Sale v. Ambler
| Decision Date | 25 May 1939 |
| Docket Number | 161 |
| Citation | 335 Pa. 165,6 A.2d 519 |
| Parties | Sale v. Ambler et al. Emmett, Appellant |
| Court | Pennsylvania Supreme Court |
Argued April 19, 1939.
Appeal, No. 161, Jan. T., 1939, from decree of C.P. No. 2 Phila. Co., June T., 1937, No. 3848, in case of Eleanor Sale v. Robert S. Ambler et al. Decree affirmed.
Bill in equity. Before ROSEN, J.
The opinion of the Supreme Court states the facts.
Decree entered requiring defendant to pay a specified sum directly to plaintiff shareholder. Defendant appealed.
Error assigned, among others, was dismissal of exceptions.
Decree affirmed at appellant's cost.
Ralph S. Croskey, of Edwards & Croskey, with him Theodore L Reimel, for appellant.
Nathan Lavine, for appellee.
Before KEPHART, C.J., SCHAFFER, MAXEY, DREW, LINN, STERN and BARNES JJ.
In 1934, a bill was filed by Jerome Apt, a shareholder, in the name of the H.C. Ambler Construction Company, a New Jersey corporation, against Anna S. Emmett, the present appellant, alleging that her brother had fraudulently misappropriated more than $30,000 of corporate funds, and had turned the proceeds over to her, with her full knowledge as to their source. The bill asked that she make restitution to the corporation. Although several further steps were taken, the case never reached trial or adjudication on the merits. Two years later, the law partner of appellant's attorney in the proceeding filed an appearance for the corporation, and the prothonotary made the following entry on the docket: The corporation had ceased to do business, and in January, 1937, its charter was declared void by proclamation of the Governor of New Jersey. In July of that year, appellee, another shareholder, filed this bill against Anna S. Emmett, joining the latter's brother and the corporation as respondents. The same allegations were made as in the preceding bill, with the additional averment that the present suit was not brought in the name of the corporation because it had become inactive, and because respondents, who controlled it, would not permit the use of its name. Restitution to the corporation was asked, or, in the alternative, direct relief to appellee. Appellant filed an answer pleading res judicata, settlement and other matters.
After a hearing, the chancellor found that the order to mark the case "settled, discontinued and ended" was not authorized by the corporation, and that the alleged settlement agreement was, in fact, merely the purchase of Apt's shares by appellant, terminating his interest in the proceeding and giving appellant control of all the shares outstanding with the exception of those held by appellee. Upon these findings the chancellor ruled that appellee was not barred by the earlier proceeding, and decreed that, in view of the defunct character of the corporation and the control of the remaining shares by appellant, the latter should pay directly to appellee the amount to which she would be entitled if payment were made to the corporation and redistributed to the shareholders.
The only questions presented by appellant are whether the action was barred by the former suit and whether it was proper to order payment directly to appellee.
It is unnecessary for the purposes of this appeal to determine the exact position of Apt and the corporation in the former suit. We could hold the first proceeding properly instituted by the corporation at the instance of Apt as shareholder, but there was ample evidence to indicate that, while suit was brought in the corporate name, the purpose was solely to protect that shareholder's individual interest. Whether or not it be termed a shareholders' bill, we are merely interested in the manner and effect of its termination. There is nothing in the record that sets up a bar to a new suit by either the corporation or a shareholder in a representative capacity. Generally speaking, a suit by the corporation conclusively bars a shareholder's right of action in a representative capacity, but where fraud, collusion or over-reaching by litigants is shown, a contrary rule will be enforced.
Although appellant relied on the doctrine of res judicata, citing numerous cases thereon, and although it has been incorrectly said that the entry "settled, discontinued and ended" makes a case res judicata, [*] she admits that the doctrine is inapplicable here because no decree on the merits was ever reached in the earlier suit. The rule of res judicata is clearly stated in Wallace's Estate, 316 Pa. 148, 153.
Appellant's argument is that the entry on the record indicates a settlement forever ending the cause of action, on that or any other suit, and that it cannot be attacked in another proceeding. No judicial approval of the settlement is indicated. A discontinuance itself is not a bar to a subsequent suit: Lowry v. McMillan, 8 Pa. 157; Lindsay v. Dutton, 217 Pa. 148. On the other hand, a pending legal claim may be compromised or settled by a valid contract of settlement, and in such case the right of action is merged in the agreement of settlement. If such an agreement accompanies a discontinuance, of course the claim is thereafter barred and a new action thereon cannot be maintained. See Lowry v. McMillan, 8 Pa. 157, 163; Phillips v. Israel, 10 S. & R. 391, 392.
While the marking of a suit "settled, discontinued and ended," without any judgment on the merits, may for many purposes be conclusive as between all parties directly interested, it does not have the effect of res judicata as to parties interested who are in no way brought into the case. The entry at best is merely evidence of a settlement which, if validly made, would terminate that cause of action.
But a settlement, like any other agreement, to be enforceable, must possess all of the elements of a valid contract, and like any other agreement it may be attacked for want of authority or consideration, or on equitable grounds warranting that it be set aside. Township of North Whitehall v. Keller, 100 Pa. 105; Good v. Grit Publishing Co., 214 Pa 614; Berg et al. v. Cypher, 291 Pa. 276, 281. In Schmitt v. Cook, 65 Pa.Super. 51, the Court said: "When parties have settled a case, and the plaintiff has agreed to discontinue, the court will not allow him to recede from his contract, but will hold him to it if the agreement is such as the court should lend its aid to enforce." In Hoge v. Hoge, 1 Watts 163, 217, this Court held that, where a...
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In re El Paso Pipeline Partners, L.P. Derivative Litig.
...pro rata recovery where director-shareholders engaged in fraud in connection with dissolution of company); Sale v. Ambler, 335 Pa. 165, 6 A.2d 519 (1939)(granting direct recovery to plaintiff when directors of dissolved company misappropriated corporate funds); Bailey v. Jacobs, 325 Pa. 187......
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...167, 39 A.2d 738 1944; Currier v. Bilger, 149 Pa. 109, 24 A. 168 1892; Berg v. Cypher, 291 Pa. 276, 139 A. 844 1927; Sale v. Ambler, 335 Pa. 165, 6 A.2d 519 * * * * * * The final determination of the 1957 action precludes the plaintiffs from maintaining this suit, even though other grounds ......
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