Opinion
July 12, 1935.
RODNEY, J., sitting.
Ivan Culbertson for plaintiff.
Horace Greeley Eastburn and Caleb M. Wright for defendant.
Superior Court for Sussex County, No. 48, June Term, 1935.
Motion to refuse judgment notwithstanding an affidavit of demand.
The question arose under Section 4169 of the Revised Code, which provided in part:
"In all actions in the Superior Court upon bills, notes, bonds, or other instruments of writing for the payment of money, * * * judgment by default shall be entered upon motion by the plaintiff or his attorney on the last day of the regular term to which the original process is returnable, notwithstanding appearance by the defendant, unless the defendant, or if there be more than one, one or more of them, shall have previously filed in the cause an affidavit stating that he or they verily believes or believe there is a legal defense to the whole or part of such cause of action, and setting forth the nature and character of the same; * * * Provided, that no judgment shall be entered by virtue of this section unless the plaintiff * * * shall, on or before the first day of the term to which the original process is returnable, file in the office of the Prothonotary a copy of the instrument of writing * * * with an affidavit stating the sum demanded, and that he or they verily believe that the same is justly and truly due."
The plaintiff filed an affidavit stating:
"That he is the plaintiff in the above-stated action; that annexed hereto are true and correct copies of the instruments of writing sued upon in this action; that the sum demanded of the said defendant is the sum of $7,000.00 with lawful interest on the said sum from the 31st day of December, A.D. 1932, and a further sum of $7,000.00 with lawful interest thereon from the 4th day of January, A.D. 1933, and a further sum of $8,350.00 with lawful interest thereon from the 2d day of November, A.D. 1934; and said deponent further says that he verily believes the same are justly and truly due from the said defendant to the said plaintiff.
"That the amounts due as hereinabove set forth, based on the instruments of writing, copies of which are hereto attached, are owing to the plaintiff as assignee of Southwest Securities Company of Chicago, a Delaware corporation, and Hawthorne Securities Company, a Delaware corporation, the said assignors being and having been at all times hereinabove mentioned, stockholders of record of Fleming Coal Company."
Attached to the affidavit as constituting copies of the "instruments of writing" were copies of the minutes of three several special meetings of the defendant corporation. The first sets forth a meeting of the directors of the defendant Company on December 30th, 1932, at which all of the directors were present. The minutes set forth a financial statement which showed that the Company had a surplus of $269,469.80 as of November 30th, 1932. It then set forth the following motion:
"Resolved: That a cash dividend of sixty per cent. (60%) be, and the same is hereby declared out of the surplus earnings of the company upon its outstanding capital stock payable December 31, 1932, to stockholders as registered on the books of the company at 12:00 o'clock noon on December 31, 1932, and
"Be it further resolved: That the proper officers of the company be, and they are hereby authorized and directed to pay said dividend on said date, provided, however, that as to any stockholder who is on the date of distribution herein provided, indebted to the corporation, said stockholder shall be credited on the books of the corporation upon said account and the residue, if any, be paid to said stockholder."
The second Resolution was similar to the first except that the meeting was held on January 4th, 1933, and recorded the declaration of a cash dividend of 35%, payable January 4th, 1933, to stockholders on January 4th, 1933. The third Resolution was also similar to the first, with the exception that the meeting was held on November 2d, 1934, and recorded the declaration of a cash dividend of 41.75%, payable November 12th, 1934, to stockholders registered on the books of the Company at 12:00 o'clock noon on November 2, 1934.
The defendant moved that the Court refuse judgment notwithstanding the affidavit of demand.
The judgment must be refused at this time. Notwithstanding the value of the Statute as preventing unnecessary delay in litigation, the Courts of this State have never been inclined to unduly extend the language of the Statute and uniformly have refused judgment when a reasonable doubt existed as to the right of the plaintiff to what has been termed a "snap judgment." Several cogent reasons suggest themselves as preventing the judgment on the affidavit of demand in the present case.
It has been held in this State that an affidavit of demand must be based upon an unconditional promise to pay a sum of money and that this sum must be a sum certain. Reed v. Glens Falls Insurance Company, 2 Marv. (16 Del.) 370, 43 A. 256, 257. And it has also been held that the obligation must be for a sum of money and nothing more. Tweed v. Dayett, 5 Houst. (10 Del.) 526.
It therefore seems entirely clear that the obligation in writing, the basis of the affidavit of demand, must be for a sum certain. In Woolley's Delaware Practice, § 249 ( g), it is said:
"The sum demanded should be such a sum as is shown to be due by the copy or copies of the cause of action appended, unless indeed, the original amount due, has been reduced by payments or executions."
In the Resolutions of the Board of Directors declaring the dividends, claimed to be the obligations in writing in this case, there are no sums certain alleged to be due. Under the first Resolution declaring 60% cash dividend, the sum of $7,000.00 is sworn by the affidavit to be due. This amount cannot be determined from the Resolution, either by the Prothonotary or any other person, and the amount due must necessarily depend upon the stock holding of each individual stockholder. This amount due must vary in the same proportion as the holding of stock. That this is true is clearly shown by the affidavit, which alleges that, under the first Resolution declaring a cash dividend of 60%, there is due the sum of $7,000.00; under the second Resolution declaring a cash dividend of 35%, the same sum of $7,000.00 is alleged to be due, which could only be true upon a change in the proportional holding of stock. Under the third Resolution declaring a cash dividend of 41.75%, there is alleged to be due a greater amount, to-wit, $8,350.00, notwithstanding the fact that the percentage of dividend is much smaller than that provided in the first Resolution.
If, as counsel argues, it is only essential that the amount due be alleged in the affidavit, without any reference to the cause of action or obligation in writing attached to the affidavit, then one important reason for requiring the cause of action to be exhibited would cease to exist. I cannot accede to this view, but hold that the copy of the cause of action filed with the affidavit of demand must show a definite sum to be due.
In view of this opinion it is perhaps not material to consider the other grounds urged by the defendant, viz., (1) that it does not appear what dividends are due or to what extent the dividends may be decreased by indebtedness due from the stockholder to the corporation; (2) that the allegation of the assignment to the present plaintiff, whether it be of stock holding or of dividends, is too indefinite to be enforced; and (3) that no suit can be enforced to recover a dividend until after a specific demand has been made for payment. Some of these might, perhaps, be more properly raised by affidavit of defense.
I do, however, have extreme doubt that a Resolution of a Board of Directors declaring a dividend is such an "instrument of writing for the payment of money" as will support an affidavit of demand and justify a summary judgment by default at the first term.
It seems to be true that upon the declaration of a lawful dividend by a Board of Directors that the relation of debtor and creditor is set up between the corporation and the stockholder. In most cases the right set up in the stockholder is an irrevocable right and the declaration of the lawful dividend creates an obligation of the corporation and there exists a right of action on the part of the stockholder to enforce its payment. The right of action is in the nature of a contract and grows out of the declaration of a lawful dividend. The actual wording of the Resolution, the physical minutes, constitute mere matter of Record. The obligation grows out of the legal action of the Board of Directors, the vote of the declaration of dividend — the minutes are mere matters of evidence, showing the action of the Board, and the minutes themselves do not constitute "an obligation in writing for the payment of money" within the intent of the Statute.
Judgment is refused.