LEAHY, District Judge.
Defendant, a Delaware corporation, was dissolved on September 30, 1940. Plaintiff
brought suit September 23, 1943. Summons was served on the Corporation Trust Company, as defendant’s resident agent. Defendant moved under Rule 12 of the Rules of Civil Procedure, 28 U.S.C.A. following section 723c, to quash and set aside the service of the summons. While the particular provision of Rule 12 which defendant desires to utilize is not specified, it is presumed to be (b) either (4) or (5), i.e., either insufficiency of process or insufficiency of service of process. The question on the motion, then, is the validity of the summons on the Corporation Trust Company;, or, generally, is service of process on a resident agent of a dissolved Delaware corporation invalid for the reason that the resident agent’s power to accept such service is terminated by the dissolution ?
Sec. 48 of the Delaware Corporation Law, 41 Laws of Delaware of 1937, c. 131, p. 276, provides for service of process on either the officers or directors who may be located within the State of Delaware, or upon the resident agent.
If service cannot be made on the individuals named, then a procedure is outlined for service on the Secretary of State of Delaware.
For purposes of discussion it is tacitly agreed by all that no officer or director of defendant resided in Delaware at the time of institution of suit. ' .
Sec. 42 of the Delaware Corporation Law, 43 Laws of Delaware 1941, c. 132, p. 457,, provides for the continuance of dissolved corporations for limited' purposes, and provides that suits may be commenced against such corporations at any time within three years after the dissolution.
Defendant argues that the Delaware statutes in effect on September 23, 1943— the date of institution of suit here — provide that absent a proper appointment of a resident agent of a dissolved corporation designated by the directors as trustees or by receivers appointed under Sec. 43 of the Delaware Corporation Law, Rev.Code of 1935, c. 65, § 2075, p. 476, no service on a former resident agent can confer jurisdiction of the dissolved corporation upon this court. This argument is bottomed on an interpretation of Sec. 42 that, while the section continues corporations after dissolution for a period of three years for the purposes stated therein, there is no provision which provides what persons shall have power to do the various acts “for the purpose of prosecuting and defending suits by or against them [dissolved corporations], and of enabling them gradually to settle and close their business, to dispose of and convey their property * * * ”; in short, that Sec. 42 contains no automatic extension of the powers of directors or officers or of any resident agent. Thus, defendant contends, if a creditor desires to exercise the right to sue under Sec. 42, he must first make application to the Delaware Chancery Court under Sec. 43 to have the directors appointed trustees or have some person appointed receiver of the dissolved corporation; such persons may then appoint an agent upon whom service of process may be served.
But absent action under Sec. 43 and in the light of the elimination of old Secs.
41 and 42 in their entirety hy the Legislature in 1925, the defendant insists “the directors of a dissolved corporation * * * no longer possess the powers as ‘trustees under dissolution’ Therefore, defendant’s inevitable conclusion is that unless the Delaware Chancery Court “appoints” the former directors “trustees of and for the corporation” or “appoints receivers thereof”
"no one has lawful power to act for the dissolved corporation.”
Defendant fails to consider that Sec. 42 creates a new right of substance, for at common law a dissolved corporation could neither sue nor be sued. See, Thompson, Law of Corporations 3d Ed., § 6510; Fletcher, Cyc. Corporations, Perm. Ed., § 8142; First Nat. Bank of Selma v. Colby, 21 Wall. 609, 22 L.Ed. 687; Commercial Bank v. Lockwood’s Adm’r, 2 Del. 8, 2 Harr. 8. The nature of the new right conferred is similar to that conferred by the various Lord Campbell Acts in keeping a legal wrong alive by creating a new cause of action which may be prosecuted to remedy the wrong. Since the matter is one of substance, it necessarily is controlled by the law of Delaware. American Transportation Co. v. Swift & Co., 2 Cir., 24 F.2d 310. There are many cases which have, in effect, rejected the argument urged by defendant here that action must first be had under Sec. 43 before suit may be com menced under Sec. 42. See, United Automatic Rifles Corp. v. Johnson, D.C., 41 F.Supp. 86; Trounstine v. Bauer, Pogue & Co., Inc., D.C., 44 F.Supp. 767; Arn v. Bradshaw Oil & Gas Co., 5 Cir., 93 F.2d 728. At least one Delaware authority runs counter to defendant’s argument. In Carle v. International Clay Products Co., 15 Del.Ch. 166, 132 A. 892, a case decided after the 1925 amendments referred to and relied on by defendant, it was held that, in an action under Sec. 43, good cause must be shown to have a receiver appointed during the three year period the corporation survives after dissolution. If a litigant has a cause of action against a dissolved corporation, it would hardly seem rational that Carle holds the litigant must first convince the chancery court he should be allowed to sue. Cf. Salembier v. Great Neck Bond & Mortgage Corp., 1937, 22 Del.Ch. 183, 194 A. 35.
