19 Del. Ch. 368 | New York Court of Chancery | 1933
The order for constructive service entered in this cause was based on Section 3850, Section 7, of the Revised Code of 1915, as amended by .the Act of April 29, 1929, 36 Del. Laws, c. 268. The Section in its amended form is as follows:
“3850. Sec. 7. Orders for Appearance; Upon Failure of Service and Affidavit; Publication of; Upon Default; Decree Pro Confesso; Enforcement by Seizure or Delivery of Property Demanded ; Payment Upon Security for Restitution ; Proceedings if Security Not Given; Foreign Attachment:—If, after subpoena or other process issued, any defendant therein named shall not appear in obedience to said process and according to the rules of the Court, the Court may, on affidavit that such defendant is out of the State, or*373 cannot be found to be served with process and that there is just ground to believe that he intentionally avoids such service, make an order for his appearance on a certain day and publish such order as the Chancellor shall direct not less than once a week for three consecutive weeks. And if the defendant shall not appear, after such publication, according to such order, the Court may order the plaintiff’s bill to be taken pro confessa, and may thereupon issue process to . compel the performance either by seizifre of the real and personal property of such defendant or part thereof, sufficient to satisfy the plaintiff’s demand, or by causing possession of the estate, or effects, demanded by the bill, to be delivered to the plaintiff, or otherwise, as the case requires. And the Court may also order the plaintiff to be paid his demand out of any property so seized, upon his giving approved security, in a sufficient sum, to abide any order of the Court for the restitution thereof upon the defendant’s appearing to defend the suit, and paying such costs as the Court shall order. If such security be not given, the property seized,' or whereof possession shall be decreed to be delivered, shall remain under the direction of the Court in the hands of a receiver or otherwise, until the defendant’s appearance, or until such order shall - be made therein as the Court shall think just.
“If it shall appear in the bill of complaint that the defendant or any one or more of the defendants is a non-resident of the State of Delaware, it shall be lawful for the Chancellor to make an order directing such non-resident defendant or defendants to appear by a day certain to be designated. Such order shall be served on such non-resident defendant or defendants by mail or otherwise, if practicable, and shall be published in such manner as the Chancellor may direct, not less than once a week for three consecutive weeks. The Chancellor shall have power to compel the appearance of the defendant by the seizure of all or any part of his property, which property may be sold under the order of the Chancellor to pay the demand of the complainant, if the defendant shall not appear, or shall otherwise default. Such property shall remain subject to said seizure and may be sold to satisfy any decree made in the cause, unless security sufficient to the Chancellor shall be given to secure the release thereof. The Chancellor shall have power to make all necessary rules respecting the form of process, the manner of issuance and return thereof, the release of such property from seizure and for the sale of the property so seized, and may require the plaintiff to give approved security to abide any order of the Chancellor respecting the said property. Any transfer or assignment of the property so seized as aforesaid after the seizure thereof shall be void and „ after the sale of said property is made and confirmed, the purchaser*374 shall be entitled to and have all the right, title and interest of the defendant in and to the property so seized and sold and such sale and confirmation shall transfer to the said purchaser all the right, title and interest of the defendant in and to said property as fully as if the defendant had transferred the same to the purchaser in accordance with Law.”
The bill, as shown in the statement of facts, has a dual aspect. It aims first to annul the voting trust arrangement, and second to establish, through an accounting, a personal liability of certain of the defendants for the damage done to the Pennroad Corporation by their alleged wrongful and fraudulent behavior. The non-resident defendants, Morris, Potts and Wayne, Jr., “as Voting Trustees under Voting Trust Agreement dated May 1, 1929, in respect of The Pennroad Corporation, a corporation of the State of Delaware” are by that name and style made parties to the bill. The same persons, however, are also made parties in their individual capacities.
The attempted service upon them by publication in obedience to the order in that behalf was made upon them in their status as trustees. The order was particularly confined in that respect and the publication which ensued called upon them to appear only “as Voting Trustees, etc.,” as above set out.
1. The moving defendants, in the first ground they advance in support of the vacation of the order and the quashing of the alleged constructive service, proceed on the assumption that if they appear generally as trustees in defense of that branch of the bill which seeks to strike down the voting trust, such general appearance will operate to draw them before the court in their individual capacities and thus subject them to a liability under that branch of the bill which seeks to require them personally to account to the Pennroad Corporation for the alleged frauds which they are charged with having shared in perpetrating upon it. There is no power in the court, say the moving defend
The moving defendants, then, assuming that if they appear “as trustees, etc.,” in defense of the first aspect or phase of the case they will by their act of appearing in that role be appearing also as individuals in response to the second phase of the case and thereby subject themselves to the jurisdiction of the court over them in respect of a ground of complaint involving “many millions” of personal liability—a jurisdiction over them which the court is utterly powerless to exert because neither have they been personally served with process nor has any of their property been seized against which a liability to respond to a decree can be enforced—take the position that the court should not proceed to an adjudication of the question of whether the trust under which they are acting should be annulled without affording them an opportunity to be heard in its support and exact of them, as a price for being heard in their official capacities, a submission of themselves as individuals to the jurisdiction of the court over them in a distinct controversy in which many millions of liability is asserted against them. They cite Zimmerman v. Barnes, 56 Kan. 419, 43 P. 764, in support of their position, in this regard, and the complainants cite Bede Steam Shipping Co. v. New York Trust Co., (D. C.) 54 F. (2d) 658, contra.
