Helen ASHLEY, Appellant, v. Joseph ASHLEY, Ashley Machine & Tool Co. and Wipco, Inc., Appellees.
393 A.2d 637
Supreme Court of Pennsylvania.
Decided Oct. 5, 1978.
Reargument Denied Nov. 8, 1978.
Argued Jan. 13, 1978.
The parties stipulated, that this same Section would exclude from tax these same tools, materials and supplies if the public utility utilized these items in the identical manner as appellant utilized them. (R-12a)
The majority errs when it says that this appellant must be taxed for these items because they were not affixed. The last paragraph of Section 201(o)(4)(B) does list exceptions to the granting of the exemption, however these exceptions must be read in conjunction with the previous language granting the exemption. The interpretation of the exceptions employed by the majority requiring all materials or supplies to be “affixed” strips the general exemption of any rational meaning.
Additionally, the legislature carefully stated in this same section that “tools and equipment used but not installed in the maintenance of facilities” are subject to tax. If the legislature had meant this same standard to apply to tools and equipment utilized in construction activities, it would have so stated in the same unambiguous language.
Rosenn, Jenkins & Greenwald, Joseph J. Savitz, Wilkes-Barre, for appellees.
Before EAGEN, C. J., and O‘BRIEN, ROBERTS, POMEROY, NIX, MANDERINO and LARSEN, JJ.
MANDERINO, Justice.
On October 8, 1971, appellant, Helen Ashley, commenced an action in equity in the Court of Common Pleas of Luzerne County, seeking to partition assets held as tenants by the entireties by her and her husband, appellee, Joseph Ashley, and to recover certain shares of stock in WIPCO, Inc. and in Ashley Machine and Tool Co. Following an extended hearing, the chancellor ordered an accounting and partition of all the entireties property held by Helen and Joseph Ashley. The Chancellor concluded, however, that appellant was not a shareholder of either WIPCO, Inc., or Ashley Machine and Tool Co. Exceptions filed by both appellant and appellee were denied by the court en banc. Appellee took no appeal from the court ordered accounting and partition of the property held by him and appellant as tenants by the entireties.
Appellant appealed that portion of the Court‘s decree denying her exceptions to the court‘s adjudication that she had no stock interest in WIPCO, Inc.; her exception to that portion of the adjudication denying her any stock interest in Ashley Machine and Tool Co. was withdrawn. The Superior Court affirmed the court en banc, Ashley v. Ashley, 240 Pa.Super. 702, 360 A.2d 233 (1976). We granted appellant‘s petition for allowance of appeal, and this appeal followed.
Appellant argues that she is entitled to 50 shares of WIPCO stock. She bases her argument upon the following facts about which there is no dispute. On January 6, 1964, appellant and her husband, appellee Joseph Ashley, entered into a subscription agreement with the newly formed WIPCO, Inc. The agreement, which was approved by the Board of Directors of WIPCO, Inc., stated that appellant and appellee were each to purchase 50 shares of WIPCO stock at a purchase price of $5,000.00 for each block of 50 shares. On March 5, 1964, individual stock certificates in the amount of 50 shares each to appellant and appellee, Joseph Ashley, were prepared by an attorney who handled appellee‘s legal
In May, 1972, subsequent to the commencement of the proceedings which culminated in this appeal, appellee authorized his accountant to mark “void and not issued” on the receipt stubs in WIPCO‘s stock registry book for the stock certificates indicating that Helen and Joseph Ashley each owned 50 shares of WIPCO stock. The receipt stubs were also crossed out with an “X.” No notice was given to appellant that the shares certificate receipt stub indicating her ownership in 50 shares of WIPCO stock was being voided. At the same time that he “voided” the stock certificate receipt stubs above, appellee‘s accountant filled in WIPCO stock certificate “Number 3” to indicate that 100 shares of WIPCO stock were owned by Ashley Machine and Tool Co. Stock certificate “Number 3” was back-dated to March 11, 1964, pursuant to appellee‘s directions. In May, 1972, at the time of the above transactions, appellant was a judicially declared incompetent, having been declared so by the court on April 28, 1971, because of alcoholism. Her competency was judicially restored on June 5, 1972.
Appellant presents several theories in support of her contention that she is entitled to 50 shares of WIPCO stock. We agree with appellant that the chancellor erred in con
To establish a valid inter vivos gift, it is essential that the two elements of a gift be shown. These elements are (1) an intention to make an immediate gift, and (2) such actual or constructive delivery to the donee as will divest the donor of dominion and control of the subject matter of the gift. Wagner v. Wagner, 466 Pa. 532, 353 A.2d 819 (1976); King Estate, 387 Pa. 119, 126 A.2d 463 (1956).
