Sylvania Industrial Corporation v. Lilienfeld's Estate

• Decision Date: 02 January 1943
• Docket Number: No. 4972.,4972.
• Citation: 132 F.2d 887
• Parties: SYLVANIA INDUSTRIAL CORPORATION v. LILIENFELD'S ESTATE et al.
• Court: U.S. Court of Appeals — Fourth Circuit

132 F.2d 887 (1943)

SYLVANIA INDUSTRIAL CORPORATION v. LILIENFELD'S ESTATE et al.

No. 4972.

Circuit Court of Appeals, Fourth Circuit.

January 2, 1943.

COPYRIGHT MATERIAL OMITTED

C. O'Conor Goolrick, of Fredericksburg, Va. (Basil N. Bass and T. J. Deyrup, both of New York City, on the brief), for appellant.

Alex. W. Parker, of Richmond, Va. (G. K. Richardson, of Boston, Mass., and Joseph M. Winston, Jr., of Richmond, Va., on the brief), for appellees.

Before PARKER and DOBIE, Circuit Judges, and William C. Coleman, District Judge.

PARKER, Circuit Judge.

This is a suit instituted in the court below by the Sylvania Industrial Corporation, a corporation organized and existing under the laws of the State of Virginia and doing business in that state. The defendant is Antonie Lilienfeld, individually and as executrix in fact of her deceased husband, Leon Lilienfeld. Defendant is a citizen of Poland and her husband, who died in the year 1938, was a citizen of that country. He left a will in which he devised and bequeathed all of his property to her. Although another person was named as executor of the will, it is admitted that all of the property was turned over to her by the executor, and that under the law of Poland, where she and her husband resided and where the will was probated, the effect of this was to clothe her with the status of executrix. A substantial part of the assets of the estate consisted of 15,244 shares of the capital stock of the plaintiff corporation, and these are still standing on the records of the corporation in decedent's name. Summons was served upon the defendant, who is now residing in Massachusetts, while she was in the territorial jurisdiction of the court below. The contention as to the validity of the service upon her as executrix under the law of a foreign country rests upon the ownership by the estate of stock in plaintiff, a Virginia corporation, and the fact that one of the purposes of the suit is to establish plaintiff's right to this stock.

The complaint states two causes of action. The first relates to a contract made between the Sylvanic Company, a Delaware corporation and a subsidiary of plaintiff, and Leon Lilienfeld, by the terms of which Lilienfeld granted to that company licenses under certain United States and foreign patents in consideration of the payment to him of $49,169.62 or £6,000 gold, and the delivery to him of 1,000 shares of its stock, subsequently exchanged for 10,000 shares of stock in plaintiff, and the payment of royalties as provided for in the contracts. These contracts were merged in a contract between the Sylvanic Company and Lilienfeld dated October 29, 1936, all rights under which were transferred to plaintiff by the Sylvanic Company, along with its other property, on June 28, 1937; and it is alleged that on May 6, 1940, plaintiff and defendant, as executrix, entered into an agreement modifying in certain respects the license agreements under this contract. The second cause of action relates to a contract made between Cellulose Holdings, Ltd., a Canadian corporation and a subsidiary of plaintiff, and Leon Lilienfeld, by the terms of which Lilienfeld granted to that company licenses under United States and foreign patents in consideration of the payment to him of $24,561.20, or £3,000 gold, and the delivery to him of 1,000 shares of its capital stock, subsequently exchanged for 6,559 shares of the stock of plaintiff, and the payment of royalties as provided for in the contract. It is alleged that on May 6, 1940, the contract entered into by Lilienfeld was modified by an agreement between Cellulose Holdings, Ltd., and defendant as executrix of Lilienfeld's estate. On August 1, 1940, Cellulose Holdings, Ltd., transferred to plaintiff all of its business and property.

The complaint does not seek to recover on either of the contracts and contains no allegations appropriate for the recovery of damages on account of breach. It is brought not as an action at law, but in the nature of a suit in equity under the old practice. The allegation is that there has been failure to prosecute patent applications, to communicate improvements to plaintiff so that patents could be sought therefor, to protect existing patent rights by opposing patents to others and generally to protect the patents under which licenses were granted and to perform the terms and provisions of the license agreements. The relief asked is that the contracts be rescinded and declared null and void, that the stock acquired by Lilienfeld thereunder be assigned and transferred to plaintiff and that defendant pay to plaintiff the money received by Lilienfeld under the contracts.

