Blumenthal v. Blumenthal

• Decision Date: 29 January 1944
• Citation: 35 A.2d 831,28 Del.Ch. 1
• Court: Court of Chancery of Delaware
• Parties: MARGARET FEARS BLUMENTHAL, v. ALFRED C. BLUMENTHAL, MIRIAM ROGERS and POLI-NEW ENGLAND THEATRES, INC., a corporation of the State of Delaware

35 A.2d 831

28 Del.Ch. 1

MARGARET FEARS BLUMENTHAL, v. ALFRED C. BLUMENTHAL, MIRIAM ROGERS and POLI-NEW ENGLAND THEATRES, INC., a corporation of the State of Delaware

Court of Chancery of the State of Delaware, New Castle

January 29, 1944

Aaron Finger, of the firm of Richards, Layton &amp Finger, for complainant.

John J. Morris, Jr., and W. Reese Hitchens, of the firm of Hering, Morris, James & Hitchens, (Stillman &amp Stillman, of New York City, of counsel), for Alfred C Blumenthal and Miriam Rogers.

OPINION

BILL TO SET ASIDE THE ASSIGNMENT of certain shares of stock in a Delaware corporation, and other property, by Alfred C. Blumenthal, without any fair consideration being paid therefor, for the alleged fraudulent purpose of hindering and delaying the complainant in the collection of certain debts due her from Blumenthal; and also seeking to subject that property to the payment of such debts.

The bill alleged, in substance, that on June 20th, 1934, Alfred C. Blumenthal, one of the defendant, entered into a separation agreement with Margaret Fears Blumenthal, his wife, the complainant, in which he agreed to pay her certain sums of money from time to time for her support; that shortly after the execution of that agreement, Blumenthal failed to make the payments therein provided for; that the complainant subsequently brought suit in the Supreme Court in the County of New York, in the State of New York, for the recovery of the sum then due her under that agreement, and on January 9th, 1939, recovered judgment against Blumenthal in that proceeding for $44,801.81; that no part of that judgment and the interest due thereon from January 9th, 1939, has been paid the complainant; that Blumenthal was also indebted to the said complainant in the aggregate sum of $180,000 with interest thereon, for other and subsequent sums due and unpaid under the said separation agreement; that on or about October 22nd, 1937, Blumenthal assigned and transferred to Miriam Rogers, one of the defendants, twenty-five shares of the common capital stock of Poli-New England Theatres, Inc., a corporation of the State of Delaware, which said shares represented 25% of the outstanding common capital stock of that corporation; that Blumenthal also assigned and transferred to the said Miriam Rogers certain notes and other receivables due him from the said Poli-New England Theatres, Inc., the exact amount and character of which were unknown to the complainant; that the said Miriam Rogers was a sister of Blumenthal, and the said assignments and transfers to her were without fair consideration, rendered Blumenthal insolvent, and were made for the purpose of defrauding the complainant and hindering and delaying her in the collection of the indebtedness due her.

The bill further alleged that Alfred C. Blumenthal was the real equitable owner of the corporate stock and other property so transferred to the said Miriam Rogers. A copy of the separation agreement was attached to the bill.

The complainant prayed:

(1) That the court take jurisdiction of the case in the manner prescribed by Section 4374 of the Revised Code of the State of Delaware 1935, and particularly under the provisions of the second paragraph thereof;

(2) That an order be made for the issuance of a subpoena for each of the defendants, and that it direct the individual defendants to appear by a day certain, to be designated in said order; and it appearing that they were nonresidents of this State, that such order be served on them by mail, or otherwise, and be published in such manner as the Chancellor might direct, but not less than once a week for three successive weeks;

(3) That the appearance of the individual defendants be compelled by making an order for the seizure of their property, which had its situs within the State of Delaware, and that the property so seized be sold under order of the Chancellor to pay the complainant's demand, if the individual defendants should not appear, or should otherwise default;

(4) That the assignments and transfers from Alfred C. Blumenthal to Miriam Rogers be decreed to be fraudulent as to the complainant, and be set aside;

(5) That the Chancellor decree that Blumenthal was the real equitable owner of the shares of stock, and notes and other receivables, which were transferred by him to Miriam Rogers, as set forth in the bill; and that the complainant was entitled to have such shares of stock, notes and receivables subjected to the payment of the indebtedness of the defendant, Blumenthal, to the complainant; and decree that Miriam Rogers had no right, title or interest therein, or to any part thereof;

(6) That the Chancellor ascertain and determine the amount of the indebtedness from the defendant, Blumenthal, to the complainant, and decree the payment thereof from Blumenthal to the complainant, and also subject the property referred to in the bill to the payment of the indebtedness so ascertained and determined, and make such order of sale of the shares of stock, notes and other receivables herein prayed to be seized, as the Chancellor should think proper, in order to effect payment of the complainant's demand.

