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fendant to withdraw so much of the demurrer | pense on the litigants and longer delay the or answer as denies the court's jurisdiction.

[Ed. Note.-For other cases, see Equity, Cent. Dig. § 825; Dec. Dig. § 386.*]

adjudication of their rights, as the evidence and the manner of the submission of the case warrant the final decree entered by the learn

3. APPEAL AND ERROR (§ 248*)—PRESENTA-ed court in banc. TION BELOW-EQUITY.

On appeal from the final decree entered in a suit in equity, only such matters as have been excepted to below and finally passed upon are assignable for error.

[Ed. Note. For other cases, see Appeal and Error, Cent. Dig. §§ 1432, 1435-1439, 1443, 1447-1452, 1454-1459, 1462, 1464-1468; Dec. Dig. § 248.*]

This was a bill filed by the plaintiffs to restrain the borough of Schuylkill Haven from entering into contracts for grading and paving Dock street in said borough and from collecting assessments and entering liens against the land of the plaintiffs under the authority of the ordinance authorizing the

4. APPEAL AND ERROR (§ 1009*)-FINDINGS- improvement. The plaintiffs are residents EVIDENCE.

Findings of the court in a suit of equity will not be disturbed on appeal, when sustained by the evidence, though the appellate court might have found differently.

[Ed. Note.-For other cases, see Appeal and Error, Cent. Dig. §§ 3970-3978; Dec. Dig. §

1009.*]

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6. COURTS (§ 101*)-DECREE - CONCURRENCE OF JUDGES.

In a suit in equity, it is improper for the chancellor who hears the case to enter a decree "by the court," concurred in by the other two members of the court, who did not hear the case; the two judges not sitting being incompetent to give any opinion on the facts or law until after the case has been heard on exceptions by the judges sitting in banc.

[Ed. Note.-For other cases, see Courts, Cent. Dig. §§ 344-350, 629; Dec. Dig. § 101.*1 7. EQUITY (§ 389*)-PRACTICE-FINDINGS.

A suit in equity at issue upon answer should be heard and conducted in court in the same manner as an action at law wherein trial by jury has been waived, and requests for findings and the findings made should be filed in the office of the prothonotary, who should then enter a decree nisi pursuant thereto and give

notice to the parties or their counsel.

[Ed. Note. For other cases, see Equity, Cent. Dig. 830; Dec. Dig. § 389.*]

Appeal from Court of Common Pleas, Schuylkill County.

Bill for injunction, by John M. Ebling and others against the Borough of Schuylkill Haven. From a decree dismissing the bill, plaintiffs appeal. Affirmed.

Argued before BROWN, MESTREZAT, POTTER, ELKIN, and MOSCHZISKER, JJ.

C. E. Berger, Otto E. Farquhar, and J. H. Filbert, all of Pottsville, for appellants. J. B. Reilly and J. A. Noecker, both of Pottsville, for appellee.

MESTREZAT, J. We have examined this record with care and are not convinced of any reversible error. There are irregularities in the procedure arising from the disregard by the court and counsel of the equity rules, but we will not impose additional ex

of the borough and owners of real estate abutting on the street. The facts averred in the bill as grounds of relief are: (1) That the ordinance was enacted without a petition of the property owners; (2) that the street had been graded and macadamized many years ago and had been kept up, repaired, and macadamized at public expense for at least 60 years, and the pavements and curbs maintained by the property owners; and (3) that the expense of the work will increase the indebtedness of the borough above 2 per centum of the assessed valuation of the taxable property therein. The answer admitted the facts averred as the first and denied the facts averred as the second and third grounds of relief. The answer also averred that the court had no jurisdiction, for want of equity, and that plaintiffs have an adequate remedy at law.

