Widder v. Leeds

• Decision Date: 01 March 1974
• Citation: 317 A.2d 32
• Parties: Bertram N. WIDDER, and Courtland Manor, Inc., a Delaware corporation, Plaintiffs, v. Leonard S. LEEDS and William V. Leeds, Defendants.
• Court: Court of Chancery of Delaware

Page 32

317 A.2d 32

Bertram N. WIDDER, and Courtland Manor, Inc., a Delaware corporation, Plaintiffs, v. Leonard S. LEEDS and William V. Leeds, Defendants.

Court of Chancery of Delaware, New Castle County.

March 1, 1974.

Peter J. Shanley, Murdoch, Longobardi, Schwartz & Walsh, Wilmington, for plaintiffs, Bertram N. Widder and Courtland Manor, Inc.

Bruce M. Stargatt, Young, Conaway, Stargatt & Taylor, Wilmington, for defendant, William V. Leeds.

BROWN, Vice Chancellor.

William V. Leeds, one of the Defendants named in this action, has moved to vacate an order of sequestration entered by this Court on July 5, 1973. The sequestration order, made pursuant to 10 Del.C. § 366 for the purpose of compelling Leeds to appear in this State and to answer the complaint against him, attached a limited partnership interest in Courtland Manor Associates, a Delaware limited partnership. The interest sequestered is owned of record in the sole name of William V. Leeds.

Leeds seeks to have the order vacated for two reasons. First, although he acknowledges that he is the owner of record in his individual name, he contends that the beneficial or equitable interest in the partnership is owned by him and his wife as tenants by the entireties and that consequently it is not subject to seizure for suit brought against him only. Secondly, Leeds contends that the only allegations and prayers of the complaint directed against him alone seek the imposition of a constructive trust on lands owned by him, and that since previous decisions of our courts in Wightman v. San Francisco Bay Toll-Bridge Co., Del.Ch., 16 Del.Ch. 200, 142 A. 783 (1928) and Hughes v. Trans World Airlines, Inc., Del.Super., 40 Del.Ch. 552, 185 A.2d 886 (1962) have held that the complaint must set forth a claim definable in monetary damages in order for sequestration to be invoked, it is not a proper process to be used against him here.

Factually, it appears that prior to the formation of the partnership a number of meetings were held with William Leeds, his son Leonard Leeds, and prosepctive investors. It is contended by the Plaintiffs, and not denied by Leeds at this point, that his wife, Viola, did not attend any meeting, that she was not mentioned and that it was not indicated that she would be associated with the partnership in any way. On November 6, 1968, William Leeds executed the Courtland Manor Associates partnership agreement as the only limited partner. Leonard Leeds was designated general partner. On this same date the agreement was amended so as to include additional limited partners, the Plaintiff Widder being one. Another amendment occurred on April 9, 1969, and, as to each amendment William Leeds alone was stated to be one of the limited partners. A Certificate of Limited Partnership and two amendments thereto were recorded as required by statute, each indicating that William Leeds was a limited partner and that he had contributed a sum certain toward the partnership. The name of Viola Leeds does not appear in any of these documents. Subsequent to formation, various meetings were held by the partnership, including one to discuss the possible sale of the partnership interests. William Leeds attended these meetings but his wife did not. Although various financial statements of the partnership have been produced, none indicate that Viola Leeds has any legal or beneficial interest in the partnership.

Leeds counters these facts by his personal affidavit in which he states that

'While I am the record owner of an interest in Courtland Manor Associates, a limited partnership, the beneficial interest is vested in my wife, Viola Leeds and me jointly. The funds utilized for the acquisition of the interest in the said limited partnership derived directly from property held jointly by my wife and me, including a loan at Bank of Delaware signed for by both of us with securities in joint ownership as collateral. The limited partnership interest belongs to both of us together, and not simply to me.'

The only other evidence offered at this point is the affidavit of Viola Leeds in which she states as follows:

'2. During November, 1968, my husband and I obtained a loan at the Bank of Delaware with jointly owned securities as collateral, and the documents relating to this loan were signed by both me and my husband. It was my understanding and expectation that the proceeds of this loan would be used to purchase a limited partnership interest in Courtland Manor Associates, which interest would be owned by both me and my husband jointly.'

