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filed: December 1, 1980.


Nos. 2571 & 2572 October Term, 1978 Appeal from the Order in the Court of Common Pleas of Cumberland County, Civil Division-Equity, No. 5 March Term, 1973.


Robert C. Saidis, Carlisle, for Krosnar, appellant at No. 2571 and appellee at No. 2572.

Richard C. Snelbaker, Mechanicsburg, for Schmidt et al., appellants at No. 2572 and for appellee at No. 2571.

Price, Gates and Dowling, JJ.*fn*

Author: Price

[ 282 Pa. Super. Page 532]

Following the filing of a petition for involuntary dissolution of the professional corporation of accountants known as Schmidt Krosnar McNaughton Garrett Company (hereinafter referred to as SKMG), the accountants associated with the corporation, J. Donald Schmidt, George Krosnar, Francis C. McNaughton and Thomas A. Garrett, agreed to abandon the action and voluntarily dissolve SKMG. They continued to disagree, however, as to the number of shareholders who retained an interest in the corporation at the time of dissolution and whether any of the parties had breached their fiduciary duty to the corporation. Seeking a division of the assets, Krosnar brought a suit in equity and trial was held before the Honorable Sylvia H. Rambo on July 6 and 7, 1977. Chancellor Rambo filed her adjudication and decree nisi on December 2, 1977, in which she found that only two shareholders, Krosnar and Schmidt, retained an equal interest in the corporation at dissolution and that none of the parties had violated their fiduciary duty to the corporation. She decreed that Schmidt pay Krosnar $2,603 to make the division of corporate assets equal between the two shareholders. Exceptions were filed by both parties, and after argument before the court of common pleas en banc, they were overruled and the decree nisi made final.

[ 282 Pa. Super. Page 533]

Krosnar filed the original appeal to this court and SKMG, Schmidt, and Garrett filed a cross appeal.*fn1 The issues raised in these appeals are as follows: (1) whether the court erred in its determination of the number of shareholders of the corporation; (2) whether the court erred in calculating the final distribution of assets and liabilities; (3) whether the court erred in refusing to find that Krosnar violated his fiduciary duty to the corporation; and (4) whether Krosnar should be permitted to recover interest on the sum to be paid him by Schmidt under the chancellor's decree. We hold that the findings of fact made by the chancellor are inadequate to allow this court to properly determine the second issue concerning the distribution of assets, and therefore, this case must be remanded to the court of common pleas for further proceedings with regard to this issue.

The facts developed at trial indicate the following sequence of events. In May of 1970, Krosnar, Schmidt and one Jay Nenninger formed an accounting partnership in which each owned, respectively, a twenty percent, forty percent and forty percent interest. On October 14, 1971, Krosnar and Schmidt formed the professional corporation of Schmidt Krosnar Company (hereinafter SK Company) with authority to issue 10,000 shares of stock. SK Company purchased all of Nenninger's interest in the partnership, and after Krosnar paid a sum to Schmidt to equalize the capital contribution to SK, stock was issued to Krosnar and Schmidt in equal amounts of 3,000 shares.

Schmidt and Krosnar later entered into negotiations with Garrett and McNaughton to merge their accounting practices with the result that the practices were pooled and the corporation renamed SKMG by amendment to the articles of incorporation. The amendment, filed with the Commonwealth of Pennsylvania on February 5, 1973, contained this language immediately following the specification of the change in name:

[ 282 Pa. Super. Page 534]

"NOTE: That Francis C. McNaughton and Thomas A. Garrett are now stockholders in this professional corporation and are qualified Certified Public Accountants . . . ."

All billings were made thereafter in the name of SKMG.

Differences arose between the four accountants, and in February 1973, McNaughton withdrew from the company. Although he remained in the same office within the SKMG suite, he effectively withdrew his assets since they became subject solely to his own use. This was especially indicated by the accounts receivable for the clients he was servicing, the collections from which he deposited in his own account. Thereafter, in March of 1973, Garrett also withdrew from his association with Krosnar and Schmidt. The assets and staff of his office in Lebanon, Pennsylvania, which had been used as a branch office of SKMG, returned to his sole control and he began billing clients using his own billhead rather than that of SKMG. By stipulation of the parties the date of dissolution of SKMG was fixed as April 11, 1973.

Our scope of review in equity matters is a limited one. The chancellor's findings of fact, affirmed by the court en banc, have the effect of a jury verdict and will not be reversed on appeal if adequate evidence is present to support them and they are not premised on erroneous inferences and deductions or an error of law. Piercing Pagoda, Inc. v. Hoffner, 465 Pa. 500, 351 A.2d 207 (1976); Onorato v. Wissahickon Park, Inc., 430 Pa. 416, 244 A.2d 22 (1968). Thus, our function is not to substitute our view for the chancellor's but, rather, to determine whether a judicial mind, on due consideration of the evidence as a whole, could reasonably have reached the conclusion of the chancellor. Aiken Industries, Inc. v. Estate of Wilson, 477 Pa. 34, 383 A.2d 808 (1978); Payne v. Kassab, 468 Pa. 226, 361 A.2d 263 (1976). Nevertheless, conclusions of law or fact, being derived from nothing more than the ...

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