“Donative intent is the intention to make an ‘immediate gift.‘” Wagner v. Wagner, supra, 466 Pa. at 537, 353 A.2d at 822, quoting from Parkhurst Estate, 402 Pa. 527, 531, 167 A.2d 476, 478 (1961). The evidence presented at trial clearly shows that at the time WIPCO was incorporated, appellee possessed the required “donative intent” to give 50 shares of the WIPCO stock to his wife, appellant here, and the equity court‘s conclusion that appellant had failed to establish that element of a valid, inter vivos gift was erroneous. At trial, appellee testified that, as early as January 6, 1964, he intended to give appellant 50 shares of WIPCO stock. He also testified that at the time WIPCO was incorporated in March, 1964, he intended to give appellant half of the WIPCO stock, and that his attorney prepared stock certificates Numbers One and Two, and put the federal tax stamps on them, in order to effectuate the intended gift. Appellee stated that at that time-March, 1964-he assumed that the stock had been issued. Subsequently, according to appellee, it appeared that the issuance had not been completed because the attorney was “having problems.” For reasons not revealed at trial, certificates Numbers One and Two were never signed by the president of WIPCO. Additionally, the trial court found as a fact that from 1964 until 1968, at least, appellee made both oral and written representations that appellant owned WIPCO stock.
In Connell‘s Estate, supra, 282 Pa. 555, 128 A. 503 (1925), the Court held that a gift of stock had been made even though delivery of the certificates was made without endorsement as required by the Uniform Stock Transfer Act. The Court stated that the statute was enacted to protect the corporation so that it could safely pay dividends to the persons registered on its books as the owners of the stock. The Act was not intended to control the rights of parties transferring stock.
The Uniform Stock Transfer Act has been replaced by Article 8 of the Uniform Commercial Code.
“[w]here a security in registered form has been delivered to a purchaser without a necessary indorsement he may become a bona fide purchaser only as of the time the endorsement is supplied, but against the transferor the transfer is complete upon delivery and the purchaser has a specifically enforceable right to have any necessary endorsement supplied.” (Emphasis added.)
The reasoning of Connell Estate, and section 8-307 of the Code is implicit in Brightbill v. Boeshore, 385 Pa. 69, 122 A.2d 38 (1956). Prior to his death, the decedent in Brightbill assigned stocks to his daughter and delivered the certificates to her, making no changes on the books of the corporation. The certificates were placed in a safe deposit box to which both had equal access. The donor received and retained
As we more recently said in Wagner v. Wagner, supra, 466 Pa. 532, 539, 353 A.2d 819, 822-23 (1976),
“[t]he essence of delivery of a gift is relinquishment by the donor of dominion and control of the subject matter of the gift. The clearest form of a delivery of a gift of corporate shares is registration of the shares in the name of the donee on the stock ledger of the company coupled with physical delivery to the donee of stock certificates in the name of the donee representing the shares so registered. But less formal modes of delivery have also been held to be sufficient.” (citations omitted) (emphasis added).
We believe that the instant case is analogous to the authorities cited above, and that the chancellor erred when he concluded that failure to comply with the formal requirements of the Business Corporations Law, Act of May 5, 1933, P.L. 364, as amended,
This conclusion is further supported by the language of the Business Corporation Law itself. Article VI, Section 607 (
“[t]he fact that shares are issued in violation of, or without full compliance with, the provisions of this act shall not make the shares so issued invalid.”
