Opinion
Argued March 23, 1954.
June 1, 1954.
Equity — Pleadings — Averments — Sufficiency — Fraud.
In a suit in equity in which plaintiff averred that a final settlement agreement between her and defendant was based upon false statements of defendant, it was Held that plaintiff's averments of fraud did not have the required particularity or detail, and that preliminary objections to the complaint were properly sustained.
Before STERN, C. J., STEARNE, JONES, BELL; MUSMANNO and ARNOLD, JJ.
Appeal, No. 69, March T., 1954, from decree of Court of Common Pleas of Erie County, Sept. T., 1952, in Equity, No. 12, in case of Gertrude Schlosser v. A. R. Weiler and D. Schlosser Company. Decree affirmed.
Complaint in equity.
The facts are set forth in the opinion by EVANS, P.J., of the court below, as follows:
This matter is before the court on preliminary objections filed to a second amended complaint in equity.
It is averred that the defendant, A. R. Weiler, son-in-law of the plaintiff, on or about the first part of December, 1943, received from the plaintiff a general power of attorney at his request in order that he might look after the plaintiff's interests in Erie while she was residing in New York City. Plaintiff is unable to attach a copy of said power of attorney for the reason that she retained no copy.
It is further averred that in 1947 the plaintiff, at the oral request of the defendant, A. R. Weiler, and without any consideration passing to her, endorsed her name to 249 1/2 shares of the capital stock of the D. Schlosser Company, with instructions that in case of her death said stock was to be transferred to her daughter, Ruth Weiler, wife of the defendant A. R. Weiler. Accompanying this transfer was the oral understanding that she was to receive the dividends accruing during her lifetime. On December 20, 1947, without knowledge or consent of the plaintiff and for his personal advantage, A. R. Weiler converted the shares of stock to his own name on the books of the corporation. Between December, 1943, and 1950, plaintiff, at various times, requested of the defendant, A. R. Weiler, a statement as to the financial condition of said corporation, but Weiler refused to comply with her request. In the early part of 1950 the plaintiff demanded that A. R. Weiler return to her her stock certificates but he refused this request alleging that she was indebted to him for certain moneys advanced to her and for her use while she was in New York City. On October 19, 1950, an agreement was entered into, induced however by the defendant, A. R. Weiler, representing that he would render her a complete and accurate accounting of all moneys received by him and all expenditures made by him on behalf of the plaintiff. A copy of this agreement, attached to the pleadings and marked "Exhibit A", shows that the plaintiff was indebted to the defendant, A. R. Weiler, as of January 1, 1950, in the sum of $12,585.57 for moneys loaned and advanced to her between the years 1942 and 1950. The agreement provided that the defendant, A. R. Weiler, would hold the stock as collateral security for this debt, until the same was paid in full, and in the event the plaintiff did not pay her indebtedness prior to her death the defendant, A. R. Weiler, was to become owner of said stock absolutely and the obligation cancelled. All emoluments, bonuses and dividends of any kind received by virtue of this stock in the D. Schlosser Company were to be applied to the indebtedness. The defendant, A. R. Weiler, further agreed that he would not foreclose this collateral security during the lifetime of the plaintiff, and would not transfer, pledge or encumber it. Attached, as "Exhibit B", is a five-page single-spaced statement of the receipts and expenditures in support of defendant's, A. R. Weiler's, position as a creditor of the plaintiff, in the amount of $12,585.57. The second amended complaint states that a copy of the accounting was given to her after the above recited agreement was entered into.
