Sherman v. Yiddisher Kultur Farband, Appellant.
Supreme Court of Pennsylvania
October 15, 1953
375 Pa. 108 | 99 A.2d 543
The decree is reversed and the bill dismissed at the cost of the plaintiffs.
Finance Corporation v. McHarg, 282 Fed. 560; and Kimmell v. Geeting, 2 Grant 125; there had been formal action taken by the corporation for purchase of stock acquired by the officer and director; and in Durfee v. Durfee & Canning, Inc., 80 N.E. 2d 522 (Mass) the officer formed another company which resold gasoline at a mark-up and then pocketed profits made at the expense of the corporation.
Sherman v. Yiddisher Kultur Farband, Appellant.
Hymen Schlesinger, for appellant.
Frank P. Lawley, Jr., Deputy Attorney General, and Robert E. Woodside, Attorney General, amicus curiae, filed a brief.
OPINION BY MR. JUSTICE ALLEN M. STEARNE, October 15, 1953:
May petitioners, who are not members of a nonprofit corporation, intervene and petition the court of common pleas to revoke its decree of incorporation, upon the ground that such decree had been obtained through fraudulent misrepresentation?
The Yiddisher Kultur Farband, also known as Jewish Culture Association, in proceedings under the
Samuel Louis Sherman and Paul Ginsburg filed a petition in that court as of the original term and number at which the charter was granted, in which petition they pray that they be permitted to intervene specially as parties. They allege that the incorporators, directors and officers wilfully, maliciously and corruptly perpetrated a fraud upon the court by misrepresenting the purposes of the corporation, “its true and clandestine purpose being the establishment of a Communist formed, controlled and directed ‘front’ for unlawful purposes,” and that the existence of the corporation constitutes a continuing fraud upon the court and a gross abuse of the corporation laws of the Commonwealth. They aver, therefore, that, after
All corporations, whether for profit or nonprofit, are creatures of statute, which prescribes not only how they shall be formed but how they shall be dissolved:
Petitioners possess no status as interested parties in this proceeding. The
The order of the court below is reversed. The preliminary objections are sustained, and the petition is dismissed. Costs to be paid by appellees.
DISSENTING OPINION BY MR. JUSTICE BELL:
A Court has a fundamental and inherent right and power to correct its records and to modify, change or vacate a decree whenever such record or decree has been obtained by fraud; and such power may be exercised (a) sua sponte, with or without an amicus curiae, or (b) in a proper proceeding by a party having a right or interest therein, or (c) in certain cases, in a quo warranto proceeding brought by the Attorney General. The majority opinion admits, as it must, the jurisdiction as well as the basic power of the Court to vacate its decree when obtained by fraud: Macoluso‘s Naturalization, 237 Pa. 132; Cochran v. Eldridge, 49 Pa. 365; Sallada v. Mock, 277 Pa. 285; cf.
The Act upon which the majority relies, i.e., §209 of the
The decision of the majority is not only based upon an act which being permissive, utterly fails to support its position, but it is likewise contrary to prior decisions of this Court, which require this appeal to be quashed or dismissed. This is not an appeal from a final judgment, order or decree; this is an appeal under and limited by the Act of 1925. In Com. ex rel. Shumaker v. New York & Pennsylvania Co., Inc., 367 Pa. 40, 79 A. 2d 439, the Court said (page 46): “. . . The narrow scope to which this inquiry must be confined was clearly restated recently by Mr. Justice JONES in Upholsterers’ International Union etc. v. United Furniture Workers, etc., 356 Pa. 469, 52 A. 2d 217 (1947), where he said, p. 472, 473, ‘The procedure prescribed by the Act of 1925 for testing jurisdiction “in the court of first instance” applies to questions of jurisdiction either of the defendant or of the subject-matter: Welser v. Ealer, 317 Pa. 182, 184, 176 A. 429. In the present instance, the question involved goes to the jurisdiction of the cause of action (whereon the suit was instituted) which “. . . relates ‘solely to the competency of the particular court to determine controversies of the general class to which the case then presented for its consideration belongs‘: Skelton v. Lower Merion Twp., 298 Pa. 471, 473. See also Koontz v. Messer, 314 Pa. 434“: Welser v. Ealer, supra . . . The thing of chief importance on a question of jurisdiction of subject-matter is not whether the plaintiff may recover in the particular forum on the cause of action pleaded but whether the court is empowered to hear and determine a controversy of the character involved: Matthews v. Plum Township, etc., 152 Pa. Superior Ct. 544, 546-547, 33 A. 2d 38.‘”
In Welser v. Ealer, 317 Pa., supra, this Court said (page 183-184): “This case is before us by virtue of the provisions of the
The majority opinion necessarily admits that the Court below had jurisdiction over the defendant and over the subject matter or cause of action, viz., fraud, as well as the power to determine controversies of the general class to which the case belongs, viz., the grant and revocation of charters of nonprofit corporations. The majority dismiss this appeal on procedural grounds and because the parties plaintiff have no interest in the suit, thus flying in the teeth of the foregoing authorities
The pleadings allege (and the Court below heard testimony which up to now has not been contradicted) that this charter was fraudulently obtained to teach, foster, advocate and spread Communism instead of its chartered purpose of promoting Jewish culture.
