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LAPAYOWKER v. LINCOLN COLLEGE PREPARATORY SCHOOL. (09/24/56)

September 24, 1956

LAPAYOWKER, APPELLANT,
v.
LINCOLN COLLEGE PREPARATORY SCHOOL.



Appeal, No. 124, Jan. T., 1956, from decree of Court of Common Pleas No. 5 of Philadelphia County, March T., 1955, No. 3492, in equity, in case of Rose Lapayowker v. Lincoln College Preparatory School, Inc., et al. Decree affirmed; reargument refused November 16, 1956. Equity. Before ALESSANDRONI, J. Adjudication filed finding for defendants; exceptions to adjudication dismissed and final decree entered dismissing complaint. Plaintiff appealed.

COUNSEL

F.A. Truscott, with him Samuel Moyerman and Truscott, Berguido, Kline, O'Neill & Howson, for appellant.

Robert J. Callaghan, with him Josephine H. Klein, Arlin M. Adams, and Schnader, Harrison, Segal & Lewis, for appellees.

Before Stern, C.j., Jones, Bell, Chidsey and Musmanno, JJ.

Author: Chidsey

[ 386 Pa. Page 168]

OPINION BY MR. JUSTICE CHIDSEY

This is an appeal from a final decree dismissing a wife's complaint in equity to secure a transfer of 48 shares of common stock held by the individual defendant*fn1 in defendant corporation. She also seeks 25 shares of nonvoting preferred stock held in the defendant corporation's treasury. The total authorized and issued stock in the corporation consists of 50 shares of common and 50 shares of preferred. After a hearing on the merits at which extensive testimony was taken, the chancellor entered an adjudication in favor of defendants

[ 386 Pa. Page 169]

    together with detailed findings of fact and conclusions of law. Plaintiff's exceptions were overruled by the court en banc which approved the chancellor's findings and dismissed the complaint. This appeal followed.

The facts as found by the chancellor may be summarized as follows: Plaintiff, Rose Lapayowker, and the individual defendant, Dr. Manfred E. Lapayowker, are husband and wife. They were married in 1921, and separated in 1951. Dr. Lapayowker is the principal of Lincoln College Preparatory School, Inc., a Pennsylvania corporation which traces its beginning to a sole proprietorship founded by him in 1923. Lincoln College Preparatory School is a private high school located in Philadelphia with a student body at the present time of 350 and a faculty of 11 members. In 1932 Dr. Lapayowker incorporated the school under the laws of the State of Delaware and transferred the assets of the proprietorship to that corporation. His purpose in incorporating was to avoid an attachment of the school's assets by reason of a bond and warrant he had given to accompany a mortgage on his former home, 1603 South 6th Street, Philadelphia, which he had sold in 1924 under and subject to the mortgage. Pursuant to an oral agreement between plaintiff and the individual defendant, the controlling shares of the Delaware corporation were placed in plaintiff's name to be held by her until defendant Lapayowker's liability on the bond was extinguished. In May, 1934, the school was incorporated in Pennsylvania. Immediately thereafter, the Pennsylvania corporation purchased the Delaware corporation and forth shares of common and twenty-five shares of preferred stock were issued to plaintiff to replace the shares held by her in the Delaware corporation. At the same time, eight shares of

[ 386 Pa. Page 170]

    common stock were issued to Dr. Lapayowker which he immediately transferred to plaintiff. These forty-eight shares of common stock were and are the controlling interest in the school. Notwithstanding the registration of the shares in her name, plaintiff never operated or attempted to control the operation of the school, never demanded any dividends or accounting of the school's finances, never demanded that any corporate meetings be held or that she be permitted to attend such meetings. At all times defendant Lapayowker operated the corporation as though it were his own individual property in the same manner as he ran the school itself. The majority of the purported meetings of the directors and stockholders were never held, but Dr. Lapayowker prepared minutes of such alleged meetings. The operation of the school was virtually the sole means by which Dr. Lapayowker supported himself, his wife and his three children. Plaintiff never demanded the stock certificates for the stock issued in her name which have always been in Dr. Lapayowker's possession.

In July, 1935, at the request of defendant Lapayowker, plaintiff endorsed and returned to the corporation as treasury stock the twenty-five shares of preferred. In 1932 the buyer of 1603 South 6th Street, who had purchased the property subject to the mortgage, defaulted in his payments. A series of legal proceedings was then instituted by the assignee of the mortgagee to enforce defendant Lapayowker's personal liability on the bond which culminated in 1939 in an equity action to set aside the transfer to plaintiff of the eight shares of common stock on the ground that it ...


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