In Eastman Gardiner & Co. v. Warren, 5 Cir., 109 F.2d 193, the Court said: “The argument of appellant ignores the fact, of which we take judicial notice, that the statutes of Delaware extended appellant’s life as a corporation for three years for the purpose of suing and being sued. See Section 2074 of the Revised Code of Delaware for 1935. As an additional safeguard, Section 2078 of said Code expressly provides that dissolution shall be no cause for abatement of any action pending on the date of the dissolution of any corporation. Harned v. Beacon Hill Real Estate Co., 9 Del.Ch. 411, 84 A. 229. Section 2075 permits the appointment of receivers, but their appointment is not mandatory.” No case has been discovered which decides or implies, and the conclusion is not reached here, that action must be had under Sec. 43 before suit may be brought under Sec. 42. In view of the right to sue under Sec. 42, as it has been construed here, the instant action may, therefore, be maintained.
But, the motion for decision is directed at the sufficiency of the service of the summons.
It is Delaware law that, after a corporate dissolution, absent a statutory provision, the agency relationship between the corporation, as principal, and its local resident agent, as agent, ceases; and the latter is no longer possessed of powers to act for its principal.
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LEAHY, District Judge.
Defendant, a Delaware corporation, was dissolved on September 30, 1940. Plaintiff
brought suit September 23, 1943. Summons was served on the Corporation Trust Company, as defendant’s resident agent. Defendant moved under Rule 12 of the Rules of Civil Procedure, 28 U.S.C.A. following section 723c, to quash and set aside the service of the summons. While the particular provision of Rule 12 which defendant desires to utilize is not specified, it is presumed to be (b) either (4) or (5), i.e., either insufficiency of process or insufficiency of service of process. The question on the motion, then, is the validity of the summons on the Corporation Trust Company;, or, generally, is service of process on a resident agent of a dissolved Delaware corporation invalid for the reason that the resident agent’s power to accept such service is terminated by the dissolution ?
Sec. 48 of the Delaware Corporation Law, 41 Laws of Delaware of 1937, c. 131, p. 276, provides for service of process on either the officers or directors who may be located within the State of Delaware, or upon the resident agent.
If service cannot be made on the individuals named, then a procedure is outlined for service on the Secretary of State of Delaware.
For purposes of discussion it is tacitly agreed by all that no officer or director of defendant resided in Delaware at the time of institution of suit. ' .
Sec. 42 of the Delaware Corporation Law, 43 Laws of Delaware 1941, c. 132, p. 457,, provides for the continuance of dissolved corporations for limited' purposes, and provides that suits may be commenced against such corporations at any time within three years after the dissolution.
Defendant argues that the Delaware statutes in effect on September 23, 1943— the date of institution of suit here — provide that absent a proper appointment of a resident agent of a dissolved corporation designated by the directors as trustees or by receivers appointed under Sec. 43 of the Delaware Corporation Law, Rev.Code of 1935, c. 65, § 2075, p. 476, no service on a former resident agent can confer jurisdiction of the dissolved corporation upon this court. This argument is bottomed on an interpretation of Sec. 42 that, while the section continues corporations after dissolution for a period of three years for the purposes stated therein, there is no provision which provides what persons shall have power to do the various acts “for the purpose of prosecuting and defending suits by or against them [dissolved corporations], and of enabling them gradually to settle and close their business, to dispose of and convey their property * * * ”; in short, that Sec. 42 contains no automatic extension of the powers of directors or officers or of any resident agent. Thus, defendant contends, if a creditor desires to exercise the right to sue under Sec. 42, he must first make application to the Delaware Chancery Court under Sec. 43 to have the directors appointed trustees or have some person appointed receiver of the dissolved corporation; such persons may then appoint an agent upon whom service of process may be served.
But absent action under Sec. 43 and in the light of the elimination of old Secs.
41 and 42 in their entirety hy the Legislature in 1925, the defendant insists “the directors of a dissolved corporation * * * no longer possess the powers as ‘trustees under dissolution’ Therefore, defendant’s inevitable conclusion is that unless the Delaware Chancery Court “appoints” the former directors “trustees of and for the corporation” or “appoints receivers thereof”
"no one has lawful power to act for the dissolved corporation.”