The learned president judge of the court below, sitting as chancellor, heard the case, found the facts, stated his conclusions of law, answered numerous requests of both parties for findings of fact and law, and entered a decree restraining the borough from collecting any assessment and entering any lien against the land of the plaintiffs under the authority of the ordinance providing for the improvement. The learned chancellor found that the street had been previously paved, and that therefore the borough could not pave it again partly at the expense of the abutting property owners. As this finding was controlling against the defendant, the other questions raised by the pleadings were not determined. Numerous exceptions to the findings of the chancellor were filed by both parties and were disposed of in an opinion and decree by the other two judges of the common pleas; the president judge who sat as chancellor being absent. The decree sustained the defendant's first and sixty-eighth exceptions, set aside and revoked the chancellor's decree, and dismissed the bill for want of jurisdiction. Subsequently a reargument was had before the three judges sitting in banc, and a decree was entered by the court sustaining certain exceptions and dismissing the bill without prejudice to plaintiffs' right to defend at law. The chancellor who first heard the case dissented. The plaintiffs have taken this appeal.

*For other cases see same topic and section NUMBER in Dec. Dig. & Am. Dig. Key-No. Series & Rep'r Indexes

1

In disposing of the exceptions to the chancellor's decree, the two judges filed an opinion in which they only considered and disposed of the question of jurisdiction. In the subsequent hearing before the full bench, the parties were heard on all the questions raised by the exceptions to the chancellor's decree and his findings of fact and law, and the majority of the court filed an exhaustive opinion in which they dealt with both the merits of the case and the question of jurisdiction. The decree entered by the court permits the plaintiffs to assert their rights at law in any proceeding by the borough to pave and grade Dock street in pursuance of the ordinance.

It is true that the plaintiffs in their thirteenth request for findings of law requested the chancellor to find that the earlier was repealed by the later statute, but the request was not answered, and of course was not before the court in banc. In their printed brief the plaintiffs say that if the chancellor, in handing down his decision, had not stated that his colleagues concurred in his findings, "the plaintiffs would have insisted on a disposition of the question raised by the thirteenth request for findings of law." We therefore cannot convict the learned court below of error for not considering and deciding the question, and it must be considered out of the case.

By the tenth paragraph of their bill, the plaintiffs allege that, if the contract authorized by the ordinance is let by the defendant borough, the indebtedness of the borough will be increased above the constitutional limit. This is the third question which the court below considered and ruled against plaintiffs on the facts. In its opinion the court says: "The plaintiffs presented no conclusive evi

[1] The question of the jurisdiction of his court having been raised by the answer, the act of June 7, 1907 (P. L. 440), required the learned chancellor to decide the issue in limine. This was not done; the chancellor in his opinion stating as a reason that the point had not been argued and was not pressed at any time during the hearing of the case. He was evidently misled as to the defendant borough's intention to question the jurisdic-dence on the third ground (for relief), and the tion, as it filed an exception to the decree alleging the chancellor had erred in not dismissing the bill for want of jurisdiction. Where the question of jurisdiction is raised by demurrer or in the answer, and it is not withdrawn by a proper entry on the record, the chancellor should dispose of it as required by the act.

[2] In the present case, if the defendant borough did not insist on the decision of the question of jurisdiction, the learned chancellor should have required its counsel to formally withdraw that paragraph of the answer denying the jurisdiction of the court. This would have prevented the misunderstanding between the judge and counsel, and also prevented counsel from again raising the question by exceptions to the chancellor's decree. As a matter of practice, the record should disclose the withdrawal of the objections to the jurisdiction when the question has been raised by a demurrer or answer.

evidence on the part of the defendant shows clearly that the indebtedness of the borough will not be increased above 2 per centum of the assessed valuation of all taxable property in the borough."

The evidence warrants this finding of fact, and therefore we cannot reverse it.

[4] Of the other and second ground on which the plaintiffs rest their right to relief, to wit, the street was graded and macadamized many years ago and has been kept up, repaired, and macadamized at public expense for at least 60 years and the pavements and curbs maintained by the property owners, the learned court says:

"The second ground is the only one left for consideration, and it was the only one urged by the plaintiffs and rests entirely upon the facts in the case."

