By Judge John C. Morrison, Jr.
On March 22,1996, this court took under advisement the issues raised in defendants’ demurrer to Milstead’s amended bill of complaint which set forth a personal cause of action. This court now sustains die demurrer and dismisses Milstead’s personal action (C95-1576). It is die court’s determination that a shareholder’s derivative suit is the appropriate proceeding to institute against defendants.
Most recently, die parties appeared before this court on defendants’ motion for summary judgment. This court has considered counsel’s argumente, supporting briefs, and cited authorities concerning derivative suite. For die reasons stated in this opinion, this court denies defendants’ motion and grants plaintiff standing to bring a derivative suit. This court further concludes that Milstead is not barred by res judicata from trying this derivative suit (C961498).
Rule 2:21 of die Supreme Court of Virginia extends the remedy of summary judgment to equity. A court must enter judgment in favor of a moving party if it appears from the pleadings, orders, and admissions that the party is entitled to judgment Rule 2:21. “[Sjummary Judgment is a drastic [429]*429remedy which is available only where there are no material facts genuinely in dispute.” Slone v. General Motors Corp., 249 Va. 520, 522 (1995) (citing Turner v. Lotts, 244 Va. 554, 556 (1992)). It applies only to cases in which no trial is necessary because no evidence could affect the result. In considering a motion for summary judgment, a trial court must adopt those inferences from the facts alleged that are most favorable to the nonmoving party unless those inferences are forced, strained, or contrary to reason. See GSHH-Richmond, Inc. v. Imperial Associates, 253 Va. 98, 102 (1997) (citations omitted).
In making its decision, this court considered (1) whether a final divorce decree can be considered a “nominee certificate” for purposes of Virginia Code § 13.1-603; (2) whether Milsicad is a “shareholder” under Virginia Code § 13.1-603; (3) whether Mislead possesses sufficient equitable interest to sustain a derivative suit; and finally, (4) whether the applicable statute of limitations had expired prior to the filing of filis suit
A derivative suit is an equitable device created by statute to protect shareholders against abuses by the corporation, its directors, officers, and controlling shareholders. See Fletcher Cyclopedia of Corporations § 5941.10 (1996). The nature of the derivative suit is two-fold. First the suit is the equivalent of a suit by a shareholder to compel file corporation to sue upon a right of action. See id. Second, it is also a suit by the corporation, asserted by the shareholder on its behalf, against those liable to the corporation. See id.
Virginia Code § 13.1-603 sets forth the definition of “shareholder” as follows:
[T]he person in whose name shares are registered in the records of file corporation, the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation, or file beneficial owner of shares held in a voting trust.
Generally, a shareholder has no right to sue in her own name upon a cause of action existing in the corporation. However, where the corporation actually or virtually refuses to institute or prosecute the suit, a shareholder may bring forth a derivative suit. The shareholder must allege and prove that a request or demand has been made upon the corporation that it institute proceedings on its own behalf against file wrongdoers and that the corporation refused to do so within a statutory period not to exceed ninety days. See Va. Code § 13.1-672.1(B). Demand is excused only upon allegation and proof of such facts as show that it is reasonably certain that a demand for corporation action would have been useless. See Reilly Mtg. Group, Inc. v. Mount Vernon Sav. & Loan Ass'n, 568 F. Supp. 1067 (E.D. Va. 1983).
[430]*430Virginia Code § 13.1-672.1 addresses the issue of standing to commence a derivative suit
A shareholder may not commence or maintain a derivative proceeding unless the shareholder: (1) Was a shareholder of the corporation at the time of the act or omission complained of; (2) Became a shareholder through transfer by operation of law from one who was a shareholder at that time; (3) Became a shareholder before public disclosure and without knowledge of the act or omission complained of; and (4) Fairly and adequately represents the interests of the corporation in enforcing tire right of the corporation.
Clearly, Virginia law requires contemporaneous stock ownership to have standing to bring a derivative suit The law is consistent with the general rule that one has standing to sue when he or she has sufficient interest at stake in the controversy which will be affected by the outcome of the litigation. In a derivative action where the corporation is the real party in interest the law seeks to ensure that the plaintiff affords proper representation on behalf of the corporation’s interests. This is accomplished by requiring a plaintiff in a derivative suit to be a “shareholder," i.e. one who has a legitimate interest in the corporation in order to adequately represent the corporation’s interest in the suit
Other jurisdictions1 recognize that record ownership of shares is not necessary to bring a derivative suit and, therefore, holders of equitable or beneficial interests in shares have standing to sue. See Shilling v. Erwin, 881 F. Supp. 236 (S.D. W. Va. 1995); Edgeworth v. First Nat'l Bank of Chicago, 677 F. Supp. 982 (S.D. Ind. 1988); Provence v. Palm Beach Taverns, 676 So. 2d 1022 (Fla. App. 1996); Jones v. Taylor, 348 A.2d 188 (Del. Ch. 1975). A recent Florida court articulated the reasoning behind this departure from the stock ownership requirement:
hi recognition of the equitable nature of derivative actions, courts interpreting derivative actions statutes... have liberally construed such provisions to grant standing in a variety of factual settings without requiring “record” ownership. The consistent rationale of these [431]*431decisions is that die policies supporting the contemporaneous ownership rule are not advanced by denying standing to a proven owner of an equitable interest in shares.
