Appeal, No. 119, March T., 1958, from decree of Court of Common Pleas of Westmoreland County, No. 2629, in equity, in case of Nick Petrishen et al. v. Westmoreland Finance Corporation et al. Decree reversed.
Milton W. Lamproplos, with him Andrew S. Romito, Myron W. Lamproplos, and Eckert, Seamans & Cherin, and Cassidy & Lamproplos, for appellants.
Vincent E. Williams, with him Meyer W. Gordon, Robert W. Smith, Jr., and Smith, Best & Horn, for appellees.
Before Jones, C.j., Bell, Musmanno, Jones and Cohen, JJ.
OPINION BY MR. JUSTICE BENJAMIN R. JONES.
This is an appeal from the entry of a decree by the court below ordering the individual appellants to deliver up for cancellation certain shares of stock purportedly issued to them illegally by the corporate appellant, and restraining both the corporate and individual appellants from issuing or transferring any of the corporate stock until compliance has been had with the decree directing cancellation.
The Westmoreland Finance Corporation was incorporated on March 15, 1950, for the purpose of engaging in the small loan business. The articles of incorporation authorized the issuance of $100,00 capital stock, divided into 200 shares each having a par value of $500. Nick Petrishen, Joseph Brinko, Edward Brinko, Jacob J. Ross, John Marzullo and Mary D. Ross each subscribed and paid for ten shares of stock. On the same date, the corporation entered into an agreement with Joseph Marzullo, who had had previous experience in the small loan business, which provided that Marzullo was to be the manager of the corporation and that he was "to sit in at all meetings" of the corporation's board of directors "with the powers and rights of a Director..." This agreement further provided that: " Seventh: When the Employer Company shall have, after expenses, earned funds in an amount equal to Thirty Thousand ($30,000.00) Dollars (the
amount contributed by the remaining officers and directors on the basis of Five Thousand ($5,000.00) Dollars each, then, whether the said Thirty Thousand ($30,000.00) Dollars is distributed or not among the original contributors, the proportionate share of Five Thousand ($5,000.00) Dollars each shall be allocated to said contributors. Thereafter the Corporation shall issue stock to the Manager in an amount equal to share held by each of the other officers or directors (after the allocation set forth above), so that thereafter all of the Directors, including the Manager, shall hold equal shares of stock in the said company, at which time the Manager shall formally be elected as a Director." This agreement was approved and ratified by all of the directors, who at that time also constituted all of the corporation's stockholders.
On March 16, 1950, the stockholders adopted a resolution authorizing the board of directors "to issue the capital stock of this corporation to the full amount or number of shares authorized by the Articles of Incorporation, in such amounts and proportions as from time to time shall be determined by the Board, and to accept in full or in part payment thereof such property as the Board may determine shall be good and sufficient consideration and necessary for the business of corporation." On May 2, 1951, after Marzullo had been in the corporation's service for over a year, the board of directors adopted the following motion: "Regularly moved, seconded, and carried that 10 Shares of Stock be issued to Joseph S. Marzullo; such shares to draw dividend only after $30,000.00 in profit has been earned as per the contract agreement..." It would appear from the minutes of the meeting that the number of directors required by the by-laws to constitute a quorum were not present. However, testimony was introduced to show that an additional director, whose presence was
not recorded in the minutes, actually did attend and did vote ...