Groome's Estate

Stearne, J., Decedent executed a pledge to a college, a corporation of. the first class, not for profit. At the date of death the pledge, upon its face, was barred by the statute of limitations. The college, claimant, at the audit of the executor’s account, sought to toll the statute by the testimony of two members, of [536] ficers of the corporation. The auditing judge ruled that such witnesses were disqualified under the Act of May 23, 1887, P. L. 158, sec. 5 (e), 28 PS §322, and dismissed the claim. He-relied upon Aquetong Hall Assn. v. James, 100 Pa. Superior Ct. 440. The syllabus of the Aquetong case reads as follows: “In a claim for rent by a corporation of the first class against a decedent’s estate . . . the treasurer was not a competent witness to testify against the decedent’s estate as to matters occurring in the latter’s lifetime . . .”. That case was thereafter cited with approval by Judge Stadtfeld of the Superior Court, quoting the above syllabus: Broderick Co. v. Emert et al., 110 Pa. Superior Ct. 327, 332. This court, as presently constituted, in opinions cited the Aquetong case with approval: Deal’s Estate, 1319 of 1934 (not reported), and Field’s Estate, 34 D. & C. 468. Exceptant is confronted by two horns of a dilemma. In order to effect the tolling of the statute, the acknowledgment of the debt and the promise to pay must be made to the creditor or its duly authorized agent: Miller’s Estate, 9 D. & C. 670; Gillingham v. Gillingham, 17 Pa. 302; Spangler, Executrix, v. Spangler, 122 Pa. 358; Bahny v. Levy, 236 Pa. 348. If claimant concedes that the corporation’s witnesses (members and officers of the college) are integral parts of the corporation itself, then decedent’s acknowledgment and promise to pay was indeed made to the creditor. But claimant is then faced with the Aquetong case, which rules that these witnesses are incompetent. Its learned counsel seeks to drive between the horns. He maintains that what Judge Keller wrote in the Aquetong case was dictum, and not supported by the statutes and judicial decisions. A majority of the court do not regard the decision written by Judge Keller in the Aquetong case as dictum. An examination of the record in that case reveals that the single assignment of error was to the ruling of the [537] trial judge that an officer of a corporation of the first class, not for profit, was a competent witness under the Act of 1887, supra. This was the sole issue presented to the appellate court. The Superior Court decided that such ruling was error and that the witness was not competent. It refused, however, to disturb the verdict, even though the ruling was wrong, because it was harmless error in the facts of that particular case. As the issue raised required a determination of the legal question, the words of the opinion writer cannot be regarded as dictum, even though the decision did not rest solely upon the principle enunciated. See 15 C. J. 952 §344: “An adjudication on any point within the issues presented by the case cannot be considered a dictum. Accordingly, a point expressly decided does not lose its value as a precedent because the disposition of the case is based upon other grounds, even though, by reason of other points in the case, the result reached might have been the same if the court had held, on the particular point, otherwise than it did”. See also Bell’s Estate, 31 D. & C. 670. It is argued that Judge Keller’s use of the language “we would be inclined to hold” and also “even if wrongful ly admitted ... [it is] harmless error” emasculates the opinion of the force of a definitive decision upon the point of law in question. We think not, particularly since the sole assignment of error related to the question of the competency of the witness. Furthermore, the citation of the Aquetong case with approval by the Superior Court upon this principle, in a later decision (Broderick Co. v. Emert et al., supra) confirms our conclusion that the Superior Court regarded that it had so decided the question. As the Aquetong case stands unreversed, we could well dismiss the exceptions upon the theory of stare decisis. The learned counsel for exceptant, however, maintains that (unlike the Aquetong case) the two witnesses, members and officers of this corporation, were not adverse witnesses within the meaning of the Act of 1887, supra, [538] and were therefore competent. He contends that the disqualifying ádverse interest must be pecuniary; that the corporation in the Aquetong case, supra, was an affiliate of a fraternal order; that members of incorporated fraternal orders, social clubs, beneficial associations, and the like, become owners of the assets upon dissolution; that