Appeal from decree of Court of Common Pleas of Butler County, June T., 1970, No. 13, in case of Anthony G. Johns et al. v. Estate of W. Carl Cheeseman et al.
William D. Sutton, with him Lee C. McCandless, Frank P. Krizner, Thorp, Reed & Armstrong, and McCandless, Chew & Krizner, for appellants.
Saul J. Bernstein, with him Willis A. MacDonald, and Bernstein and Campbell, for appellees.
Jones, C. J., Eagen, O'Brien, Pomeroy, Nix and Manderino, JJ. Opinion by Mr. Justice Pomeroy. Mr. Justice Nix and Mr. Justice Manderino concur in the result. Mr. Justice Roberts took no part in the consideration or decision of this case.
The appellants are stockholders of the Community Finance Company of Butler ("Finance"), a Pennsylvania corporation engaged in the business of making small loans to consumers. They own approximately 30% of the outstanding stock. On March 8, 1971, they filed a complaint in equity, asserting a stockholders' derivative action against the corporation,*fn1 a number of directors of the corporation, and against the estate of W. Carl Cheeseman, the deceased former chief executive officer of the corporation.*fn2 Preliminary objections in the nature of a demurrer having been filed and overruled, defendants answered on the merits and, under the heading of "New Matter", pleaded the affirmative
defenses of laches and estoppel.*fn3 Plaintiffs filed a reply to the new matter, denying that a factual basis existed upon which they could be said to be either estopped or guilty of laches.
Defendants then moved for judgment on the pleadings under Pa. R. C. P. 1034. Plaintiffs in turn moved for summary judgment, but in that motion stated that "the pleadings of the defendants in this case" entitled them to judgment. The lower court denied the plaintiffs' motion for summary judgment and granted the defendants' motion on the "basis of facts developed by the pleadings and the depositions relevant to the positions of the parties . . ."*fn4 It is from that decree that the present appeal is taken by the plaintiffs.
The record as it was originally printed in this Court contained no "depositions . . . of the parties", as referred to in the court's opinion, nor did either appellants or appellees make any reference to such depositions. Since, however, they had clearly been considered by the lower court in reaching its decision, we ordered that the parties print a supplemental record containing the depositions referred to and considered by the court below and that the parties file supplemental briefs addressed to the question of what facts were established without genuine dispute by the proceedings below.
The salient facts derived from the pleadings and depositions, insofar as they are not in genuine dispute, are as follows. The Community Finance Company ("Finance") is a closely-held corporation which has been since 1932 engaged in the business of making small consumer loans. In 1954, Finance formed a subsidiary, Community Investment Corporation ("Investment"), for the purpose, inter alia, of selling insurance. Investment was also used by Finance as its vehicle to own land and to construct a banking building in 1957-1958.
In connection with its small loan business, Finance (or its subsidiaries) offered its borrowers credit health and/or credit life insurance. If the borrower elected the insurance coverage, Finance employees would process the necessary paperwork, would collect the insurance premium (or deduct it from the loan proceeds), and would forward the sums thus obtained to the insurance company offering the insurance through Finance. The insurance company would ...