Loading...
HomeMy WebLinkAbout97-6131 equitySTILES R. MADER and MADER DRYWALL, INC. : IN THE COURT OF COMMON PLEAS OF : CUMBERLAND COUNTY, PENNSYLVANIA : : V. : CIVIL ACTION - EQUITY : : ROBERT F. SPANGLER, JR. : NO. 97-6131 EQUITY and ALETA SPANGLER : IN RE: ADJUDICATION BEFORE GUIDO, J. AND NOW, this DECREE NISI day of JANUARY, 1999, after hearing, it is hereby ordered and directed as follows: 1) Judgment is entered in favor of Plaintiff Mader Drywall, Inc. and against Defendants Robert F. Spangler, Jr. and Aleta Spangler, jointly and severally, in the amount of $7700, representing the excess rent paid by the corporation. 2) Judgment is entered in favor of Plaintiff Mader Drywall, Inc. and against Defendant Robert F. Spangler, Jr. in the amount of $34,087.14 representing the corporate funds which he improperly converted to his own use. 3) Defendants Robert F. Spangler, Jr. and Aleta Spangler are directed to pay, jointly and severally, to Plaintiff Stiles R. Mader the sum of $193.75 representing reimbursement of sums paid to the accountant, said sums to be paid within seven (7) days. 4) Ail equipment and tools currently in the possession of Stiles R. Mader, exclusive of vehicles, are, and shall hereafter be deemed to be, the sole and exclusive property of the said Stiles R. Mader. 5) Ail motor vehicles titled in the name of Mader Drywall, Inc. shall be transferred to Stiles R. Mader. The said Stiles R. Mader is hereby authorized to execute on behalf of the corporation any documents necessary to effectuate the said transfer. Concurrent with the transfer of said vehicles the said Stiles R. Mader shall make arrangements to refinance the encumbrances thereon so as to relieve the corporation from any liability in connection therewith. 6) The following items are awarded to Plaintiff Stiles R. Mader: 1. 4-drawer metal file cabinet. 2. Smith Corona Word Processor/Typewriter 3. 2 metal tool boxes - one smashed, one new. 4. miscellaneous scaffolding - Baker & utility 5. 1 black telephone with answering machine 6. 1 tripod 7. one hitch 8. 1-2 drawer file cabinet 9. 1 snow blower 10. 1 snow plow that went on the front of Mr. Mader's truck 11. Reddy heaters (2) - (1) 100,000 & (1) 150,000 BTU 12. 1 cordless drill (Bosh) 13. walk-up benches 14. miscellaneous dry wall tools 15. taper Defendants, Robert F. Spangler and Aleta A. Spangler, are directed to deliver possession of these items to Mr. Mader within one (1) week of the date of this Order. 7) The affairs of the corporation shall be wound up and the corporation shall be dissolved in accordance with Subchapter G of the Business Corporation Law (75 Pa. C.S.A. § 1981 et seq.). 8) RObert O'Brien, Esquire is appointed to act as receiver to wind up the affairs of the corporation under the auspices of the Court in accordance with 15 Pa. C.S.A. § 1985. This decree nisi shall become a final order of court unless exceptions are filed within ten (10) days. By the Edward E. Guido, J. Robert L. O'Brien, Esquire For the Plaintiff Matthew J. Eshelman, Esquire For the Defendants :sld STILES R. MADER and : IN THE COURT OF COMMON PLEAS OF MADER DRYWALL, INC. : CUMBERLAND COUNTY, PENNSYLVANIA : : V. : CIVIL ACTION - EQUITY : : ROBERT F. SPANGLER, JR. : NO. 97-6131 EQUITY and ALETA SPANGLER : IN RE: ADJUDICATION BEFORE GUIDO, J. OPINION AND DECREE NISI GUIDO, J., January 28, 1999. This equity action was instituted by complaint filed on November 5, 1997. The Plaintiffs alleged that the Defendants had converted corporate assets to their own use and benefit, thereby rendering the corporation unable to pay its creditors. Plaintiffs requested, inter alia, that we order an accounting by the Defendants, determine whether the corporation is insolvent, and appoint a receiver to wind up the affairs of the corporation. Several hearings were scheduled in connection with a preliminary injunction requested by Plaintiffs. Before the commencement of each hearing, the parties reached an agreement thereby eliminating the need for testimony. Various orders were entered, the following of which are relevant