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Wilmington Trust Co. v. Wright

Court of Chancery of Delaware, New Castle County

July 16, 1952

WILMINGTON TRUST CO.
v.
WRIGHT et al.

Page 481

Caleb S. Layton (of Richards, Layton & Finger), Wilmington, for plaintiff.

Rodney Layton, Wilmington, for defendant Wilmington Trust Co., executor of estate of Ernest B. Wright.

Hugh M. Morris (of Morris, Steel, Nichols & Arsht), Wilmington, for Wilmington Trust Co., and Elizabeth J. Wright, executors of estate of J. Pilling Wright.

Howard L. Williams (of Hering, Morris, James & Hitchens), Wilmington, for individual defendants.

[33 Del.Ch. 64] SEITZ, Chancellor.

I am concerned with the right of one seeking contribution to pursue assets into the hands of a distributee of an estate.

Ernest B. Wright died November 16, 1934 leaving a will which was probated before the Register of Wills for New Castle County. Defendant, Wilmington Trust Company, qualified as Executor. Under the will of Ernest B. Wright certain specific bequests were to be made, and the residue of the estate was to be transferred to plaintiff, Wilmington Trust Company, in trust. Under the terms of the trust the income was payable to the decedent's widow for life, with a direction for the distribution of the corpus among the decedent's children, per stirpes, upon their attaining the age of twenty-five years, respectively. The trust is still being administered.

In November and December 1934, the required statutory notice was published stating, inter alia, that '* * * all persons having demands against the deceased are required * * * to exhibit and present the same, duly probated, to the said executor, on or before the 22nd day of November, A.D.1935, or abide by the law in this behalf'. A notice in similar terms was posted.

No claim was filed against the estate having as its basis a certain indemnity agreement entered into by Ernest B. Wright during his lifetime, and which agreement has given rise to the claim now asserted. The estate was closed on September 22, 1936. Thereafter, plaintiff, trustee under the Ernest B. Wright will, brought this action seeking instructions as to whether the trust estate could be compelled to satisfy a claim for contribution in the sum of $16,000 made by the executors of the J. Pilling Wright estate.

The claim here asserted arises out of a somewhat complicated situation. An indemnity agreement dated March 7, 1929 was entered into by and between the stockholders of Diamond State Fibre Company, the stockholders of the Continental Fibre Company (hereafter called 'Continental') and Haystone Securities Corporation. Ernest B. Wright and J. Pilling Wright, inter alia, were stockholders of Continental and, as such, executed the agreement. Without detailing the terms of the agreement, it may be stated that Ernest B. Wright, J. Pilling Wright and other Continental stockholders[33 Del.Ch. 65] agreed to indemnify Continental and the new company (Continental-Diamond Fibre Company hereafter called 'Continental-Diamond') for any liability arising out of claims existing at the time of the transfer of assets to the new company. On November 29, 1932 Continental-Diamond was sued on such a claim by one Arthur J. Schmitt and on July 3, 1941 a judgment was entered requiring Continental-Diamond to account for profits arising out of certain operations.

Page 482

On April 17, 1947, J. Pilling Wright, one of the Continental stockholders who, like Ernest B. Wright, entered into the same indemnity agreement, died and Elizabeth J. Wright, his widow, and Wilmington Trust Company qualified as Executors of his estate. On February 6, 1948 Continental-Diamond filed a claim against the estate of J. Pilling Wright, deceased, based upon the indemnity agreement. On October 20, 1948 judgment for a fixed sum was entered in the Schmitt action against Continental-Diamond.

On November 22, 1950 Continental-Diamond paid the decree in the Schmitt suit which with expenses amounted to about $250,000. Thereupon, Continental-Diamond made demand upon the executors of the estate of J. Pilling Wright, deceased, for a proportionate part of the amount paid in settlement of the suit. The executors of the J. Pilling Wright estate on November 22, 1951 contributed not only their share but Ernest B. Wright's share. Thereafter demand was made by defendants, executors of the J. Pilling Wright estate, upon plaintiff as trustee-distributee under the will of Ernest B. Wright, for contribution in the sum of $16,000. The legality of this claim is the sole issue here.

Neither the executor of the Ernest B. Wright estate, nor the individual defendants question that $16,000 is a fair proportionate share if there is any proper claim against the Ernest B. Wright trust. Nor is any point made of the fact that Continental-Diamond made no claim against the Ernest B. Wright estate. But the executor and the individual defendants, beneficiaries of the Ernest B. Wright trust, assert that no money is legally owing from the trust assets. They contend that Chapt. 183, Vol. 38, Laws of Del, Del. [33 Del.Ch. 66] Code 1935, Par. 3861 [1], in effect during the administration of the estate, bars this claim because the statute required that it be filed and it was not. They assert that because the claim was not filed as required by the statute, it cannot now be successfully asserted against plaintiff as a distributee of the estate.

The executors of the J. Pilling Wright estate contend that the statute pursuant to which the Register of Wills caused notice to creditors to be published is unconstitutional. [2] They further contend that even if the statute is constitutional it is not applicable to this claim because this claim was not a 'claim' within the meaning of the statute at the time the Ernest B. Wright estate was being administered.

I pass by the argument that the Code 1935, Par. 3861 is unconstitutional. I note that it has since been ...


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