The court then reviews at great length the evidence submitted on this question, and concludes against the contention of the plaintiffs that Dock street had hitherto been paved or macadamized within the meaning of the law [3] It was conceded that the ordinance which prohibits the borough from again was enacted without a petition of the proper-grading and paving a street partly at the exty owners, but the defendant claimed that this was authorized by the act of May 12, 1911 (P. L. 288). The plaintiffs' contention is that this act was repealed by the act of June 13, 1911 (P. L. 887), and hence the ordinance was defective unless supported by a

petition of the owners. The court in banc understood the question to have been abandoned and did not consider it; the court saying in its opinion:

"The first ground was not pressed by the plaintiffs and was not considered."

This seems to be denied by the appellants, but the briefs of both parties sustain the court. The appellees say:

"The validity of the ordinance was entirely a legal question and was abandoned by the appellants during the course of the trial."

We

pense of the abutting property owners.
have examined the evidence and think it sus-
tains the court's conclusion. At least it is
sufficient to support the court's findings, and,
under the well-settled rule, this court, though
it might have found differently, will not re-

verse.

[5] The court in banc, having found the facts against the plaintiffs on the controlling questions in the case, might have entered a decree finally disposing of the issues raised by the pleadings. This is authorized by the act of 1907, where the question of jurisdiction has not been decided against the plaintiff in limine. The facts found by the court did not warrant the relief prayed for in the bill. The decree, however, fully protects the

plaintiffs by permitting them to defend at law against any invasion of their rights in grading and paving the streets under the ordinance in question.

The irregular procedure in the court below in this case requires us to direct attention to the proper practice in such cases. The record here is burdened with unnecessary exceptions, and the procedure is at variance with the plain words of the act of assembly which, no doubt, is attributable in great part to a disregard of the rules of equity practice, and the failure to observe a distinction in

such cases between the duties of a judge, sitting as chancellor, and the court sitting in

banc.

[6] The chancellor filed an opinion and entered a decree "by the court," instead of filing his findings and by a proper order directing the prothonotary to enter a decree nisi in accordance with the findings. The court in banc and counsel dealt with the first decree as if made "by the court." The printed record discloses the findings of fact and law "made by the chancellor, joined in by the court," which, in itself, is unintelligible, but, as explained in appellant's brief, means that the learned chancellor in handing down his opinion sta ed that his colleagues concurred in his findings. The two nonsitting judges had not heard the case, and could give no opinion on the facts or law until after it was heard on exceptions by the judges sitting in banc. The decree thereafter entered is the decree of the court. Schuylkill county is a separate judicial district and has "three judges learned in the law in the common pleas." The three judges constitute one court and not three courts, and appeals lie to the proper appellate court from the judgment or decrees, not of the judge, but of the court. The equity rules provide that the healing of cases in equity shall be conducted before the judge sitting as chancellor.

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Failure of complainant, in a bill in equity to sustain by evidence a positive averment of fraud, will not entitle defendant to dismissal where there is proof of constructive fraud.

[Ed. Note. For other cases, see Equity, Cent. Dig. §§ 651, 652; Dec. Dig. § 327.*1 2. CORPORATIONS (§ 310*)-DIRECTORS - DuTY TO SHAREHOLDERS. administer its affairs with strict impartiality in The directors of a corporation are bound to the interest of all the shareholders alike.

[Ed. Note. For other cases, see Corporations, Cent. Dig. §§ 1352-1362; Dec. Dig. § 310.*] 3. CORPORATIONS (§ 320*)-LEASE OF PROPERTY-FRAUD.

The action of the directors of a corporation in leasing the entire corporate property to another corporation is presumably fraudulent where another equally responsible party offers, with their knowledge, to pay a much greater rental, especially where the directors voting for the lease are financially interested in the lessee corporation.

[Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 1426-1431, 1433-1439; Dec. Dig. § 320.*] 4. CORPORATIONS (§ 317*)-FRAUDULENT CON

TRACTS-RATIFICATION.

The act of the majority stockholders of a corporation, in subservience to whose interests the directors made a fraudulent contract, in subsequently voting to approve such contract against the protest of the minority did not constitute a ratification of the contract.

Cent. Dig. §§ 1401-1414; Dec. Dig. § 317.*]
[Ed. Note. For other cases, see Corporations,
Appeal from Court of Common Pleas, Phil-
adelphia County.

Bill by Mathew Schmid and another
against the Lancaster Avenue Theater Com-
pany and others to enjoin the execution of a
lease. From a decree dismissing the bill,
plaintiffs appeal. Reversed.
Argued before MESTREZAT, POTTER,
STEWART, and MOSCHZIS-
ELKIN,
KER, JJ.

[7] When a case is at issue upon answer, it is to be heard and conducted in court in the same manner as an action at law wherein trial by jury has been waived. The requests for findings of fact and law with the answers thereto, and the findings of the judge, both of law and fact, must be filed in the prothonotary's office, whereupon the "prothonotary shall enter a decree nisi in accordance therewith, and give notice to the parties or their counsel." If no exceptions are filed within ten days, the prothonotary enters a final decree as of course. If exceptions are filed, they are heard upon the argument list as upon a rule for a new trial, and the judge (if alone composing the court) or the court (if composed of more than one judge) in banc may sustain or dismiss any of such exceptions STEWART, J. The bill in this case was and confirm, modify, or change the decree; filed to restrain a proposed renewal of the and upon appeal such matters only as have lease of the William Penn Theater on Lanbeen so excepted to and finally passed upon caster avenue, Philadelphia, by the William by the court are assignable for error. This Penn Theater Company to the Penn Charter *For other cases see same topic and section NUMBER in Dec. Dig. & Am. Dig. Key-No. Series & Rep'r Indexes

John G. Johnson and Benjamin O. Frick, both of Philadelphia, for appellants. Alex. Simpson, Jr., and Ehrlich & Archbald, all of Philadelphia, for appellees.

Amusement Company, Incorporated, for a period of five years from October 1, 1914, at an annual rental of $22,500. The bill averred that the renewal of the existing lease as proposed would be a fraud on plaintiffs' rights as minority stockholders, inasmuch as at a meeting of the board of directors at which a renewal of the lease was decided on, and before such action was taken, a written offer from a responsible and equally capable party was submitted, agreeing to accept a lease of the theater for a like term paying therefor an annual rental of $30,000, giving satisfactory, security therefor, which offer was rejected, and the lease to the Penn Charter Amusement Company ordered by a vote of three to two; the three parties voting in the affirmative being interested in the Penn Charter Amusement Company. The answer filed raised but few questions of fact; it denied that the three directors who voted in favor of the lease to the amusement company were interested financially in said company, and, without assigning any reasons for the rejection of the higher rental offered, denied all fraudulent design or effect. Upon hearing plaintiffs' bill was dismissed. The appeal is from the decree dismissing the bill. We excerpt from the findings of fact by the learned chancellor such as we regard important to a correct understanding of the case and the termination of the question here raised.

The Lancaster Avenue Theater Company was incorporated in March, 1909, for the purpose of building, maintaining, and managing theaters, etc., with a capital stock of 500 shares of the par value of $100. Within a few months thereafter the capital stock was increased to $150,000, consisting of 1,500 shares. Of these, 1,120 of the par value of $100 were issued in return for cash payment as follows: 339 shares to W. W. Miller; 392 shares to Gustavus A. Muller; and 389 shares to Mathew Schmid. On December 8, 1911, the holding of these shares was as follows: W. W. Miller 338; Joseph S. Miller, son of W. W. Miller, 1; Gustavus A. Muller 131; Gustavus C. Muller 130; Walter H. Muller 131; Mathew Schmid 333; and William A. Schmid, son of the latter, 56. The Lancaster Avenue Theater Company was thus practically a close corporation. Three families or interests were engaged in it. Out of the total number of shares, the Miller family held 339, the Muller family 392, and the Schmid family 389.