for our purposes: · On November 25, 1997, the corporation was declared to be insolvent. · On January 13, 1998, we ordered the corporation to cease doing business. We further directed all parties to deposit any sums received for work performed by the corporation into Financial Trust Account number 523360436, with no disbursements to be made therefrom without agreement of counsel or further order of court. NO. 97-6131 EQUITY Trial in this matter eventually began on May 6, 1998. After several hours of testimony it became clear that professional help was needed to interpret the corporate records. The hearing was continued so that the parties could agree upon an accountant to review the corporate records and, if necessary, testify at trial. The parties agreed to share the cost of the accountant. They further agreed that Plaintiff Stiles Mader would front the money to pay the accountant with Defendants' share being included as part of our award. The order continuing the case provided, in relevant part, as follows. · The Defendant was directed to compile all receipts for money reimbursed to him from the corporation and for money contributed by him to the corporation. Copies of all such receipts were to be furnished to the accountant by May 22, 1998. · The parties were directed to turn over all information to the accountant by May 29, 1998. · The parties were directed to exchange all exhibits intended to be presented at trial at least ten (10) days prior to the next scheduled hearing. The trial recommenced on October 1, 1998. The accountant agreed upon prepared a report and testified at trial. However, for whatever reason, the Defendant did not cooperate with the accountant as directed in our Order of May 6, 1998. At the conclusion of the hearing the parties were given the opportunity to file proposed findings of fact as well as to submit legal authority in support of their respective positions. This matter is now ready for disposition. NO. 97-6131 EQUITY FINDINGS OF FACT 1) Plaintiff Stiles R. Mader is thirty-seven (37) years old and has been in the dry wall business for seventeen (17) years. 2) He began working on his own as a sole proprietor in 1989. His business did well until 1992. As a result of a bad estimator, his business lost about $130,000.00 in 1992. 3) Mader has no aptitude whatsoever for bookkeeping. He is naive and fiscally inexperienced. However, he is a hard worker and able to make money. 4) In 1992 his sister joined the business as the bookkeeper. By 1995 they had paid virtually all of the outstanding bills except for a tax lien of $10,000 and a $13,000 debt to one trade creditor. 5) The business grossed $438,000 in 1994. Mader took withdrawals of about $22,713.00 and the rest went to pay bills. 6) In 1995, the business grossed $387,677.00. From that amount, Mader withdrew $49,501.00 and the rest went to pay bills. 7) Mader operated his business from space he rented from the Defendants at 28 East Simpson Street, Mechanicsburg, Cumberland County, Pennsylvania. Through 1995 he was paying the Defendants $150 per month for said space. 8) Defendant Robert Spangler held himself out as a financial planner. In late 1995 or early 1996, he indicated to Mader that he wanted to learn the drywall business. 9) On February 1, 1996, Defendant Robert Spangler and Mader NO. 97-6131 EQUITY formed Plaintiff Mader Drywall, Inc., a Pennsylvania corporation. The corporation's principal place of business and registered office was at 28 East Simpson Street, Mechanicsburg, Cumberland County, Pennsylvania 10) Mader and Robert Spangler each received 100 shares of common stock in the corporation. 11) Robert Spangler's capital contribution to the corporation was to be $20,000 to $25,000 cash plus office space and some office equipment. 12) Mader's capital contribution was his accounts receivable, knowledge and goodwill. 13) Mader continued to do the work in the field. 14) Defendant Robert Spangler had complete control of all corporate books, records, and accounts during the operation of the new corporation. 