'3. Until sometime early in 1973, I had no knowledge or reason to believe that the limited partnership interest was owned of record other than by me and my husband jointly.'

Previous decisions in this State have recognized that personal property may be owned by husband and wife as tenants by the entireties. Carlisle v. Parker, Del.Super., 8 W.W.Har. 83, 188 A. 67 (1936); Rauhut v. Reinhart, Del.Orph., 22 Del.Ch. 431, 180 A. 913 (1932); DuPont v. DuPont, Del.Ch., 33 Del.Ch. 571, 98 A.2d 493 (1953); In re Northeastern Water Co., Del.Ch., 28 Del.Ch. 139, 38 A.2d 918 (1944); In re Griffith, Del.Ch., 33 Del.Ch. 387, 93 A.2d 920 (1953). It has likewise been held that, in the absence of proof to the contrary, a joint bank account opened in the conjunctive form in the name of a husband and wife may create a tenancy by the entireties, and this status is not altered by the fact that either may withdraw funds therefrom. Hoyle v. Hoyle, Del.Ch., 31 Del.Ch. 64, 66 A.2d 130 (1949). In Ciconte v. Barba, Del.Ch., 19 Del.Ch. 6, 161 A. 925 (1932) it was stated that 'the weight of authority deduces a holding by the entireties so to speak from the bare circumstance that the title to a mortgage, bond, note or Bank account is in the husband and wife.' (Emphasis added) Moroever, a tenancy by the entireties can result from the joint acquisition of personalty by a husband and wife even though the instruments by which they take it do not refer to their marital relationship. In re Giant Portland Cement Co., Del.Ch., 26 Del.Ch., 32, 21 A.2d 697 (1941). Nor is it of any consequence that one spouse contributes more than the other to the joint bank account if it is their intention to hold it by the entireties. In re Putney's Will, Del.Ch., 213 A.2d 57 (1965); Moser v. Moser, Del.Supr., 287 A.2d 398 (1972).

In Rigby v. Rigby, Del.Ch., 32 Del.Ch. 381, 88 A.2d 126 (1952) this Court indicated by way of dicta that if it could be shown that personal property had been purchased with funds from a bank account held by a husband and wife by the entireties, the property purchased might also be held by the entireties. Any further speculation on this point was recently put to rest in Moser v. Moser, supra. There the issue was the ownership of corporate stock acquired in the sole name of the husband with funds taken from the joint bank account of the husband and wife and which had been earned and deposited in the main by the husband. The Chancellor had found from the facts that the parties intended to hold the bank account by the entireties, and in affirming his ruling that the wife had a one-half interest in the stock, the Supreme Court stated as follows at 287 A.2d 400:

'When property is acquired by the use of joint funds, but title is taken in the name of one spouse alone, the property nevertheless will remain the joint property of the spouses.'

Thus, it seems, the argument of Leeds reduces itself to this. Since personal property can be held by a husband and wife as tenants by the entireties, and since direct derivatives of entireties property prima facie remain entireties property, even if taken in the name of one spouse alone, the mere showing that the partnership interest taken in his name was purchased by funds obtained on the joint application of him and his wife and secured by securities owned by them jointly, without more and regardless of anything else, establishes that the beneficial ownership of the partnership interest is vested in him and his wife as tenants by the entireties and, as such, cannot be subject to sequestration for a claim brought against him alone.

Without doubt, once it is brought to the attention of the Court that the interest seized pursuant to a sequestration order is actually held for the benefit of another, justice requires that it be released. Nickson v. Filtrol Corp., Del.Ch., 265 A.2d 425 (1970); Jacobs v. Tenney, D.C.Del., 316 F.Supp. 151 (1970). However, I am of the opinion that the argument made by Leeds suffers from a crack in its foundation.

The starting point for his position assumes that where funds are obtained and deposited in a joint bank account by a husband and wife, they automatically become funds held by the entireties. The above authorities, as I read them, do not support such a principle. In Ciconte it was held that such a joint deposit 'deduces', or infers, such a result, not that it is required. Carlisle v. Parker involved funds remaining from the foreclosure of a purchase money mortgage held by husband and wife on lands formerly owned by them by the entireties and thus the funds bore the...