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JEWELCOR JEWELERS AND DISTRIBUTORS v. PAUL J. CORR (04/11/88)

filed: April 11, 1988.

JEWELCOR JEWELERS AND DISTRIBUTORS, INC. AND JEWELCOR, INCORPORATED,
v.
PAUL J. CORR, RAYMOND L. CROFT, JAMES A. FLICK, JR., WILLIAM F. GRAUER, EDWARD W. KAY, NEILL R. SCHMEICHEL, ROBERT J. SEIDER, WILLIAM J. STONE, HOMER E. ULLMAN AND JOHN W. WILCHEK, A PARTNERSHIP T/A ERNST & WHINNEY, APPELLANTS



Appeal from the Order Entered December 19, 1986 in the Court of Common Pleas of Luzerne County Civil Division, No. 2342 of 1977.

COUNSEL

Jack Kaufman, Allentown, for appellants.

Marvin Comisky, Philadelphia, for appellees.

Cirillo, President Judge, and Popovich and Cercone, JJ.

Author: Cercone

[ 373 Pa. Super. Page 540]

This is an appeal from the order of the Court of Common Pleas of Luzerne County entered December 19, 1986 granting appellees' Motion for New Trial.

On March 25, 1977, appellees Jewelcor, Inc. (referred to herein as "Jewelcor") and its wholly owned subsidiary Jewelcor Jewelers and Distributors, Inc. (formerly known as Granjewel Jewelers and Distributors, Inc., and referred to herein as "Granjewel") initiated this civil action by filing a complaint, which was subsequently amended on September 28, 1977. The amended complaint asserted that appellant Ernst & Ernst, an accounting partnership, (now known as Ernst & Whinney; and referred to herein as "E & W") was negligent, grossly negligent and breached its oral contract with Granjewel in the conduct of E & W's audit of Granjewel's first yearly financial statements and in the issuance of the resultant report and opinion letter. The amended complaint also asserted that Jewelcor, the holding company of Granjewel, was harmed, as a third party beneficiary, by E & W's actions. Jewelcor alleged that it had relied on E & W's audit of Granjewel in its financial decision making and as a result of this reliance on the inaccurate audit, Jewelcor allegedly lost millions of dollars.

The relationship of Jewelcor with Granjewel is based on the following history: in October 1972, Jewelcor, a company in the catalog jewelry business, entered into a joint venture agreement with W.T. Grant (referred to herein as "Grant"),

[ 373 Pa. Super. Page 541]

    a retail chain store operation, to form Granjewel, a corporation that would operate a chain of retail catalog showrooms. Jewelcor and Grant operated Granjewel under their agreement until September 1975, when their joint venture was terminated and Granjewel became a wholly-owned subsidiary of Grant. Jewelcor subsequently purchased, from Grant, Granjewel's stock, making Granjewel a wholly-owned subsidiary of Jewelcor. Shortly thereafter this suit was filed. The claims in this case relate to E & W's audit of Granjewel's financial statements for the year ending January 31, 1974 (referred to herein as "1974 audit").

On March 14, 1984 the jury, by means of special interrogatories, rendered its verdict in favor of E & W and against Granjewel and Jewelcor. On March 22, 1984 appellees filed a Motion for New Trial. After receiving oral argument, the motions court*fn1 granted appellees' motion citing six separate errors committed at trial. This appeal from the grant of a new trial by E & W followed.

Appellants have raised six issues on appeal. We will address each claim with the understanding that, in reviewing an order granting a new trial, we must examine all the evidence presented at trial "to determine whether the verdict was arbitrary or capricious or whether it was against the weight of the evidence, or whether there was clearly error of law or palpable abuse of discretion in the rulings of the court below." Gonzalez v. United States Steel Corp., 248 Pa. Super. 95, 108, 374 A.2d 1334, 1341 (1977), aff'd, 484 Pa. 277, 398 A.2d 1378 (1979). See also, Carnicelli v. Bartram, 289 Pa. Super. 424, 433 A.2d 878 (1981); Sindler v. Goldman, 256 Pa. Super. 417, 389 A.2d 1192 (1978).

I.

The first claim to be addressed is whether the motions court erred in finding that the trial court had erred in allowing E & W to call an expert witness who contradicted testimony by former E & W employees who had been called

[ 373 Pa. Super. Page 542]

    to testify by E & W. The motions court concluded that the testimony by E & W's former employees constituted judicial admissions which could not be subsequently contradicted by another witness called by the defense.

