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KENNETH A. BURDON v. GEORGE B. ERSKINE (03/16/79)

decided: March 16, 1979.

KENNETH A. BURDON, APPELLANT,
v.
GEORGE B. ERSKINE, WILLIAM L. MEISEL, WILLIAM M. ERSKINE, ROBERT A. TAYLOR, INDIVIDUALLY AND AS MEMBERS OF THE BOARD OF DIRECTORS OF EMPORIUM SPECIALTIES CO., INC., EMPORIUM SPECIALTIES CO., INC. AND EMPORIUM TRUST COMPANY



No. 585 October Term, 1978, Civil Action, Equity - Appeal from Orders of the Court of Common Pleas of the Fifty-Ninth Judicial District, Cameron County Branch, Entered Nov. 30, 1977, Feb. 22, 1978 and Feb. 23, 1978 at No. 13, November Term, 1974

COUNSEL

Heath L. Allen, Harrisburg, for appellant.

J. Bruce Walter, of Rhoads, Sinon & Hendershot, Harrisburg, for appellees.

Jacobs, President Judge, and Hoffman, Cercone, Price, Van der Voort, Spaeth and Hester, JJ. Jacobs, former President Judge, and Hoffman, J., did not participate in the consideration or decision in this case.

Author: Spaeth

[ 264 Pa. Super. Page 585]

This is an appeal from an order sustaining a demurrer and dismissing with prejudice a complaint in equity.

Appellant is trustee in bankruptcy of MW Manufacturing Corporation, which wholly owns appellee Emporium Specialties Co., Inc. Appellees George Erskine, William Erskine, and William Meisel are directors and officers of Specialties. Appellee Emporium Trust is a bank. Appellee Robert Taylor, now deceased, was president of Emporium Trust and a director of Specialties.

Appellant filed his complaint on December 5, 1974. The complaint alleged that as directors, the individual appellees had breached their fiduciary duty to Specialties by approving "unreasonable and excessive" employment contracts with the three of them who were officers of Specialties, and further, by approving two loan agreements between Specialties and Emporium Trust. Appellees filed their preliminary objections, including a demurrer, to the complaint on December 20, 1974. No further action occurred until August 8, 1977, when appellees moved to dismiss the complaint for failure to prosecute. After discovery and an evidentiary hearing, the lower court granted appellees' motion to dismiss for failure to prosecute, and also sustained appellees' demurrer. We find it necessary to consider only the order sustaining the demurrer.

Pa.R.Civ.P. 1506 provides:

[ 264 Pa. Super. Page 586]

In an action to enforce a secondary right brought by one or more stockholders of a corporation . . . the complaint shall set forth . . .

(2) the efforts made to secure enforcement by the corporation or similar entity or the reason for not making any such efforts.

The basis of the demurrer, and of the lower court's order, was that the complaint represented a secondary action brought by MW Manufacturing as the sole stockholder of Specialties, but that it did not set forth, either any effort by MW Manufacturing as sole stockholder to secure enforcement by Specialties of its ...


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