Direction der Disconto-Gesellschaft v. United States Steel Corporation

• Decision Date: 05 June 1924
• Citation: 300 F. 741
• Parties: DIRECTION DER DISCONTO-GESELLSCHAFT v. UNITED STATES STEEL CORPORATION et al. BANK FUR HANDEL UND INDUSTRIE v. SAME.
• Court: U.S. District Court — Southern District of New York

300 F. 741

DIRECTION DER DISCONTO-GESELLSCHAFT v. UNITED STATES STEEL CORPORATION et al.

BANK FUR HANDEL UND INDUSTRIE v. SAME.

United States District Court, S.D. New York.

June 5, 1924

[Copyrighted Material Omitted]

Alfred K. Nippert and John Wilson Brown, III, both of Washington D.C., for plaintiffs.

Frederic R. Coudert, Howard Thayer Kingsbury, and Mahlon B. Doing, all of New York City, for public trustee.

William Averell Brown, of New York City, for United States Steel Corporation.

LEARNED HAND, District Judge (after stating the facts as above).

I must be careful to observe what is not involved in the suits. I have nothing to decide as to the validity of the seizure of an unindorsed certificate in the name of a registered shareholder, who was not only a subject of Germany, but a resident of that empire, over whom, therefore, the king of Great Britain had no personal jurisdiction, and who owed him no allegiance. Again I have nothing to do with the power of the United States to capture these shares, notwithstanding a prior capture in England; that is, I need not say whether, if the local sovereign lays his hand upon the corporation, he should prevail over similar action taken elsewhere against the shareholder. Miller v. Kaliwerke, etc. (C.C.A 2) 283 F. 746. Perhaps that would always be a diplomatic question; in any event, it is not up in these suits. Any rights of the United States as captor depended upon a state of war and ceased after July 2, 1921, no capture having been attempted up to that time.

It may be as well here to take up the point raised by the United States Steel Corporation that the United States, not as putative captor, but as transferee under the Treaty of Berlin (42 Stat. 1939) might demand the same shares after the termination of these suits, since no decree in this suit can foreclose it. While it is therefore quite true that the United States Steel Corporation is not protected against such a demand, I think that the risk to the company is not serious enough to justify a refusal to adjust the differences actually presented. The United States by hypothesis must claim under the treaty and its rights would be in devolution from those of the plaintiffs. If, as I believe, those rights had already ended before the treaty was made, it is difficult to see how the United States, which may not claim as captor could succeed as grantee. Furthermore, though it is reasonably apparent that Congress does not mean to act in the matter, yet, since no lapse of time would affect its rights, the controversy could in all probability never be adjusted, if the United States is a necessary party. It must be forever hung up without decision against the possible assertion by the United States, good till the end of time, of a claim, derivative merely from the rights of the plaintiffs, which it apparently never means to make. Faced with this very practical dilemma, it appears to me that I may properly say that, while the United States would be a proper party, it is not a necessary one, and that the case may proceed. Nor does the company's risk seem to me substantial enough to require the new certificates to carry a notice which might very seriously affect their negotiability, as suggested.

Coming, then, to the actual issues, I have to decide what person the company must recognize as shareholder. In deciding that question I can only follow the law of the place where I sit. It is indeed commonly said that, when a court must consider the legal effect of events happening elsewhere, it enforces foreign law. That I conceive is a compressed statement, which it is at times useful to expand. Of necessity no court can enforce the law of another place. It is, however, the general law of all civilized peoples that, in adjusting the rights of suitors, courts will impute to them rights and duties similar to those which arose in the place where the relevant transactions occurred. Hilton v. Guyot, 159 U.S. 163, 16 Sup.Ct. 139, 40 L.Ed. 95; Guinness v. Miller (D.C.) 291 F. 769.

While I must therefore first look to the law of the state of New York to ascertain the duties of the United States Steel Corporation, that state will impose duties similar to those of the domicile of the corporation, New Jersey. At the time when these certificates were issued in January, 1913, and February, 1916, the Uniform Stock Transfer Act (P.L. 1916, p. 404) had not been enacted in New Jersey (it was passed in March, 1916), and by section 23 of that act it does not apply to certificates issued before its passage. Hence the question as to who must be recognized as the shareholder is to be determined by the common law of New Jersey. There is no difference, however, between the common law (Johnston v. Laflin, 103 U.S. 800, 26 L.Ed. 532) and the law of that state (Broadway Bank v. McElrath, 13 N.J.Eq. 24); that is to say, the indorsement in blank and delivery of the certificate transfers the title to the shares. No controversy can arise as to the first of these conditions, because under the law of New Jersey, as well as under the law of England, the signature of the power of attorney by the registered holder, without filling in any name, was an indorsement in blank. Controversy can and does arise over the question of delivery, and the agreed statement of facts merely says that the public trustee 'physically seized, took possession of and retained' the certificates. The 'vesting orders' provide that the securities shall 'vest' in him, together with the right to take possession of the documents.

It is, of course, possible that in the case of the Disconto-Gesellschaft the local agent of the plaintiff surrendered the certificates on demand, and in the case of the Bank fur Handel that the pledgee did the same. Were those facts admitted, the case would at once be clear, because such a surrender would be a delivery within the common law of New Jersey. The fact that the delivery was compelled by the sanctions of the English statute would be irrelevant. Any deliberate action of the sovereign within its own territory is necessarily lawful. American Banana Co. v. United Fruit Co., 213 U.S. 347, 356, 29 Sup.Ct. 511, 53 L.Ed. 826, 16 Ann.Cas. 1047. No foreign court would treat it otherwise, unless it violates the ethos of its own people, a position scarcely tenable in a country which under similar, though less pressing, provocation did exactly the same thing.

However, the agreed facts do not allow this easy disposition of the suits, because it is consistent with them that the public trustee may have forcibly seized the certificate, and such a change of possession would not fall within any latitude of definition of the word 'delivery,' as the plaintiffs properly maintain. Therefore, as the English statute was not part of the law of New Jersey, it becomes necessary to determine whether the transfer of title to the shares is governed by the law of New Jersey or the law of England. It is, indeed, sometimes said that the transfer of shares must be governed by the law of the corporate domicile; but the cases do not, I think, go so far. In Hammond v. Hastings, 134 U.S. 401, 10 Sup.Ct. 727, 33 L.Ed. 960, the question was only whether the transferee took subject to the corporation's lien; in Shaw v. Goebel Brewing Co. (C.C.A. 6), 202 F. 408, 120 C.C.A. 470, 45 L.R.A.(N.S.) 1090, whether the conditions annexed to the shares were valid against the assignee. Black v. Zacharie, 3 How. 483, 11 L.Ed. 690, indeed, recognizes that the transfer of 'equitable title' is governed by the lex loci, and within 'equitable title' Justice Story certainly included all that we are discussing here. Under the law of England the transfer of title is determined by the lex loci. Williams v. Colonial Bank, L.R. 38 Ch.Div. 388 (C.A.). This must be true, whether the shares be identified with the certificates qua documents, or whether the rights of the transferee be worked out as attorney for the registered holder.

It is scarcely necessary to say that, if the shares are identified...