| S.D.N.Y. | Jan 31, 1921
(after stating the facts as above). In accordance with the views expressed in Bank v. Palmer (D. C.) 256 Red. 680, I held originally, in some of the cases of this group, that if the Alien Property Custodian required the aid of this court for the seizure of property under section 17 of the Trading with the Enemy Act, the court had power to determine the adverse claims to the possession of the property.
The decision of the Supreme Court in Trust Co. v. Garvan, and other cases, 254 U.S. 554" court="SCOTUS" date_filed="1921-01-24" href="https://app.midpage.ai/document/central-union-trust-co-of-ny-v-garvan-99699?utm_source=webapp" opinion_id="99699">254 U. S. 554, 41 Sup. Ct. 214, 65 L. Ed. —, rendered January 24, 1921, affirming (C. C. A.) 265 F. 477" court="2d Cir." date_filed="1920-03-03" href="https://app.midpage.ai/document/garvan-v-20000-bonds-8816144?utm_source=webapp" opinion_id="8816144">265 Fed. 477, 481 (see Garvan v. $25,-000 Canadian Southern Bonds, 270 F. 217" court="2d Cir." date_filed="1920-11-10" href="https://app.midpage.ai/document/garvan-v-25000-canada-southern-ry-co-5-bonds-8819189?utm_source=webapp" opinion_id="8819189">270 Fed. 217, 2d, C. C. A. November 10, 1920), settles this question adversely to the'views then expressed by me.
These opinions and Judge Learned Hand’s very full and excellent consideration of the scope and purposes of the act in Kahn v. Garvan (D. C.) 263 F. 909" court="S.D.N.Y." date_filed="1920-04-13" href="https://app.midpage.ai/document/kahn-v-garvan-8815319?utm_source=webapp" opinion_id="8815319">263 Fed. 909, with which I fully concur, render further discussion of these matters unnecessary.
The question before me is one of jurisdiction of the res. If this court has jurisdiction over the res, petitioner is entitled to the decree as prayed for.
Section 7 — C of the Trading with the Enemy Act as amended November 4, 1918 (Comp. St. 1918, Comp. St. Ann. Supp. 1919, § 3lJ51/^d), clearly contemplates the transfer for custodial, purposes of stock shares, that is, of the obligation owing from a corporation to the shareholders, irrespective of the existence or location of any stock certificate. Does the fact that this obligation or the correlative right is to a great extent incorporated in a negotiable certificate which, not being within the jurisdiction of the court, or, so far as shown, within the jurisdiction of the government, is itself incap: hie of seizure, prevent the government from requiring and asking the aid of the court in compelling the cancellation of the original registration, the substituted registration of the Alien Property Custodian, and the issuance to him of a certificate in recognition of that registration for the purpose of effectuating, as to an incorporeal right, the equivalent of the seizure of chattels ?
The respondents by their own offer in effect concede both the right of the government and the jurisdiction of the court to compel such a registration as will enable the Alien Property Custodian to exercise such rights in respect to the corporation as the registered alien enemy shareholder, without possession of the certificate, could have exercised, that is, the right to vote and to receive dividends. They contend, however, that in view of the lack of jurisdiction over the certificate itself, its negotiability, the possibility that it may be outstanding in the hands of some individual or government other than an alien enemy, and the liability of the corporation thereunder, there is neither jurisdiction over the stock, nor, even if there he jurisdiction, can the corporation constitutionally be compelled to issue any unconditional new certificate capable of transfer to a bona fide purchaser, and thereby subject itself to a double liability — the recognition of such a purchaser as its stockholder and an action for damages by the holder of the old certificate.
It is unnecessary to consider whether there would be jurisdiction in
Furthermore, what the rightful owner of the shares is concerned with is not primarily the certificate, but the shares themselves. As to these,' he has exactly the same rights under section 9 of the act that the claimant to chattels has. By proper and prompt proceedings thereunder, the holder of the original certificate, not an alien enemy, may recover from the Alien Property Custodian the new certificate on surrender and cancellation of the old one, and thereby obtain the full status of a shareholder with the only outstanding certificate. If through lack of knowledge of the seizure or for any other cause he fail to act promptly and thereby lose this right, nevertheless, in lieu thereof, he may enforce a claim to the proceeds of any disposition by the Alien Property Custodian of the shares as represented by the new certificates. These actions are the statutory substitutes for his claim for damages against the corporation. And in this respect there is, in my judgment, no substantial difference between chattels and shares of stock. The obligation of the corporation or of the voting trustees, whether based upon contract or estoppel, to recognize the bona fide holder of a certificate as its shareholder and on demand to register him as such, is no more absolute than the contractual obligation of an agent to hold chattels subject only to the specific orders of his principal. In each case the obligation is subject to the superior right of the government to actual seizure or its equivalent, under the war powers. While the exercise of this right may result eventually in loss of ownership of the chattel or shares, the statute provides what in law must be deemed an adequate compensation or substituted right and remedy, in the claim to the proceeds of any sale thereof.
The certificates of voting trustees of corporate shares, representing the beneficial interest in these shares, are for practical purposes similar to certificates of the shares of stock. The obligations of the voting trustees in respect to the recognition of transferees is no different from the obligation of the corporation itself in respect to transferees of stock certificates. Union Trust Co. v. Oliver, 214 N. Y. 517, 108 N. E. 809. They are not to be differentiated in proceedings under section 7-C.
I hold, therefore, that the shares of the corporation and the equivalent obligation of the voting trustees are the res in question; that the government may demand the transfer thereof to the Alien Property Custodian in the manner specified in the statute as it may demand the custody of a chattel; and that, on refusal, the court that has jurisdiction over the corporation or the trustees may by its decree compel such transfer.
Decree for libelant.