Defendant fails to consider that Sec. 42 creates a new right of substance, for at common law a dissolved corporation could neither sue nor be sued. See, Thompson, Law of Corporations 3d Ed., § 6510; Fletcher, Cyc. Corporations, Perm. Ed., § 8142; First Nat. Bank of Selma v. Colby, 21 Wall. 609, 22 L.Ed. 687; Commercial Bank v. Lockwood’s Adm’r, 2 Del. 8, 2 Harr. 8. The nature of the new right conferred is similar to that conferred by the various Lord Campbell Acts in keeping a legal wrong alive by creating a new cause of action which may be prosecuted to remedy the wrong. Since the matter is one of substance, it necessarily is controlled by the law of Delaware. American Transportation Co. v. Swift & Co., 2 Cir., 24 F.2d 310. There are many cases which have, in effect, rejected the argument urged by defendant here that action must first be had under Sec. 43 before suit may be com menced under Sec. 42. See, United Automatic Rifles Corp. v. Johnson, D.C., 41 F.Supp. 86; Trounstine v. Bauer, Pogue & Co., Inc., D.C., 44 F.Supp. 767; Arn v. Bradshaw Oil & Gas Co., 5 Cir., 93 F.2d 728. At least one Delaware authority runs counter to defendant’s argument. In Carle v. International Clay Products Co., 15 Del.Ch. 166, 132 A. 892, a case decided after the 1925 amendments referred to and relied on by defendant, it was held that, in an action under Sec. 43, good cause must be shown to have a receiver appointed during the three year period the corporation survives after dissolution. If a litigant has a cause of action against a dissolved corporation, it would hardly seem rational that Carle holds the litigant must first convince the chancery court he should be allowed to sue. Cf. Salembier v. Great Neck Bond & Mortgage Corp., 1937, 22 Del.Ch. 183, 194 A. 35.
In Eastman Gardiner & Co. v. Warren, 5 Cir., 109 F.2d 193, the Court said: “The argument of appellant ignores the fact, of which we take judicial notice, that the statutes of Delaware extended appellant’s life as a corporation for three years for the purpose of suing and being sued. See Section 2074 of the Revised Code of Delaware for 1935. As an additional safeguard, Section 2078 of said Code expressly provides that dissolution shall be no cause for abatement of any action pending on the date of the dissolution of any corporation. Harned v. Beacon Hill Real Estate Co., 9 Del.Ch. 411, 84 A. 229. Section 2075 permits the appointment of receivers, but their appointment is not mandatory.” No case has been discovered which decides or implies, and the conclusion is not reached here, that action must be had under Sec. 43 before suit may be brought under Sec. 42. In view of the right to sue under Sec. 42, as it has been construed here, the instant action may, therefore, be maintained.
But, the motion for decision is directed at the sufficiency of the service of the summons.
It is Delaware law that, after a corporate dissolution, absent a statutory provision, the agency relationship between the corporation, as principal, and its local resident agent, as agent, ceases; and the latter is no longer possessed of powers to act for its principal. To allow it to continue the existence of such a relationship pro hac vice is to ignore the rule that corporations exist only by legislative act; so, if it is to have a resident agent for whatever purpose, “there should be some statutory authority for the prolongation.”
The relationship between the corporation and its resident agent is purely contractual. I fail to find in the Delaware law the imposition of a statutory obligation for a resident agent as a condition of a domestic corporation doing business,
for if
there is no resident agent who can be served the statute has provided that service may be had on the Secretary of State where officers and directors are not present. This was the very contingency contemplated by Sec. 48, especially in the light of the fact that Sec. 42 is remedial in that the substantive right conferred by that section was nonexistent at common law. Since this new right is conferred, it must have been the Legislature’s intent that there should be a method to enforce the right. Secs. 42 and 48 when considered together must be liberally construed.
The Secretary of State’s capacity to accept service on behalf of a dissolved corporation is one of the conditions upon which a Delaware corporation pursues its right to do business under a Delaware charter. Cf. Dehne v. Hillman Investment Co., 3 Cir., 110 F.2d 456. Since the Delaware courts would have to recognize the validity of service on the Secretary of State for a dissolved corporation, the Rules of Federal Procedure would make such service good here.
See Rule 4, Federal Rules of Civil Procedure. The view that the Secretary of State may now be served in the case at bar (even though subsequent to the filing of the complaint more than three years from the date of dissolution have expired) is bottomed on the rule that the instant action commenced by the filing of the complaint. See Rule 3, Federal Rules of Civil Procedure. A similar rule prevails in the Delaware chancery and law courts. Connecticut M. L. I. Co. v. Merritt-Chapman & Scott Corp., 19 Del.Ch. 103, 163 A. 646; Rice v. McCaulley, 7 Houst. 226, 31 A. 240; Philadelphia, B. & W. R. Co. v. Gatta, 4 Boyce 38, 85 A. 721, 47 L.R.A.,N.S., 932, Ann.Cas.l916E, 1227; and 1 Woolley, Delaware Practice, §§ 161, 178.
The precise holding, then, is that defendant’s motion to quash the summons is granted. And the greater part of the former discussion is simply a guide as to how proper service may be made on a dissolved Delaware corporation where suit is brought within three years of its dissolution.