therefore such members are financially interested in the corporation. Contradistinguished from such corporations are religious, literary, educational, or charitable corporations. In the latter corporations, upon dissolution, the assets are not divided among the members. These assets cannot be diverted from such uses: Nonprofit Corporation Law of May 5, 1933, P. L. 289, sec. 1001. Because the present college was a corporation wholly eleemosynary in character, it is argued that irrespective of the fact that the witnesses were members and officers of a corporation (the “surviving or remaining party”), and who actually made the alleged contract with decedent, the witnesses’ lack of pecuniary interest renders their testimony competent. The Act of May 23, 1887, P. L. 158, sec. 5(e), provides: “Nor, where any party to a thing or contract in action is dead . . . shall any surviving or remaining party to such thing or contract, or any other person whose interest shall be adverse ... be a competent witness to any matter occurring before the death. . . .” This act has been construed by the Supreme Court in Weaver, Exec., v. Welsh, 325 Pa. 571, 577, where Chief Justice Kephart has written: [539] construed not merely to render the surviving party incompetent to testify concerning the precise transaction, but to testify to any fact occurring before the death of the decedent which bears upon it: Swieczkowski v. Sypniewski, 294 Pa. 323; Uhl v. Nostoller, 298 Pa. 124. But, to effect this disqualification, the interest of the surviving party must be adverse to that of the decedent. See King v. Lemmer, 315 Pa. 254; Dillon’s Estate, 269 Pa. 234; First National Bank of Bloomsburg v. Gerli, 225 Pa. 256; Edmundson’s Estate, 259 Pa. 429.” [538] “. . . the controlling factor is clause (e), section 5, of the Act of May 23,1887, P. L. 158, the purpose of which is obviously to prevent the injustice which might flow from permitting the surviving party to a transaction with a decedent to give testimony thereon favorable to himself and adverse to the decedent, which the latter’s representative would be in no position to refute: Karns v. Tanner, 66 Pa. 297 (decided under the Act of 1869, the forerunner of the Act of 1887). This clause has been [539] Perhaps the best illustration of the operation of the rule is observed in Edmundson’s Estate, 259 Pa. 429, cited by the Chief Justice. There claimant offered evidence that claimant’s mother had conveyed an interest in real estate to decedent upon decedent’s promise to claimant’s mother that decedent would pay or bequeath the proceeds of sale to claimant. Claimant’s witness was her mother, who had made the contract with decedent. Her competency was objected to because she was the “surviving and remaining” party to the contract. Her competency was sustained, however, on the ground that (p. 437) “The disqualification is made to depend not only on the fact of being a remaining party but also of having an adverse interest”. There are very many cases in the books defining “adverse interest”. It is conceded that in the varying circumstances pecuniary interest often becomes an important factor. Yet we do not deem this to be the sole factor. Another term, “disinterested” witness, frequently appears in many decisions. This arises because the Act of April 26,1855, P. L. 328, amended by Act of June 7,1911, P. L. 702, and adopted by section 6 of the Wills Act of June 7, 1917, P. L. 403, required any bequest or devise for a religious or charitable use to be by will “attested by two credible, and, at the time, disinterested witnesses . . .”. (Italics supplied.) This portion of the act was subsequently repealed by the Act of July 2, 1935, P. L. 573. The Act of 1887 is an evidence act, whereas [540] the Act of 1855 was a mortmain statute. However, the analogy in terms between “adverse” interest in the Act of 1887 and “disinterested” witness under the Act of 1855 was so closely allied that frequently, in the cases, these terms seem to have been inaccurately used interchangeably. No useful purpose will be served by collecting and discussing these decisions. Were the present corporation claimant an individual there cannot be a shadow of doubt that such an individual claimant’s testimony (being that of an adverse “surviving or remaining” party to the contract) would be incompetent. Two recent cases, following a long line of decisions, are Buttorff’s Estate, 329 Pa. 561, and Gallagher, Admr., v. Rogan, 330 Pa. 545. Here an eleemosynary corporation is the claimant. It seeks, as the “surviving or remaining” party to the contract, to establish a claim against the estate of the deceased, the other party thereto. It endeavors to do this by the testimony of