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REIFSNYDER v. PITTSBURGH OUTDOOR ADVERTISING CO. (07/18/61)

July 18, 1961

REIFSNYDER, APPELLANT,
v.
PITTSBURGH OUTDOOR ADVERTISING CO.



Appeals, Nos. 52 and 57, March T., 1961, from orders of Court of Common Pleas of Allegheny County, Jan. T., 1956, No. 2844, in case of H. Y. Reifsnyder v. Pittsburgh Outdoor Advertising Co. et al. Orders reversed; reargument refused August 18, 1961.

COUNSEL

John C. Hanna, with him Metz, Cook, Hanna & Kelly, for appellant.

Carl E. Glock, with him Reed, Smith, Shaw & McClay, and Strassburger & McKenna, and Eckert, Seamans & Cherin, for appellees.

Before Jones, C.j., Bell, Musmanno, Cohen, Bok and Eagen, JJ.

Author: Cohen

[ 405 Pa. Page 144]

OPINION BY MR. JUSTICE COHEN.

We are called upon in these appeals to determine whether the defendants in a prior action brought by a shareholder are entitled to have the plaintiff in that action pay the costs and attorneys fees incurred by them in successfully defending that suit by virtue of the Act of April 18, 1945, P.L. 253, 12 PS § 1321.*fn1 In order to make this determination we must decide whether the prior action in which the present appellant was the plaintiff and the present appellees, the defendants, was a secondary or derivative suit as opposed to a direct personal or representative one.*fn2

The prior action, Reifsnyder v. Pittsburgh Outdoor Advertising Company, 396 Pa. 320, 152 A.2d 894 (1959), was a suit by a minority shareholder against the corporation whose stock he owned and against certain

[ 405 Pa. Page 145]

    of its officers and directors. In that suit Reifsnyder, the present appellant, contested the validity of resolutions enacted at a shareholders' meeting and passed by votes of the majority shareholder. The resolutions in question authorized the corporation to purchase on its own behalf all the stock in the corporation held by the majority shareholder and to increase the corporation's indebtedness in order to finance the purchase. Reifsnyder also sought in the prior action to nullify the acts taken pursuant to the resolution and to restore the status quo. Reifsnyder was unsuccessful in the lower court in that action and when the case came before us on appeal we dismissed the appeal because of failure to join an indispensable party. The present appellees then petitioned the court of common pleas to determine and award fees and expenses incurred in the defense of the initial action. Approximately $70,000 was awarded to the appellees and this appeal followed.

Appellees claim that the appellant's act of posting security for costs in the original suit and the lower court's treatment of the former proceeding as a derivative suit are determinative of the issue before us. We do not feel that such factors are controlling. In determining whether a suit is direct or derivative the allegations of the complaint germane to the cause of action must govern. See 13 Fletcher, Cyclopedia Corporations § 5911 (rev. vol. 1961), and cases cited therein.

The complaint filed by Reifsnyder in the prior action was divided into three major sections. The first section contained 21 paragraphs which set forth in great detail the circumstances surrounding the adoption of the contested resolution and the events subsequent to the adoption of the resolution. The second section contains a request ...


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