Diamond State Iron Co. v. Husbands

8 Del. Ch. 205 | New York Court of Chancery | 1898

The Chancellor:—

The bill filed in this cause prays for the specific performance of an agreement in writing entered into on the 24th day of February, 1897, by the complainant, the Diamond State Iron Company, and the respondent, Thomas L. Husbands. By this article of agreement the complainant agreed by good and lawful deed or deeds to convey unto the respondent, on or before March 6, 1897, a lot of land in the city of Wilmington at the corner of Lobdell and Heald Streets, in fee simple and clear of incumbrances, for the consideration of twelve hundred dollars, the respondent agreeing that upon the delivery of such deed or deeds he would secure to the complainant the payment of said consideration of twelve hundred dollars by a bond and mortgage payable, with interest, on or before the expiration of three years from the date of the deed, with the condition that the principal and interest should become due in sixty days after any defalcation in the payment of interest; possession to pass upon delivery of the deed.

A deed was executed and tendered by the complainant in accordance with the terms of the agreement, but the respondent declined to accept it and to execute and deliver the said bond and mortgage, returning said deed with a letter from his counsel, Benjamin Nields, Esq., to the effect that he had advised the respondent “that the said deed tendered as aforesaid, does not and would not well and sufficiently grant, convey and assure the said property to him in fee simple.”

The respondent filed an answer admitting all the facts as above stated, but denying that the complainant had a good and sufficient title in fee simple, and alleged as follows in his answer:

‘‘ XI. And the respondent further says that said lot, piece or parcel of land in paragraph 3 of said Bill of Complaint mentioned, is part of a larger piece or parcel of land, conveyed by the Lobdell Car Wheel Company to said complainant, by deed dated July 20th, A. D. 1883, and recorded in the office of the Recorder of Deeds at Wilmington, in Deed Record R, vol. 12, page 424, &c. That said larger tract of land was conveyed to the said Lobdell Car Wheel Company under the corporate name of The Lobdell Car Wheel, Tire and Machine Company, by Benjamin F. Townsend and wife, by deed dated November 23rd, A. D. 1868, and recorded in the office as aforesaid in Deed Record Y, vol. 8, page 146, See.

“That the said The Lobdell Car Wheel, Tire and Machine Company was incorporated by Act of the General Assembly of the State of Delaware, passed March 7, A. D. 1867. l^That said Act was a private act, was not of a public nature or published as such and that the same was not recorded in the Recorder’s Office in one of the Counties of this State, within twelve months after the passage thereof, and said act, therefore, became and was void at the time of the conveyance of the said tract of land to it by the said Benjamin F. Townsend and wife, as aforesaid.

“XII. And said respondent further says that the said Diamond State Iron Company, the complainant, was incorporated by an Act of the General Assembly of the said State of Delaware, passed March 7th, A. D. 1865, to continue in force for twenty years; that said incorporation was not for public improvement and that the same was not re-enacted at any time within twenty years after the passage thereof, and that said act expired by act of limitation March 6, A. D. 1885, and said corporation thereby then became and -was from thenceforth dissolved. That by the laws of this State all of the estate, right, title and interest of said Complainant in and to the said lot, piece or parcel of land in paragraph 3 of said Bill of Complaint mentioned, upon the dissolution of said corporation reverted to and became vested in the said grantor thereof, viz. The Lobdell Car Wheel Company, its. successors or assigns.

“XIII. And said respondent respectfully submits that by reason of the failure of the said The Lobdell Car Wheel, Tire and Machine Company to record its charter in one of the Counties of this State within twelve months after the passage of the act incorporating the same, and because of the expiration of the Charter of the said Complainant on the Sixth day of March, A. D. 1885, as above set forth, the said complainant was not on the said 24th day of February, A. D. 1897, seized in fee simple of said lot, piece or parcel of land, and was not then and is not capable in law of well and sufficiently granting, conveying and assuring unto the respondent the said lot, piece or parcel of land in fee simple, clear of all incumbrance and all manner of liens whatsoever according to its covenants in that behalf in said agreement set forth.” >

Two remedial or curative statutes are cited by counsel for the complainant, which they claim were enacted for the purpose of saving the Lob dell Car Wheel Company and the Diamond State Iron Company, respectively, from the legal consequences of the neglect fully set forth and described in the respondent’s answer, as above quoted, and, therefore, have removed from the property in dispute any alleged cloud upon the title,

The first statute cited, the one applying to the Lobdell Car Wheel Company, was passed February 4, 1869, Laws of Delaware, Vol. 13, page 356, and is as follows:

“An Act' to Revive and Extend the Time for Recording Private Acts.