two of its own members, who are officers, and who themselves made the contract with decedent. We are therefore faced with the legal problem concerning the status of these witnesses. Are the witnesses mere agents of the corporation, with no adverse interest, or are they integral parts of the corporation itself? While a corporation has been long regarded through a fiction of law as a legal entity, Gibbs’ Estate, 157 Pa. 59, the modern tendency has been to disregard this fiction when the interests of equity and justice require it. In such cases it has been said: “ Tor purposes of equity, courts will look behind that artificial personality, and if need be, ignore it altogether and deal with the individuals who constitute the corporation’ ”: S. G. V. Co. v. S. G. V. Co., 264 Pa. 265, 269, citing Kendall v. Klapperthal Co., 202 Pa. 596, 607. See also Duquesne Brewing Co., etc., v. Mazza, 30 D. & C. 389, 394, and Stony Brook Lumber Co. v. Blackman et al., 286 Pa. 305. When, therefore, we disregard the form and look to the substance, we find, as pointed out by Mr. Savidge, in Savidge on Corporations [541] (2d ed.), sec. 704, that the stockholders or members of the corporation constitute the corporate body itself. It follows, therefore, that the corporation is but a convenient form of an association of individuals to act together as a group. Its officers and directors are consequently representatives not only of the corporation, but of the stockholders or members collectively. Most of the cases disqualifying a stockholder but permitting a nonstockholding officer to testify, emphasize the financial interest of the stockholder. But the disqualification can just as logically be placed on the ground that the stockholder is really one of the co-owners of the corporation, who, with his associates, constitutes the corporation. In this regard, members of an eleemosynary corporation, which has no stockholders, are in the same category as stockholders in that they are the owners (with perhaps qualified title) of the corporation. The witnesses, whose testimony was excluded by the auditing judge, were at the same time both trustees and members of the corporation. As members they occupy precisely the same position as stockholders in a corporation for profit, of the second class, under the Act of April 29, 1874, P. L. 73. As co-owners of the corporation and its assets, they were essentially actual parties to the controversy and their interest as such undoubtedly adverse. While it may be true that upon liquidation of this particular form of corporation the assets would not be divided among the then members of the corporation as would be the case on the dissolution of other corporations, this fact does not make their ownership of the corporation any the less real, for they control its destiny, property, and affairs. Reflection clearly demonstrates that the fundamental legal philosophy behind the Act of 1887, supra, is to prevent a living person, possessing an adverse interest, from testifying against a decedent’s estate, when the living person and decedent were the parties to the contract. In such a situation, without the protection of the statute, the estate would be at the mercy of an interested witness. [542] A person may have no direct pecuniary interest as a member of an eleemosynary corporation, yet membership or directorship therein may be of tremendous indirect personal and financial benefit to him. It would appear a most dangerous principle to permit a member and officer of an eleemosynary corporation to testify on behalf of the corporation, concerning the terms of a contract between the corporation and decedent, especially, as in this case, between the witnesses themselves and the decedent. The whole estate could be sworn away, without the slightest ability to refute such testimony. Were we to accept (which we do not) exceptant’s theory that these witnesses are mere agents of the corporation and are, therefore, without adverse interests, claimant is again met with a most formidable barrier to a recovery. In order to toll the statute of limitations, the agents of the creditor must be authorized agents: Bahny v. Levy, supra; Spangler, Executrix, v. Spangler, supra; Gillingham v. Gillingham, supra; Miller’s Estate, supra. These witnesses certainly were not authorized to collect this pledge from decedent. When engaged in the conversations with decedent they were not acting under specific authority from the corporation. Such action was no more authorized than if the witnesses had agreed, with decedent, to cancel or modify her original pledge. This alone is fatal to the allowance of the claim. The exceptions are dismissed and the adjudication is confirmed absolutely.