It is at long last recognized, legislatively, judicially and by public officials that a major objective of Communism is the overthrow of our Government by sabotage, violence, and revolution. To counteract this and to protect our Country from its mortal enemies, we need the aid not only of all our public officials, agencies, and Courts but also of every patriotic American citizen. A Court‘s power to revoke a decree obtained fraudulently is clear and unquestioned; the only question is whether it must suppress or nullify its own fundamental powers, jeopardize the interests of our Country, and call upon a very busy and distant Attorney General to institute the proceedings. If there were any doubt on this question—and in my opinion there is none—it should not be resolved in favor of those who are charged with advocating and plotting the destruction of our Country.
How untenable, unrealistic, and unwise is the majority opinion which gives to the Attorney General, who has a multiplicity of other important duties, the sole and exclusive power to vacate a fraudulent decree and to protect the security of our Country and the safety of our citizens, is further apparent from the Attorney General‘s brief: “The rule asked for by the
*
*
*
*
*
*
“It is respectfully submitted that the appeal in this case be dismissed and the action of the court below affirmed.”
I would sustain and protect the fundamental powers of our Court, and like the Attorney General, I would not limit or restrict the protection of our Country in these critical times to one administrative department of our Government. Especially would I not do so, when the head of that department, viz., the Attorney General of Pennsylvania, although imbued with a high sense of patriotism and conscientious discharge of duty, asserts that such exclusive delegation of power is neither necessary nor desirable or even legal.
DISSENTING OPINION BY MR. JUSTICE MUSMANNO:
On May 8, 1944, eight individuals in Pittsburgh petitioned the Court of Common Pleas of Allegheny County to be awarded a charter for a proposed corporation to be entitled the Yiddisher Kultur Farband. In
No one appearing in court to controvert the statements of the incorporators, the Court, undoubtedly impressed by the representations as to the idealistic character of the proposed corporation, granted the petitioned-for charter, and on May 22, 1944, the Yiddisher Kultur Farband came into being.
On March 23, 1953, a petition by two other individuals was presented in the Court of Common Pleas setting forth, under oath, that the cultural objectives enumerated in the application for the charter of the Yiddisher Kultur Farband constituted a false curtain painted by skillful word artists, and that, behind the camouflage of phraseology, a group of malefactors were engaged in Communist front activities. The petition made clear that what the Yiddisher Kultur Farband was cultivating was not the cultural level of its members but slavish adherence to Communist doctrine. The petition averred that the Court of Common Pleas had been deceived into granting a charter to an organization engaged in an illegal venture. If the petitioners’ averments are true, it would be difficult to imagine a more hideous fraud than this one, designed, as it was, to obtain legal sanction for an enterprise committed to the destruction of the government of the nation and of the Commonwealth of Pennsylvania, together with the Court of which it forms a part. That that is the pur-
Acting upon the petition of March 23, 1953, Judge Ellenbogen, then presiding in the Court of Common Pleas of Allegheny County, issued a rule on the corporation to show cause why its charter should not be revoked. The corporation filed no answer denying the accusatory averments. A hearing was scheduled for March 31st, later continued to April 2, 1953. On the latter date testimony was taken which verified the accusation in the petition. One of the original incorporators, Joseph Saul, called for cross-examination, was asked if he ever belonged to the Communist Party. He refused to answer on the ground that his answer would involve self-incrimination. This silence on so vital a question might save him from criminal prosecution but it cannot prevent formation of the logical inference which follows such an ostrich concealment behind the Fifth Amendment. Saul‘s muteness speaks loudly as to the real purpose of the Yiddisher Kultur Farband.
This organization is not one of trifling means. It is housed in a magnificent, spacious, two and one-half story gray stoned manse at 6328 Forbes Street, Pittsburgh, in a high class residential district. In order to avert suspicion the incorporators did not purchase the building outrightly in the name of the organization. Joseph Saul obtained title to the land and building and then conveyed it to the Yiddisher Kultur Farband. Because the building is supposedly the home of a cultural society, this subversive organization which owns and occupies it enjoys an 85% exemption in taxes. (The 85% exemption of course must be made up by the rest of the taxpayers.)