15) Defendant Robert Spangler systematically cOnverted funds of the corporation to his own use. He used a complicated scheme of bookkeeping entries, including false receipts and bogus cash in, cash out entries to cover his tracks. 16) The fraudulent financial dealings of Defendant Spangler rendered the corporation insolvent. 17) Robert Spangler increased the rent paid by the corporation to him and his wife to $1000 per month fr'om $150 per month. ~This was basically the same space previously occupied by Mader as a sole proprietor. NO. 97-6131 EQUITY 18) Defendants Robert and Aleta Spangler received $7,700 in rental overpayments 19) In addition to the excess rental payments set forth above, Defendant Robert Spangler improperly converted $34,087 in corporate funds to his own use. 20) Susan Stott, CPA was retained by the parties in accordance with our order of May 6, 1998. Her fees and costs totalled $387.50. 21) Mader has in his possession a Ford F-150 pick up truck and two Ford F-250 trucks which are owned by the corporation. Ail vehicles are encumbered. 22) Since the date this action was commenced Mader has made all payments due on the encumbrances on said vehicles. 23) The total current liens on said vehicles exceed the total value of the vehicles by more than $10,000. 24) Defendants are in possession of the following personal property which either belongs to the corporation or is the individual property of Mader: 1. 4 drawer metal file cabinet 2. Smith Corona Word Processor/Typewriter 3. 2 metal tool boxes - one smashed, one new. 4. miscellaneous scaffolding - Baker & utility 5. 1 black telephone with answering machine 6. 1 tripod 7. one hitch 2There was some additional space occupied by the corporation. The accountant testified that the fair rental value did not approach $1000 per month. She testified that the corporation overpaid rent in the amount of $7,700 which testimony we find to be credible. NO. 97-6131 EQUITY 8. 1-2 drawer file cabinet 9. 1 snow blower 10. 1 snow plow that went on the front of Mr. Mader's truck 11. Reddy heaters (2) - (1) 100,000 & (1) 150,000 BTU 12. 1 cordless drill (Bosh) 13. walk-up benches 14. miscellaneous dry wall tools 15. taper 25) The value of the personal property listed above which belongs to the corporation is much less than $10,000. 26) Ail tools and equipment currently in the possession of Mader, even though used in his work for the corporation, are his personal property. DISCUSSION Section 1981 of the Business Corporation Law (15 Pa. C.S.A. § 1981) provides that the Court may entertain proceedings for the involuntary dissolution of a corporation if certain circumstances, including either of the following, exist: 1) The acts of those in control of the corporation are fraudulent and it is beneficial to the interests of the shareholders that the corporation be wound up and dissolved. 2) The corporate assets are being misapplied or wasted and it is beneficial to the interests of the shareholders that the corporation be wound up and dissolved. See 15 Pa. C.S.A. ~ 1981 (a) (1) and (2). In the case before us we find that both circumstances exist. Therefore, we shall order the winding up and dissolution of the corporation in accordance with the provisions of the Business Corporation Law. Mader has asked that we award him one half of the difference between the sums the Defendants misappropriated from the corporation. His theory is that since he was a one half owner of NO. 97-6131 EQUITY the corporation, he is entitled to one half of all sums taken by Defendants. However, 'this ignores the fact that the corporation is a separate and independent legal entity. Lomax Industries, Inc. v. Aultman, 543 Pa. 38, 669 A.2d 893 (1995). It was the corporation, not Mader, which was directly harmed by the wrongdoing of the Defendants. Therefore, it is the corporation that is entitled to recover the sums which were improperly diverted to the use of the Defendants. Said sums should be used to pay the corporate creditors. If there is any money remaining, it will then be disbursed to the shareholders as part of the winding up process. Mader has also asked that we award him the personal property listed in finding of fact 24. Since the encumbrances on the vehicles well exceed their fair market value, and since the value of the personalty requested by Mader is much less than the difference between the encumbrances and the value of the vehicles, this proposal works to the benefit of the corporation.3 Therefore, we will include it as part of our resolution of this matter. Based upon the foregoing findings of fact and discussion, we are satisfied that the decree nisi set forth below is appropriate. 