Drug, Inc. v. Hunt

Decision Date02 March 1933
Citation35 Del. 339,168 A. 87
PartiesDRUG, INCORPORATED, a corporation of the State of Delaware, Defendant Below, Plaintiff in Error, v. GRAHAM P. HUNT, Receiver, appointed by the Court of Common Pleas of Hamilton County, Ohio, for the partnership consisting of J. Nevin Roberts and Walker P. Hall, trading under the firm name of Roberts & Hall, Plaintiff Below, Defendant in Error
CourtSupreme Court of Delaware

NOTE.--There was a motion for a re-hearing in this case, but after due consideration, on October 3, 1933, it was denied by the Court.

Supreme Court, No. 4, June Term, 1932; Writ of Error to Superior Court for New Castle County.

The action in the court below was in trover for the conversion of 200 shares of the common stock of Household Products, Inc.

In addition to alleging that Roberts & Hall, for whom Hunt was receiver, had purchased the stock in question from Dean Onativia & Company and had possession of the stock certificates, with the assignments thereon duly endorsed in blank by that company, and the other formal allegations usually appearing in a declaration in trover, the plaintiff's declaration alleged: "That the assets and property of said Household Products, Inc., subsequent to the date of the issuance of said stock certificate and subsequent to the conversion aforesaid, the exact time not being known to the plaintiff, were acquired by Drug Incorporated, a corporation of the State of Delaware, the defendant above named, and said defendant thereupon assumed all liabilities of said Household Products, Inc., including the liabilities and obligations incident to the issuance of said certificate by Household Products, Inc., and including, also, the liabilities and obligations growing out of said conversion by said Household Products, Inc., of said 200 shares of stock."

The declaration, also, alleged that Graham P. Hunt, the plaintiff in the court below, had been appointed Receiver by the Common Pleas Court of Hamilton County, Ohio, for the partnership firm of J. Nevin Roberts and Walker P. Hall, and had duly qualified as such; and that upon his appointment and qualification Hunt "became the owner," as such Receiver, of all the rights of said J. Nevin Roberts and Walker P. Hall, constituting said firm of Roberts & Hall, in and to and respect of said 200 shares of stock of said Household Products, Inc., and of all their rights in respect to and growing out of said conversion of said 200 shares of stock by said Household Products, Inc.

It further alleged that the Ohio statute (Gen. Code Ohio, § 11897) provided that "Under the control of the court, the receiver may bring and defend actions in his own name, as receiver, take and keep possession of the property, receive rents, collect, compound for, and compromise demands, make transfers, and generally do such acts respecting the property as the court authorizes"; and that by reason of this statute Hunt, as Receiver, had the power "to bring this suit in his own name" and was, in fact, expressly authorized to bring it by the Ohio Court on or about February 11, 1931.

The defendant pleaded not guilty, release, statute of limitations and three special pleas, which it is unnecessary to set out.

The evidence produced in the court below was not included in the printed record before this Court but it was claimed by the plaintiff below and not denied by the defendant below, the plaintiff in error, that there was evidence before that Court from which the jury, by finding a verdict for the plaintiff, must have found:

1. That in 1924, Dean, Onativia & Company, New York stock brokers, and members of the New York Stock Exchange, had held and owned certificates made out in their partnership name, for 200 shares of the common stock of Household Products, Inc., a Delaware corporation; that on the twenty-first day of December of that year the usual printed assignment and transfer blanks, appearing on the backs of these stock certificates, were signed in blank by Dean, Onativia & Company, and the signatures of that company were duly witnessed, so that such certificates being so signed by a firm having a membership in the New York Stock Exchange became what are usually known as "street certificates"; that such certificates for 200 shares of the common stock of Household Products, Inc., were then delivered by Dean, Onativia & Company to Roberts & Hall, a stock brokerage partnership doing business in Cincinnati, Ohio, and that such delivery was made in payment of a debt then due that firm from Dean, Onativia & Company.

