Townsend Corp. of America v. Davidson

• Decision Date: 30 March 1962
• Citation: 40 Del.Ch. 295,181 A.2d 219
• Parties: TOWNSEND CORPORATION OF AMERICA, Plaintiff, v. Clinton DAVIDSON, Morris M. Townsend, Josephine Townsend, A. C. Wedemeyer, G. B. Pillsbury, P. C. Hackett, W. F. Rockwell, C. F. Smith, R. E. Hartz, R. F. Nelson, J. R. E. Ozias and The Gayo Fund, Inc., Defendants.
• Court: Court of Chancery of Delaware

Page 219

181 A.2d 219

40 Del.Ch. 295

TOWNSEND CORPORATION OF AMERICA, Plaintiff, v. Clinton DAVIDSON, Morris M. Townsend, Josephine Townsend, A C. Wedemeyer, G. B. Pillsbury, P. C. Hackett, W. F Rockwell, C. F. Smith, R. E. Hartz, R. F. Nelson, J. R. E Ozias and The Gayo Fund, Inc., Defendants.

Court of Chancery of Delaware, New Castle County.

March 30, 1962.

Irving Morris, of Cohen & Morris, Wilmington, and Martin Horwitz and Martin E. Gotkin, New York City, for plaintiff.

S. Samuel Arsht, of Morris, Nichols, Arsht & Tunnell, Wilmington, for defendants Davidson, M. M. Townsend, Wedemeyer, Pillsbury, Smith, Hartz and Nelson.

Robert H. Richards, Jr., of Richards, Layton & Finger, Wilmington, and Robert G. Zeller, of Cahill, Gordon, Reindel & Ohl, New York City, for defendant, W. F. Rockwell.

Defendant P. C. Hackett, pro se.

SEITZ, Chancellor.

This is the decision on certain motions made by individual defendants. The first motion to be considered is that made by the defendant Townsend.

Plaintiff sought to sequester stock standing in the name of the defendant Townsend. The only stock purportedly seized was stock standing in the names of Morris M. Townsend and Josephine M. Townsend 'as joint tenants'.

The defendant Townsend has moved to dismiss the complaint and to vacate and quash the order of appearance and sequestration as to him on the ground that he has not been personally served and none of his property has been effectively seized. More specifically, he contends that the stock purportedly seized is held under a tenancy by the entireties and thus cannot be seized for a claim against him.

Plaintiff tacitly concedes that Morris and Josephine Townsend are husband and wife and that the stock was not validly sequestered if it is held by the entireties. The plaintiff argues, however, that by the use of the language 'joint tenants' the parties intended to create a joint tenancy rather than a tenancy by the entireties. I understand that defendant does not deny that a joint tenancy in the stock could have been created in Morris and Josephine Townsend if such intent had been clearly expressed and that in such a situation defendant's interest therein could have been sequestered. There is no evidence showing who caused the stock to be registered in the manner indicated. There is thus presented the issue as to the nature of the interest created in the stock in question.

There is no Delaware case precisely in point but a review of the authorities helps in resolving the present issue. In the Giant Portland Cement Co. Case, 26 Del.Ch. 32, 21 A.2d 697, this court was concerned with the nature of the interest created in stock registered in the names of two individuals who were shown to be husband and wife. The court concluded that in such a situation the estate was deemed to be an estate by the entireties. It is not clear from the opinion whether the ruling was intended to reflect an absolute rule of law or only a presumption. That case is not controlling here because it involved only the listing of the two names on the corporate records. In the present case the words 'as joint tenants' appear.

In the prior case of Godman v. Greer, 12 Del.Ch. 397, 105 A. 380, the Delaware Orphans' Court held that where a devise of land to two persons, who were shown to be then married, was explicitly to them as tenants in common the married parties held the property as tenants in common and not as tenants by the entireties. The court's reasoning was that the Married Woman's Act removed certain of the wife's common law legal disabilities and that on the basis of policy and benefit there was no reason why the court should not implement the intent of the testator rather than follow the inflexible so-called common law rule. The importance of this decision is that it emphasized that the nature of the estate was to be found from the expression of intent and not from an inflexible application of the principles of the old common law applicable to married persons.

Defendant says that the Godman case is distinguishable on the ground that under 25 Del.C. § 701, there is a policy in Delaware favoring a tenancy in common over a joint tenancy. While the statute applies only to real estate defendant says the policy is equally applicable to personal property. Assuming this to be true, the present case involves the issue of joint tenancy versus tenancy by the entireties and so the policy reflected in the statute is not pertinent.

