Action by K. McKinley Smith against the Biggs Boiler Works Company and others to have declared void a voting trust agreement. The Court of Chancery, Layton, Acting Vice Chancellor, held that service by publication upon nonresident voting trustees of Delaware voting trust was valid.
Motion to quash service upon nonresident voting trustees and in the alternative to strike certain paragraphs from complaint denied; motion for temporary restraining order by plaintiff denied.
See also 82 A.2d 919.
In action to have voting trust agreement with respect to stock in Delaware corporation declared void, plaintiff's motion for temporary order restraining individual defendants from proceeding further with an action commenced by them in Ohio to declare valid same voting trust would be denied where defendants were citizens of Ohio and could not be personally served.
John Van Brunt, Jr., David Snellenburg, II, Wilmington, for plaintiff.
William E. Taylor, Jr., Wilmington, for defendants.
LAYTON, Acting Vice-Chancellor.
On May 7, 1951, plaintiff filed a complaint to have declared void a voting trust agreement dated December 6, 1950, to which all of the issued stock of the Biggs Boiler Works Company, a Delaware corporation, is subject. In addition to the corporation, one Krizanek and one Steadman, two of the voting [32 Del.Ch. 288] trustees, were joined as defendants. Plaintiff is the remaining voting trustee. The company was summoned by service upon its resident agent. A return of non sunt invention was made as to the individual defendants who were accordingly served by publication upon order of this Court pursuant to Sec. 4374, Revised Code of Delaware, 1935 and Rule 4(d) of this Court. The defendant voting trustees have appeared specially upon a motion to vacate the service upon them. The defendant corporation has appeared generally on a motion to dismiss the complaint for lack of jurisdiction or, in the alternative, to strike certain specified paragraphs from the complaint. This action is in most respects similar to Civil Action 238 wherein, in effect, I declared this same voting trust agreement void for such period as the shares remained subject to an escrow agreement. See Del.Ch., 82 A.2d 372.The relief prayed for here differs only in that it seeks to have the agreement permanently voided.
Also to be decided is a petition by plaintiff for a temporary restraining order
against the two individual defendants to enjoin them from further prosecution of an action in Ohio, the purpose of which is to have declared valid the same voting trust agreement which is the subject of these two suits.
In Perrine v. Pennroad Corporation, 19 Del.Ch. 368, 168 A. 196, it was held that service by publication upon non-resident trustees of a Delaware voting trust was valid without seizure of the corporate stock constituting the trust
Shares providing the relief prayed against the individual defendants was in their official capacity as trustees only. The result was based upon 2105, Sec. 73, Revised Code of 1935, which declares that for all purposes of title, action and jurisdiction of courts, the situs of shares in a Delaware corporation shall be regarded as within the State of Delaware.
This decision, then, disposes of the question unless 45 [32 Del.Ch. 289] Del.Laws, Chapt. 159, The Uniform Stock Transfer Act, in any way changes the result reached in the Perrine case. Defendants argue that the Uniform Stock Transfer Act makes the certificate the share of stock itself and no longer do shares of stock in a Delaware corporation have their situs here. If this is correct, then jurisdiction can no longer be based upon the reasoning of the Perrine case. However, Chancellor, now Justice, Wolcott has passed upon this exact question in Hodson v. Hodson Corp., Del.Ch., 80 A.2d 180. This was an action against a corporation and one Jessie Price seeking, inter alia, the cancellation of 34 shares of stock previously issued by the corporate defendant to the individual defendant. Service by publication was made on Jessie Price. A special appearance was entered on her behalf on a motion to quash the service. The corporate defendant also moved for summary judgment upon the ground that Jessie Price was an indispensable party and neither she nor the shares of stock in question were within the jurisdiction of the Court. One of the principal arguments was that Sec. 16M of the Uniform Stock Transfer Act prohibited attachment or levy upon corporate shares unless they were actually seized or surrendered in Delaware and that a Court of Chancery would not assume jurisdiction of an action in which it could not enforce its decree. The Chancellor concluded that, despite defendant's argument, the Uniform Stock Transfer Act did not purport expressly to amend or repeal 2105, Sec. 73, Revised Code, for the reason that amendments by implication were not favored. He further decided that the basic purpose of the Uniform Stock Transfer Act was to make stock certificates negotiable instruments in order to protect innocent purchasers for value. Accordingly, the rights of an innocent purchaser for value not being drawn into question, the Chancellor concluded that jurisdiction should be sustained under the reasoning of the Perrine case.
Nothing in the briefs before me here indicates that the rights of an innocent purchaser for value are involved. [32 Del.Ch. 290] It results, then, that this motion to quash must be denied upon the authority of Hodson v. Hodson Corp., supra.
The corporate defendant's motion to dismiss is denied for the same reasons and its motion to strike certain
paragraphs from the complaint is also ...