The contention, however, does not appeal to me as tenable. I say this for the reason that the assumption upon which it proceeds is an erroneous one. I do not think it is true that if the non-resident defendants appear in their official roles as trustees, in which capacity they are sued and are eo nomine notified by the publication to appear, they can in any sense be held to have appeared as individuals. The case is entirely different from Zimmerman v. Barnes, supra. In that case the defendant was such in only one capacity—his individual capacity. Whether, therefore, the rule of the Kansas case is a sound one, as is contended by the defendants, is a question which the facts of this case do not call upon me to say. I have no hesitancy in declaring that if the non-resident trustees should appear simply “as trustees, etc.,” their act in so appearing should not result in their being treated as present before the court in their individual capacities and that no accounting relief should be afforded against them as individuals.
If a complainant chooses to tie up in the same bill two grounds of complaint against a non-resident, one against him in his official capacity and another one against him in his individual capacity, it seems to me to be out of all reason to say that if the defendant appears to defend his office in response to notice by the court to do so, it is right and just to say to him—“you cannot appear in your official capacity as noticed to do in defense of one of the grounds of complaint unless you at the same time appear also in your individual capacity in response to the ground of complaint asserted against you personally.” If it were not so, in such a case as this we would have the result in all likelihood that a trust which is sought to be destroyed would be deprived of the aid which its trustees could afford, and
The observations hereinbefore stated must of course be read in the light of the nature of the case which evokes them. The principle of Allen, et al., v. Leach, 7 Del. Ch. 232, 44 A. 800, where it was determined that a decree, in form de bonis testoris, rendered against an administrator, could be enforced against him in his individual capacity upon a showing that a devastavit had been committed, has no application here. In a case of that sort the administrator is liable in his individual capacity to pay the sum decreed to be paid by him in his official capacity if he has allowed the estate committed to his care to suffer a devastavit. The opinión of the Chancellor shows the grounds upon which he based his conclusions to have been that the' defendant in his official capacity had had every opportunity to contest the primary fact of liability charged in the bill calling upon him to account, and that to require a separate bill to be filed against him simply for the purpose of establishing the dissipation of the assets, upon which his personal liability is based, would be to indulge in a useless circuity of actions.
In this case, however, the trustees as such are called upon by the bill simply to appear and defend the lawful existence of the trust. That issue involves in no sense an examination of the question of whether the individuals who happened to have acted as trustees were guilty of such acts as, if done, would subject them to a personal liability for money.
It would be a great injustice to the non-resident trus
I shall regard the pending' motion, therefore, on the theory that the case is one where the only relief sought by the bill, so far as the moving defendants are presently concerned, is a decree declaring the trust to be void.
So regarding it, I proceed to examine the other grounds put forward by the trustees in support of their motion. The first ground advanced by them is not accepted.
2. It is urged that constructive service upon nonresidents is ineffective without a preliminary seizure of property within the state belonging to such non-residents. As a general proposition this contention, with a slight modification not necessary to mention, may be accepted as sound if it is to be confined to suits in personam. I took occasion in Cantor v. Sachs, et al., supra, to deal somewhat at length with that proposition.
But it has never been held that a court is powerless to bring non-residents before it by constructive service unattended by seizure, if the suit is one wherein the relief sought
The bill here seeks a decree that certain property, viz., shares of stock in a Delaware corporation, is not subject to a voting trust, and that its legal title be decreed to the present holders of the voting trust certificates. The property in question has its situs in this State. Section 72 of the General Corporation Law (Rev. Code 1915, § 1986) under which the property was created so declares and this court has so held. Bouree v. Trust Francais, etc., 14 Del. Ch. 332, 127 A. 56; Wightman v. San Francisco Bay Toll-Bridge Co., 16 Del. Ch. 200, 142 A. 783; Nye Odorless Incinerator Corp. v. Nye Odorless C. Co., 18 Del. Ch. 179, 156 A. 176. The case of Hunt v. Drug, Inc., 156 A. 384, decided by the Superior Court of this State is to the same effect. So far as the trustees are concerned, the suit simply seeks to determine the legal ownership and control of that property. That being so, seizure of it is unnecessary as a prerequisite to jurisdiction over the trustees. Service upon them by publication is sufficient. Indeed if there had been a seizure under the second paragraph of Section 3850 as amended, the nature of the suit against the trustees is such that the seizure would be ineffective as process. Wightman v. San
The defendants argue that, as the bill prays that the voting trustees be required to transfer the stock registered in their names to the complainants and others of the beneficial owners, the suit in that particular is strictly in personam, that the principles applicable in proceedings which are in rem or quasi in rem are hence not applicable, and therefore that a decree directed against the persons of the trustees to do the personal act of transferring the stock can have no effect if the non-resident persons have never been served personally with process. It is to be borne in mind, .however, that the bill prays for a decree declaring the trust to be annulled and the legal title to the stock, with all its voting incidents, to be conferred on the complainants and others who are similarly situated, free from the provisions of the trust agreement. This court is not without power, if the complainants should establish their conten
The proceeding in the phase of it now under discussion is essentially one which is quasi in rem, and when that is so, the powers of the court to effectuate its decree being as broad as I have just pointed out, there can be no valid objection to further proceeding with the cause if the service by notice and publication (unsupplemented by immediate seizure), which has been had, is not otherwise objectionable as a foundation for regarding the trustees as constructively present before the court. Amparo Mining Co. v. Fidelity Trust Co., 74 N. J. Eq. 197, 71 A. 605.