Defendant next says that the Godman case was concerned with the carrying out of a testamentary intent which was clearly expressed. In contrast, he says that no such clear evidence of intent is here found by the use of the words 'joint tenancy'. He argues that such words are ambiguous, citing Hoyt v. Winstanley, 221 Mich. 515, 191 N.W. 213. The Hoyt case appears to support defendant's position. It emphasized that an estate by the entireties is a species of joint tenancy and is commonly included in that class. There are cases to the contrary. Thus, the court is confronted with the necessity of determining whether the use of the words as 'joint tenants' constituted a reasonable expression of an intent to create a joint tenancy as opposed to a tenancy by the entireties.

Since there is no legal prohibition against creating a joint tenancy, I do not see how the intent to create such a tenancy rather than a tenancy by the entireties can be much more clearly stated in affirmative language than by the use of the words 'as joint tenants'. Of course, it could be recited that the property is held 'as joint tenants and not as tenants by the entireties' but I do not believe the law requires such negative language in our situation. It is true that negative language is called for by the statute in situations where there is a desire to create a joint tenancy as opposed to a tenancy in common in real estate. But here we are dealing with two kinds of joint tenancy and so the statutory policy is inapplicable. Moreover, I think there is no reason today to lean toward a construction favoring a tenancy by the entireties. I say this because the advantage to the wife may be as great under a joint tenancy as under a tenancy by the entireties. Also, simple language can be employed to make clear when a tenancy by the entireties is intended.

The authorities are not uniform on the approach to this matter but I think the reasonable inference from the Delaware cases and the effect of the modern view as to the rights of a wife dictate the conclusion that by the language employed here a joint tenancy was intended and created. Compare Wolf v. Johnson, 157 Md. 112, 145 A. 363; 41 C.J.S. Husband and Wife § 31b(2); 1 Christy, Transfer of Stock, § 75. Defendant Townsend's motion will therefore be denied.

Certain defendants ('defendants') have moved to dismiss the action for lack of jurisdiction over them because there was no effective service of process with respect to the subject matter of the supplemental amended complaint. The history of this action is important to the disposition of these motions.

A stockholder's derivative action was filed and a sequestration order entered seizing the stock of the defendants. Thereafter the defendants appeared and the sequestration of their stock was vacated. The defendants filed motions raising jurisdictional and other attacks upon the complaint. These motions were not brought on for decision. Rather, an amended complaint was filed. Thereafter, a motion was filed and granted staying the proceedings. Still later the stay was lifted and, on application, Townsend Corporation of America, the corporation for whose benefit the action was commenced, was realigned as plaintiff and filed a supplemental amended complaint which was allowed without prejudice to defendants' right to assert the matter here considered. It is this complaint which is now under attack.

Defendants contend that the eleven count supplemental amended complaint confronts them for the first time with a new plaintiff and with many claims not asserted against them at the time they elected to appear in Delaware and contest the subject matter of the original complaint. Although stated in different ways, all the defendants are saying that their appearances should be limited to the subject matter of the original complaint because they elected to appear to defend those charges rather than default. Plaintiff claims that the defendants elected to appear under the statute which authorizes a 'general appearance' and they must be deemed to have submitted themselves to the jurisdiction for all purposes properly permitted by the rules of court.

Plaintiff first urges that the subject matter of six of the eleven counts of the supplemental amended complaint is found in the original complaint while that of another count is found in general terms. It says that three other counts involve transactions not specifically alleged in the original complaint but encompassed within the language concerning unspecified 'otherwise unlawful and improper transactions'. Finally, it admits that one count refers to events occurring after the filing of the original complaint.

It is pertinent first to compare the subject matter of the original complaint with that appearing in the supplemental amended complaint. I say this because to the extent defendants were fairly put on notice of certain claims and their general nature they cannot raise the problem above the dignity of an issue as to the sufficiency of the pleading. Any such alleged deficiency would not create a jurisdictional or constructive fraud problem.

I will not lengthen this opinion unduly by here comparing the two complaints in great detail. After having compared them I am satisfied that though not so artfully worded in the original complaint as in the supplemental amended complaint, most of the matters alleged in the supplemental amended complaint appear in the original complaint with sufficient definiteness to...