Opinion
April 28, 1951.
TERRY, J., sitting.
Everett F. Warrington and Caleb M. Wright for the plaintiffs.
James M. Tunnell, Jr., (of Tunnell and Tunnell) for the defendants.
This is an action in ejectment brought by Roger I. Addy and William R. Errett, trustees in dissolution of the Bethany Beach Improvement Co., a dissolved Delaware corporation, (called old corporation) against William P. Short, Jehu F. Derrickson and the Bethany Beach Improvement Co., a Delaware corporation, (called new corporation).
On August 31, 1905 the old corporation (owner in fee simple) conveyed to the United States of America for life saving purposes two and eighty-six hundreds acres of land situated in Bethany Beach, Sussex County, Delaware. Included within the language of said conveyance appears the following stipulation: "* * * and it is further stipulated that the United States shall be allowed to remove all buildings and appurtenances from said land whenever it shall think proper and shall have the right of using other lands of the grantor for passage over the same in affecting such removal. And, it is further agreed on behalf of the United States that, in the event that the land hereby conveyed should hereafter cease to be used and occupied for lifesaving purposes, said lot of lands shall then revert to the party of the first part or its assigns."
On November 3, 1940 the old corporation by voluntary proceedings was dissolved. On December 1, 1945 the United States, through the Navy Department, sold to Jehu F. Derrickson, a defendant, a lifeboat station building and appurtenances thereto situated upon said land for the sum of $555.00. On December 5, 1945 Jehu F. Derrickson sold to William P. Short, a defendant, the lifeboat station building and appurtenances. On December 19, 1945 the United States abandoned the aforesaid land, and caused to be recorded in the Recorder's Office at Georgetown a formal certificate to that effect. On October 2, 1946 the United States, through the Navy Department, sold to the new corporation a radio direction finder station with appurtenances thereto situated upon said land for the sum of $4000.00. On November 3, 1949 the Chancellor appointed Roger I. Addy and William Errett trustees in dissolution of and for the old corporation, and, as such, they entered upon their duties and are now acting in that capacity.
The plaintiffs allege that as of the date of abandonment of said land by the United States (December 19, 1945) the fee simple absolute title in said land immediately reverted to and vested in the old corporation.
It is further alleged that since October 2, 1946 all of the respondents, or one of them, have been and are now in possession of the aforesaid land and have withheld possession of the same from the old corporation and are now withholding possession thereof from the trustees aforesaid.
The complaint concludes with a demand for judgment in the following particulars:
(1) That the trustees be declared the owners of said land in question, and that an order be entered delivering to them the possession thereof.
(2) That the trustees recover the sum of $50,000.00 for the unlawful withholding of the possession of said land, together with cost of suit.
The defendants in their answer have interposed the following defenses:
(1) They deny that a vested interest in said land was acquired by the old corporation as of the date of abandonment thereof (1945) by the United States.
(2) And for a further answer defendants William P. Short and Bethany Beach Improvement Company, a Delaware corporation, say that at the time of the abandonment by the United States of all right, title, and interest in the land forming the subject matter of this suit, the title thereto did not vest in Bethany Beach Improvement Company, a dissolved Delaware corporation, because the United States had held at most what in law is known as a "fee simple determinable" title, and the time of the dissolution of the said Bethany Beach Improvement Company, it had held no estate or title whatsoever which was cognizable in law, but a bare possibility of reverter, and thereafter, namely, upon the happening of the reversionary contingency, the Bethany Beach Improvement Company, having been dissolved for a period of more than three years, was not legally capable of acquiring title by said reversion, and, since the plaintiffs here must depend upon the strength of their own title, which does not exist, the defendants demand dismissal of the suit, with costs.
Two issues are raised by the pleadings. The first is an issue of law. This issue springs from a denial of the allegations in the complaint that upon the abandonment of all right, title and interest in said land by the United States the fee simple absolute title therein immediately reverted to the old corporation. The second issue is one of fact and relates to the question of damages.
Each of the parties has filed a motion for summary judgment under subdivision "c" of Rule 56 of this Court. The respective motions will be considered by me only in respect to a determination of the issue of law as directly raised by the pleadings.
The defendants contend —
(1) That the title acquired by the United States under its deed from the old corporation (1905) was a fee simple determinable.