3. Under this head the defendants object that the published notice did not sufficiently • advise them of the nature of the suit and that therefore the substituted process is insufficient. The notice consisted of a full copy of the Chancellor’s order directing the absent trustees to appear on or before the day named therein and answer the bill which had been filed against them in this court by the complainants herein. The order will not be set out in full. It is sufficient to say that the notice contained equally as much information as does the usual subpoena which from ancient times has
It is further contended that the publication in the Morning News, a daily newspaper published in Wilmington, Delaware, was an insufficient publication because it cannot be expected that the defendants would be readers of that paper and would therefore receive the notice. No case has been cited to me nor am I acquainted with any which holds, that publication of notice to appear is insufficient if it appears only in newspapers of general circulation published in the domicile of the jurisdiction. The practice, I suspect, in the absence of statute, is well nigh universal to adopt publication of that type, and, if it be bad, it is surprising that no case is cited holding it to be so. In this case the defendants were ordered to be given additional notice by mail. This was in obedience to Rule 19 of this
4. It is next objected that Section 3850 of the Code as amended does not apply to suits against non-residents, except where a money decree is sought and there has been some sort of seizure of their property within the State. This objection is untenable. In Wightman v. San Francisco Bay Toll-Bridge Co., 16 Del. Ch. 200, 142 A. 783, it was expressly held that the second paragraph of Section 3850 of the Code as it then stood (35 Del. Laws, c. 217) applied to suits against non-residents only in cases where a money decree was sought; but that the first paragraph of the section was applicable in suits against non-residents where a decree was sought, not for money payment, but settling the title to personal property. That case answers the present contention, unless some change has been made in the statutory law since it was decided. It is argued that such a change has been made. The change consists in this, that Section 3856 of the Code was in effect when the Wight-man Case was decided but has since been repealed. 36 Del. Laws, c. 268, § 2. Now in the Wightman Case it was said that the first paragraph of Section 3850 when read in connection with Section 3856 was plainly applicable in suits against non-residents where title to property located in the jurisdiction is sought to be adjudicated. Since Section 3856 is now repealed, the defendants argue, it must follow that Section 3850 can no longer have the application which it was said to have when read in the light of the repealed section. The argument proceeds upon the erroneous assumption that the vitality of Section 3850 as applied to such cases as this one and as the Wightman Case was bor
5. Finally it is objected that the affidavit on which the order of publication was based is defective in that it avers that the trustees “reside outside of the State of Delaware,” stating their residence upon information and belief to be in Pennsylvania, whereas the statute (first part of Section 3850) requires the affidavit to show that the defendant is “out of the State.”
The case of Baker v. Baker, Eccles & Co., 162 Ky. 683, 173 S. W. 109, L. R. A. 1917(7, 171, is cited in support of this contention and said by the solicitor for the defendants to be impossible of differentiation from the case sub judice upon the point in support of which it is cited. I cannot agree with that statement. I think the cited case is clearly distinguishable. It is so for the reason that the Kentucky statute (Civ. Code Prac., § 57) there under examination required that the affidavit should show not only that the defendant is a non-resident of Kentucky but further that he is “believed to be absent therefrom.” The affidavit which was filed in that case stopped at averring that the
Such is not the question here. The question here is one of interpretation of the meaning of the statute’s language, viz., the question of whether the legislative expression “out of the State” can be taken to embrace residence in another State. That is the sort of question which was before the court in Foster v. Givens, et al., 67 F. 684, 693, decided in the Circuit Court of Appeals, Sixth Circuit, by Judges Taft, Lurton and Severns. In that case the statute required that the affidavit should show that the defendant was “out of this commonwealth,” and in that respect the statute was in substance identical with ours. The affidavit in the cited case assumed to meet the statute by stating that the defendants were “not inhabitants of this commonwealth.” Here the affidavit undertakes to meet the statute by stating that the defendants “reside outside of the State.” This averment may be taken to be substantially the same as that found in the cited case, when it is considered that Judge Lurton in speaking for the court stated that the word “inhabitant” refers primarily to one’s abode or residence,
It is quite true that statutes of the sort here involved must be strictly followed. Cantor v. Sachs, et al., 18 Del. Ch. 359, 162 A. 73. But this rule does not forbid interpretation.' The rule is applied only after interpretation discovers the statute’s meaning; and while the principle of construction in such cases is the one of strictness, the strictness nevertheless should be neither strained nor hypercritical.
The motion will be overruled. Order accordingly.