“Whereas by Chapter 4, Section 3 of the Revised Statutes of the State of Delaware, it is provided that private statutes (namely ‘such as are not of a public nature, or published as such’) shall be recorded in the Recorder’s office in one of the counties of this State within twelve months after their passage, or they shall be void;

“And Whereas by Chapter 1, Section 2 of Volume 13, Part 1, it is provided ‘that the Secretary of State be and he is hereby directed to exclude from the publication of the laws of this State all acts of incorporation, and other acts of a private nature, unless such acts contain a provision directing their publication;’

“And Whereas a number of private and unpublished acts heretofore passed have inadvertently been allowed to become void through ignorance of the aforesaid enactments;

“Therefore, for the purpose of relieving the parties interested of the embarrassments and disappointments arising from unintentional neglect in the premises,

“Be it enacted by the Senate and House of Representatives of the State of Delaware in General Assembly met,

“ Section 1. That all unpublished acts heretofore passed, and that have become void on account of not being duly recorded in compliance with the provisions aforesaid, be and the same are hereby severally revived and re-enacted, and, together with the provisions therein •contained, are respectively declared to be in full force; and all acts and transactions done and performed under the provisions of said acts respectively shall have the same force and effect, and be as valid to all intents and purposes as if the'said acts had been severally recorded according to law; Provided, That this enactment shall not take effect in the case of any act that has become void as aforesaid until a certified copy thereof, procured of the Secretary of State, shall be duly recorded in the Recorder’s office of one of the counties of this State; And provided further, That no such copy of a voided act shall be received for record after the expiration of one year from the passage of this act.

“ Section 2. This act shall be deemed and taken to be a public act and published as such.”

The act incorporating the Lobdell Car Wheel Company was recorded May 20, 1869, in New Castle County in Private Acts Record B. Vol. 1, page 59; that is within the year prescribed by the remedial statute above quoted, and the deed of the property in dispute was made to the complainant, July 20, 1883.

The second statute cited was one re-enacting the charter of the complainant, the Diamond State Iron Company, and was passed March 27, 1885, Laws of Delaware, Vol. 17, page 974, twenty-one days after its expiration by limitation of time on March 6, 1885. It is as follow's:

“A further supplement to an Act entitled ‘An Act to incorporate ‘The Diamond State Iron Company.”

“Be it enacted by the Senate and House of Representatives of the State of Delaware in General Assembly met, (two ¡thirds of each branch thereof concurring herein):—

“Sec. 1. That Section 1 of the act-entitled ‘An Act to incorporate the Diamond State Iron Company,’ passed at Dover, March 7, 1865, be and the same is hereby amended by inserting the words ‘and steel' after the word ‘iron’ in both places where the said word ‘iron’ occurs in the fifth line of said section as the same is printed on page 584 of the 12th volume of Delaware Laws.

“Sec. 2. That that Act to which this is a supplement as amended by a supplement thereto passed January 23, 1873, and by section 1 of this Act, be and the same is hereby re-enacted, and the corporation thereby created is reincorporated and continued in force for twenty years from the passage of this Act with all the powers, privileges and franchises and subject to all the provisions granted or contained in the said original act of incorporation as so amended.”

This act was recorded in New Castle County, April 9, 1885, in Private Act Record C, Vol. 1, page 302.

The cause was heard on bill and answer, and it appears from the pleadings and statements of counsel for the respective parties that the respondent is both ready and willing to take the property in accordance with the terms of his agreement, and that his only reason for refusing to accept the deed tendered by the complainant, and executing and delivering to the complainant his bond and mortgage for twelve hundred dollars, is the alleged defect in complainant’s title,— his belief that the complainant cannot give him a good title to the lands for the reasons given in the paragraphs of his answer above quoted.

