International Mortgage & Investment Corp. v. Von Clemm

• Decision Date: 05 April 1962
• Docket Number: Docket 27178.,No. 158,158
• Court: U.S. Court of Appeals — Second Circuit
• Parties: INTERNATIONAL MORTGAGE & INVESTMENT CORPORATION (derivatively by Edward H. Heims et al.), Applicant for Intervention, Edward H. Heims et al., etc., Individually, Joint applicants for Intervention, Hans Kroch et al., etc., Individually, Joint applicants for Intervention, Appellants, v. Werner C. VON CLEMM and Rayford W. Alley, Trustee, co-partners under the name of Bridge Import Company, a co-partnership, and Werner C. Von Clemm, individually, Plaintiffs-Appellees, and Elizabeth Rudel Smith, Treasurer of the United States, Robert F. Kennedy, Attorney General of the United States, and Pioneer Import Corporation, Defendants-Appellees.

301 F.2d 857 (1962)

INTERNATIONAL MORTGAGE & INVESTMENT CORPORATION (derivatively by Edward H. Heims et al.), Applicant for Intervention Edward H. Heims et al., etc., Individually, Joint applicants for Intervention Hans Kroch et al., etc., Individually, Joint applicants for Intervention, Appellants, v. Werner C. VON CLEMM and Rayford W. Alley, Trustee, co-partners under the name of Bridge Import Company, a co-partnership, and Werner C. Von Clemm, individually, Plaintiffs-Appellees, and Elizabeth Rudel Smith, Treasurer of the United States, Robert F. Kennedy, Attorney General of the United States, and Pioneer Import Corporation, Defendants-Appellees.

No. 158, Docket 27178.

United States Court of Appeals Second Circuit.

Argued December 13, 1961.

Decided April 5, 1962.

Henry F. Butler, Washington, D. C. (Amos J. Peaslee, Jr., New York City, on the brief), for appellants International Mortgage & Investment Corp. and Edward H. Heims.

George Eric Rosden, Washington, D. C. (Waldemar J. Dittmar, New York City, on the brief), for appellants Hans Kroch, and others.

Alexander Kahan, New York City, for plaintiffs-appellees Werner C. Von Clemm, and others.

Michael A. Berch, Asst. U. S. Atty., Southern Dist. of New York, New York

City (Robert M. Morgenthau, U. S. Atty., and Eugene R. Anderson and David Klingsberg, Asst. U. S. Attys., on the brief), for defendants-appellees.

Before LUMBARD, Chief Judge, and MOORE and HAYS, Circuit Judges.

LUMBARD, Chief Judge.

Whether shareholders and equitable owners of a corporation claiming ownership of property seized by the Alien Property Custodian may intervene as parties defendant in a suit by other claimants to the vested property against the Office of Alien Property so that they may protect their corporate and individual rights is the question for decision on this appeal.

The suit was commenced in July 1960 by Werner Von Clemm and Rayford W. Alley, Trustee, co-partners of Bridge Import Company and Von Clemm individually, against the Treasurer and the Attorney General of the United States, under § 9(a) of the Trading with the Enemy Act, 50 U.S.C.A.Appendix, § 9(a), for recovery of the common stock of Pioneer Import Corporation, a New York company, and the proceeds of the sale of certain precious stones, all alleged to be worth over $900,000. The stock of Pioneer and the precious stones are also claimed by International Mortgage & Investment Corporation (IMC), organized in Maryland in 1926, of which two-thirds of the stock was vested by the Alien Property Custodian. It is to protect this claim of IMC that two groups of stockholders in IMC are here seeking to intervene.¹ One group, the Heims claimants, consists of eight individuals, an estate, a foundation and a company, all of whom claim to be American citizens since prior to 1939 and all of whom claim ownership of IMC common and preferred stock since prior to 1939.

The second group of IMC stockholders are the Kroch claimants, consisting of Hans Kroch and members of his family, Jewish residents of Germany under Hitler, who claim that they were the owners of approximately one-third of IMC's preferred stock before the Hitler regime appropriated the property by compelling transfer of the stock to a German bank. Ultimately this stock was vested by the Alien Property Custodian.

I.

Notice of claim to the Pioneer stock and precious stones was filed by Von Clemm and Alley at some time prior to May, 1949. Other notices of claim to this property and to the vested IMC stock were filed after May, 1949. There followed administrative proceedings under 50 U.S.C.A.Appendix §§ 9(a), 32(a), to determine which, if any, of the claims should be allowed. On June 14, 1955 the Chief Hearing Examiner of the Office of Alien Property recommended that the IMC stock of which the Krochs had formerly been deprived be returned to them. On April 9, 1959, the Chief Hearing Examiner recommended that the derivative claims of IMC by the Heims group to the Pioneer stock and to the precious stones be allowed. All these recommendations, though in one case made almost seven years ago and in the other three years ago, are still awaiting review by the Director of the Office of Alien Property and by the Attorney General.

