Henis v. Compania Agricola de Guatemala, Civ. No. 1530.

• Decision Date: 22 October 1953
• Docket Number: Civ. No. 1530.
• Citation: 116 F. Supp. 223
• Parties: HENIS et al. v. COMPANIA AGRICOLA DE GUATEMALA et al.
• Court: U.S. District Court — District of Delaware

116 F. Supp. 223

HENIS et al. v. COMPANIA AGRICOLA DE GUATEMALA et al.

Civ. No. 1530.

United States District Court, D. Delaware.

April 30, 1953.

On Motion to Dismiss October 22, 1953.

Arthur G. Logan (Logan, Marvel & Boggs) and Stephen E. Hamilton, Jr., of Wilmington, Del., and Alexander Kahan, of New York City, for plaintiffs.

Caleb S. Layton, Wilmington, Del. (Richards, Layton & Finger, of Wilmington, Del., Inzer B. Wyatt and Edward M. Harris, Jr. (Sullivan & Cromwell), of New York City, for International Railways of Central America.

William S. Potter and James L. Latchum, Wilmington, Del. (Berl Potter & Anderson), of Wilmington, Del., Porter R. Chandler, New York City, and Edwin J. Jacob, Rego Park, N. Y., Davis, Polk, Wardwell, Sunderland & Kiendl, New York City, for Compania Agricola de Guatemala.

LEAHY, Chief Judge.

A mere reading of the affidavits reveals sharp issues of fact between the parties. The pleadings also suggest difficult questions of law are in dispute. The relief which plaintiffs, here, seek, calls for one of the extraordinary equitable remedies. It is established law of this District and Circuit that a preliminary injunction will not issue under such circumstances. Sneider v. Transcontinental & Western Air., D.C.Del., 79 F. Supp. 339, 341; Reynolds International Pen Co. v. Eversharp, D.C.Del., 63 F. Supp. 423, citing Warner Bros. Pictures v. Gittone, 3 Cir., 110 F.2d 292; Murray Hill Restaurant v. Thirteen Twenty One Locust, 3 Cir., 98 F.2d 578; Hand v. Missouri-Kansas Pipe Line Co., D.C.Del., 54 F.Supp. 649; Oneida Community v. Fouke Fur Co., D.C.Del., 286 F. 757; General Talking Pictures v. Stanley Co., D.C.Del., 42 F.2d 904; Popular Mechanics v. Fawcett, D.C.Del., 1 F.Supp. 292; United States v. Weirton Steel Co., D.C. Del., 7 F.Supp. 255. The party seeking a preliminary injunction must not only allege facts as to which there is no serious dispute but also indicate such facts must show that the moving party has a reasonable probability of success upon final hearing.

If any doubts are created by the paper record as to the merits of the claim for relief, the preliminary injunction will be denied. General Talking Pictures Corp. v. Stanley Co., D.C., 42 F.2d 904, 906; Porges v. Vadsco Sales Corp., 27 Del.Ch. 127, 135, 32 A.2d 148; Belle Isle Corp. v. MacBean, 29 Del.Ch. 261, 49 A.2d 5.

The threatened injury, if it can be compensated for by a monetary award, will not support the issuance of the court's injunctive process. The threatened damage must be irreparable. Hand v. Missouri-Kansas Pipe Line Co., supra.

And Now, April 30, 1953, plaintiffs' motion for preliminary injunction pendente lite having come on for argument, and counsel having been heard, it is

Ordered that said motion for preliminary injunction be and the same hereby is denied.

On Motion to Dismiss.

This is a derivative action on behalf of International Railways of Central America, a New Jersey corporation (referred to as "IRCA"), against that corporation and Compania Agricola de Guatemala, a Delaware corporation (referred to as "Agricola").

Agricola filed a motion, under Federal rule 12(b), 28 U.S.C., for an order of dismissal for failure to state a claim. The motion also asks, pursuant to Federal rule 23(b) and the corresponding New Jersey statute, N.J.S.A. 14:3-16, for dismissal because plaintiffs were not shareholders of IRCA at the time of the transactions complained of. In the alternative, defendant asks for an order staying the proceedings here until final determination of a pending action in the Supreme Court of New York, entitled Ripley v. International Railways of Central America and United Fruit Company, 196 Misc. 798, 95 N.Y.S.2d 202, Id., 276 App.Div. 1006, 95 N.Y.S.2d 871, on the ground the New York litigation involves the same subject matter as the case at bar. IRCA joins in the latter motion asking for a stay pending determination of the Ripley action. A motion of plaintiffs for preliminary injunction was denied.