It is not contended that the statutes above quoted in full are not retrospective in their operation if constitutional, nor that the act in the one case does not give the same force and effect to the charter of the Lobdell Car Wheel Company as if it had been recorded in the first instance within the time prescribed by the general statute for recording of private acts, nor that the act in the other case does not re-enact the charter of the Diamond State Iron Company retrospectively so that the re-enactment relates back to a time prior to the dissolution of the corporation by the limitation of time, and has the same effect as if it had been enacted on or before March 6, 1885, that is twenty-one days prior to its actual passage.

Such statutes have long been familiar to the Bar of this State, for it has been the custom of our Legislature, at each biennial session, to pass such a retrospective act as the one above quoted for the purpose of extending the time for the recording of private statutes; and it has not been unusual for Delaware corporations, which have inadvertently allowed the twenty years of limitation to expire without re-enactment of their charter, to obtain from the Legislature such a retrospective act of renewal as the statute quoted above, renewing and continuing the charter of the Diamond State Iron Company.

Their constitutionality or effect has never been passed upon by our Courts, because of the general acquiescence and approval of the Bar, and the question is raised for the first time in the cause pending before me.

The learned counsel for the respondent contends that both statutes are unconstitutional and inoperative in so far as they may be construed to affect the interest of the grantors in the real estate in question, which it is claimed became vested prior to the passage of either act, and, therefore, could not be taken from them by an act of the legislature.

He cites Commercial Bank vs. Lockwood’s Adm’rs., 2 Harring. 8 (1832). In that case Mr. Justice Black delivering the opinion of the Superior Court said:

“If the fact of dissolution, absolute dissolution, be admitted or established, there would seem, from the authorities which bear on this point, to be no question as to what becomes of the estate both real and personal, and of the rights and credits of the corporation. The text books and cases decided are uniform in their language—that the real estate held by the corporation at its civil death, reverts to the grantor and his heirs—that the personal estate vests in the people, or in England, in the crown, and that the debts due to and from the corporation are totally extinguished, so that neither the stockholders nor the directors or trustees of the corporation can recover or be charged with them in their natural capacity. Levvnz 237; Owen 73; 2 Anderson 107; 1 Blackford’s Indiana Rep. 267; 2 Bacon’s Abr. 32; 4 Comyn’s Digest 273; 1 Black. Com. 484; 2 Kyd on Corp. 516; 2 Kent’s Com. 307-9;Angelí and Ames on Corp. 513.”

In the case of Fox vs. Horah, 1 Ired. Eq. 358, decided June 1841, Judge Gaston says, “We believe that the rules of common law, governing the disposition of the property which the corporation held, at the moment of death are well settled —though differing according to the character of the property upon which they operate as being either realty, personalty, or choses in action. The real estate remaining unsold reverts to the grantor and his heirs, ‘because (in the language of Lord Coke) in the case of a body politic or incorporate the fee is vested in their political or incorporate capacity, created by the policy of man, and therefore the law doth annex a conditian in law to every such gift and grant that if such body politic or incorporate be dissolved, the donor or grantor shall reenter, for that the cause of the gift or grant faileth.’ Co. Lit. 136.”

It is not necessary to cite other cases upon this point, for the effect at common law of the dissolution of a corporation upon the legal title to its real estate, was described in the same language by the courts generally, whenever the subject was abstractly discussed, prior to the time when the general introduction and growth of the modern trading or business corporation occasioned the almost universal enactment of the statutes, from which the existing law of corporations has been largely developed.

Certain modern commentators on the law of corporations who intemperately criticise and denounce the able and learned judges who so announced the old common law rule, seem to lose sight of the dual nature of our legal system. It was the province of the common law judges to apply to questions of title to real estate only the fixed rules of the common law, those highly technical but harmonious and interdependent principles which taken together govern the legal ownership of land.

But the rules of the common law are supplemented and made consonant with our ideas of equity and natural justice by the system of jurisprudence administered by the Court of Chancery, and must be construed in connection with the equally well settled principles of equity.

The two systems have been developed side by side, and not without some friction at times, but long before the distinctly modern period they constituted but one harmonious body of law, although administered by two distinct tribunals, and it will be found that in every case where the real estate of a dissolved corporation actually reverted to the grantor, or his heirs, that is where the grantor took the beneficial as well as the legal estate, he had received no valuable consideration for his land, upon which could be raised a trust in the Court of Chancery. I, of course, do not allude to grants to turnpike companies, &c., which involve other considerations.

