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MCCLEMENTS v. MCCLEMENTS. (06/07/63)

June 7, 1963

MCCLEMENTS, APPELLANT,
v.
MCCLEMENTS.



Appeal, No. 77, March T., 1963, from decree of Court of Common Pleas of Allegheny County, Oct. T., 1958, No. 355, in case of Gertrude K. McClements v. James B. McClements, Jr., John K. McClements, Frederick S. McClements et al. Decree affirmed.

COUNSEL

Walter O. Howarth, for appellant.

Louis Vaira, with him Albert G. Brown, for appellees.

Before Bell, C.j., Musmanno, Jones, Cohen, Eagen, O'brien and Roberts, JJ.

Author: Eagen

[ 411 Pa. Page 259]

OPINION BY MR. JUSTICE EAGEN

The appellant, Gertrude K. McClements, instituted this action in equity seeking to have seventy-five shares of corporate stock held by her sons, the individual defendants, charged with a constructive trust for her benefit.*fn1

Joyce-McClements Company, the family-owned corporation involved, is engaged in the food catering business in the City of Pittsburgh. In 1926, when the business began, James B. McClements, Sr., the appellant's husband, owned seventy-eight shares of the corporate stock and his brother John owned seventy-two shares. This represented the total number of shares issued and outstanding. In 1930, sixty-five shares of stock were sold by John McClements to his nephew, James B. McClements, Jr., and the remaining seven shares of stock owned by John went into the company as treasury shares.

James B. McClements, Sr., died testate on December 25, 1945. His widow, the appellant, was named executrix and the sole beneficiary of his estate. In the present action, she maintains that at the date of death her husband was still the legal or equitable owner of seventy-eight shares of stock in the corporation, which interest she inherited. The defendants, three sons of the appellant and her deceased husband, contend that seventy-five shares of the stock were given to them as a gift inter vivos in the year 1940. After hearing, the chancellor entered a decree nisi dismissing the complaint. The court en banc dismissed exceptions thereto

[ 411 Pa. Page 260]

    and entered a final decree. This appeal followed. Whether or not the evidence is legally sufficient to justify the lower court's conclusion that the defendants are and have been for several years the owners of the stock involved is the main issue for determination.

The following facts are undisputed. The defendant, James B. McClements, Jr., has been an officer and general manager of the corporation for more than thirty years and during that period continuously in charge of its operation. For many years before his death, James B. McClements, Sr., although having little to do with the business operation, received substantial sums from the profits thereof. These payments ranged from $300 to $600 monthly. Subsequent to his death, the sum of $400 monthly was paid to the appellant until July, 1950. Following the death of James B. McClements, Sr., the inventory of the estate listed among its assets only three shares of stock in the corporation involved. The appellant, as executrix, certified to the correctness of this statement.

To sustain the defendants' position of ownership of the stock by gift, James B. McClements, Jr., testified, inter alia (without objection) that in 1940, his father was in personal financial difficulty and in order to place seventy-five shares of the stock of the corporation then registered in his name beyond the execution process, he transferred the registration of the ownership thereof to the witness; that the father also then said that the stock was to be equally distributed among his sons, James, Jr., Fritz and John, all of whom were active in the business; that subsequently he (James, Jr.,) turned over twenty-five shares to each of his brothers. He further stated that the ...


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