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SHAPIRO v. MAGAZINER (05/25/65)

decided: May 25, 1965.

SHAPIRO, APPELLANT,
v.
MAGAZINER



Appeal from order of Court of Common Pleas No. 7 of Philadelphia County, March T., 1963, No. 2552, in case of Merton Shapiro v. D. Arthur Magaziner, Bennard Shapiro, David A. Magaziner, Jr. et al.

COUNSEL

Michael H. Egnal, with him Egnal and Simons, for appellant.

William T. Coleman, Jr., with him Stuart H. Savett, and Dilworth, Paxson, Kalish, Kohn & Dilks, for appellees.

Bell, C. J., Musmanno, Jones, Cohen, Eagen, O'Brien and Roberts, JJ. Opinion by Mr. Justice Cohen

Author: Cohen

[ 418 Pa. Page 279]

This is an appeal from an order of the lower court in equity directing plaintiff-appellant to pay "costs

[ 418 Pa. Page 280]

    and reasonable counsel fees" incurred by defendant-appellees "if suit is commenced anew." The order was entered in connection with the granting of plaintiff-appellant's motion for a voluntary non-suit of his shareholder's derivative action. The order must be modified to exclude the allowance of reasonable counsel fees.

"'Over and over again we have decided there can be no recovery for counsel fees from the adverse party to a cause, in the absence of express statutory allowance of the same . . .', Smith v. Equitable Trust Co., 215 Pa. 413, 417, 64 Atl. 591, 592 (1906), or clear agreement by the parties, Fidelity-Philadelphia Trust Company v. Philadelphia Transportation Company, 404 Pa. 541, 548, 173 A.2d 109, 113 (1961), or some other established exception, see Hempstead v. Meadville Theological School, 286 Pa. 493, 134 Atl. 103 (1926)." Corace v. Balint, 418 Pa. 262, 271, 210 A.2d 882, 886-7 (1965). Appellees contend that a statute supports the allowance of counsel fees in this case. Section 516 of the Business Corporation Law, added by the Act of August 27, 1963, P. L. 1355, § 1, 15 P.S. § 2852-516, to the Act of May 5, 1933, P. L. 364, 15 P.S. § 2852-1 et seq., provides, inter alia: "B. In any such [derivative] suit*fn1 instituted or maintained by a holder or holders of less than five per centum of the outstanding shares of any class of such corporation . . . unless the shares . . . held by such holder or holders have a fair market value in excess of fifty thousand dollars ($50,000), the corporation in whose right such action is brought shall be entitled at any stage of the proceedings, to require the plaintiff or plaintiffs to give security

[ 418 Pa. Page 281]

    for the reasonable expenses, including attorneys' fees, which may be incurred by it in connection with such suit, and by the other parties defendant in connection therewith, for which it may become liable pursuant to subsection C of this section 516, to which security the corporation shall have recourse in such amount as the court having jurisdiction shall determine upon the termination of such action.

" C. The reasonable expenses, including attorneys' fees, of any party defendant incurred in connection with the successful defense of such suit shall be assessed upon the corporation. . . . The amount of all such expenses so assessed shall be awarded as costs of the suit and be recoverable in the same manner as statutory taxable costs. . . ."*fn2

Plaintiff-appellant owns more than five per centum of the outstanding shares of the defendant-appellee corporation. Accordingly, the corporation could not have required plaintiff to put up the security provided for in § 516B. However, appellees contend that § 516B is merely a method by which the corporation may secure and recover from a financially insecure plaintiff its own litigation expenses and those assessed against it under § 516C. On the other hand, they contend that § 516C, especially the last quoted sentence thereof, provides that a corporation may recover all such expenses from a losing plaintiff, ...


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