* Dennis et al. v. U. S., 341 U. S. 494; Albert Appeal, 372 Pa. 13; Com. v. Truitt, 369 Pa. 72, 81, 91-2.
The majority of this Court has now decided that Schlesinger‘s position is well taken. The majority says that only the Attorney General has the right to initiate quo warranto proceedings to dissolve a corporation. But this is not a quo warranto action at all. This is simply a proceeding wherein a sworn petition informs the Court that a gross fraud has been perpetrated upon it and it asks the Court to uncover the fraud and revoke the charter obtained through that fraud. The Court of Common Pleas is asked to correct a grievous error. That was and is the purpose of the petition of March 23, 1953. The majority has not cited, nor is there any authority in all the law books which says that a court may not cleanse its own records, once it is proved that they have been contaminated by a perjurious hand, leprous with deception, deceit and betrayal.
The object of a court is to render justice. In the achievement of that end, judgments are pronounced, modified, altered and cancelled; verdicts are reversed; new trials are ordered; decrees are rescinded and others substituted—all in accordance with facts presented and judicially evaluated. Every tribunal in the United States does honor to the venerable rule that courts possess inherent power to control, amend, open and vacate their decisions according to circumstance, and especially where vitiated by fraud. Many pages would be required to enumerate the authorities com-
In Cochran v. Eldridge, 49 Pa. 365, the scholarly Chief Justice WOODWARD wrote: “That wholesome maxim of the common law, that fraud vitiates whatever it touches, makes no exception of judgments at law. No court of justice will set aside or even be led to look into a solemn judgment on light or trivial grounds; but when it is alleged upon adequate proofs that a judgment in whole or in part has been obtained by a suppression of truth which it was the duty of the party to disclose or by the suggestion of a falsehood or by any of the infinite and therefore undefinable means by which fraud may be practised, no court will allow itself, its records, and the process of law to be used as instruments of fraud.”
In Sallada v. Mock, 277 Pa. 285, we said: “Courts, when appealed to, will prevent the triumph of fraud, and, where a judgment has been obtained by fraud, no court will permit its records and processes to be the instruments of infamy . . . Relief may be granted by opening or vacating such void judgments or decrees, as mere nullities.”
After such powerful and determined utterances, how can a Court of this Commonwealth stand idly by when it is made aware that its records and processes are being used as “instruments of infamy?”
* Italics throughout, mine.
To say that a court does not have the right to revoke a decree is like saying that a general has no right to change a military order; that a ship‘s captain may not alter the course of his vessel; that an aviator may not deviate from the scheduled orbit of his flight though a strange aircraft appears before him; that a doctor may not rewrite a prescription even though new symptoms dictate a different treatment. Under this line of reasoning a judge may not change a punishment even though newly revealed facts and renewed reflection convince him the first sentence was unjust. This type of reasoning rips from the ship of dutiful performance the rudder of responsibility; it tears from the ordnance of correction the guiding sight of accuracy.
The majority opinion collides squarely with the authority of National Indemnity and Endowment, 142 Pa. 450. There the Court of Common Pleas of McKean County was induced to grant a charter to certain incorporators who asserted the formation of “a society for beneficial and protective purposes to its members from funds collected therein.” Later, the
The Common Pleas Court then, on its own initiative, appointed an auditor to take testimony. Upon receiving the report of the auditor the Court announced: “A careful examination of the petition, leads us to the conclusion that the purposes and objects of this company come nearer a scheme to cheat and defraud than a beneficial society. We are satisfied that we made a grave error, in granting the certificate of incorporation, and that it was void ab initio.” The incorporators appealed to the Supreme Court of Pennsylvania and this tribunal, after outlining the procedure followed in ascertaining the facts of the fraud, perpetrated upon the lower court, said: “We are in no doubt of the power of the court to revoke this alleged charter. It never was a charter. It was not authorized by any act of assembly, and is absolutely void . . . A void charter confers no rights, and the court below was justified in revoking the order which gave it an apparent validity.”
How does this National Indemnity and Endowment case differ from the case at bar? Here the Court issued a rule on the Yiddisher Kultur Farband to show cause
The majority opinion indicates that a Court can only learn of an error through official and formal procedure. This is like saying that a lost article can only be found by a policeman. How does the manner of discovery affect the seriousness of the knowledge gained thereby? A Court may learn of the victimizing fraud by inquiry, by investigation or even by accident. And certainly it may learn of the fraud through a petition filed in Court. In the National Endowment Case the Court discovered the fraud by itself and, as stated above, it acted sua sponte in undoing the harm caused by the granting of the undeserved charter.
