United States v. Ascher, 479-M.
| Decision Date | 17 March 1943 |
| Docket Number | No. 479-M.,479-M. |
| Citation | 49 F. Supp. 257 |
| Court | U.S. District Court — Southern District of California |
| Parties | UNITED STATES et al. v. ASCHER et al. |
Leo V. Silverstein, U. S. Atty., of Los Angeles, Cal., for the United States.
Macdonald & Pettit and Robert H. Edwards, Jr., all of Los Angeles, Cal., for Reconstruction Finance Corporation.
Henry H. Childress, of Los Angeles, Cal., for defendant Frederick C. Widmann.
This is a representative suit brought by plaintiffs as creditors to enforce the payment of liability of California resident stockholders of Central Republic Trust Company (formerly Central Republic Bank and Trust Company), a banking corporation under the laws of the state of Illinois. The action is brought in the interests and for the benefit of the plaintiffs and all other creditors of said Central Republic Bank and Trust Company, as well. For brevity, Reconstruction Finance Corporation will be referred to herein as RFC, and Central Republic Trust Company (formerly Central Republic Bank and Trust Company) will be called the Bank in this memorandum.
The action is brought pursuant to Section 6, Article XI of the Constitution of the State of Illinois, Smith-Hurd Stats., and Section 6, Chapter 16½ of the Illinois Banking Act, Ill.Rev.Stat.1941. The constitutional provision is as follows: "Every stockholder in a banking corporation or institution shall be individually responsible and liable to its creditors, over and above the amount of stock by him or her held, to an amount equal to his or her respective shares so held, for all its liabilities accruing while he or she remains such stockholder." And the pertinent part of the Banking Act is as follows:
More than 125 residents of the Southern District of California are named as defendants in the complaint in this case.
The action presently before this court concerns defendant Frederick C. Widmann, admittedly a resident of the judicial district of this court.
The sufficiency of the complaint was brought in issue by numerous defendants who interposed motions to dismiss, which the court denied, as appears by memorandum of conclusions filed herein September 29, 1941, reference thereto being hereby made.
Two crucial issues are raised by the answer of defendant: (1) Lack of jurisdiction by reason of insufficiency of amount in controversy, and (2) that defendant Widmann was not a stockholder of the Bank on October 6, 1932, an admittedly effective date of liability of stockholders upon an obligation of the Bank to RFC incurred at that time.
Plaintiffs moved for summary judgment against defendant Widmann under Rule 56 of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c. We denied such motion, believing that under the record then before the court, and the state of controlling law at that time, the paramount issue of Mr. Widmann's liability was not so insubstantial as to remove a genuine issue requiring trial. See Cohen v. Eleven West 42nd Street, Inc., 2 Cir., 115 F.2d 531. Therefore the action has been heard on the merits and, upon consideration of the entire record, the court is constrained under authoritative appellate decisions to adjudge the defendant liable.
The following substantial factual situation has been discosed:
The bank incorporated under the laws of the State of Illinois resulted from a consolidation on July 25, 1931 of two other Illinois banking organizations.
On October 6, 1932, a large sum of money was loaned and advanced by RFC to the Bank which, to evidence and memorialize the loan, gave its promissory note to RFC for $50,000,000, with interest. There still remains unpaid on such note, principal in excess of $30,000,000, plus certain accrued interest.
Defendant Widmann on or about July 30, 1932, purchased ten shares of the capital stock of the bank through an accredited brokerage firm in Los Angeles, California. Shortly thereafter Mr. Widmann accepted delivery of Stock Certificate No. F-9128, dated July 30, 1932, for ten shares of the capital stock of the bank of the par value of $100 per share. Shortly before September 9, 1932, Widmann directed the same brokerage company through which he purchased the bank stock to sell it for his account. On September 9, 1932, upon advice that a sale of said stock had been effected, Widmann endorsed the stock certificate and concurrently delivered it to the same brokerage firm. The endorsement of Frederick C. Widmann on the reverse side of the stock certificate appears under stamped date, "Sep. 9-1932," and by its terms sells, transfers and assigns to Constantine A. Palaeologos Mammonas the shares of bank stock represented by the certificate, and constitutes and appoints the same brokerage company through which Widmann had bought and sold the stock as attorney to transfer the stock on the books of the bank.
Mr. Widmann did not know and has never had any business or other contacts or relationships with said Mammonas who appears as the assignee of said stock certificate. Widmann having made no effort to transfer the stock on the books of the Bank, and no one else having done so, on or prior to October 6, 1932, on that date Frederick C. Widmann was the registered owner of the bank stock, appearing as such on the books of the bank. There is no evidence that the bank's creditors had knowledge that Widmann had sold the stock on September 9, 1932, or that anyone other than the registered owner of the stock was the actual and true owner on October 6, 1932. The Certificate No. F-9128 was not cancelled until March 10, 1934.
The amount in controversy is not material in this action. The suit is brought by the United States jointly with a corporate instrumentality of the Government in which all the stock is owned by the United States. Both are proper parties to the action. Erickson v. United States, 264 U. S. 246, 44 S.Ct. 310, 68 L.Ed. 661; Reconstruction Finance Corporation v....
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