As Mr. Justice Campbell remarked in 1855 {Bacon et al. vs. Robertson, 18 How. 487), “The instances which support the dictum in reference to the lands, consist of the statutes and judgments which followed the suppression of the military and religious orders of knights, and whose lands returned to those who had granted them, and did not fall to the king as an escheat; or of cases of dissolution of monasteries and other ecclesiastical foundations upon the death of all their members; or of donations to public bodies, such as a mayor and commonalty. But such cases afford no analogy to that before us. The acquisitions of real property by a trading corporation are commonly made upon a bargain and sale, for a full consideration, and without conditions in the deed; and no conditions are implied in law in reference to such conveyances. The vendor has no interest in the appropriation of the property to any specific object, nor any reversion, where the succession fails.”

Mr. Thompson is no doubt correct when- he says (5 Commentaries on the Law of Corporation, sec. 5746) “the author does not believe that a case can be found, decided in any of the English courts within the last hundred years, where it was held that land which had been purchased by an incorporated joint-stock business company, for a consideration, reverted, on the dissolution of the corporation, to the grantor or his heirs; or, where the personal property of such corporation, upon the event of its dissolution, was held to escheat to the Crown.”

The case I have cited supra, from the Supreme Court of the United States, was that of a bank whose charter had been forfeited by the judgment of a court, and Mr. Justice Campbell, continued his discussion of this question of forfeiture, as follows:

“The question is, has the bona fide and just creditor of a corporation, dissolved under a judicial sentence for a breach in its charter, any claim upon the corporate property for the satisfaction of his debts, apart from the reservation in the act of the legislature which directed the prosecution? Can the lands be resumed in disregard of their rights by vendors, who have received a full payment of their price, and executed an absolute conveyance ? Can the careless, improvident, or faithless debtor plead the extinction of his debt, or of the creditor’s claim, and thus receive protection in his delinquency? The creditor is blameless,—-he has not participated in the corporate mismanagement, nor procured the judicial sentence; he has trusted upon visible property acquired by the corporation, in virtue of its legislative sanction. How can the vendors of the lands or the delinquent debtors resist the might of his equity? But, if the claims of the creditor are irresistible,- those of the stockholder are not inferior, at least against the parties who claim to hold the corporate property. The money, evidences of debt, lands, and personalty acquired by the corporation were purchased with the capital they lawfully contributed to a legitimate enterprise, conducted under the legislative authority. The enterprise has failed under circumstances, it may well be, which entitled the State to withdraw its special support and encouragement; but the State does not affirm that any cause for the confiscation of the property, or for the infliction of a heavier penalty, has arisen. It is a case, therefore, in which courts of chancery, upon their well settled principles, would aid the parties to realize the property belonging to the corporation, and compel its application to the satisfaction of the demands which legitimately rest upon it,”

It seems to be manifest, therefore, that even if it be conceded that our law courts might sustain the dictum of the Superior Court in Commercial Bank vs. Lockwood’s Administrator, cited supra, and hold that the title of the land in dispute either remained in or reverted to the grantor before the passage of the two remedial statutes above cited, yet they could not hold that the grantor took more than the naked legal title, and it would necessarily follow that the Court of Chancery, upon proper application, would be bound to declare the grantor to be merely a trustee for the equitable owner or owners, and, under proper circumstances, compel a conveyance of the legal title.

The complainant does not contend, however, that its title without the aid of the curative act would be such a title as this Court would compel the respondent to take by decree for specific performance, for it is a self-evident proposition that a Court of Equity will not make a decree for the specific performance of a contract to convey land, at the suit of the vendor, where there is any doubt of the legal sufficiency of the title; a Court of equity is not the forum in which land titles are tried. But if the curative or remedial statutes cited by the complainant are not unconstitutional, there can be no doubt about their efficacy, and no question but that they remove, as the complainant contends, the alleged cloud upon its title.

That being the case, it follows necessarily that this Court is bound to consider the question of their constitutionality; and if it be found that they are clearly constitutional, it also follows that then the complainant is entitled to a decree for the specific performance of - the contract set forth in its bill, inasmuch as no other objection is raised by the respondent and no other is discoverable from the case presented.

I do not deem it at all necessary for me, in this connection, to enter into any further discussion of the doctrine of specific performance, because it has been so exhaustively examined by the distinguished Chancellors who have preceded me in this State.

