Appeal from judgment of Court of Common Pleas of Washington County, Nov. T., 1966, No. 456, in case of William G. O'Brien v. O'Brien Steel Construction Company et al.
James M. Carter, with him Marjorie H. Matson, for appellants.
Frank C. Carroll, with him McIlvaine & Carroll, for appellee.
Bell, C. J., Jones, Cohen, Eagen, O'Brien, Roberts and Pomeroy, JJ. Opinion by Mr. Justice Roberts. Mr. Justice Cohen concurs in the result.
We are asked in this appeal to reverse a $10,000 judgment for plaintiff in an assumpsit action because of the asserted illegality of the underlying contract.
Plaintiff, William G. O'Brien, Jr., is the brother of defendants Helen, James, John and Joseph O'Brien, and Sue O'Brien Miller. All are children of William and Ada O'Brien, both now deceased. The principal sum was found to be due plaintiff as a third party donee beneficiary of a contract between defendants and their parents.
William, Jr.'s chief witness was his brother James who recounted a meeting at his father's home in February of 1951 attended by all members of the immediate family save for William, Jr. According to James, his parents at that time expressed their desire for financial security during the remainder of their lives and a concern for what William, Sr. thought would be an onerous tax burden on their estates if he and Ada were to die owning their share of stock in the O'Brien Steel Construction Company, the family business. James testified that it was orally agreed that William, Sr. and Ada would transfer their stock in the family corporation to defendants. In return, defendants agreed to furnish a $600 monthly annuity to their parents and, in addition, promised to pay William, Jr. the $10,000 death benefit of an insurance policy upon the life of William, Sr. which was owned by and made payable to the corporation. Since William, Jr. had not been active in the management of the corporation for some time, he was to receive the future $10,000 cash payment in lieu of a share of his parents' stock.*fn1
Sue, John and Joseph for their part denied that such a meeting had ever occurred or that such an oral agreement had been consummated or even discussed. Nevertheless, William, Sr. and Ada did transfer their stock to defendants,*fn2 and a written support agreement similar in terms to the alleged oral agreement was executed.
The jury, apparently crediting the testimony of James, returned a verdict for plaintiff. Defendants' motion for new trial was denied, and the present appeal ensued.*fn3
Defendant-appellants now and for the first time contend that the contract founding William, Jr.'s claim to the insurance proceeds had an illegal purpose and is, for that reason, unenforceable.*fn4 Specifically, they assert that the stock transfer, the annuity, and the assignment of the future interest in the insurance policy were inextricably bound to an unlawful scheme to commit tax fraud upon the United States. In support of this conclusion, we are urged to consider the following evidence: William, Sr.'s federal gift tax return for 1951 contained no reference to the gift of the future interest in the life insurance to William, Jr. William, Sr. and Ada filed gift tax returns on March 15, 1952, for the years 1950 and 1951. These returns report gifts of a portion of the stock to defendants in the first month of each of the two years. The stock certificates themselves ...