Bush v. Hillman Land Co.

• Decision Date: 21 June 1938
• Citation: 2 A.2d 133,22 Del.Ch. 374
• Parties: HENRY T. BUSH and C. RAY PHILLIPS, Receivers of Missouri-Kansas Pipe Line Company, and MISSOURI-KANSAS PIPE LINE COMPANY, v. HILLMAN LAND COMPANY, JOHN H. HILLMAN, JR., and HENRY T. BUSH and C. RAY PHILLIPS, as Receivers of Frank P. Parish & Co
• Court: Court of Chancery of Delaware

2 A.2d 133

22 Del.Ch. 374

HENRY T. BUSH and C. RAY PHILLIPS, Receivers of Missouri-Kansas Pipe Line Company, and MISSOURI-KANSAS PIPE LINE COMPANY, v. HILLMAN LAND COMPANY, JOHN H. HILLMAN, JR., and HENRY T. BUSH and C. RAY PHILLIPS, as Receivers of Frank P. Parish & Co

Court of Chancery of Delaware, New Castle

June 21, 1938

BILL FOR CANCELLATION of twenty-five thousand shares of the capital stock of Missouri-Kansas Pipe Line Company, issued to John H. Hillman, Jr., and by him transferred to Hillman Land Company, in whose name the shares are now registered.

The defendants, receivers of Frank P. Parish & Co., have answered the bill.

The defendants, Hillman Land Company and John H. Hillman Jr. have demurred.

Heard on the demurrer.

Demurrer sustained.

Arthur G. Logan, of the firm of Marvel, Morford, Ward & Logan, for complainants.

Caleb S. Layton, of the firm of Richards, Layton & Finger, for demurrants.

OPINION

THE CHANCELLOR:

The bill charges that the shares sought to be cancelled were issued by the company under circumstances which make their issuance and their continuance as outstanding shares unauthorized, illegal and void. Wherefore the bill seeks a decree declaring the shares and the certificates evidencing them to have been illegally issued, requiring the shares and certificates to be surrendered for cancellation and that the court formally cancel the same. The bill charges the present holder with notice.

The alleged wrongful issue of the stock occurred in February, 1931. The bill was filed on April 15, 1937.

The first ground of demurrer which is presented is that the suit is barred by the statute of limitations. There is no statute of limitations in this State applicable to causes in equity. Our statute is applicable only to actions at law. But the Court of Chancery in administering its equity jurisdiction will in proper cases apply the statute of limitations as a bar, notwithstanding the statute is in terms applicable to law actions only. It is contended that the instant case is a proper one for the application of the statute. If so, then the suit is undoubtedly barred, for the alleged unlawful issuance of the stock occurred six years before the bill was filed, and the applicable statutory period is three years.

The question, therefore, is whether the case is a proper one for the application of the statute of limitations governing actions at law. In 1845 the old Court of Errors and Appeals of this State in the case of Perkins v. Cartmell's Adm'r., 4 Har. 270, 42 Am. Dec. 753, stated the following to be the law:

"Hence it is an established rule, that where the statute bars the legal remedy, it shall bar the equitable remedy in analogous cases, or in reference to the same subject matter, and where the legal and equitable claims so far correspond, that the only difference is, that the one remedy may be enforced in a court of law, and the other in a court of equity."

The demurrants treat this case as one falling within the field of the concurrent jurisdiction of law and equity, and, so treating it, make the point that the complainants by choosing equity rather than law as the forum should not be permitted to escape the bar, which the statute would impose had they brought their suit at law.

Is the case one falling within the concurrent jurisdiction? Professor Pomeroy has devoted a chapter of his treatise on Equity Jurisprudence to a discussion of the concurrent jurisdiction. It is found at Section 173, et seq., in the first volume of the fourth edition of his work. A case he says is within the concurrent jurisdiction when "the remedies administered under a given state of circumstances, by equity and by the law, are substantially the same--recoveries of money, or of specific tracts of land, or of specific chattels." (Section 173.) Again he says: "the remedy--that is, the substantial relief obtained by the decree--must be of the same general nature as that which would be obtained by means of an action at law under like circumstances." (Section 174.)

