Baker v. Goetz

• Decision Date: 20 December 1971
• Docket Number: Civ. A. No. 4072.
• Parties: George P. BAKER et al., Plaintiffs, v. Fidel GÖTZ et al., Defendants.
• Court: U.S. District Court — District of Delaware

336 F. Supp. 197

George P. BAKER et al., Plaintiffs, v. Fidel GÖTZ et al., Defendants.

Civ. A. No. 4072.

United States District Court, D. Delaware.

December 20, 1971.

William E. Taylor, Jr., Wilmington, Del., and Edwin P. Rome, Morris L. Weisberg, Philadelphia, Pa., Special Counsel for Trustees of the Property of Penn Central Transportation Co., and Robert W. Blanchette, Philadelphia, Pa., Counsel for Trustees of the Property of Penn Central Transportation Co., for plaintiffs.

Arthur G. Connolly and Arthur G. Connolly, Jr., Wilmington, Del., and Saul L. Sherman and William B. Graves, New York City, of counsel, for defendants.

R. Franklin Balotti, Wilmington, Del., for Textron Inc. and Textron Atlantic Inc., petitioners.

OPINION

STEEL, District Judge.

Three defendants, non-residents of Delaware, whose property purports to have been sequestered under FRCP 4(e)¹ in an action praying, inter alia, for a money judgment against them, have moved upon the basis of affidavits to vacate the sequestration and/or to dismiss for lack of jurisdiction. FRCP 4(e) incorporates by reference 10 Del.C. § 366² and its implementing Court of Chancery Rule 4(db), Del.C.Ann.³

The return of the sequestrator discloses that he purported to sequester the following property:

Property of Inter-Marketing Corp.

30,000 SSI Computer Corp. common stock purchase warrants.

$1,000,000 principal amount 7% subordinated note, SSI Computer Corp. (now ITEL Computer Leasing Corporation).

50 shares common stock.⁴

Property of Minolta

25,360,500 (Swiss francs) principal amount 8% notes of Textron Atlantic, Inc.

Property of Vileda

$500,000 principal amount of SSI Computer Corp. debentures (now ITEL Computer Leasing Corporation).⁵

10,000 ITEL warrants.⁶

Plaintiffs are three individuals who were duly appointed trustees of the property of Penn Central Transportation Co., debtor in proceedings for reorganization of the railroad pursuant to § 77 of the Bankruptcy Act, by the Honorable John P. Fullam, United States District Judge for the Eastern District of Pennsylvania.

The eight defendants are either natural persons, "juridical persons", or corporations, all of whom are citizens of foreign states and reside in continental Europe. The complaint charges that seven of the defendants are completely controlled and dominated by the eighth defendant, Fidel Götz, that one or more of them entered into a conspiracy with Götz to convert and embezzle and did convert and embezzle $4,000,000 belonging to the Penn Central Transportation Company in order to benefit Fidel Götz and/or one or more of themselves in breach of their fiduciary obligations to Penn Central. The complaint prays that the defendants be required to account to plaintiffs in the amount of $4,000,000 with interest and accretions, that a judgment be entered against the defendants, jointly and severally, for punitive, exemplary, or vindictive damages, and for other relief. Jurisdiction is predicated upon 28 U.S.C. § 1332(a) (2) pertaining to aliens and diversity of citizenship. The complaint is unverified. No answer has been filed.

The sequestration of property in Delaware owned by a non-resident defendant for the purpose of compelling the appearance of such a defendant in an action for a money judgment is authorized by 10 Del.C. § 366. As a result of the decision in Cantor v. Sachs, 18 Del. Ch. 359, 162 A. 73, 85-86 (Del.Ch.1932), decided under the statutory forerunner of § 366, an implementing rule was promulgated by the Court of Chancery which in its present form is Rule 4(db). Greene v. Johnston, 34 Del.Ch. 115, 99 A.2d 627, 637 (Sup.Ct.Del.1953). Compliance with the affidavit requirement of Rule 4(db) is a condition to the sequestration of property owned by a nonresident defendant. In purported compliance with the Rule, William E. Taylor, attorney of record for plaintiffs, filed an affidavit which in part stated:

"2. Upon information and belief, the source of which is Edwin P. Rome, Esquire, Special Counsel for the Trustees of Penn Central Transportation Company, the property sought to be seized is the following property in which Fidel Götz or Volker Götz has a legal or equitable interest, or in which one or more of the other named defendants, which are all controlled by Fidel Götz, has or have a legal or equitable interest:

(a) Notes in the amount of approximately $7,000,000 issued by Textron, Inc., which are owned by, or in which the following have an interest: Inter-Marketing Corp. Anstalt, Götz Aktiengesellschaft of St. Gallen, or Inter-Industry Aktiengesellschaft of St. Gallen, or one of the other defendants;