3In our order of January 13, 1998 we gave Defendant Robert Spangler the opportunity to "purchase" one of the vehicles from the corporation by simply refinancing the encumbrance thereon. He declined to do so. NO. 97-6131 EQUITY CONCLUSIONS OF LAW 1) The Court has jurisdiction over the parties and subject matter of this litigation. 2) Defendant Robert Spangler, while in control of the corporation, fraudulently converted corporate funds to his own use. 3) Defendant Robert Spangler misapplied or wasted corporate assets. 4) It is beneficial to the interests of the shareholders that the corporation be wound up and dissolved. DECREE NISI AND NOW, this 28TH day of JANUARY, 1999, after hearing, it is hereby ordered and directed as follows: 1) Judgment is entered in favor of Plaintiff Mader Drywall, Inc. and against Defendants Robert F. Spangler, Jr. and Aleta Spangler, jointly and severally, in the amount of $7700, representing the excess rent paid by the corporation. 2) Judgment is entered in favor of Plaintiff Mader Drywall, Inc. and against Defendant Robert F. Spang!er, Jr. in the amount of $34,087.14 representing the corporate funds which he improperly converted to his own use. 3) Defendants Robert F. Spangler, Jr. and Aleta Spangler are directed to pay, jointly and severally, to Plaintiff Stiles R. Mader the sum of $193.75 representing reimbursement of sums paid to the accountant, said sums to be paid within seven (7) NO. 97-6131 EQUITY days. 4) Ail equipment and tools currently in the possession of Stiles R. Mader, exclusive of vehicles, are, and shall hereafter be deemed to be, the sole and exclusive property of the said Stiles R. Mader. 5) Ail motor vehicles titled in the name of Mader Drywall, Inc. shall be transferred to Stiles R. Mader. The said Stiles R. Mader is hereby authorized to execute on behalf of the corporation any documents necessary to effectuate the said transfer. Concurrent with the transfer of said vehicles the said Stiles R. Mader shall make arrangements to refinance the encumbrances thereon so as to relieve the corporation from any liability in connection therewith. 6) The following items are awarded to Plaintiff Stiles R. Mader: 1. 4-drawer metal file cabinet. 2. Smith Corona Word Processor/Typewriter 3. 2 metal tool boxes - one smashed, one new. 4. miscellaneous scaffolding - Baker & utility 5. 1 black telephone with answering machine 6. 1 tripod 7. one hitch 8. 1-2 drawer file cabinet 9. 1 snow blower 10. 1 snow plow that went on the front of Mr. Mader's truck 11. Reddy heaters (2) - (1) 100,000 & (1) 150,000 BTU 12. 1 cordless drill (Bosh) 13. walk-up benches 14. miscellaneous dry wall tools 15. taper Defendants, Robert F. Spangler and Aleta A. Spangler, are directed to deliver possession of these items to Mr. Mader within NO. 97-6131 EQUITY one (1) week of the date of this Order. 7) The affairs of the corporation shall be wound up and the corporation shall be dissolved in accordance with Subchapter G of the Business Corporation Law (75 Pa. C.S.A. ~ 1981 et seq.). 8) Robert O'Brien, Esquire is appointed to act as receiver to wind up the affairs of the corporation under the auspices of the Court in accordance with 15 Pa. C.S.A. § 1985. This decree nisi shall become a final order of court unless exceptions are filed within ten (10) days. By the Court, /s/ Edward E. Guido Edward E. Guido, J. Robert L. O'Brien, Esquire For the Plaintiff Matthew J. Eshelman, Esquire For the Defendants :sld 10