2. That on January 16, 1929, one Joseph Rosenbaum purporting to act as the liquidating partner of the firm of Dean, Onativia & Company, filed with Household Products, Inc., a statement under oath in which he, among other things, in substance, stated that there were outstanding in the name of Dean, Onativia & Company certificates for 200 shares of the common stock of Household Products, Inc., but that such certificates had "either been lost, mislaid, stolen or destroyed" some time since November, 1924; that the "loss" of such certificates was not discovered until the middle of the year 1928 when notices of the corporation were brought to his attention; that to the best of his knowledge and belief Dean, Onativia & Company had not disposed of said shares of stock or the certificates therefor, and that no person, firm or corporation, other than Rosenbaum Grain Corporation, then had any interest therein.

The affidavit of Rosenbaum, in question, also set forth in detail that an involuntary petition in bankruptcy had been filed against the firm of Dean, Onativia & Company in August, of 1927, but they had made a composition agreement with their creditors, which had been approved by the United States District Court, whereby Rosenbaum Grain Corporation became entitled to the 200 shares of the common stock of Household Products, Inc., in question.

At the same time that Rosenbaum filed this affidavit with Household Products, Inc., he, also, filed what purported to be an assignment of the said 200 shares of stock of Dean, Onativia & Company to Rosenbaum Grain Corporation, and requested that a new certificate therefor be issued to that corporation.

On October 2, 1929, pursuant to the above mentioned affidavit of Rosenbaum, and the purported assignment by Dean, Onativia & Company to Rosenbaum Grain Corporation, hereinabove referred to, Household Products, Inc., issued and delivered a certificate for 200 shares of its common stock to Rosenbaum Grain Corporation; said stock having been issued and delivered in place of the stock originally issued to Dean, Onativia & Company and, as we have already stated, the original certificates for which, duly endorsed for transfer, were then in the possession of Roberts & Hall.

3. That on February 14, 1930, Household Products, Inc., entered into a written agreement, under seal, with Drug, Incorporated, which was therein termed a "reorganization" agreement. In the preliminary part of this agreement it was stated that "Drug desires to acquire and Household desires to sell to Drug, all of the assets, property, business and good will of Household in consideration of,

"1. The issue and delivery to Household of a number of shares of the capital stock of Drug, as hereinafter provided.

"2. The assumption by Drug of all the liabilities and obligations of Household, as hereinafter set forth, and to provide for the distribution to stockholders of Household of the shares so to be issued and delivered by Drug, all upon the terms and conditions and for the purpose of carrying out a reorganization within the meaning of the Revenue Act of 1928, pursuant to the plan of reorganization hereinafter set forth."

In consideration of the premises, etc., Household Products, Inc., then agreed "to sell, convey, transfer, assign and deliver to" Drug, Incorporated, and Drug, Incorporated, agreed "to purchase, accept and pay for," as thereinafter provided, "all of the assets, property, business and good will" of Household Products, Inc., "as a going concern."

The agreement then provided that the sale should be affected by such deeds, bills of sale, etc., as Drug, Incorporated, should reasonably request. "Delivery of all such instruments of transfer and conveyance shall be made to Drug, as against such delivery to, or upon the order of Household, of certificates for all full shares and script certificates for all fractional shares (such certificates for full shares to be issued in such names of the Household stockholders and in such denominations, and such script certificates to be of the description provided in Article 4, hereof, and to be issued for such number of fractional shares as Household shall request in writing to Drug -----). "

A subsequent clause of the agreement, also, provided that Drug, Incorporated, "As the purchase price for the assets" of Household Products, Inc., would deliver to that company, or upon its order, "certificates issued in such names, of such Household stockholders, and in such denominations as Household shall request for a number of full paid and non-assessable shares of the capital stock, without par value, of Drug."

This was followed by a provision for the delivery of fractional shares in the ratio of one share of Drug, Incorporated, for each 1 2/5 shares of Household Products, Inc.; and by a subsequent provision whereby Drug, Incorporated, agreed to "deliver an appropriate instrument, or instruments, in writing, satisfactory in form and content to Household, whereby Drug will assume the payment of all liabilities and obligations of Household and the performance of all unperformed or undischarged obligations on the part of Household to be performed."

Both corporations also agreed to submit this agreement to their stockholders...

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