The majority opinion emphasizes that the two petitioners in this case were not members of the Yiddisher Kultur Farband. It is not to be expected that those who actually participated in the original fraud or are at present enjoying its meretricious benefits would petition the Court. If the law must wait on the intervention of outlaws it will wait a long time for its vindication. In a case like this, the petition, if it is to come at all, must perforce come from some one not within the illegal organization.
The majority says that “the present petitioners are merely informers without any peculiar interest of their own, and if they were to be permitted to institute
If it should appear in court proceedings that the petitioner is irresponsible or is improperly motivated his shortcomings will be quickly detected. However, the harassment or annoyance of an occasional ill-advised petition is of no consequence whatsoever in comparison to the great peril which could befall the safety of our courts if they were not permitted to accept and consider petitions which in apparent good faith ring an alarm bell of present and continuing danger.
The majority states that to entertain the petition of the two petitioners in this case would be to authorize “each and every citizen of the Commonwealth” the right to intervene. I always understood the law in the United States to be that any aggrieved citizen had the right to petition in an appropriate manner for a redress of grievances. Whether there is merit to a petition is something that will be ascertained readily. And when one considers the expense, time and incon-
And then, even if it were to be ascertained that, although the petition averred a truth, an improper motive lurked behind the disclosure, how would that affect the question as to whether a fraud had been committed? Even a thief may report a burglary for the purpose of seeking revenge on a co-thief, but the law would not ignore such a complaint merely because it was propelled by a base motive.
The majority opinion would almost seem to call the petitioners interlopers. They are referred to as “informers without any peculiar interest of their own.” One of the petitioners, Paul Ginsburg, is an attorney at law and as such is an officer of the court. He, therefore, has a justifiable interest in the integrity of the court‘s decrees. When he testified in the lower court he said that upon learning of the fraud committed by the incorporators of the Yiddisher Kultur Farband he felt he had a duty to acquaint the Court with what he had ascertained. He testified: “I would say my interest in this proceeding, of course, is primarily as an American citizen, and more pertinently now, as an officer of this Court. I thought I should help bring to the attention of this Court the existence of a fraud which was perpetrated upon it in connection with the application for the charter of this organization. It is not only my interest and duty as an American and as a taxpayer, but also I would be violating the Canons of Professional Ethics, in my opinion, if I did not do so.”
The other petitioner, Samuel Louis Sherman, is also an American citizen, and that in itself should be enough authority for him to enter an American tri-
On the day that this case was orally argued before this Court in the Capitol at Harrisburg, the able Attorney General of the Commonwealth ROBERT E. WOODSIDE (now Judge of the Superior Court) stepped into the courtroom and he was asked from the bench wheth-
Section 2851, (209) of the
It will be noted that this Act states that the Commonwealth may act to dissolve a corporation. It does not say that it must act. Nor does this provision indicate that the Commonwealth‘s intervention is desired, or even permitted where the question involved is whether a corporation‘s charter should not be revoked because obtained through fraud. And it is to be particularly noted further that the Corporation Act does not deprive the Court of its inherent powers to correct its records and vacate decrees improperly obtained, it specifically stating that the Act “shall not be deemed to curtail in any manner whatsoever the law or equity jurisdiction of the courts of this Commonwealth.” (
The majority opinion says further: “If the Association here is what petitioners allege it to be the situation is one of public concern and a public wrong, not a private injury, and, as such, it is for the Commonwealth and for it alone, acting through the Attorney General, to apply for the issuance of a writ of quo warranto.” But suppose, as now Superior Court Judge WOODSIDE honestly and realistically put the proposition, the Attorney General capriciously or arbitrarily refuses to bring an action of quo warranto, what then? The answer, in the words of Judge WOODSIDE, is that the “court would be powerless to cleanse itself of the fraud.” There would be no way to force the Attorney General to act since the statute only says that the Commonwealth may intervene. The refusal of the Attorney General to act could not be considered as non-
What the majority opinion does here is to abdicate the power of the judiciary to correct injustice, to root out fraud, to uncover deceit and to stay the advance of a recognizable and certain evil force moving on the citizenry within its jurisdiction and entitled to its protection.