Other prayers ancillary to the relief sought were also attached to the bill.

Pursuant to the prayer of the bill, on June 9th, 1943, the Chancellor entered an order reciting that it appeared that Blumenthal was the "equitable owner" of twenty-five shares of common stock of Poli-New England Theatres, Inc., and that the defendant, Rogers, held the legal title thereto. In the same order, the Chancellor appointed a sequestrator for the twenty-five shares of stock, and directed him: (1) to seize "the said property of the individual defendants"; (2) to mail a certified copy of the subpoena and a certified copy of the order of June 9th, 1943, to each of the individual defendants; and (3) to publish the order in a newspaper, published in the City of Wilmington.

On June 20th, 1943, the sequestrator filed his report, showing that he had found no stock of the Poli-New England Theatres, Inc., outstanding in the name of Blumenthal, but that he had found twenty-five shares of such stock to be registered and outstanding in the name of the defendant, Miriam Rogers; and that, pursuant to his order of appointment, he had notified Poli-New England Theatres, Inc., not to transfer any of the stock until further order of the Chancellor. By virtue of the sequestration order, the sequestrator seized the property of the "individual defendants, Alfred C. Blumenthal and Miriam Rogers, which has its situs within the State of Delaware, and which is identified and described in said Bill of Complaint, and accompanying sworn statement of the complainant, consisting of twenty-five (25) shares of the common capital stock of Poli-New England Theatres, Inc., a corporation of the State of Delaware, together with all the rights and interests of said individual defendants, Alfred C. Blumenthal and Miriam Rogers, thereto belonging."

The complainant was a resident of the State of New York.

Alfred C. Blumenthal, one of the defendants, was formerly a resident of that State, but resided in the City of Mexico, in the Republic of Mexico, when the bill was filed. He was permitted to appear specially, and moved to vacate the the Chancellor's order of June 9th, 1943, in so far as it directed him to appear in this case; he also moved to dismiss the bill as to him, because of the alleged lack of legal service.

Miriam Rogers, the other individual defendant, was a resident of the State of Massachusetts. She entered a general appearance, and also moved to vacate the order of June 9th, 1943, in so far as it directed the seizure of the stock of Poli-New England Theatres, Inc. standing in her name, as substituted service of process upon her; and also moved that the bill be dismissed as to her.

The case was heard on these motions.

Miriam Rogers also demurred to the complainant's bill, alleging (1) That since this court was without jurisdiction over the defendant, Alfred C. Blumenthal, and since he was a necessary party, no relief could be given against her; and (2) that the bill did not state sufficient facts to entitle the complainant to any equitable relief against her.

Other facts will appear in the opinion of the court.

HARRINGTON, Chancellor: The complainant seeks to set aside an alleged fraudulent transfer of certain shares of stock in a Delaware corporation by Alfred C. Blumenthal, and to subject them to the payment of debts, alleged to be due her from Blumenthal. She alleges that the transfer was without any fair consideration, made Blumenthal insolvent, and was for the purpose of hindering and delaying her in the collection of his indebtedness; and that in equity he is the real owner thereof.

In contemplation of law, the situs of stock issued by a Delaware corporation is in this State; Section 73 of the General Corporation Laws, Rev. Code, 1935, § 2105, so provides. See Skinner v. Educational Pictures, etc., Corp., 14 Del.Ch. 417, 129 A. 857; Wightman v. San Francisco Bay Toll Bridge Co., 16 Del.Ch. 200, 142 A. 783.

The complainant's bill is, therefore, in the nature of an equitable execution, for the seizure of property located here (Provident Trust Co. v. Banks, 24 Del.Ch. 254, 9 A.2d 260; Bouv. Law Dict., Rawle's 3rd Revision, 726) and, as an incident to the relief sought, she seeks to set aside the alleged fraudulent transfer and obstruction to the collection of the debts due her. 4 Pom.Eq.Jr., (5th Ed.) § 1415; 5 Pom.Eq.Jur., (2d Ed.) § 2310. The jurisdiction of equity to entertain suits in aid of creditors in such cases, had its origin in the narrowness of the common law remedies by writs of execution. 4 Pom.Eq.Jur., (5th Ed.) § 1415; 5 Pom.Eq.Jur., (2d Ed.) §...