The nature and judicial history of this whole branch of equity jurisprudence, especially with reference to the character of the judicial discretion to be exercised by the Court in administering it, have been examined by Chancellor Bates in the exceptionally able and painstaking opinion delivered by him in Godwin vs. Colhns, 3 Del. Ch. 189—-a case affirmed by the Court of Errors and Appeals in a long opinion delivered by Chief Justice Gilpin, whilst the opinion of the Chancellor was quoted by Mr. Justice Field with emphatic approval in Willard vs. Tayloe, 8 Wall. 566.

Subsequently the subject was further discussed in different aspects by Chancellor Bates in Crockett vs. Green, 3 Del. Ch. 466; Satterthwaite vs. Marshall, 4 Del. Ch. 337; Maxfield vs. Terry, 4 Del. Ch. 618; and also by Chancellor Saulsbury, his distinguished successor, in Connaway vs. Wright’s Admr., 5 Del. Ch. 472; McFarland vs. Reeve, 5 Del. Ch. 118; Diamond State Iron Co. vs. Todd, 6 Del. Ch. 163.

It having been shown that nothing more than a naked legal title, without any color of beneficial interest, could possibly.be held by any court to have remained in or have reverted to the grantor of the land, it only remains to consider whether such an interest would be protected by the courts -from the effects of retrospective legislation—assuming that retrospective legislation is unconstitutional when it affects vested interests or the obligation of contracts.

Retrospective legislation, as a rule, is deemed dangerous and generally reprehensible. In Dash vs. Van Kleeck, 7 Johns. 477, 505, (decided in 1811) the leading case cited whenever the subject is elaborately discussed, Kent, then Chief Justice of the Supreme Court of the State of New York, said:

“There has not been a distinguished jurist or elementary writer within the last two centuries who has had occasion to take notice of retrospective laws, either civilly or criminally, but has mentioned them with caution, distrust, or disapprobation.”

In the same case, page 490, is a quotation from 6 Bac. Abr., 370, 2 Inst. 292, “that the rule of the British Parliament is that nova constitutio futuris formant debet imponere, non preteritis,”

Kent further says, page 505, “It is not pretended that we have any express constitutional provision on the subject; nor have we any for numerous other rights dear alike to freedom and to justice. An ex post facto law, in the strict technical sense of the term, is usually understood to apply to criminal cases, and this is its meaning, when used in the constitution of the United States; yet laws impairing previously acquired civil rights are equally within the reason of' that prohibition, and equally to be condemned. We have seen that the cases in the English and in the civil law apply to such rights; and we shall find, upon further examination, that there is no distinction in principle, nor any recognized practice, between a law punishing a person criminally, for a past innocent act, or punishing him civilly by divesting him of a lawfully acquired right. The distinction consists only in the degree of the oppression, and history teaches us that the government which can deliberately violate the one right, soon ceases to regard the other.”

Referring to the question of express constitutional prohibition, Mr. Justice Washington in Satterlee vs. Matthewson, 2 Pet. 413, (decided in 1829) says: “The objection, however, which was most pressed upon the court and relied upon by the counsel for the complainant in error, was, that the effect of this act was to divest rights which were vested by the law in Satterlee.

“There is certainly no part of the Constitution of the United States which applies to a state law of this description; nor are we aware of any decision of this or any Circuit Court which has condemned such a law upon this ground: provided its effect be not to impair the obligation of a contract.”

Following this, Mr. Justice Story in Watson and others vs. Mercer, 8 Pet. 109, 110, (decided in 1834) says:

“As to the first point, it is clear, that this Court has no right to pronounce an act of the state legislature void, as contrary to the Constitution of the United States, from the mere fact that it devests antecedent vested rights of property. The Constitution of the United States does not prohibit the states from passing retrospective laws generally; but only ex post facto laws. Now, it has been solemnly settled by this Court, that the phrase, ex post facto laws, is not applicable to civil laws, but to penal and criminal laws, which punish no party for acts antecedently done, which were not punishable at all, or not punishable to the extent or in the manner prescribed. In short, ex post facto laws relate to penal and criminal proceedings, which impose punishments or forfeitures, and not to civil proceedings, which affect private rights retrospectively. The cases Calder vs. Bull, 3 Dall. R. 386, 1 Cond. Rep. 172; Fletcher vs. Peck, 5 Cranch’s R. 138, 2 Cond. Rep. 308; Ogden vs. Saunders, 12 Wheaton’s R. 266; 6 Cond. Rep. 523; and Satterlee vs. Matthewson, 2 Peter's R. 380, fully recognize this doctrine.”