Provence, at 1022 (quoting South End Improvement Group, Inc. v. Mulliken, 602 So. 2d 1327, 1330 (Fla. App. 1992)). Thus, persons with a clear beneficial or equitable interest in a corporation may bring a derivative suit without being shareholders of record.
Milstead seeks to qualify as a shareholder by arguing that her final divorce decree is a “nominee certificate.”
The issuance of nominee certificates is a common practice between corporations and investment brokerage firms. To have any effect, a nominee certificate must be directly issued by a corporation. The nominee certificate must also be on file with a corporation. See Va. Code § 13.1-603.
A final divorce decree cannot be considered a “nominee certificate” because it is not directly issued by a corporation. Generally, a corporation issues nominee certificates pursuant to a procedure established to recognize shares held by nominees. Virginia Code § 13.1-664 sets forth the following discussion regarding shares held by nominees:
A. A corporation may establish a procedure by which the beneficial owner of shares that are registered in the name of a nominee is recognized by the corporation as the shareholder. The extent of filis recognition may be determined in the procedure....
(Emphasis added.) Without establishing a procedure by which nominees may hold a corporation’s shares of stock, a corporation cannot issue a nominee certificate. In filé instant case, it is clear that the Bylaws of Currents General, Inc:, do not provide for this statutory procedure and therefore, has not elected to permit the issuance of nominee certificates.
For these reasons, this court concludes that Milstead does not qualify as a “shareholder” using filis theory under Virginia law because she is not a “beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with [the] corporation.”
The final divorce decree did however, transfer an equitable ownership interest in the shares in question. On June 25, 1993, Milstead and her ex-husband executed their final separation agreement which designated a transfer of 100 shares of Currents General stock to Milstead. The final divorce decree, entered on October 6,1993, by the Virginia Beach Circuit Court incorporated the separation agreement. It is Miistead’s position that the final separation [432]*432agreement created a contractual expectancy in the 100 shares of stock and that such constitutes an equitable ownership interest in those shares. See J. G. Wilson Corp. v. Cahill, 152 Va. 108 (1929) (“[T]he feet that a transfer of shares is not mad* in fee manner prescribed by the charter, general law, or bylaws of the corporation does not necessarily render it void as between fee parties. Ordinarily a transfer which is not made in the prescribed mode, but which would be sufficient at common law, will convey at least an equitable title to the purchaser, and he will be protected therein by a court of eqiiity."). The court accepts Milstead's argument that, at fee very least, fee final divorce decree transferred an equitable ownership interest to Milstead.
Many jurisdictions outside of Virginia recognize feat holders of equitable or beneficial interests in shares have standing to commence a derivative suit hr order to align itself wife fee other jurisdictions which recognize feat actual record ownership of shares is not necessary to bring a derivative action, this court construes Virginia Code § 13.1-603 as allowing Milstead to proceed.
In Provence v. Palm Beach Taverns, Inc., fee court held that status as a beneficiary of a constructive trust over 50% of shares satisfied fee Florida’s contemporaneous ownership requirements for standing to bring a derivative suit. 676 So. 2d 1022 (Fla. App. 1996). The "contemporaneous stock ownership rule” in relation to derivative suits reads as follows:
(1) A person may not commence a proceeding in fee right of a domestic or foreign corporation unless fee person was a shareholder of fee corporation when fee transaction complained of occurred or unless fee person became a shareholder through transfer by operation of law from one who was a shareholder at that time....
(7) For purposes of this section, “shareholder” includes a beneficial owner of shares whose shares are held in a voting trust or held by a nominee on his behalf.
Fla. Stat § 607.07401(1), (7) (1993). A comparison of these statutory provisions wife Virginia Code §§ 13.1-603 and 13.1-672.1 reveals substantial similarities between Virginia and Florida’s statutory standing requirements for derivative suits. Clearly, fee Provence case lends sufficient support for this court to grant Milstead standing.