The complaint charges a civil conspiracy against Agricola and United Fruit Company. It is alleged Agricola entered into a conspiracy with United in 1936 to injure IRCA, which conspiracy culminated in Agricola obtaining certain contracts with IRCA; and under those contracts Agricola obtained from IRCA certain secured notes and common stock of IRCA.¹ The relief prays not only for cancellation of the stock and notes but a monetary decree is also sought.

1. The motion to dismiss under Federal rule 12(b) is based on a defense of statute of limitations; such may be raised by a motion to dismiss.² The complaint was filed on March 30, 1953. The applicable Delaware statute of limitations, Title 10, Del.Code, 1953, § 8106, provides as follows: "* * * no action to recover damages caused by an injury unaccompanied with force or resulting indirectly from the act of the defendant shall be brought after the expiration of 3 years from the accruing of the cause of such action * * *." In Delaware, an action on the case must be brought within 3 years; and it is the rule in Delaware that actions for an injurious conspiracy are considered actions on the case.³ Hence, the applicable Delaware statute of limitations, pertaining to civil conspiracies, is 3 years. This being the law of the forum, it is binding in the case at bar.⁴ If the cause of action here stated accrued prior to March 30, 1950, the action must be dismissed, as it was commenced more than 3 years after the expiration of the accruing of the cause of action. In civil conspiracies the statute of limitations begins to run upon the occurrence of an overt act resulting in damage.⁵ I think our case of Park-In Theatres v. Paramount-Richards Theatres, supra, controls. It, too, involved a civil conspiracy. The action was dismissed as barred by the Delaware 3-year statute of limitations. Judge Rodney, there, wrote (90 F.Supp. at page 729): "The gravamen of a civil action for conspiracy is found in the overt act which results from the conspiracy and culminates in damage to the plaintiff. As said in Nalle v. Oyster, 230 U.S. 165, 182, 33 S.C. 1043, 1048, 57 L.Ed. 1439, `no civil action lies for a conspiracy unless there be an overt act that results in damage to the plaintiff.'

"The distinction between the application of a Statute of Limitations in a criminal conspiracy case and such application in a civil case based upon a conspiracy has been clearly pointed out in Momand v. Universal Film Exchanges, 1 Cir., 172 F.2d 37, at page 49. There it is shown that in a criminal prosecution the Statute of Limitations does not begin to run until the last overt act performed in compliance with the original agreement has been accomplished. A civil case, however, is based upon the damage caused by the commission of the overt act and the applicable statute must run from the time of the commission of that act which is alleged to have caused the damage. * * *

"If the Statute of Limitations had no precise date, as the happening of the overt act, from which it could be computed, then there could be no limitation of actions at all applicable where the conspiracy continued. Of even greater importance is the fact that the injured party would seem to have no right of action so long as the conspirators chose to keep the conspiracy in a continuing state. The Statute of Limitations must run from the commission of the several overt acts complained of.

"In this case there are only two overt acts clearly defined and indicated in the amended complaint. One is the alleged duress and conspiracy resulting in the closing of the Camden Theatre in 1933. The other is the duress and conspiracy culminating in the exclusive license agreement of November 20, 1940." In the Park-In Theatres case, as here, it was argued that the conspiracy is a continuing wrong and that as long as damages flow from the overt acts the statute does not run. Judge Rodney rejected that view and stated, 90 F.Supp. at page 729: "At the argument plaintiff's counsel suggested several matters in the rather lengthy amended complaint that could be considered as overt acts happening or coming to their knowledge within the Statute of Limitations. Some of these are clearly matters only affecting damages allegedly resulting from the overt act and not such matters as would themselves constitute overt acts from which to compute the running of the Statute. * * * In the present complaint two, and two only, overt acts are expressly alleged and these are of date beyond the Statute of Limitations, although damages resulting therefrom may have continued."⁶

In the case at bar plaintiffs allege two overt acts as a result of the alleged conspiracy of Agricola and United. The alleged unlawful conspiracy resulted in Agricola obtaining certain contracts, dated September 17, 1936, from IRCA. The second phase of the alleged conspiracy was completed in 1936 when IRCA was required, under the contract, to issue its secured notes and stock to Agricola. Both overt acts occurred in 1936, more than 16 years prior to the commencement of the case at bar. Clearly the alleged conspiracy which forms the basis of a derivative action accrued in 1936. By that time all the overt acts had been committed.

Clearly the present suit comes too late. It is long after the expiration of 3 years from the date of the accrual of the cause of action. Although certain equitable relief is demanded in the case at bar as an aid to the recovery of damages, this does not hinder the application of the statute of limitations. In fact, under the Delaware law, courts of equity apply the applicable statute of limitations.⁷ Since the present suit is based upon diversity, no recovery can be had when a state statute of limitations would have barred recovery had the case been instituted in the state courts. See Guaranty Trust Co. v. York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079. There was no allegation that any fraudulent concealment was had in connection with the making of the...