The majority decision strikes at the very vitals of the independence of the judicial department of the government. It holds that the courts made up of a judiciary elected by the people shall be at the mercy of a non-elected official who may be hundreds of miles away. It says that no matter what may be the evidence of the fraud, or the proof of the deceit, or the extent of the treachery perpetrated upon the courts, the Courts are helpless. The courts are made to wait on the Attorney General who may delay, ignore, procrastinate or deliberately refuse to intervene. The Courts, heretofore always occupying the throne of justice, would be left sitting on the doorstep waiting and hoping. It is a humiliation that beggars description.
And who will be the beneficiary of this particular capitulation of the Courts? Some civic organization? Some charitable group? Some religious body? The incredible truth is that the Court in this case is yielding judicial power, not intentionally of course, but nonetheless actually and realistically to the fortuitous benefit of the most sinister, most deadly, most anti-American and most destructive organization in our land—the Communist Party of the United States.
I take judicial notice of the fact that sworn testimony before a United States Senate Committee has disclosed that the Yiddisher Kultur Farband is run by Communists, directed by Communists, inhabited by Communists, and that some of these Communists conduct classes in sedition and revolution. It was testified, under oath, that in this building, owned, controlled and operated by the Yiddisher Kultur Farband, instruction is imparted in the construction of hand grenades and bombs and that in the cellar of this structure a target range has been maintained.
It was within this organization that, according to the testimony of a former FBI undercover agent, statements were made regarding plans for the assassination of a United States Senator. I also take judicial notice of the fact that the Attorney General of the United States, after suitable investigation, declared that the Yiddisher Kultur Farband, (translated: the Jewish Cultural Association), is a subversive Communist front organization. Only several days ago, sworn
This, then, is the type of organization that this Court says must not be touched, must not be investigated, must not have its charter questioned until and unless the Attorney General decides to act.
The petition which called the attention of the Court to the fraud perpetrated upon it by the Yiddisher Kultur Farband was filed on March 23, 1953. Presumably the organization has been operating ever since. This is another illustration of how the Communist Party, judicially recognized as a criminal conspiracy working to overthrow our government by force and violence, can and does use our courts in the furtherance of its revolutionary plans. If, as the majority opinion indicates, the integrity of the Court‘s decrees are to be entrusted to the guardianship of the Attorney General, why has the Attorney General not acted heretofore? As long ago as February, 1950, Matt Cvetic, former FBI undercover agent, testified before the House Un-American Activities Committee, that the Yiddisher Kultur Farband was a Communistic organization. Why did the Attorney General not step in then with quo warranto proceedings and demand cancellation of the charter of this illegal enterprise? This fact alone demonstrates the impracticability—and the danger—of leaving to the Attorney General alone the responsibility of protecting decrees of our Courts of Common Pleas in the 67 counties of our Commonwealth. In addition to the other reasons already men-
The whole country is aroused, and properly so, by the Communist peril. We know that Communist agents have been discovered in all the departments of the United States government. We know that Communist spies have stolen the awesome atom and H-bomb secrets. We know that Communists have infiltrated into labor unions, into the professions, the arts, the sciences and we know they have polluted literary and cinematic streams. Within the next year or more, 25,000 flag-draped caskets will be returning from Korea and each one will contain, mingled with the mangled form of an American soldier, a Communist bullet or the fragment of a Communist shell or grenade. And 50,000 Communists in the United States will cheer that grim harvest because they are of the same brand as those who committed the slaughter in Korea. Among the ghouls sneering at the ineffable coffins will be not only the members of the Communist Party but the members of the Communist front organizations, of which the Yiddisher Kultur Farband is one.
Congressional investigations by the hundreds have revealed the manner in which the Communists have deceived the highest of American government officials. The most notorious of them all deceived the President of the United States and sat at his elbow recommending cessions of vast territory and uninhibited international power to Communist Russia. The people of the United States look to the Army, the Navy and the
So that there may be no doubt about my position in this case I repeat that it is my considered judgment that, because of precedent and the innate jurisdiction residing in every Court of our Commonwealth to thwart fraud and correct error, Judge ELLENBOGEN had the authority of his own motion, as was done in the Indemnity case, supra, to ascertain whether the Yiddisher Kultur Farband charter was granted through fraud, and, once the fraud was discovered, he had the authority and the bounden duty to revoke that charter. Not only that, but it was within his power to sit as a committing magistrate on his own initiative to formally charge with crime those whom he believed were probably guilty of perjury or sedition in this transaction.
How long must this Communist front organization go on functioning? The Attorney General has declared
But in conclusion, I would emphasize that over and above the perilous contretemps created by the majority decision, that decision has wrought splintering damage to the inkstand of judicial independence resting on the bench of every judge in the Commonwealth of Pennsylvania.