West Virginia courts also recognize that “(pjersons wife a clear beneficial interest in a corporation may bring a derivative suit without being shareholders of record.” Shilling v. Erwin, 888 F. Supp. 236 (S.D. W. Va. 1995) quoting Felsenheld v. Glock Brothers Tobacco Co., 119 W. Va. 167, 192 S.E. 545 (1937) (permitting beneficiaries of trust to sue where fee trust [433]*433corpus consisted of shares). Further, persons with equitable ownership interest in stock may bring a derivative action against the corporation. See Shilling, at 239. West Virginia Code § 31-1-103, which governs shareholder derivative actions, states in part:
No action shall be brought in this State by a shareholder in die right of a domestic or foreign corporation unless the plaintiff was a holder of record of shares or of voting trust certificates therefor at the time of the transaction of which he complains, or his shares or voting trust certificates thereafter devolved upon him by operation of law from a person who was a holder of record at such time.
In Shilling v. Erwin, die son of a deceased controlling shareholder brought a derivative action against the corporation and its directors for unlawful suppression of dividends. Defendants moved for summary judgment, and the court, after considerable analysis, granted defendants’ motion. Applying West Virginia law, the court concluded that the son lacked standing to maintain a derivative action because he did not have an equitable or beneficial interest in the stock, even though the son would inherit the stock if he were to prevail on another cause of action to declare invalid a codicil giving a controlling interest in tiie corporation to another individual. See id. hi other words, “a person who has an interest in an estate as a statutory distributee is nor an equitable owner entitled to maintain a derivative action." See id. at 239 (emphasis added) (citations omitted).
The Shilling case provides this court additional support and reason to find that Milstead, as an equitable owner of Currents General stock, has standing to bring a derivative suit even though she does not qualify as a “shareholder" under the Virginia Code. Unlike the plaintiff in Shilling, Milstead is not a statutory distributee, but rather, the holder of a contractual expectancy in certain shares of stock validated by a final divorce decree. According to the defendants in the instant case, it is necessary for Milstead to establish her rights against her transferor ex-husband. However, as the Shilling case has articulated, it does not matter whether Milstead would prevail on a separate cause of action against her ex-husband to direct a proper transfer of shares. The outcome of such action does not affect tins court’s ability to grant her standing on the basis of her equitable interest.
Even the state of Delaware permits equitable owners of stock to sue derivatively in instances where a trust relationship is involved. See Jones v. Taylor, 348 A.2d 188 (Del. Ch. 1975) (“It has been generally held under Delaware law that for purposes of a derivative action, the term “stockholder” [434]*434employed in Section 327 includes an equitable owner.”). The pertinent statute pertaining to derivative suits is found Delaware Code § 327 and provides that:
hi any derivative suit instituted by a stockholder of a corporation, it shall be averred in the complaint that the plaintiff was a stockholder of die corporation at the time of the transaction of which he complains or that his stock thereafter devolved on him by operation of law.
In Jones, plaintiff brought a derivative action charging improper conversion of corporate assets by certain corporate officers during the year 1972. Plaintiff based her standing to sue derivatively on the fact that she was the equitable owner of die shares under a written contract with her mother to make a will. She and her brother had agreed with their mother to convey their mother all of their right, tide, and interest in 700 shares of Taylor Auto stock in return for their mother's agreement to execute a will bequeathing the stock to them in equal shares upon her death. See id. at 190. The court recognized that plaintiff possessed a sufficient equitable interest in stock so as to permit her to maintain the stockholder derivative suit and denied defendants’ motion tor summary judgment. See id. at 191.
In reaching its conclusion, the Jones court considered the policy behind Delaware Code § 327 and articulated the following.
The purpose of die rule requiring the plaintiff to be a shareholder at the time of die transaction of which [she] complains is to prevent what is considered to be a wrong, namely, die purchasing of shares in order to maintain a derivative action so as to attack a transaction which occurred prior to tire purchase of stock.
See id. Without such a rule, subsequent purchasers of shares could reap a windfall from any recovery in a derivative suit which was not considered in the purchase price of their shares. See Fletcher Cyclopedia Corporations § 5981.81 (1996). The Jones court took the position that where this primary purpose will not be frustrated, the shareholder standing requirements should be liberally construed. See id.
By denying an equitable owner of shares the opportunity to enforce a corporate right because she toils to satisfy die ownership requirements as a "shareholder,” a court does not advance the policy articulated in Jones. It might also lead to an inequitable result since there may be no other shareholders willing to bring a derivative suit See Jones, at 192. For these [435]*435reasons, many jurisdictions grant standing to sue derivatively to proven owners of an equitable or beneficial interest in shines.
