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decided: July 7, 1975.



Harry W. Miller, Miller, Urbanik & Sherman, Pittsburgh, for appellant.

J. Robert Maxwell, Maxwell & Huss, Robert K. Stitt, III, Pittsburgh, for appellee.

Jones, C. J., and Eagen, O'Brien, Roberts, Pomeroy, Nix and Manderino, JJ. Roberts, J., filed a concurring opinion. Manderino, J., filed a dissenting opinion in which Nix, J., joins.

Author: Pomeroy

[ 462 Pa. Page 312]


Appellant, Abraham Fishkin, is a minority shareholder, director and secretary-treasurer of Hi-Acres, Inc., a Pennsylvania Corporation.*fn1 He brought this suit in equity alleging that the two majority shareholders of Hi-Acres, R. F. and Louise L. Zahorchak (who are, respectively, the president and vice-president and also directors of the company), had, purportedly on behalf of the corporation, alienated certain real estate of the company to Carl Lubetsky, Louis Zelekovitz and Morris Lubetsky, appellees herein. The complaint, brought against the Zahorchaks, the company and the three transferees, averred that although the deed contained a statement of authorization of sale by the board of directors, there had been in fact, no prior director approval. As to the shareholder-defendants, the Zahorchaks, equitable relief in the nature of an accounting for the proceeds of sale was sought, as well as injunctive restraint against any disbursement of those proceeds until after the final disposition of the litigation. The relief requested as to the three purchaser-defendants was a declaration that the sale was a nullity and an injunction prohibiting the vendees from taking possession of the premises.*fn2

Both the Zahorchaks and the purchaser-defendants filed preliminary objections, which included preliminary objections in the nature of a demurrer. In each instance the demurrers were sustained by the trial court. With respect to the shareholder-defendants the court in its decree

[ 462 Pa. Page 313]

    gave leave to appellant to file an amended complaint; it concluded that because of the fiduciary relationship which exists between majority and minority shareholders, the possibility remained that a cause of action against the Zahorchaks could yet be stated.*fn3

With regard to the purchaser-defendants, however, the court below determined that leave to amend ought not to be granted. The complaint was accordingly dismissed with prejudice. Appellant does not challenge the decree of the lower court insofar as it sustained the preliminary objection in the nature of a demurrer. Indeed, his brief to this Court concedes that the original complaint failed to state a cause of action as to any of the defendants. Appellant's sole contention is that, in its decree sustaining the preliminary objections, the court below committed reversible error in dismissing the complaint against the purchaser-defendants without leave to amend.

In its opinion in support of the decree dismissing the complaint, the court en banc stated: "As to the purchaser-defendants, however, no leave for amendment is in order. There is no hint in the averments before the Court in the Complaint that the purchasers were anything but bona fide or that they have done anything to injure the plaintiff. Even if the sale of the property to them was done without the proper authorization, there are no allegations of their knowledge or complicity in the impropriety. Such a question and dispute about compliance with correct corporate procedure would clearly be between the shareholder and the corporation, and should

[ 462 Pa. Page 314]

    not be allowed to cloud the title and forestall the taking of possession by an innocent purchaser. Therefore, leave to amend with respect to Carl Lubetsky, Louis Zelekovitz and Morris Lubetsky shall not be granted."

It is fundamental that opportunity to amend a defective complaint must be granted unless there exists no reasonable possibility that a cause of action can be made out upon a better statement of facts. Glenn v. Point Park College, 441 Pa. 474, 483, 272 A.2d 895, 900 (1971); Quaker City v. Delhi-Warnock, 357 Pa. 307, 312, 53 A.2d 597, 600 (1947); Winters v. Pennsylvania R. Co., 304 Pa. 243, 247, 155 A. 486, 487 (1931).

The essence of appellant's claim in this court is that a sale of a corporation's sole asset in violation of § 311, subd. B of the Pennsylvania Business Corporation Law, Act of 1933, May 5, P.L. 364, Art. III, § 311, subd. B, as amended, 15 P.S. § 1311, subd. B, is void, and therefore, ineffectual to convey legal title. He states that this was in fact the vice of the transaction here involved and that, therefore, the status of the ...

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