(b) Common stock of California Financial Corp., 11 Tillman Place, San Francisco, California, of an approximate value of $250,000, in which one or more of the defendants have an interest;

(c) Debentures and/or common stock of Culligan, Inc., of a value of approximately $150,000, in which defendant Vileda Anstalt, or one or more of the other defendants, has an interest;

(d) Convertible subordinated notes of C.B.K. Agronomics, Inc., 1125 Grand Avenue, Kansas City, Missouri, in which one or more of the defendants has an interest;

(e) Subordinated 7 percent notes of ITEL Computer Corporation (formerly known as S.S.I. Computer, Inc.) of a face value of $2,000,000, in which Finanz Aktiengesellschaft, or Vileda Anstalt, or Inter-Marketing Corp. Anstalt, or one of the other defendants has an interest;

(f) Common or preferred stock of Oceanography, Inc., of an approximate value of $500,000, in which one or more of the defendants has an interest;

(g) Debts, obligations and property of, or held by, Bache & Co. Incorporated, in which defendant Inter-Marketing Corp. Anstalt, or one or more of the other defendants has an interest;

(h) Debts, obligations and property of, or held by, Eastman Dillon, Union Securities & Co. Incorporated, in which defendant Finanz Aktiengesellschaft, or defendant Inter-Marketing Corp. Anstalt, or one or more of the other defendants has an interest;

(i) Debts, obligations and property of, or held by duPont, Glore Forgan, Incorporated (formerly William R. Staats & Co. Incorporated or Glore Forgan, Wm. R. Staats Inc.), in which one or more of the defendants has an interest;

(j) Debts, obligations and property of, or held by duPont Glore Forgan Municipals, Incorporated (formerly Francis I. duPont Municipals, Inc.), in which one or more of the defendants has an interest;

(k) Notes issued by Textron, Atlantic, Inc., a wholly-owned subsidiary of Textron, Inc., in which Inter-Marketing Corp. Anstalt, Götz Aktiengesellschaft of St. Gallen, Inter-Industry Aktiengesellschaft of St. Gallen, Minolta Anstalt, or one or more of the other defendants has an interest;

(l) Common stock of Summit Industries, Inc. held by one or more of the defendants;

(m) Common Stock of Summit Corporation, held by one or more of the defendants."

The affidavit continued by alleging the nonresidency of the defendants, setting forth their last known addresses and then continued:

"5. The number of shares of stock, notes, debentures, debts, contract obligations and any other property of said defendants (`property'), insofar as known to your affiant, are set forth in paragraph 2.

6. Affiant is unable to state the value of any of the property owned by any of said defendants, except as set forth in paragraph 2, because that information is peculiarly within the knowledge of said defendants and the corporation whose shares, notes, debentures, debts and contract obligations are involved.

7. The title of the defendants to said property cannot specifically be determined to be legal or equitable with respect to the various items of property listed in paragraph 2 because all of said property in whatever manner said property is held is subject to the control and domination of Fidel Götz and cannot be determined from time to time, except on information obtained from said defendants.

8. Affiant is unaware of and, therefore, unable to state that any person or persons or other legal entities have an equitable or legal interest in any of said property because such information is peculiarly within the knowledge of the defendant Fidel Götz or persons or corporations subject to his control and domination and not available to plaintiffs or affiant.

9. The statements made herein are made upon information and belief, based upon information supplied to affiant by Edwin P. Rome, Esquire, affiant's associate counsel, based upon investigation by (a) Mr. Rome, (b) Robert W. Blanchette, Esquire, Counsel for the Trustees of Penn Central Transportation Company, and (c) other partners in the firm of Blank, Rome, Klaus & Comisky, Special Counsel for the Trustees of Penn Central Transportation Company, appointed as such counsel by orders of the Honorable John P. Fullam, United States District Judge for the Eastern District of Pennsylvania.

10. Affiant has stated all knowledge which he or Mr. Rome presently has from investigations relating to the facts required to be set forth pursuant to Chancery Court Rule 4(dd). Any failure to specifically set forth the facts required by this Rule has been occasioned by affiant's inability to secure any further information."

This affidavit fails to state that either Inter-Marketing, Minolta or Vileda owned any of the property which has been sequestered. In paragraph 8 Taylor states that he is unaware of and unable to state whether any of the defendants have any interest in any of the property which is specified in paragraph 2. Presumably paragraph 8 relates to Taylor's lack of personal knowledge. Paragraph 2 is based upon information and belief, the source of which is Edwin P. Rome, Esquire, Special Counsel for the Trustees, and it is likewise deficient for it fails to state that either Inter-Marketing, Minolta or Vileda own any of the property which has been seized. It says only that one or more of the eight defendants have an interest in one or the other of the thirteen categories of property...