(2) That, since the title acquired by the United States was a fee simple determinable, the United States held the fee simple title to said land and nothing whatsoever was retained in the old corporation in the way of a title or estate except a bare possibility of a reverter.
(3) That, since the old corporation retained no estate prior to the abandonment by the United States, the corporation could not as of the date of abandonment acquire real estate.
The plaintiffs contend that the possibility of reverter in the old corporation constituted a corporate asset which the old corporation possessed prior to and at the time of dissolution, and, as such, was retained under the provisions of Section 42 of the Corporation Act. They further contend that upon abandonment of the land by the United States (1945) the fee simple absolute in said land immediately reverted and vested in the old corporation.
Superior Court for Sussex County, No. 200, Civil Action, 1950.
The estate conveyed to the United States by the old corporation (1905) was a fee simple determinable. Lynch v. Bunting, 3 Terry 171, 29 A.2d 155; 33 Am. Jur., Pg. 683. Had the abandonment of said land by the United States taken place prior to the dissolution of the old corporation the title thereto would have immediately passed to the old corporation and its estate therein would have been a fee simple absolute. It is the abandonment of said land by the United States subsequent to the date of dissolution of the old corporation that gives rise to the question to be determined, which is, Was the possibility of reverter possessed by the old corporation as of the date of dissolution a property right that constituted a corporate asset, and, as such, retained after dissolution under the provisions of Section 42 of the Delaware Corporation Act, Chapter 65, Revised Code of Delaware, 1935? The question is one of first impression in this State. Other jurisdictions lend no assistance of any consequence.
The corporate powers of the old corporation were very limited. Its purposes were those of an ordinary realty company. It purchased and sold real estate and performed sundry other acts incidental to the conduct of such a business.
On November 3, 1940 the old corporation was voluntarily dissolved and on that date its corporate life expired, and, if it were not for the provisions of Sections 42 and 43 of the Corporation Act, it would have ceased to exist as completely as does a natural person in death.
Sec. 42. "* * * All corporations, whether they expire by their own limitation, or are otherwise dissolved, shall nevertheless be continued for the term of three years from such expiration or dissolution bodies corporate for the purpose of prosecuting and defending suits by or against them, and of enabling them gradually to settle and close their business, to dispose of and convey their property, and to divide their capital stock but not for the purpose of continuing the business for which said corporation shall have been established * * *."
Sec. 43. "When any corporation organized under this Chapter shall be dissolved in any manner whatever, the Court of Chancery, on application of any creditor or stockholder of such corporation, at anytime, may either appoint the directors thereof trustees, or appoint one or more persons to be receivers, of and for such corporation, to take charge of the estate and effects thereof, and to collect the debts and property due and belonging to the company, with power to prosecute and defend, in the name of the corporation, or otherwise, all such suits as may be necessary or proper for the purposes aforesaid, and to appoint an agent or agents under them, and to do all other acts which might be done by such corporation, if in being, that may be necessary for the final settlement of the unfinished business of the corporation; and the powers of such trustees or receivers may be continued as long as the Chancellor shall think necessary for the purposes aforesaid."
Upon voluntary dissolution all of the corporate powers theretofore possessed by the old corporation were terminated, except those that were extended for the three year period of grace as indicated under the provisions of Section 42. McBride v. Murphy, 14 Del. Ch. 242, 124 A. 798; 14 Del. Ch. 457, 130 A. 283. As to continuance of corporate life upon forfeiture of charter for non-payment of taxes see Harned v. Beacom Hill Real Estate Co., 9 Del. Ch. 411, 84 A. 229; Was v. Riverview Cemetery Co., 2 Terry 424, 24 A.2d 431.
Section 43 provides a remedy for stockholders and creditors of a dissolved corporation which may be invoked for their protection at any time in order to settle and wind up the corporate affairs. The provisions of this section are sufficiently broad to include the appointment of a trustee even after the three year period of grace granted under Section 42. Harned v. Beacom Hill Real Estate Co., supra; Slaughter v. Moore, 9 Del. Ch. 350, 82 A. 963; Levin v. Fisk Rubber Corp., (Del.Ch. ) 33 A.2d 546.
