Kitzer v. Phalen Park State Bank of St. Paul
Decision Date | 06 July 1967 |
Docket Number | No. 18586.,18586. |
Citation | 379 F.2d 650 |
Parties | Phillip KITZER, Sr. and Phillip Kitzer, Jr., Appellants, v. PHALEN PARK STATE BANK OF ST. PAUL, Homer A. Bonhiver as Receiver of American Allied Insurance Company and Allied Realty of St. Paul, Inc., Appellees. |
Court | U.S. Court of Appeals — Eighth Circuit |
Mark L. Schwartzman, Chicago, Ill., for appellants; Franklin Petri, Jr., Minneapolis, Minn., with him on the brief.
Samuel H. Morgan, St. Paul, Minn., for appellees Homer A. Bonhiver, as Receiver of American Allied Ins. Co., and Allied Realty of St. Paul, Inc.
Theodore R. Mellby, Montgomery, Minn., for appellee Phalen Park State Bank of St. Paul.
Before VAN OOSTERHOUT, MATTHES and LAY, Circuit Judges.
This is an action involving the Federal Interpleader Act, 28 U.S.C. § 1335. The Phalen Park State Bank of St. Paul, Minnesota, instituted the action joining as defendants Phillip Kitzer, Sr. and Phillip Kitzer, Jr., citizens of the State of Illinois, and Homer A. Bonhiver, receiver for American Allied Insurance Company, a citizen of the State of Minnesota, and Allied Realty of St. Paul, Inc., also a citizen of Minnesota. Under 28 U.S.C. § 2361, nationwide service of process is authorized and service was made on the Illinois citizens pursuant thereto.
The action concerns conflicting claims between two groups of claimants of diverse citizenship to ownership of 100 shares of the capital stock of the bank.1 At the commencement of the action on October 25, 1965, the two certificates were in the possession of the Kitzers and were not deposited into the registry of the court by the bank. The bank alleged in its complaint that it was a mere stakeholder claiming no interest in the ownership of the stock, but because of conflicting claims as to the ownership of stock it was subjected to a multiplicity of suits. Contemporaneously with the filing of the complaint the bank filed a surety bond in the amount of $2,000.00, approved by the court. The Kitzers pursuant to a court order deposited the certificates endorsed in blank into the registry of the court. The trial court held that jurisdictional requirements were satisfied; that the Kitzers owned no beneficial right, title or interest in the stock; that the certificates be delivered to the bank and that the bank transfer the shares on its records and issue new certificates to the owners of the stock. We affirm.
Appellants bring this appeal and contend, as they did below, that the bank's action should be dismissed for lack of jurisdiction over the subject matter under provisions of § 1335. Appellants contend that where there are rival claimants to a specific property it is a prerequisite to jurisdiction under the interpleader statute that a plaintiff deposit the property into the registry of the court. Appellants urge the bank did not and could not meet this requirement and therefore the court was without jurisdiction.
The requirement that the stakeholder deposit money or property or the giving of a bond in lieu thereof is a condition precedent to obtaining interpleader jurisdiction. 3 Moore, Federal Practice § 22.10 at 3077-86 (2d ed. 1966); Treinies v. Sunshine Mining Co., 9 Cir. 1939, 99 F.2d 651, aff'd 308 U.S. 66, 72, 60 S.Ct. 44, 84 L.Ed. 85. Where property alone is involved the courts have liberally construed the interpleader statute2 to allow the deposit of only the specific property in plaintiff's possession with the condition that the property deposited be of the value of $500.00 or more in compliance with the statute. See Austin v. Texas-Ohio Gas Co., 5 Cir., 218 F.2d 739, 744-745. However, many situations may exist where it becomes impracticable for a stakeholder to deposit the specific res in controversy into the registry of the court. Cf. Edner v. Massachusetts Mutual Life Ins. Co., 3 Cir., 138 F.2d 327. It is because of this that the Interpleader Act was amended to allow the use of a surety bond. The Senate Judiciary Report specifically reads:
Sen. Rep.No. 558, 74th Cong., 1st Sess., p. 6.
The act itself reads in part as follows:
If the bank is not a stakeholder of "property" under the Act it does not qualify to utilize the interpleader action to resolve the present controversy by the deposit of a bond in court.
The determination of what "property" is to be deposited under Tit. 28 § 1335 depends upon the person who invokes interpleader and what he asserts to be the subject matter of the controversy. Here the complaint alleges the dispute is over the "ownership" of the stock of the corporation. It might be argued that since the certificate of stock is in the possession of the appellant in Illinois, the Bank cannot qualify as a stakeholder to bring an interpleader suit. But such an assumption misreads the nature of the controversy. As was stated in First Nat. Bank of Jersey City v. Fleming, D.N.J., 10 F.R.D. 159 at 160, "the property here in litigation is not the certificate of stock but the shares of stock of which the certificate is merely evidence." This statement does not eliminate the deposit of a stock certificate as being sufficient for jurisdictional purposes under similar circumstances. See Wertheimer v. Bank of Nova Scotia, S.D.N.Y., 140 F.Supp. 950. However, at the same time where the corporation has "custody or possession" of the shares of stock as distinguished from the certificate, it should not eliminate the corporation as a stakeholder under the act. Even though the certificate of stock is treated as property for some purposes it still has no intrinsic value itself separate from the share of stock it represents. See 18 C.J.S. Corporations § 258, p. 723; 11 Fletcher, Cycl., Corporations, §§ 5092, 5096, 5097.
As the Supreme Court said in Pacific Nat. Bank v. Eaton, 141 U.S. 227 at 234, 11 S.Ct. 984 at 985, 35 L.Ed. 702:
Such a dichotomy is not strange to the law. Even in Minnesota after the passage of the Uniform Stock Transfer Act, e. g., Minn.Stat.Annot. c. 302, the shares of stock of the corporation as distinguished from the certificates were subject to garnishment at the situs of the corporation. In Wackerbarth v. Weisman, 207 Minn. 507, 292 N.W. 214, the Minnesota Supreme Court said:
And such a distinction is not to be confused with the actual capital and property of the corporation itself. 11 Fletcher, Cycl., Corporations § 5100.
Discussion of the corporate shares as "property" becomes even more significant when one considers Tit. 28 U.S.C. § 1655.4 Corporate shares of stock as distinguished from the certificate, have long been considered "property" by the Supreme Court of the United States for jurisdictional purposes in an action to clear title of stock under § 1655.
In Jellenik v. Huron Copper Mining Co., 177 U.S. 1, at 13, 20 S.Ct. 559, at 563, 44 L.Ed. 647, the court said:
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