The court below, retaining the case as to the first cause of action in so far as it was against Antonie Lilienfeld, individually, dismissed it as against the estate of Leon Lilienfeld and as to the second cause of action. The estate of Leon Lilienfeld was dismissed on the ground that no personal representative of the estate was properly before the court. The second cause of action was dismissed on the ground that, as to it, plaintiff sued as assignee of an alien corporation which could not invoke the jurisdiction of the United States courts in a suit against an alien defendant, and that suit by plaintiff as assignee was forbidden by 28 U.S.C.A. § 41.

We are unable to see what practical difference results from the presence of the estate of Lilienfeld as a defendant. The suit is for the rescission of contracts and restoration of the consideration paid under them; and, while the contracts were made with Lilienfeld and the consideration was received by him, it is admitted that the contracts and everything belonging to the estate have been turned over to defendant. She is therefore the real party in interest. She could sue on the contracts as an individual. 21 Am.Jur. 931; Harper v. Butler, 2 Pet. 239, 7 L.Ed. 410; Vogel v. New York Life Ins. Co., 5 Cir., 55 F.2d 205, 209; note 10 A.L.R. 282. And, since she could sue on them, she was subject to suit for their rescission. Of course, she could not be ordered to restore anything that had not come into her hands, but she had in hand as an individual everything that she could have had as executrix, and the same sort of inquiry would be necessary in either case to charge her with respect thereto. The dismissal of the suit against the estate, therefore, could serve no purpose except in so far as there might be a nuisance value in the right of defendant as executrix to claim in future litigation that she was not bound by the judgment rendered in the suit to which she is a party individually.

We are satisfied, however, that defendant in her capacity as executrix of Lilienfeld was properly before the court. Under the law of Poland she occupied the status of executrix because of the fact that the property had been turned over and intrusted to her prior to the final settlement of the estate. Whether as a foreign executor she was subject to suit in a federal court in Virginia is to be determined under the law as laid down by the Virginia courts. Moore v. Mitchell, 281 U.S. 18, 23, 50 S.Ct. 175, 74 L.Ed. 673; Hale v. Allison, 188 U.S. 56, 68, 23 S.Ct. 244, 47 L.Ed. 380. The Virginia rule is that a foreign executor or administrator is subject to suit in the state when he collects assets therein or brings them into the state, after having received them in a foreign state. Tunstall v. Pollard, 11 Leigh, Va., 1; Fugate v. Moore, 86 Va. 1045, 11 S.E. 1063, 19 Am.St.Rep. 926. A fortiori, he is subject to suit within the state where the suit relates to property having a situs therein; and the shares of stock in plaintiff are such property. The rule is well settled that regardless of the place where the stock certificates may happen to be, "the state in which a corporation has been organized is the situs of its shares of stock, for purposes of administration, rather than the state of decedent's domicile, and particularly so if the corporation also conducts its business in the state where it has been organized." 21 Am.Jur. 403 and cases there cited. It is not disputed that the certificates evidencing the stock are in possession of defendant or under her control, and there is consequently no reason for considering what the situation might be if the certificates had come into the possession of others.

Determining the situs of corporate stock presents many troublesome questions. As said by Judge Learned Hand in Direction der Disconto-Gesellschaft v. United States Steel Corp., D.C., 300 F. 741, 746, "* * * a share, if we do not wish to call it a chose in action, is at least a legal relation, and can have no spatial character except by virtue of the parties to the relation. Wherever either party is, there is the property as respects such parts of the relation as touch that party. Where the corporation is, there dividends must be paid and all other duties performed to which the shareholder is entitled. There also may the sovereign declare who shall be the shareholder." The situs of the shares of stock for determining the right of ownership as between the corporation and the executrix of a deceased stockholder would unquestionably seem to be the state of incorporation. Cf. Jellenik v. Huron Mining Co., 177 U.S. 1, 20 S.Ct. 559, 44 L.Ed. 647; McQuillen v. National Cash Register Co., 4 Cir. 112 F.2d 877, 880; Harvey v. Harvey, 7 Cir. 290 F. 653; 13 Am.Jur. 300. And the fact that the Uniform Stock Transfer Act has been adopted in Virginia, Code 1942, § 3848(2) et seq., does not affect the matter, for the certificates of stock, albeit they have been given by the act certain attributes of negotiable paper, are not the stock but mere evidence of ownership, just as a negotiable promissory note is not the debt but mere evidence of the debt, the situs of which for purposes of administration is the domicile of the debtor, wherever the note itself may be or may be payable. Wyman v. Halstead, 109 U.S....