United States v. Klein

• Decision Date: 11 December 1939
• Docket Number: No. 7066.,7066.
• Citation: 106 F.2d 213
• Parties: UNITED STATES v. KLEIN, Escheator of Commonwealth of Pennsylvania.
• Court: U.S. Court of Appeals — Third Circuit

106 F.2d 213 (1939)

UNITED STATES v. KLEIN, Escheator of Commonwealth of Pennsylvania.

No. 7066.

Circuit Court of Appeals, Third Circuit.

August 7, 1939.

Writ of Certiorari Denied December 11, 1939.

J. Cullen Ganey, U. S. Atty., and Thomas J. Curtin, Asst. U. S. Atty., both of Philadelphia, Pa. (Sam E. Whitaker, Asst. Atty. Gen., W. S. Ward and Tom De Wolfe, Sp. Assts. to Atty. Gen., and Maurice W. Hibschman, of Washington, D. C., of counsel), for the United States.

Albert H. Ladner, Jr., and A. Jere Creskoff, both of Philadelphia, Pa., (Michael Edelman, of Philadelphia, Pa., of counsel) for appellee.

Before BIGGS, MARIS, and CLARK, Circuit Judges.

Writ of Certiorari Denied December 11, 1939. See 60 S.Ct. 295, 84 L.Ed. ___.

MARIS, Circuit Judge.

This is an appeal from a judgment of the District Court for the Eastern District of Pennsylvania. The facts are not in dispute.

On May 2, 1911, Alice Frances Brown and other plaintiffs filed a bill in equity in the United States District Court for the Eastern District of Pennsylvania setting forth that she was the owner of certain bonds issued by the Pennsylvania Canal Company, a subsidiary of the Pennsylvania Railroad Company; that she filed the said petition on behalf of herself and other bondholders and that certain moneys and assets subject to a lien for the repayment of the principal of the bonds had been improperly diverted at the direction of the Pennsylvania Railroad Company. She prayed for an order for payment of the principal of the bonds.

On April 6, 1916, the court below entered a decree in favor of the bondholders and directed payment to them of the amount diverted in proportion to their respective holdings of bonds. In compliance with the terms of said decree, as modified by certain later decrees, the Pennsylvania Railroad Company on January 24, 1917, paid to a trustee designated by the court, the sum of $1,923,408.16 covering the entire amount due the bondholders from the Pennsylvania Railroad Company. Most, but not all, of the bondholders filed their claims in the said proceedings. On March 14, 1919, the unclaimed moneys were paid into the registry of the court. Thereafter from time to time holders of bonds filed their respective petitions with the court setting forth their ownership of the bonds which had not been previously presented for payment and the court ordered payment of the amounts due such bondholders. The sums specified were paid in each instance.

On December 28, 1920, Alice Frances Brown and other bondholders filed a petition in the court below setting forth that the owners of thirty-two of the bonds had failed to prove their claims and prayed that the moneys held in the registry for the payment of these thirty-two bonds be divided pro rata among the bondholders whose claims had been approved. The court below entered a decree on August 17, 1921, denying the prayer of said petition and holding that the moneys in the registry were the moneys of the missing bondholders. On appeal this court affirmed the decree of the court below. Brown v. Pennsylvania Canal Co., 3 Cir., 279 F. 417.

On June 26, 1926, the balance of the fund then remaining unclaimed was transferred from the registry of the court into the Treasury of the United States through the Federal Reserve Bank of Philadelphia pursuant to the provisions of section 996, Revised Statutes, 36 Stat. 1083, 28 U.S. C.A. § 852. On February 7, 1934, the appellee was appointed escheator of the Commonwealth of Pennsylvania. On April 17, 1934, the appellee filed a petition in the court below praying for a finding of escheat to the Commonwealth of Pennsylvania of the moneys unclaimed herein and praying for an order directing the payment of the said moneys to the Commonwealth. On October 17, 1934, the court below entered an order denying the prayer of the Commonwealth's petition without prejudice. Klein v. Brodbeck, D.C., 15 F.Supp. 473.

The Commonwealth of Pennsylvania thereupon filed a petition with the Court of Common Pleas No. 5 of Philadelphia County, Pennsylvania, praying for a decree of escheat of said moneys. Prior thereto and in conformity with the provisions of 27 P.S.Pa. § 282, the appellee gave notice by publication in two newspapers of general circulation and in the legal newspaper of Philadelphia County. The petition and amended petition were dismissed. Upon appeal to the Supreme Court of Pennsylvania the decree was reversed. In re Escheat of Moneys in Custody of United States Treasury, 322 Pa. 481, 186 A. 600.

On October 1, 1936, the Court of Common Pleas of Philadelphia County entered its decree of escheat in obedience to the mandate of the Supreme Court of Pennsylvania, which decree was affirmed, In re Escheat of Moneys in Custody of United States Treasury, 326 Pa. 260, 192 A. 256. On February 28, 1938, the decree was affirmed by the Supreme Court of the United States. United States v. Klein, 303 U.S. 276, 58 S.Ct. 536, 82 L.Ed. 840.

During the interim and on July 31, 1936, the Pennsylvania Railroad Company had filed its claim in the court below seeking payment to it of the proceeds of the funds held in the registry of said court for the benefit of the missing bondholders. The District Court held that the Pennsylvania Railroad Company was not entitled thereto;...