Like the plaintiff in Jones, Milstead possesses a contractual expectancy in shaves, toe contractual expectancy having been created by toe separation shaves of Currents General in order to establish standing and, therefore, does not frustrate toe purpose Virginia Code § 13.1-671.1. Further, it does not appear that any of the other shareholders of Currents General would be willing to institute a derivative suit against toe corporation. It is unlikely that toe individual defendants, Ronald D. Bradshaw and Alfied T. Bradshaw, who are toe only shareholders, would bring a derivative suit against themselves.
The plaintiff in Jones relied upon an earlier unpublished case called Pennington v. Neukomm, No. 4172, 1973 (Del. Ch., Oct. 3, 1973) aff'd No. 26, 1974 (Del. Super., Jan. 3, 1975). The situation which creates toe contractual expectancy in Milsiead’s case is similar to that in Pennington where toe plaintiff claimed standing to sue derivatively under a separation and property settlement agreement entered into upon divorce. In its decision, toe Delaware Superior Court confirmed plaintiffs standing based upon her equitable interest in shares and stated toe following:
[Hie plaintiff] has already purchased toe stock by entering into toe separation and property settlement agreement with [her ex-husband]. In return for toe consideration given by her under this agreement, one of toe considerations she received in return was one half of [ex-husband’s] stock....
Jones, at 192. The Jones court endorsed this position in reaching its decision. This court finds great persuasive authority in these Delaware cases and endorses boto toe Jones and Pennington decisions.
Many federal courts recognize that holders of equitable or beneficial interests in shares have standing to bring a derivative suit For example, in Edgeworth v. First Nat'l Bank of Chicago, toe court held that a beneficiary of one half of toe income of a trust which owned 80% of a closely held corporation was entitled to bring a derivative action as a shareholder. 677 F. Supp. 982 (S.D. Ind. 1988). Although toe court applied Federal Rule 23.1, it stated in a footnote, “[ijn any event, this court finds no authority to suggest that reliance on federal rather than state law would yield a different result” Id. at 992, n. 5. While the court granted plaintiff standing as a “shareholder” for purposes of commencing a derivative suit it qualified its holding to toe particular facts of toe Edgeworth case and refused to articulate a blanket rule [436]*436which would consider all trust beneficiaries as shareholders. Because the trust owned such a significant percentage (i.e. 40%) of the corporation, the court determined that the "equities embodied in Rule 23.1 are best served by allowing the ¡plaintiff) to proceed as a shareholder." Id. at 993. Under this line of reasoning, Milstead’s equitable interest in one hundred shares (i.e. 33%) of Currents General is sufficient to allow her to proceed as a shareholder.
The appropriate statute of limitations is five years. Equity follows the law with respect to die statute of limitations. See Belcher v. Kirkwood, 238 Va. 430 (1989). Thus, where one asserts a legal demand in equity which at law is barred by statute, it will be equally barred in a court of equity. See id. at 433.
While a derivative action is in equity, this court must consider whether the cause of action upon which Milstead seeks to sue would be barred by a legal period of limitations had die action been brought by the corporation. "Thus, if the corporation were seeking relief by way of rescission or an accounting, for example, then [laches] would be applicable. On die other hand, if the corporation were suing for negligence of the directors or waste, die applicable legal period of limitations would be applicable." Corporate Litigation, §357 (emphasis added). Milstead alleges in her Bill of Complaint that the individual defendants "with gross negligence, carelessness, and intent ... wasted and diverted [assets] to defendant Currents Construction, Inc." This cruise of action is, therefore, subject to a statutory period of limitations.
Virginia does not have a specific statute of limitations applicable to a shareholders' derivative suit. Therefore, this court must apply the most nearly applicable period of limitations of the forum. Both parties have argued in depth their reasons tor applying certain statutes of limitations to die instant case. Milstead identifies the five-year statute of limitations for injury to property. See Va. Code § 8.01-243(B). Defendants argue that the appropriate statute of limitations is governed by Virginia’s "catch-all” provision which sets forth either a one or two-year statute of limitations depending on when the cause of action accrued, hi light of the allegations made against the defendants for wrongs affecting Milstead’s property and property rights, this court concludes that die appropriate period of limitations for commencing a derivative suit is five years. See Winston v. Gordon, 115 Va. 899 (1914) (holding that the cause of action against the directors of a bank for neglect of duty as such directors grows out of their breach of duty, and thus, the applicable statute of limitations is five years); see also Anderson v. Bundy, 161 Va. 1 (1933) (holding that in a suit against bank directors for negligence in administration of the affairs of die bank, the five-year statute of limitation applies). Thus, Milstead’s suit is not time barred.