In August, 1909, the above-named W. W. Miller organized the Penn Charter Amusement Company, with a capital stock of 50 shares of the par value of $100 each. These shares were issued as follows: 5 to Metzel, secretary of the company; 71⁄2 to Gustavus A. Miller; and 371⁄2 to W. W. Miller. The company has no other assets. Upon the completion of its building the William Penn Theater Company leased it to the Penn Charter Amusement Company, then and now controlled by the said W. W. Miller, who is the president of both companies, for a term of

five years from September, 1909, at a yearly rental of $20,000; the plaintiffs in the present bill assenting. Before one-half of the term of this lease had expired, 8th December, 1911, at a meeting of the board of directors of the William Penn Theater Company, a renewal of the lease to the Penn Charter Amusement Company for a period of five years from the expiration of the existing lease at a rental of $22,500 per annum was ordered. The consideration of the matter was postponed until the meeting of 5th March, 1912. At the meeting held on this later date all the directors (comprising all the stockholders), with the exception of Gustavus A. Muller, the were present; W. W. Miller presiding. After other business had been finished, Miller called to the chair Gustavus C. Muller, and then personally submitted the proposition of the Penn Charter Amusement Company for renewal of its lease of the theater, and asked that it be accepted upon the terms therein indicated. Before the vote was taken, a written offer was submitted by Mathew Schmid from Fred G. Nixon-Nirdlinger, a successful lessee and manager of theaters, and a man of financial responsibility, to lease the theater at the end of the current term for a term of ten or five years, as might be desired, at an annual rental of $30,000, in which offer it was stated that "they [himself and parties associated] were prepared to secure the lease with any reasonable security your company may elect." Both Nirdlinger and Schmid testified that the latter was not a party to the offer, and this testimony was not contradicted in any way. Miller resuming the chair, two resolutions were proposed and passed; one accepting the offer of the Penn Charter Amusement Company for renewal of its lease at a rental of $22,500 per annum, the other directing that the lease be executed. Though all the directors were present, excepting Gustavus A. Muller, there were but five votes; those voting in the affirmative were Gustavus C. Muller, Walter H. Muller, and Joseph S. Miller, neither of whom had financial interest in the Penn Charter Amusement Company; those voting in the negative were the two Schmids. Within a few days after this action was taken the plaintiffs filed their present bill. Thereupon a stockholders' meeting of the Lancaster Avenue Theater Company was called. At this meeting a resolution approving the action taken at the directors' meeting was adopted; the Miller and the Muller interests voting 730 shares in support of the action of the directors, and the Schmid interests 389 shares in the negative.

[1] Such are the general findings of fact. While several of them are challenged as incorrect by the assignments of error, there is but one of sufficient materiality to call for discussion, and that only because the learned chancellor has derived from it his governing conclusion, that the action of the directors in voting the lease to the Penn Charter

Amusement Company stands clear of fraudu- | of the Mullers held 130 shares, given him by lent design or effect. The finding is that nei- his father; the other, 131 shares, acquired in ther of the directors who so voted, Gustavus the same way. With the status of the parC. Muller, Walter H. Muller, and Joseph B. ties thus fixed with respect to their several Miller, was financially interested in the holdings in the theater company, another disamusement company. While it is true that tinct finding by the chancellor, which we here plaintiffs aver in their bill that the parties quote at length, enables us to understand named were financially interested in the fully what the vote cast by each of these diamusement company, it by no means follows rectors represented: that they are entitled to the relief prayed for only as they have succeeded in establishing this particular fact. What the bill specifically charges is that the execution of the proposed lease to the amusement company would be a fraud on plaintiffs' rights as minority stockholders in the Lancaster Avenue Theater Company, for the reason that it is a lease of the entire property of the theater company at a rental of $22,500 per annum, when another equally responsible party stood ready and offered to pay an annual rental of $30,000 for the same property, a fact known to the directors at the time. If this result was reached by the votes of directors financially interested in the amusement company, except as otherwise explained, the law would refer it to the fact stated and condemn it as an ac