Part of the reason for the trial court‘s failure to recognize what appears obvious to us-that appellee intended for appellant to share ownership of WIPCO-stems from the fact that the 100 shares of WIPCO stock were paid for by Ashley Machine and Tool Co., and not by appellee personally. As provided in the original subscription offer, which was accepted by the WIPCO Board of Directors, appellee and appellant were each to purchase 50 shares of WIPCO stock. Each block of 50 shares was to cost $5,000.00. Within one week of WIPCO‘s acceptance of this subscription offer, appellee caused Ashley Machine and Tool Co. to transfer various machinery and equipment to WIPCO. The record does not reveal the exact monetary worth of this machinery and equipment, however, the record shows that it was in excess of $10,000.00. In addition to authorizing this transfer of Ashley Machine assets to WIPCO, appellee, in conjunction with his accountant, set up the corporate records of both Ashley Machine and WIPCO to reflect that exactly $10,000 worth of these assets consisted of an outright transfer from Ashley Machine to WIPCO, while the remainder in excess of $10,000 value was carried as a loan from Ashley Machine to
It is true that a corporation, such as Ashley Machine and Tool Co. is normally regarded as a legal entity separate and distinct from its shareholders (in this case appellee is the sole shareholder of Ashley), Barium Steel Corp. v. Wiley, 379 Pa. 38, 108 A.2d 336 (1954); Monongahela Bridge Co. v. Pittsburgh & B. Traction Co., 196 Pa. 25, 46 A. 99 (1900). This legal fiction of a separate corporate entity was designed to serve convenience and justice, Great Oak Building and Loan Assoc. v. Rosenheim, 341 Pa. 132, 19 A.2d 95 (1941), and will be disregarded whenever justice or public policy demand and when the rights of innocent parties are not prejudiced nor the theory of the corporate entity rendered useless. Gagnon v. Speback, 389 Pa. 17, 131 A.2d 619 (1957). We have said that whenever one in control of a corporation uses that control, or uses the corporate assets, to further his or her own personal interests, the fiction of the separate corporate identity may properly be disregarded. Watercolor Group, Inc. v. Newbauer, Inc., 468 Pa. 103, 360 A.2d 200 (1976).
The record in the instant case clearly reveals that appellee himself disregarded the fiction that Ashley Machine and Tool Co. was an entity separate and distinct from himself. Not only did he personally authorize the transfer of $10,000 in Ashley assets to WIPCO in March, 1964, for the purpose of providing consideration for WIPCO stock, $5,000 of which was to be issued to him personally, but, as he testified at trial, he and Ashley Machine Tool Co. are “one and the same“; that “[he] was the business,” and that the house in which appellee presently resides was purchased with Ashley Machine and Tool Co. funds. Significantly, when asked, how long he had lived in the house owned by Ashley Machine and Tool Co., appellee responded, “I bought that home,
The chancellor thus clearly erred in concluding that WIPCO‘s failure to fully comply with the provisions of the Business Corporation Law at the time its stock certificates Number 1 and Number 2 were purportedly issued invalidated the gift to appellant. Appellant and appellee, Joseph Ashley, had each offered to purchase 50 shares of WIPCO stock for a purchase price of $5,000.00 each. Those offers were accepted by WIPCO‘s Board of Directors, and consideration for the issuance of shares was provided by appellee who caused Ashley Machine and Tool Co. to transfer $10,000.00 worth of assets to WIPCO. At that point, the gift to appellant of 50 shares of WIPCO stock was complete, and WIPCO‘s subsequent failure to fully comply with the statutory formalities regarding the issuance of the certificates which represent those 50 shares, cannot invalidate the prior gift.
The order of the Superior Court, affirming the decree of the Court of Common Pleas, is reversed, and the matter is remanded for further proceedings consistent with this opinion. Each party to pay own costs.
POMEROY, J., filed a dissenting opinion.
EAGEN, C. J., dissents.
POMEROY, Justice, dissenting.
I respectfully dissent. I would affirm the chancellor‘s findings as approved by the lower court en banc.
The chancellor, after having seen all of the evidence and after having heard all of the witnesses, held that the evidence failed to establish either of the requisite elements of a valid inter vivos gift of stock in WIPCO, Inc. to appellant by
We have said repeatedly that the findings of fact of a chancellor, affirmed by the court en banc, ordinarily “have the effect of a jury verdict and will not be reversed unless a review of the record reveals that they are unsupported by the evidence or predicated upon erroneous inferences and deductions or errors of law.” Payne v. Kassab, 468 Pa. 226, 234, 361 A.2d 263, 267 (1976). In that decision we went on to observe:
“The chancellor has seen and heard the witnesses; if a reading of the record reasonably can be said to yield the conclusions which he has drawn, we may not substitute our judgment for his. Harrisburg School District v. Pennsylvania Interscholastic Athletic Association, 453 Pa. 495, 309 A.2d 353 (1973); Yuhas v. Schmidt, 434 Pa. 447, 258 A.2d 616 (1969). See 9 Standard Pennsylvania Practice, Ch. 40, §§ 113, 115-117 (1962).” 468 Pa. at 234, 361 A.2d at 267.
My reading of the record in the case at bar leaves no doubt in my mind that the chancellor‘s findings were reasonably grounded in the evidence. The record is replete with inconsistencies and conflicts including, in the chancellor‘s words, the “morass of Joseph‘s oral statements, written statements, and badly kept corporate records.” I believe that the chancellor could best resolve these matters.