Vierling v. Baxter

• Decision Date: 16 April 1928
• Docket Number: 20
• Citation: 293 Pa. 52,141 A. 728
• Parties: Vierling, Appellant, v. Baxter et al
• Court: Pennsylvania Supreme Court

141 A. 728

293 Pa. 52

Vierling, Appellant, v. Baxter et al

No. 20

Supreme Court of Pennsylvania

April 16, 1928

Argued March 12, 1928

Appeal, No. 20, March T., 1928, by plaintiff, from judgment of C.P. Westmoreland Co., Aug. T., 1926, No. 1012, for defendants on affidavit of defense raising questions of law in case of Joseph Vierling v. Carrie Baxter, executrix of estate of Elmer J. Baxter, deceased, Chester C. Howe et al. Reversed.

Rule for judgment for want of sufficient affidavit of defense. Before COPELAND, P.J.

Judgment for defendants on question of law raised by the affidavit of defense. Plaintiff appealed.

Error assigned, inter alia, was judgment, quoting record.

The judgment is reversed with a procedendo.

Francis A. Wolf, with him George Y. Meyer and J. Raymond Sowash, for appellant. -- The amended statement of claim alleges a conspiracy to cheat and defraud appellant individually whereby he was damaged; this constitutes a breach of legal duty for which a cause of action arises: Mott v Danforth, 6 Watts, 304; Ballentine v. Cummings, 220 Pa. 621.

There being a direct breach of duty towards plaintiff, his right of action is in nowise affected by the fact that his damage is also the damage of his fellow stockholders of a corporation: Ritchie v. McMullen, 79 F. 522; Bank of Commerce v. Bright, 77 F. 949; White v. Bank, 252 Pa. 205; Kimmell v. Geeting, 2 Grant, 125; Kimmell v. Stoner, 18 Pa. 155.

R. W. Smith of Smith, Best & Horn, for appellees, cited: White v. Bank, 252 Pa. 205; Beeber v. Wilson, 285 Pa. 312; Penn Bank v. Hopkins, 111 Pa. 328; McAleer v. McMurray, 58 Pa. 126; Brown v. Orr, 112 Pa. 233.

Before MOSCHZISKER, C.J., FRAZER, WALLING, SIMPSON, KEPHART, SADLER and SCHAFFER, JJ.

OPINION

MR. JUSTICE WALLING:

Plaintiff was the inventor and patentee of certain improvements in electric washing machines and, to facilitate his business, secured the charter of a Delaware corporation, known as the Pioneer Brush Washing Machine Company, with an authorized capital stock of one hundred thousand shares of five dollars each. He assigned the patents to the corporation, receiving fifty-one thousand shares of its stock. The corporation was registered in this state and located at Pittsburgh. On September 28, 1920, plaintiff entered into an agreement with the corporation by which he, inter alia, turned over to it all his stock in excess of twenty thousand shares, waived voting power on fifteen thousand shares of the latter which he agreed might be placed in escrow. Plaintiff was to receive a royalty on all machines manufactured under his patents, the minimum of which should be $ 75 a month after eighteen months. The corporation undertook to pay plaintiff $ 7,000 for certain specified machinery and to employ him for a year at $ 300 per month. He promised to and did secure the resignation of the old board of directors and a new board took its place. He agreed to assign to the corporation all future patents he might obtain relating to the business and also to secure the cancellation of existing contracts with third parties. The six defendants, including one now dead and represented on the record by his executrix, were members of the corporation and in control thereof after the agreement of Sept. 28, 1920. Plaintiff's statement in this action of trespass charges them, inter alia, with conspiring to cheat and defraud him and that in furtherance of the fraudulent conspiracy they induced him to enter into the agreement above mentioned, after which, as officers of the corporation, they confessed judgments against it on fictitious claims by means of which the corporate property and patents, worth in all over sixty thousand dollars, were sold for $ 1,200 and purchased by one of the defendants for their joint benefit. Also that defendants secured a new Pennsylvania charter under the name of the Brush Washing Machine Company, to which the property of the old corporation, so fraudulently obtained, was turned over. All of which was done in carrying out the conspiracy, to plaintiff's damage, etc., setting forth the items. To this statement, defendants filed an affidavit of defense, raising legal questions only. Thereupon the trial court, after argument and upon due consideration, entered judgment for the defendants and plaintiff brought this appeal.

The action of the lower court was based on the conclusion that the wrongs complained of were to the corporation and all the stockholders and could be redressed only by the corporation or in its name. No fault can be found with this legal principle where the facts justify it; but the gravamen of plaintiff's complaint is not damage to the corporation or to stockholders in general but to himself individually. He avers that by reason of the fraudulent conspiracy he was deprived of his patents, of his machinery, of his stock, of his salary, of his royalties, etc. So far as these wrongs or any of them were committed against him personally there is no reason why the action may not be maintained. The correct...