Court Opinion

ID: 9701896
Source: CourtListenerOpinion
Date Created: 2023-08-25 22:42:35.605299+00
Date Added: 2024-06-11T18:21:30.526824
License: Public Domain

CERCONE, Judge
(dissenting):
The instant appeal arises from a judgment entered in favor of appellees, Mr. and Mrs. Diesel, against Charles Caputo based upon a jury verdict in the amount of $55,000.00. The relief granted by the jury was by its nature restitutionary resting upon appellee’s alternative theories of conspiracy to defraud, conversion or quasi-contract (unjust enrichment). Appellant’s requests for binding instructions and judgment n. o. v., or, in the alternative, a new trial were denied. For the reasons which follow, we reverse.
Taking the evidence in the light most favorable to appellees, they established the following facts at trial. On March 7, 1971, the Diesels saw an advertisement in the Pittsburgh Press proclaiming an investment opportunity for “an exciting fascinating, very profitable private club, interested parties reply to Press S 579.” Their reply to the advertisement led to their ill-fated meeting with Samuel “Sonny” Peters. Peters explained that the opportunity he had advertised was a one-third ownership of a private club in a bustling area of downtown Pitts*212burgh which would be operated under the charter of a not-for-profit corporation, the “Argonne Club.” He explained that if the Diesels, the Peters and a third purported investor, lzzie Weinstein, each invested $30,000, a lucrative night club business could be established. Peters already had negotiated a. lease with the owner of the proposed site of the club which was a building then being used for storage.
Persuaded by the prospects of the venture, the Diesels agreed to invest, and in April, 1971, they transferred $20,000 of their savings to a bank account in the name of “Argonne Club.” Peters simultaneously contracted with DeRamo Construction Company to remodel the building they had leased into a night club. However, the matter of obtaining a liquor license for the club remained problematical at the beginning of this enterprise.
In May, 1971, when the Diesels were visiting the site while the remodeling was taking place, they saw that an application for the transfer of a club liquor license belonging to the Italian American Professional and Businessmen’s Association (IAPBA) was posted on the premises. Mr. Caputo’s name appeared on the notice of transfer as President of the IAPBA. Since the Diesels had never met Mr. Caputo, they asked Peters why the license to be transferred was listed in the name of the IAPBA. Peters explained that, for their purposes, the name of the club to whom the license was issued was unimportant, and that using the IAPBA license would facilitate the opening of the club. Peters explained that, instead of holding the liquor license and the lease in the name of the Argonne Club, they would hold them in the name of the IAPBA. The investment and management of the club, which would trade as “The Showboat Club,” would still be theirs, as would the profits, in the form of salaries and returns on their capital investments. Peters further explained that the only consequence of this arrangement with the IAPBA was that Mr. Caputo would have to be paid $7,500 for transferring the liquor license *213to their premises. Peters indicated that' $5,000 had been paid to Mr. Caputo on that account, and at trial a check dated April 27, 1971, paid to cash, and endorsed by Mr. Caputo was offered into evidence.1 Mr. Caputo also signed a reformed lease for the club site in his capacity as president of the IAPBA.2
Prior to the opening of the club Peters informed the Diesels that Mr. Weinstein, the- person who was to have invested one-third the money, had withdrawn from the venture and, if the Diesels invested more money, they could increase their share from one-third to one-half ownership. The Diesels then invested $15,000. In July, when the club opened, the Diesels invested almost $10,000 more. The tasks involved in managing the club were divided as follows: Peters controlled the daily operations of the club; Mrs. Diesel worked in the kitchen; David Connors, Peters’ nephew, was the club’s steward, in charge of memberships, and the “doorman”; and Mr. Diesel did the bookkeeping.
Under the bookkeeping system that the Diesels had devised, in November, 1971 they discovered that Peters had not invested more than twenty dollars in the enterprise, which had been capitalized entirely by their investments, that Peters regularly took money from the cash register, and that Peters had appropriated the $25 membership fees paid by the club’s patrons.
Having discovered the fraud, the Diesels asked Mr. Thorpe, their landlord, to lease the business premises to *214them, but Mr. Thorpe explained that he could only do that with the permission of IAPBA’s president, Mr. Caputo. Subsequently, a meeting was arranged at Mr. Caputo’s law office between Mr. Caputo, Mr. and Mrs. Diesel, and Mr. and Mrs. Peters. At that meeting the Diesels requested that Mr. Caputo turn the lease over to them and help them in ousting Mr. Peters from their partnership. Peters admitted all the allegations of fraud, but audaciously maintained that he must be paid $10,000, primarily his “unpaid” salaries, before he would withdraw from the partnership. He arguéd that, although he had not invested any money in the venture, it was through his efforts that the club was organized, built and operated. Although the Diesels tentatively agreed to meet Peters’ demand, they soon changed their minds and refused. Mr. Caputo told them that, unless they settled their differences with Peters, he could not aid them in ousting him.3 This statement was apparently made since Mr. Caputo was not involved in arrangements made between Peters and Diesel. Mr. Caputo recommended to the Diesels that they seek other counsel to help resolve the problem existing between the Peters and them. The club, which had been closed by a raid, remained closed. Shortly thereafter, the Diesels sought legal counsel and commenced the instant suit.