Again, Chief Justice Taney in Charles River Bridge vs. Warren Bridge, 11 Pet. 537, (decided in 1837) says: “It is well settled by the decisions of this Court that a state law may be retrospective in character and may divest vested rights; and yet, not violate the Constitution of the United States, unless it impairs the obligation of a contract,” and he then cites and quotes from the cases in the Supreme Court which I have cited above.

Few state constitutions have prohibited the enactment of retrospective laws, eo nomme,—certainly not our own— and, therefore, state courts in considering them, whilst invariably expressing the opinion that a statute could “not retrospect so as to take away a vested civil right” have based their arguments upon the fundamental principles which underlie every well ordered civil government, rather than specific constitutional provisions.

It has been said, however, that “the judiciary of a state cannot declare a legislative act unconstitutional, unless it conflict expressly or by implication with some provision of the state or federal constitution,” and see 118 Ind. 426; and it should be noted that in addition to the protection offered by the older constitutional provisions, the rights of property are at present safeguarded by that clause of the Fourteenth Amendment to the Constitution of the United States, which reads, “Nor shall any state deprive any person of life, liberty or property without due process of law,” a clause which has already given rise to a whole library of interpretation.

A multitude of cases have arisen in which the different kinds of retrospective legislation have been defined and classified, and they have been similarly grouped and commented upon by all the conspicuous treatise writers on the subject.

These cases have been abundantly cited and ably reviewed by counsel for the complainant in his long and elaborate brief, and it is not open to question that the statutes under consideration clearly belong to a class of retrospective legislation, which has invariably received judicial approval.

As stated by Judge Cooley, “The chief restriction upon this class of cases is, that vested rights must not be disturbed; but in its application as a. shield of protection, the term ‘vested rights’ is not used in any narrow or technical sense, or as importing a power of legal control merely, but rather as implying a vested interest which it is right and equitable that the government should recognize and protect, and of which the individual could not be deprived arbitrarily without injustice.”

This proposition is a conservative statement of the rule of construction adopted by the whole line of American decisions upon the subject, and Judge Cooley has collected and reviewed them at length in pages 454-470 (and notes) of his authoritative treatise on Conshtuitonal Limitations.

It has already been shown by me, that at the utmost, a mere shadow of naked legal title, never asserted or claimed, was vested in the grantor in consequence of the failure of the Lobdell Car Wheel Company on the one hand to record its charter within the time prescribed by the Legislature, and on the other by the neglect of the complainant, the Diamond State Iron Company, to obtain the re-enactment of its charter for the space of twenty-one days after -it had lapsed by limitation of time. This being established, the legislative enactment by which in each case the interests of the owners and creditors of a great industrial corporation were saved from disaster by an act directing that a formality prescribed by statute be complied with nunc pro tune, is surely one of the least objectionable if not one of the most benificent forms which retrospective legislation could assume; and upon no principle ever sanctioned by American Courts could such statutes be held unconstitutional for the reason that they divested such a technical and barren claim of title as that urged by the respondent in this cause to be a “shield of protection.”

I have not deemed it necessary to review the numerous cases collected in the brief of counsel for the complainant in support of this proposition, not only because of the unanimity of the authorities upon this point—not a single case, contra, having been cited by the respondent’s counsel, nor any found by me after diligent research—but also because they have been so exhaustively reviewed by Judge Cooley, as I have stated above, especially in view of the fact that the two statutes under consideration are so far within the line of doubtful or questionable cases that no analysis or discrimination of them is required at my hands.

Having been thus led to the conclusion that whatever cloud may have rested on complainant’s title to the land in dispute, by reason of the irregularities set forth in the answer, and quoted above, it nevertheless has been entirely removed by the two remedial statutes which the Legislature had the power to enact, and therefore, there appearing to be no other objection to the enforcement of the contract, I am constrained to grant the relief prayed for in the bill and direct a decree to be entered requiring the respondent to specifically perform his contract for the purchase of the real estate described.

Let a decree be entered accordingly.