[437]*437Equity considers as done that which ought to be done. In other words, equity will decree that as done which by agreement is agreed to be done and is proper to fully effectuate the intentions of the parties concerned. See Pleasants v. Pleasants, 221 Va. 1017 (1981). This principle gives further support to grant Milstead standing to sue. By executing the final separation agreement, Milstead and her ex-husband agreed that she would receive his shares of Currents General stock. Had diere been an appropriate transfer of shares on Cúrrente General’s corporate books, then Milstead would qualify as a "shareholder.” If this court considers as done that which by agreement is to be done, then Milstead should have standing to sue.
bn conclusion, this court finds that Virginia Code §§ 13.1-603 and 13.1-672.1 allow for the plaintiff to commence a derivative suit against the defendants. This court finds that Milstead has standing on the basis of her equitable ownership interest in shares of stock and qualifies standing to the particular facts of this case.
November 13,1997
On October 3, 1997, die Court issued a letter opinion concluding: (1) Milstead, as an equitable owner of stock, has standing to bring a derivative suit against Defendants and (2) the five year statute of limitations for injury to property applies to Milstead’s derivative suit. The Court stands by its ruling and denies Defendants’ Motion for Reconsideration of the statute of limitations issue. Accordingly, I am this day entering Orders dismissing Milstead’s personal action against Defendants and denying Defendants’ Motion for Summary Judgment
A derivative suit is an action filed by a shareholder to enforce a corporate cause of action where the corporation for some reasons has not sued to protect its own rights. While the Virginia Code does not set forth a specific statute of limitations to shareholders’ derivative actions, die Court must determine which particular statute applies to die present case.
Milstead asserts that the five-year statute of limitations for injury to property applies. See Va. Code § 8.01-243(B). Defendants argue that the appropriate statute of limitations is governed by Virginia’s "catch-all” provision which sets forth either a one or two-year statute of limitations depending on when the cause of action accrued. See Va. Code § 8.01-248.
Defendants claim that the Court’s reliance on Winston v. Gordon, 115 Va. 899 (1914), is misplaced, hr Winston, the court applied die “catch-all” statute of limitations to the cause of action against directors of a bank for neglect of duty as such directors. See id. at 915. While the court considered the action as [438]*438one arising out of a breach of duty, "[t]he wrong, if any, was to die rights of property" Id. at 917 (emphasis added).
Section 2927 of the 1887 Code, die code section in effect in 1914, provided that: “Every personal action for which no limitation is otherwise prescribed shall be brought within five years next after the right to bring die same shall have accrued...Va. Code § 2927 (1887) (emphasis added).2 The Winston court applied this statute because the legislature had not enacted a statute setting forth a limitations period for an action based on injury to property. According to die Revisers’ Note of Virginia Code § 8.01-243, “[sjubsection B takes the 5-year limitation of the second sentence of former § 8-24 and applies it to all tort actions for injury to property.”
The court in Winston concluded that a shareholder’s claim for damages for financial loss resulting from negligent mismanagement by bank directo» were considered as damages flowing from injury to property interests.
In Anderson v. Bundy, 161 Va. 1 (1933), die court relied on its holding in Winston and applied ¿he five year statute of limitations. Like Winston, Anderson involved a suit brought by deposito» to hold bank directo» liable for their negligent administration of business affairs. “Bank directors, in their relation to the corporation, its crédito» and depositors, occupy a fiduciary position.” Anderson, 161 Va. at 18. The nature of the suits against the directo» in each of these cases is identical to that ofMilstead’s derivative suit; a cause of action grows from a breach of duty and causes an injury to property.
When one deposits money in a savings bank, or takes stock in corporations, thus divesting himself of the immediate control of his property, he expects, and has the right to expect, that the trustees or directo», who are chosen to take his place in die management and control of his property, will exercise ordinary care and prudence in the trusts committed to diem....
Anderson, 161 Va. at 16-17 (emphasis added) (citations omitted). The court further articulated:
It is clearly the law, at least in most jurisdictions, and certainly in Virginia, that no direct action lies to a creditor of a corporation [439]*439against its directors, who are its agents... for improper performance or Mure in performance of their duties. This is a right belonging to the corporation onfyt or its legal successors to the right. The creditors must sue, not for any direct right of action in them, but in the right of die corporation, after the corporation, or its proper representatives, have refused to act
Id. at 21 (emphasis added) (citations omitted). Against these facts and reasoning, the Court’s reliance on Anderson and Winston is appropriate.