The cases in our own State are illustrative. For instance in Perkins v. Cartmell's Adm'r., supra, the bill was against a devisee subject to a legacy for an account and payment of the legacy. The court held that as no action at law would lie for the legacy, equity would refuse to apply the legal bar of the statute of limitations. On the other hand, in Dodd, Adm'r., v. Wilson, 4 Del.Ch. 399, as the relief sought was for the payment of money, the Chancellor held that as there was an ample remedy at law to secure the same relief, the bar of the statute of limitations was effectively interposed. A case of the same type was Gootee, et al. v. Riggin, et al., 12 Del.Ch. 91, 107 A. 452; and the principle of these two cases is recognized in Haas v. Sinaloa Exploration and Development Co., 17 Del.Ch. 253, 152 A. 216. In Cochran v. F. H. Smith Co., 20 Del.Ch. 159, 174 A. 119, where an adequate legal remedy existed to accomplish the same identical relief as was sought to be accomplished by means of an accounting in equity, the bar of the statute of limitations was allowed as fully as it would have been at law.

Now the question arises in the instant case--what remedy is there at law to achieve the result which the complainants seek by their bill to accomplish? Here the thing which is sought is the undoing of a transaction which, it is charged, was entirely without lawful authorization, viz., the issuance of twenty-five thousand shares of corporate stock. It is sought to secure this relief by a decree of cancellation directed against the shares of stock and a surrender for cancellation of the certificates purporting to be evidence of the stock's outstanding existence. There is no remedy known to the legal tribunals by which that result can be accomplished.

It may well be true, as the demurrants contend, that if the stock was issued without consideration, it was not void but only avoidable, and that it was accordingly permissible for the corporation to pursue the remedies provided in the General Corporation Law to enforce payment thereon for the benefit of creditors (Cooney Co. v. Arlington Hotel Co., 11 Del.Ch. 430, 106 A. 39, 7 A. L. R. 955; Finch, et al., v. Warrior Cement Corp., et al., 16 Del.Ch. 44, 61, 141 A. 54, 62); or it may be conceded arguendo without deciding, that assumpsit or trover would lie for the value of the stock. Even so, such remedies as those are in affirmance of the stock as outstanding stock. The corporation has the right to insist, however, that the stock shall be stripped of its character of issued and outstanding stock. Sohland v. Baker, 15 Del.Ch. 431, 141 A. 277, 58 A. L. R. 693; Blair v. F. H. Smith Co., et al., 18 Del.Ch. 150, 156 A. 207. The law forum has no remedy whereby that result can be obtained. This suit is one where the non-existence of alleged stock is sought to be decreed and all appearance of its pretended existence obliterated. The fundamental concept lying at its foundation is equitable in nature and not within the scope of the law's notice. The remedies at law suggested by the demurrants which necessarily affirm the stock to be irrevocably outstanding and which seek to recover all or part of the consideration therefor, are inharmonious with this concept and therefore inapplicable to its assertion.

The demurrants, however, insist that the legal remedy of replevin is available to accomplish the very same relief which is sought by the bill in this case, viz., the specific recovery of the stock. Indeed this is the remedy at law which they stress rather than the other ones heretofore mentioned which look only to judgments for money as the ultimate outcome. But to maintain an action of replevin, there must be a preliminary seizure by the Sheriff of the chattels, the possession of which the action seeks to recover. Such is the effect of Frick, Adm'r., v. Miller, 30 Del. 366, 7 Boyce 366, 107 A. 391, where it was held that because certain articles of jewelry which were described in the writ were not taken by the sheriff, the jury was not permitted to consider those articles in rendering its verdict. Furthermore replevin being a possessory action, its ultimate object primarily is the securing a judgment pro retormo habendo, which presupposes a preliminary seizure and final delivery of possession to the plaintiff in an actual manual sense.

Now since shares of stock in a corporation are intangible property incapable of manual seizure and delivery (Woods v. Spoturno , decided by the Supreme Court of Delaware, 7 W. W. Harr. 295, 183 A. 319, 323; Fowler v. Dickson, 24 Del. 113, 1 Boyce 113, 74 A. 601), it must follow that the preliminary seizure which the writ contemplates and the ultimate delivery of possession which it is the primary object of the replevin ultimately to accomplish, are impossible of attainment. Therefore replevin does not lie for shares of stock. It has been so held in California where replevin appears to go by the name of an action for claim and delivery. Bell v. Bank of California, 153 Cal. 234, 94 P. 889; Ashton v. Heydenfeldt; 124 Cal. 14, 56 P. 624; Winterburn v. Sheriff, 61 Cal.App. 531, 215 P. 406. There is no statute in this State providing a substitute for the actual seizure and ultimate delivery which are necessary to sustain and make effective an action of replevin at law.

The same reason which makes the action of replevin unavailable as a legal proceeding to seize and cause the delivery of stock viz., the non-seizability of the shares and their incapacity to be manually delivered, operates likewise to render the action of detinue, which is a possessory action, unavailable for the recovery of shares of stock. Small v. Wilson, 20 Ga.App. 674, 93 S.E. 518. On the authority of cases cited in...