The plaintiff now states that she has been informed, believes, and therefore avers, that the accounting was untrue and incorrect, and the correct amounts would be known to the defendant who has access to the books of the corporation. Also attached to the complaint is "Exhibit C" which is a copy of a second agreement dated May 31, 1951, made "in furtherance of a final and absolute settlement of all the disputes, differences, and difficulties . . . however . . . not intended to be a nullification of the Stipulation of Agreement above referred to, [Exhibit A] except insofar as this Agreement is at variance in any particular with the said Stipulation of Agreement." This second agreement provided that the plaintiff relinquish all her right of redemption to the pledged stock from the defendant, A. R. Weiler, and that the debt of $12,585.57 of the plaintiff to the defendant be cancelled. The defendant, A. R. Weiler, further agreed to pay the plaintiff during the remainder of her lifetime a yearly income of $4,000 either from the earnings on said stock or from his own funds, or both.
It is averred in the complaint that this final settlement agreement was void for want of consideration, and because it was based upon false statements of the defendant, A. R. Weiler, as to her indebtedness to him.
The defendant, D. Schlosser Company, is named party defendant only to be included in an order to retransfer the shares of stock from plaintiff to defendant.
In Gallagher v. Merry, 366 Pa. 258, the court reached the conclusion that it is more desirable practice when fraud is charged to pass upon the merits of the case rather than to dismiss a bill upon technicalities in pleading. Following this thought, the original bill of complaint being most indefinite with respect to the allegations of fraud, we permitted an amendment to be filed. An amendment was then filed which was equally evasive as to any particularities from which fraud might be inferred. A second opportunity to amend was given but the second amended complaint also remains evasive on all important details from which fraud or duress may be inferred. Rule of Procedure 1019 (b) provides: "Averments of fraud or mistake shall be averred with particularity."
When the first agreement was entered into there had been, according to the second amended complaint, a period of seven years during which the defendant, A. R. Weiler, withheld from plaintiff the financial condition of the company and the amount of her indebtedness, if any, to the defendant, A. R. Weiler. The first agreement of October 19, 1950, only reaffirms plaintiff's present allegations that she was during that time cestui que trust of the capital stock of the D. Schlosser Company, and details the indebtedness of the plaintiff to the defendant for which the stock would be held as collateral as well as the conditions under which it might be redeemed. The second agreement of May 31, 1951, was entered into with full knowledge of the plaintiff of everything the defendant, A. R. Weiler, represented to be true, in support of the factual situation contained in the first agreement of October 19, 1950. In the second agreement the parties stipulate absolutely transfer of ownership of the stock to the defendant, A. R. Weiler, in discharge of plaintiff's debt and a guarantee of $4,000 per year to her as long as she should live.
At the time of all of the arguments in this court it was represented, and not denied, that both contracts were entered into under the advice of counsel. That this is true might well be concluded from the formality of the language employed in both contracts, and from the facts that lawyers were witnesses thereto. However, it is only necessary for us to assume this as a possibility or that the parties otherwise dealt at arm's length. Settlements in matters of dispute are favored by the law and must, in absence of fraud and mistake, be sustained; otherwise, any settlement agreement will serve no useful purpose.
Assuming for purposes of argument only, the possibility that the first agreement was induced by fraudulent representations both as to the income of the company and of the advancements to the plaintiff, when the second contract was entered into plaintiff had full knowledge of those representations made at the time of her first contract, and with that knowledge she secured for herself a cancellation of her debt and a guarantee of $4,000 per year for the balance of her life. Wherein, to what extent, and under what circumstances there was fraud which will remove from operation and effect the provisions of the second contract, which both parties stated to be "in furtherance of a final and absolute settlement of all disputes, differences and difficulties" does not appear from any factual averment which will sustain it.
We are constrained to conclude that after having been twice informed of the inadequacy of pleading, that there is no factual situation to support a decree setting aside the agreement of May 31, 1951. The preliminary objections must, therefore, be sustained.
Plaintiff appealed.
Vincent M. Casey, with him Charles J. Margiotti, Harry Savage, Edward E. Petrillo, Sr. and Margiotti Casey, for appellant.
John A. Spaeder, with him Marsh, Spaeder, Baur Spaeder, for appellees.
The decree is affirmed on the opinion of Judge EVANS.