As Von Clemm and Alley were dissatisfied with the Examiner's recommendations, they commenced this suit which raises the same questions already passed upon by the Hearing Examiner.² All the parties to the suit are now united as to only one thing and that is that they wish to prevent intervention by IMC or persons interested in IMC. The would-be interveners, barred from instituting suit against the United States by failure to file notice of claim prior to May 1949,³ see 50 U.S.C.A.Appendix, § 33, Grabbe v. Brownell, 247 F.2d 402 (2 Cir. 1957), sought in the district court leave to intervene both as parties plaintiff and as parties defendant. The district court denied their petitions in an opinion reported at 27 F.R.D. 488 (1961). On appeal they seek only to be permitted to intervene as parties defendant. We hold that petitioners should have been given such permission under Rules 24(a) (2) and 24(a) (3) of the Federal Rules of Civil Procedure, 28 U.S.C.

An order denying intervention as of right is clearly appealable, Sam Fox Publishing Co. v. United States, 366 U.S. 683, 81 S.Ct. 1309, 6 L.Ed.2d 604 (1961); Sutphen Estates v. United States, 342 U.S. 19, 72 S.Ct. 14, 96 L.Ed. 19 (1951).

II.

The appellants contend that they have a right to intervene as parties defendant in this action under Rule 24(a) (2) of the Federal Rules of Civil Procedure which provides that "Upon timely application anyone shall be permitted to intervene in an action; * * * (2) when the representation of the applicant's interest by existing parties is or may be inadequate and the applicant is or may be bound by a judgment in the action." We agree.

IMC's claim to the property gives it an interest which can be asserted derivatively by the Heims claimants as minority stockholders. Stoehr v. Wallace, 255 U.S. 239, 41 S.Ct. 293, 65 L.Ed. 604 (1921).

Each non-enemy stockholder in IMC has an individual interest in the assets of IMC proportionate to his stockholdings; this interest is sufficient to give him the right to intervene under Rule 24(a) (2) in his own right in an action by IMC to recover these assets — at least where there is sound reason for belief that IMC may fail adequately to protect his interest. Kaufman v. Societe Internationale, 343 U.S. 156, 72 S.Ct. 611, 96 L.Ed. 853 (1952).

Whether a stockholder's interest in the corporate assets is also sufficient to permit him to intervene when the corporation is willing and able to protect his rights is left unresolved by Kaufman. But such decisions as we have found indicate that each stockholder must himself assert his own right to a pro-rata share of the vested assets and that neither the corporation or other stockholders can recover on behalf of non-enemy stockholders not present in the action. See Kaufman v. Brownell, 101 U.S. App.D.C. 147, 247 F.2d 553 (1957); Societe Internationale v. McGrath (McGranery), 17 F.R.Serv. 394 (D.C.D.C. 1952). If this is so, each stockholder has patently a sufficient "interest" in the vested property to entitle him to intervene under Rule 24(a) (2) in an action for recovery of the property and this remains true regardless of the presence in the action of the corporation or of other stockholders.

Apparently the Office of Alien Property, which recognizes the applicability of Kaufman v. Societe Internationale to administrative proceedings, see In the Matter of Maria, Comtesse de Beurges, Title Claims 42430, 43996, 43997, Docket 57 T 38-40, recommended decision, June 27, 1957, approved, August 15, 1957, has in the present case permitted both IMC and the various persons interested in IMC to participate in the administrative proceedings concerned with the property claimed by Von Clemm. But even if in the administrative proceedings the right of persons interested in IMC to press their individual claims is regarded as conditioned on the failure of IMC to press its claim or adequately to protect their rights, or on a preliminary finding that IMC is enemy-tainted, we cannot be certain at this time that any of these conditions will not be satisfied while the suit is still in progress. For, although the recommended decision of the Chief Hearing Officer would recognize the claims of IMC to the vested property, that tentative determination is still subject to modification or reversal by the Director of the Office of Alien Property, significantly termed "initial," which in turn may be modified or reversed by the "final" decision of the Attorney General. 8 Code Fed.Regs. § 502.23 (1961). Thus a later decision may hold that IMC is enemy-tainted while recognizing the rights of various of the intervenors to recover, under Kaufman, their pro-rata shares. At that point there could be no doubt as to the sufficiency of the interests of the stockholders. We see nothing to be gained, and a possibility of serious inconvenience, in refusing to permit stockholders in IMC to intervene in their own right until such a determination is made. We see no reason to distinguish between the Heims and the Kroch appellants. Even though the claim of the Kroch appellants to 30% of the stock is still in the process of determination, the fact that the preliminary decision of the Hearing Examiner has been in their favor seems to us to give them sufficient interest in a litigation which may virtually terminate their chances ever to regain property taken from them over 20 years ago.

Plainly the various interests of appellants are not and probably will not be adequately represented by the "existing parties." Von Clemm and Alley can only recover upon a showing of their beneficial ownership of the property, Manufacturers Trust Company v. Kennedy, 291 F.2d 460, 467-468 (2 Cir. 1961); therefore they will seek to defeat the...