Opinion ID: 2190354
Heading Depth: 1
Heading Rank: 1

Heading: applicability of the dead man's act

Text: Pennsylvania's Dead Man's Act provides, in pertinent part, that: Except as otherwise provided in this subchapter, in any civil action or proceeding, where any party to a thing or contract in action is dead, ... and his right thereto or therein has passed ... to a party on the record who represents his interest in the subject in controversy, neither any surviving or remaining party to such a thing or contract, nor any other person whose interest shall be adverse to the said right of such deceased ... party, shall be a competent witness to any matter occurring before the death of said party ... [3] The purpose of the Act is to prevent the injustice that would result from permitting a surviving party to a transaction to testify favorably to himself and adversely to the interest of a decedent, when the decedent's representative would be hampered in attempting to refute the testimony or be in no position to refute it, by reason of the decedent's death. Estate of Stauffer, 504 Pa. 626, 476 A.2d 354 (1984); Estate of Kofsky, 487 Pa. 473, 409 A.2d 1358 (1979); Weaver v. Welsh, 325 Pa. 571, 191 A. 3 (1937). The deceased must have, however, an actual right or interest in the matter at issue, that is, an interest in the immediate result of the law suit. Estate of Hendrickson, 388 Pa. 39, 130 A.2d 143 (1957). We agree with the Superior Court that decedent had no such interest here. Charles Hall was merely an agent of the two corporate general partners that entered into the limited partnership agreements with claimants. He was insulated from general and unlimited personal liability to either the limited partners or to any other creditors even though he was the sole shareholder in the two corporations. Mere stock ownership, even when the stock in the corporation in question is owned by only one shareholder, will not blur the distinction between individuals and corporate entities. Barium Steel Corp. v. Wiley, 379 Pa. 38, 108 A.2d 336 (1954). This general exception to the Dead Man's Act therefore applies. When the principal (here, the corporations) survives, the death of an agent, through whom a contract has been made, does not exclude the testimony of a party who brings an action against the principal. East Girard Savings and Loan Association v. Houlihan, 373 Pa. 578, 97 A.2d 23 (1953); Danish Pride Milk Products Co. v. Marcus, 272 Pa. 340, 116 A. 303 (1922). It must be emphasized that Mr. Hall's estate was dismissed as a party defendant in these proceedings. Moreover, the trial court's order that allowed these claims was entered against the corporate general partners alone and merely reallocated funds in the partnership accounts in favor of the limited partners to the detriment of the corporate general partners. The estate was not charged in any way. Appellants invite us to find that the two general partner corporations are mere fictions, that they were alter egos of Mr. Hall who was the sole shareholder, and that the corporate veils should be pierced, thereby creating an identity of interest between Mr. Hall's estate and these corporations (and their assets) for purposes of the Dead Man's Act. We decline the invitation to do so. If anything in this litigation is clear, it is that these two corporate entities were and are not mere fictions. As explained above, the use of a corporate general partner in an overall limited partnership entity is essential in order to give the developer limited liability and to combine this benefit with the substantial tax shelter advantages available to real estate limited partnerships. Once these benefits and advantages are realized through use of such entities, the parties to such transactions will not be heard to assert that the entities were mere fictions. Moreover, each of the two limited partnership agreements involved in this case expressly gives the corporate general partner a 50% ownership interest in each of the completed buildings. (R. 609a, 681a). These buildings are obviously valuable pieces of commercial real estate and were such at the time trial in this case was held. A 50% ownership interest in each is a valuable asset owned by each corporate general partner independent of Mr. Hall's estate. These corporations are not, therefore, shell or dummy corporations. As a consequence of the tax and other benefits realized here, these valuable assets are owned by the separate corporate general partners that had to be set up, and they do not pass directly to the estate. Appellants cannot have it both ways. We hold that the estate has no direct interest in the corporate assets; hence, the Dead Man's Act has no applicability here. [4]