Initially filed in equity, appellees’ complaint alleged that Mr. and Mrs. Peters, the IAPBA, and Mr. Caputo conspired to defraud them of more than $53,000.4 Because an adequate remedy existed at law, the case was *215transferred to the law side of the court. Ultimately, when Mr. and Mrs. Peters and the IAPBA, which was hopelessly insolvent and in receivership, failed to file an answer, and the lawsuit against Mr. Caputo was- severed, appellees took judgment against the Peters and the IAP-BA by default.
Immediately prior to trial, howéver, it became apparent that appellees had revised their theory of liability against appellant Caputo and abandoned their hopes of proving a conspiracy between Peters and Caputo to defraud them. Counsel, in chambers after the jury had been sworn, admitted that appellees had no proof that Mr. Caputo took part in the fraud perpetrated upon them by Peters. Instead, they wished to proceed on the theory set forth in Brubaker v. County of Berks, 381 Pa. 157, 161, 112 A.2d 620, 622 (1955): 5
“[W]here property is fraudulently converted and diverted from its proper use, the third person into whose hands the property falls without consideration, even though he be innocent of knowledge of any wrongdo*216ing, has the obligation to restore to its rightful owner the property so wrongfully appropriated.”
The principal difficulty with appellees’ theory is that, except for $5,000 paid for transferring the liquor license, they failed to show that property fell into Mr. Caputo’s hands.
Even if we were to assume that Mr. Caputo’s actions qualified him as the “alter-ego” of the IAPBA,6 the evidence clearly demonstrated that the IAPBA gave value for the improvements to the business premises.
The Restatement of Restitution § 123 provides:
“A person, who, non-tortiously and without notice that another has the beneficial ownership of it, acquires property which it would have been wrongful for him to acquire with notice of the facts and of which he is not a purchaser for value is, upon discovery of the facts, under a duty to account to the other for the direct product of the subject matter and the value of the use to him, if any, and in addition, to:
(a) return the subject matter in specie, if he has it;
(b) pay its value to him, if he has non-tortiously consumed it in beneficial use;
(c) pay its value or what he received therefor at his election, if he has disposed of it.” [Emphasis added.]
Although Mr. Thorpe, the landlord, testified that he expected the Diesels and the Peters to pay the monthly rent of $1,200, the IAPBA was the lessee, and, in the event *217that the Diesels and Peters defaulted on the rental payments, the IAPBA was bound to pay under the lease. The law is clear that:
“Where a person acquires title to property under such circumstances that otherwise he would hold it upon a constructive trust or subject to an equitable lien, he does not so hold it if he gives value for the property without notice of such circumstances.” Id. at § 172 (1). [Emphasis added. ]
Since, as appellees concede, there is no evidence that the IAPBA or Mr. Caputo as its alter ego, had notice of the fraud perpetrated upon the Diesels when the improvements to the leased property were made with the Diesels’ money, and since the IAPBA gave value for whatever property it received,7 both by transferring the liquor license and by permitting appellees to use the leased premises, appellees have not proved the underlying facts upon which their restitutionary theory of liability rests.
However, the payment to Mr. Caputo of $5,000 is recoverable by the Diesels. Although Mr. Caputo denied ever having received that sum, the evidence offered at trial warranted the jury’s conclusion that he did receive the money. Furthermore, there is no proof that Mr. Caputo gave value in return for the $5,000, since the liquor license which was transferred was not Mr. Caputo’s, it was an asset of the IAPBA. At best, the evidence supports the inference that Mr. Caputo usurped a corporate opportunity 8 which, given his preexisting fiduciary duty to the IAPBA, does not constitute “giving value” as between the Diesels and him.
Hence, although appellees have failed to prove that appellant took part in the fraud perpetrated upon them, or *218that appellant was “enriched” by the improvements made on the business premises, the jury properly concluded that appellant, as an individual, was unjustly enriched in the amount of $5,000 in connection with the transfer of the liquor license. Since it is our power to amend any judgment to conform to the proof offered at trial,9 for the foregoing reasons I would reduce the judgment entered in the court below to $5,000.
HOFFMAN, J., joins in this dissenting opinion.