The plaintiffs concede that the extension of corporate life under the provisions of Section 42 for a period of three years subsequent to dissolution provides only for the limited purpose of prosecuting and defending suits and of enabling the corporation gradually to settle and close its business, to dispose of and convey its property, and to divide its capital stock. They contend, however, that under Section 42 corporate assets are saved for the benefit of creditors and stockholders, and that the possibility of reverter in the aforesaid land possessed by the old corporation as of the date of dissolution constituted a corporate asset which was retained by the corporation under the provisions of said Sections, and that, since the possibility of reverter has now ripened into a fee simple absolute by reason of the termination of the determinable fee, the trustees have such a title in said land that will sustain their right of recovery in this action.
Prior to a determination as to whether or not the possibility of reverter held by the old corporation as of the time of dissolution was retained under the provisions of Section 42, an understanding should be had concerning the significance to be given to the term "possibility of reverter"; that is, What is a possibility of reverter?
The Court of Chancery in this State in the case of Cookman v. Silliman, 22 Del. Ch. 303, 2 A.2d 166, determined that a bare possibility of reverter is not an estate, is not alienable, assignable, and not devisable in the absence of statute. Our statutes contain no express provisions that would after the conclusion reached in the Cookman case; thus, it seems apparent that in this State where a natural person grants a determinable fee he retains no future vested interest in fee or reversion, but merely a naked possibility of reverter which is incapable of alienation, assignment or devise and is not an estate. If he should die while possessed of the possibility of reverter before the termination of the determinable fee, his interest would descend to those who were his heirs at law at the time of his decease and not to those who were his heirs at law at the time of the termination of the determinable fee. Cookman v. Silliman, supra; Pond v. Douglas, 106 Me. 85, 75 A. 320; North v. Graham, 235 Ill. 178, 85 N.E. 267, 18 L.R.A. ( N.S.) 624, 126 Am. St. Rep. 189.
Now having determined that the possibility of reverter passes to the heirs at law of a deceased grantor at the time of his death and not as of the time of the termination of the determinable fee the question is, If the right be held by a corporation as of the time of dissolution, is it retained by the corporation for the period of its extended life under the provisions of Section 42? I think not. My reason for this is that since the possibility of reverter possessed by the old corporation was not an estate, was not alienable and was not assignable, it was not such a property right that would constitute a corporate asset as intended under the provisions of the statute. The old corporation had no successor. Such a right could not be in abeyance. Therefore, in the absence of a taker, as in the present case, I am of the opinion that the possibility of reverter became extinguished upon the dissolution of the old corporation on November 30, 1940.
However, let us assume arguendo that the possibility of reverter did continue in the old corporation under the provisions of Section 42 as contended for by the plaintiffs. In such case the corporation retained the possibility of reverter during the three year period of extended life, or until November 3, 1943. Now, since the possibility of reverter as previously indicated could not be assigned or disposed of by the corporation, where did it pass upon the termination of the period of extended life, November 3, 1943? The corporation, as previously indicated, had no successor and again such a right could not be in abeyance; therefore, in the absence of a taker it seems that the possibility of reverter became extinguished upon the expiration of the corporate life on November 3, 1943. At least it may be said that it did not remain in the old corporation in the category of an undisposed of corporate asset subsequent to November 3, 1943.
It makes little difference which of the above stated theories be considered to be the most acceptable approach insofar as a decision in the present case is concerned. This is so for the reason that the abandonment of said land by the United States did not take place until December 19, 1945, more than two years subsequent to the expiration of the three year period of extended life under Section 42.
The plaintiffs, trustees appointed on November 3, 1949 under the provisions of Section 43, never acquired any authority or jurisdiction over the land in question, for the reason that the old corporation never had an estate or property right therein or any title thereto at any time subsequent to the date of conveyance, August 31, 1905, up to and including the date of its dissolution on November 3, 1940. Since the possibility of reverter in the old corporation became extinguished on November 3, 1940, the possibility of reverter was not a corporate asset belonging to the corporation during the three year period of dissolution under Section 42 which remained to be administered upon by the trustees appointed aforesaid.
In an ejectment action the plaintiff must recover upon the strength of his own title. The plaintiffs in this action, trustees aforesaid, do not have any title whatsoever to said land; thus, their right of action herein cannot be sustained.
As to where the fee simple title in said land now rests other than in the plaintiffs is not before me. Whether the fee simple title in said land escheats to the State or remains in the United States because of the absence of a taker upon the termination of the determinable fee presents an interesting question.
The defendants' motion for summary judgment is granted. The plaintiff's motion for summary judgment is denied. An order will be entered in accordance with this opinion.