tual fraud; if, by the votes of directors not financially interested in the amusement company, unexplained, the law would condemn it none the less, but, as a constructive fraud, one not depending on fraudulent intent, but one arising by legal implication. The failure of a complainant to sustain the positive averment of actual fraud will not entitle the defendant to the dismissal of the bill, when there is proof of constructive fraud. Ricketts' Appeal, 9 Sadler, 247, 12 Atl. 60. So, if the finding that the directors named were without financial interest in the amusement company were to be sustained, it would not by any means be conclusive of the controversy. So much with respect to the legal conclusion derived by the chancellor. Now as to the finding itself. Certainly it cannot be said that the evidence supports it except as the finding is to be understod in a very qualified sense. If all that it means is that neither of these parties was the owner of stock in his own name in the amusement company, it is correct; but, understood in the larger sense as indicating that neither was in position to be individually advantaged by the financial success of the amusement company, it would be manifest error. Of the parties here involved, Joseph S. Miller was the son of W. W. Miller, the owner of a very decided majority of the stock of the amusement company; the two Mullers were sons of Gustavus A. Muller, the only person holding any considerable part of the remainder of that stock. These were the only directors voting affirmatively for the lease at a meeting where every director and stockholder of the theater company were present, excepting Gustavus A. Muller. Joseph S. Miller was the holder of one share of stock in the theater company given him by his father, W. W. Miller; one

"(19) Gustavus C. Muller, Walter H. Muller, and Joseph S. Miller had no financial interest in the Penn Charter Amusement Company, and Lancaster Avenue Theater Company, standing each of them owned absolutely the stock in the in his name. It is a fact, however, that these sons of their fathers look upon the several interest in this transaction as composed of three family regard the interest of its head as their family interests, and that the members of each own interest. This view, though not merely financial, and in some respects perhaps sentimental, undoubtedly colors the relations of the parties concerned. Gustavus C. Muller and Walter H. Muller look upon the interest of their father, Gustavus A. Muller, as their own; Joseph S. Miller looks in the same manner upon the interest of his father, Wm. W. Miller; the interest of his father, Mathew Schmid." and William A. Schmid does the like as regards

[2] This finding either means a community of financial interests between the membership of each family group according to its stockholding, or it means nothing. As we read it, it means even more than a community of interest; it is a clear finding that the determining power in each group was in its head, and that the collective power of the group in the management of the affairs of the theater company was always directed to the attainment of ends which met the views and better secured the interest of its head. This finds appropriate illustration in the vote by which the resolution was passed giving the lease to the amusement company. The meeting that was called to take action on the proposed lease was presided over by W. W. Miller, the largest stockholder both in the theater company and in the amusement company. He was actively urging that the lease be given to the latter companyvirtually to himself, since in his testimony he speaks of it as his own-but refrained from voting, allowing his son Joseph S., the holder of but one share, to cast for the family group the determining vote, for without that vote in the affirmative the resolution would have failed of adoption. Gustavus A. Muller was absent but was represented by his two sons; these voting in the affirmative with Joseph S. Miller to give the lease to the amusement company, in which the head of this particular group was a stockholder. The disguise attempted at the meeting of having those only vote who were not involved stockholders of the amusement company does not and cannot conceal the fact that the interests which these votes represented and expressed were the same interests that owned and controlled the amusement company. In the very qualified sense we have above indicated the finding of the chancellor

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