. Mr. Caputo disclaimed having received any money for transferring the license. He testified that Mrs. Peters asked him to endorse the check as an accommodation so that she could have it cashed at a branch of Pittsburgh National Bank other than the one upon which it was drawn. Although Mrs. Peters corroborated this story, the jury was entitled to disbelieve it, especially in light of the Diesels’ subsequent testimony that Mr. Caputo told them he was still owed $2,500 for transferring the license.

. Mr. Thorpe, the owner of the premises, testified that the change from Argonne Club to IAPBA was unimportant since, in either event, he expected to be paid by the Peters and the Diesels.

. It was during one of these discussions with Mr. Caputo that the Diesels learned that Peters still owed Mr. Caputo $2,500 for transferring the liquor license. Although the Diesels offered to pay him the money, Mr. Caputo declined their offer explaining that his agreement was with Peters and that he was looking to Peters for payment.

. In addition to the Diesels’ aforementioned investments, they advanced money for rent payments, liquor purchases, and fire insurance. They also co-signed notes and guaranteed loans in connection with the business.

. In abandoning the conspiracy to defraud theory, appellees were doubtless influenced by the heavy burden of proof which attends the theory of liability. As the Supreme Court stated in Ballantine v. Cummings, 220 Pa. 621, 630, 70 A. 546, 549 (1908):
“A ‘conspiracy to defraud’ on the part of two or more persons means a common purpose supported by a concerted action to defraud, that each has the intent to do it, and that it is common to each of them, and that each understands that the other has that purpose.” When evidence of the fraudulent combination is not direct and positive, but is circumstantial proof raising inferences from subsequent conduct, the court should determine, at the outset, whether the proof offered is sufficient. Id. at 631, 70 A. 546.
Furthermore, in making this determination the court should ask whether the proof of the conspiracy was “full, clear and satisfactory,” and the proof may not consist of “disconnected circumstances, any one of which, or all of which, are more consistent, or just as consistent, with a lawful purpose as with an unlawful undertaking.” Id. at 631, 632, 70 A. at 550. Cf. Fife v. Great Atlantic and Pacific Tea Co., 356 Pa. 265, 52 A.2d 24 (1947); Morris v. Halford, 352 Pa. 138, 42 A.2d 411 (1945). If the proof falls short of the required standard, the court is obliged to direct a verdict for the defendant.

. Generally, of course, corporateness will be respected and not disregarded so that officers and members of a corporation will not be deemed to have received individually that which the corporation has received as an entity — in this case for example, through the lease, an interest in the fixtures and other improvements to the night club premises. However, “when the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons.” H. Henn, Law of Corporations 252 (2d ed. 1970).

. Indeed, there is a more subtle difficulty with appellees’ theory. Virtually all the improvements to the night club were fixtures, and fixtures are not susceptible to conversion. See Norriton East Realty Corp. v. Central Penn Nat’l Bank, 453 Pa. 57, 254 A.2d 637 (1969). See also 18 Am.Jur.2d, Conversion § 20.

. H. Henn, Corporations 462-65 (2d ed. 1970).

. See 9 Standard Pa. Practice § 164 (Rev.ed. 1962).