Montfort v. Korte, 6603.
| Decision Date | 09 January 1939 |
| Docket Number | No. 6603.,6603. |
| Parties | MONTFORT v. KORTE. |
| Court | U.S. Court of Appeals — Seventh Circuit |
U. S. Lesh, James E. Lesh, and Samuel T. Lesh, all of Indianapolis, Ind., for appellant.
Sherman Minton and Frank E. Lorch, Jr., of New Albany, Ind., for appellee.
Before EVANS, MAJOR, and TREANOR, Circuit Judges.
Upon an involuntary petition filed March 19, 1937, Raymond E. Korte was adjudicated a bankrupt May 12, 1937. The present litigation is a suit brought by plaintiff, as trustee, to set aside as fraudulent, transfers to bankrupt's wife, the defendant, Catherine Korte, of 1 share of stock of Home Transit, Inc., April 7, 1934, and 131 1/3 shares July 27, 1936. The bill of complaint, upon which the cause was heard, designated as the second amended bill of complaint, filed November 24, 1937, also asked that the Home Transit, Inc., a party defendant, be restrained from paying any salary or dividends to the defendant until the final hearing of the cause, or until the further order of the court. The prayer for a temporary injunction was granted November 29, 1937.
Home Transit, Inc, was incorporated under Indiana laws in November, 1933, with its principal place of business in New Albany. The incorporators were Robert Kelso and his wife, Lessie, and the bankrupt and his wife, the defendant in this suit. One hundred ninety-nine shares of stock were issued to the bankrupt, one share to his wife and a like number of shares to Robert Kelso and his wife, Lessie, making a total of 400 shares, the amount paid for the same being $4000. Shortly after the stock was issued, Korte and Kelso each sold to Gerald H. Barr, 66 2/3 shares, receiving therefor $10 a share. This left Kelso and Korte each the record owner of 132 1/3 shares. It was the contention of the defendant that she advanced to her husband in cash one-half of the money used in the original purchase of the 200 shares and thereby became the owner of 100 shares; that after the sale of 66 2/3 shares to Barr, Korte remained the owner of only 33 1/3 shares, at which time it was agreed between Korte and the defendant that she was to become the owner of said shares, except 1 which he retained as a qualifying share, paying for the same from the income of the stock and that she then was the owner of 132 1/3 shares, those here in controversy. While the stock was carried upon the books of the corporation in the name of Raymond E. Korte up until the time of the transfer under attack, it is the position of defendant that she was the equitable owner and her husband was acting as her agent. On the other hand it is charged that defendant was never the owner of the stock, had no interest in the same and that the transfer was made for the purpose of defrauding creditors at a time when the transferor was insolvent. It is apparent that the issue presented was largely one of fact which has been determined adversely to defendant by the court below. It would serve no useful purpose to relate in detail the testimony adduced in support of the respective theories. It is sufficient for us to conclude that there is substantial evidence to support the decree.
On November 29, 1937, the court entered a temporary injunction which, among other things, restrained the corporation from paying to the defendant any earnings apportioned to the involved stock until the further order of the court.
Defendant, by her answer, raised the question as to the court's jurisdiction. It was alleged in substance that on the 17th day of March, 1937, for a valuable consideration, she endorsed and delivered to the Citizens Union National Bank of Louisville, Kentucky, 131 1/3 shares of the stock in controversy as collateral for a loan extended to her by said bank. Plaintiff replied that even so, the Louisville bank was not an indispensable party. Thus we have presented the difficult question: Was the Louisville bank an indispensable party? If so, the court was lacking in authority to proceed in the absence of such party. Plaintiff, in his brief, states: "This is purely an in rem action to determine the title to certain shares of the capital stock of Home Transit, Inc., a domestic corporation of Indiana." Defendant does not dispute but what the action is in rem, but insists the res is in Kentucky and not Indiana, and that under such circumstances, a suit is not maintainable in this jurisdiction. Many authorities are cited in support of each of the respective contentions, a review of which discloses considerable conflict. Our attention is called by plaintiff to Thompson v. Terminal Shares, 8 Cir., 89 F.2d 652, as authority for the proposition that shares of stock in a corporation have their situs in the state of incorporation. It seems the court thus held, and on page 656 are numerous cases cited in support thereof. It becomes apparent, however, that a distinction has generally been made in states where a Uniform Stock Transfer Act is in effect. Such an act exists in Indiana (6 Burns Ind.Stat., 1933, Sec. 25-701 et seq.). In Peckinpaugh v. H. W. Noble & Co., 238 Mich. 464, 213 N.W. 859, 52 A.L.R. 941, the Supreme Court of Michigan said, page 861:
To the same effect is the holding of the Supreme Court of Virginia in Iron City Sav. Bank v. Isaacsen, 158 Va. 609, 164 S.E. 520. In 39 Harvard Law Review, page 485, is found an article "Situs of Shares of Stock" in which many authorities are cited and discussed. On page 487 it is said:
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