendant's Secretary and Treasurer at or about the time of issue; the certificate has remained in the possession of the company ever since. None of the 10,000 shares has been sold.

On January 18, 1946, the Provident Trust Company of Philadelphia, plaintiff, and the executor and trustee of the estate of A. F. Huston, deceased (in whose name as trustee the certificate had been issued), demanded that defendant return the stock to the parties or the representatives of deceased parties, who were shareholders in the Iron Company in 1917 when the transaction was consummated. On failure to comply with the demand this bill was filed asking that defendant be restrained from parting with the stock; that it be ordered to deliver the certificate of stock to the plaintiff; "That new certificates for such shares of the capital stock of the defendant corporation, as may be distributable to the several persons for whom the plaintiff's decedent was acting, should be issued in place and stead of the certificate registered in the name of the plaintiff's decedent as Trustee,..." or, in the alternative, that defendant be required to pay the value of the shares "as of the date of the demand for delivery."

Personal representatives of three other deceased shareholders intervened as parties plaintiff. The chancellor filed an adjudication and recommended a decree dismissing the bill. He held that the Iron Company's shareholders made "an irrevocable gift" of the stock and added that if the gift were considered as conditional the plaintiffs had lost the right to assert breach of condition. His view may be summarized by the following quotation from his adjudication "We feel that the designation of these 10,000 shares of stock as 'Treasury Stock' established definitely the status and indicated clearly an irrevocable gift to the new company. The stock belongs not to the old stockholders but to the present stockholders and, in our opinion, may be held as Treasury Stock, may be sold to employees or on the open market...