A judicial admission is an express waiver made in court or preparatory to trial by a party or his attorney, conceding for the purposes of the trial, the truth of the admission. It has the effect of a confessory pleading, in that the fact is thereafter to be taken for granted, so that the opposing party need offer no evidence to prove it and the party by whom the statement was made is not allowed to disprove it. See 9 Wigmore, Evidence § 2588 (Chadbourn Rev.1981). It is axiomatic that a judicial admission cannot be contradicted by the party that made it. See Tops Apparel Mfg. Co. v. Rothman, 430 Pa. 583, 244 A.2d 436 (1968); 9 Wigmore, supra, at § 2590 ("The vital feature of a judicial admission is universally conceded to be its conclusiveness upon the party making it, i.e., the prohibition of any further dispute of the fact by him and of any use of evidence to disprove or contradict it." (emphasis in original)). As stated in Tops, "Pennsylvania has followed this rule since Wills v. Kane, 2 Grant 60, 63 (Pa.1853), where the court insisted: 'Where a man alleges a fact in a court of justice, for his advantage, he shall not be allowed to contradict it afterwards. It is against good morals to permit such double dealing in the administration of justice.'" Tops, 430 Pa. at 587-88 n. 8, 244 A.2d at 438 n. 8.

At trial, E & W called as witnesses Mr. Krauss and Mr. Pincus, both former employees of E & W. Each witness admitted to errors in the 1974 financial statements amounting to $775,000.00. The motions judge concluded that the witnesses' testimony constituted judicial admissions by E & W and that the trial court erred in permitting E & W's subsequent expert witnesses to contradict those admissions.

E & W contends that the testimony of a former employee does not constitute a judicial admission and that the trial court did not err in permitting an expert witness offered by E & W to contradict the former employees' testimony on

[ 373 Pa. Super. Page 543]

    the same subject. Therefore, E & W contends, the motions court erred in granting a new trial on this issue.

It is clear that the testimony of Mr. Krauss could not have constituted a judicial admission because Mr. Krauss was a nonparty witness whose testimony could not bind E & W. At the time Mr. Krauss was called to the stand, his employment relationship with E & W had been severed for well over two years. It is black letter law that "the testimony of one who is merely called as a witness for a party but who does not stand in privity with him may never be considered an admission by the party." P.L.E. Evidence § 155; McDermott v. Hoffman, 70 Pa. 31, 19 P.L.J. 133 (1871). Since Mr. Krauss was no longer employed by E & W, he was not in privity with E & W and his testimony did not constitute a judicial admission.*fn2

We further find that the testimony of both Krauss and Pincus did not constitute judicial admissions as their testimony was not advantageous to E & W. It was uncontested at trial that in 1975 a Granjewel employee discovered what he suspected to be errors in the 1974 audit. He brought this information to the attention of E & W and, in fact, E & W's 1975 audit appears to show the fact of error in the 1974 audit. At trial, Krauss and Pincus acknowledged that errors had become apparent in 1975. However, neither admitted that E & W had been negligent in the conduct of the 1974 audit. Rather, they each offered an explanation for the apparent errors.

A principle element of a "judicial admission" is that the fact has been admitted for the advantage of the admitting party. The admissions here were only an acknowledgement of the fact that errors were detected in the 1974 audit. E & W did not contest that fact. Its defense was that the errors were caused by Granjewel's own negligence. The testimony by E & W's experts explained the source of the discrepancies in the 1974 audit and provided a factual basis for E &

[ 373 Pa. Super. Page 544]

W's claim that the errors were a result of Granjewel's negligence. The testimony by Krauss and Pincus was not the type of unequivocal testimony necessary to be considered a conclusive judicial admission and does not consist of the kind of "double dealing" against which this rule of evidence was intended to protect.*fn3

In accordance with the foregoing, we find that the motions court erred in holding that the testimony of Krauss and Pincus consisted of judicial admissions which could not be explained or contradicted by further defense testimony. The trial court was correct when it permitted E & W to call an expert witness to contradict or explain that testimony. Therefore, a new trial is not warranted on this basis.

II.

E & W next contends that the motions court erred in concluding that Thomas Mulea, a juror, may have tainted the jury's deliberations by failing to disclose his prior adversarial relationship with appellees' counsel.

Objection to the presence of an individual juror cannot be raised "after the jury has been sworn except in those cases where a defendant has been intentionally misled or deceived by the juror or the opposite party." Commonwealth v. Aljoe, 420 Pa. 198, 205, 216 A.2d 50, 54 (1966) (citations omitted). See also, Commonwealth ex rel. Fletcher v. Cavell, 395 Pa. 134, 149 A.2d 434 (1959), cert. denied, 361 U.S. 847, 80 S.Ct. 102, 4 L.Ed.2d 85 (1959).

During voir dire, Mulea failed to disclose that he had been a plaintiff in an equity action in which two of the defendants had been represented by a member of a firm representing appellees in the case sub judice and that he had been a defendant in a related action in which judgment had been entered against him shortly prior to the commencement of the trial in the instant matter below. The

[ 373 Pa. Super. Page 545]

    equity action involved a stockholders' dispute in a company formed and partially owned by Mulea. The later action involved judgment being entered against him on a loan ...


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