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U.S. Supreme Court

Disconto-Gesellschaft v. U.S. Steel Corporation, 267 U.S. 22 (1925)

Direction der Disconto-Gesellschaft v.

United States Steel Corporation

Nos. 676 and 677

Argued January 9, 1925

Decided January 26, 1925

267 U.S. 22




1. Certificates of shares in a New Jersey corporation, endorsed in blank and owned and held by German corporations, were seized

Page 267 U. S. 23

in London during the late war by the Public Trustee, a corporation sole appointed under the English law to be custodian of enemy property. Held that the ownership of the paper was dependent upon the law of the place where it was at the time, viz., England, and, as the things done in England transferred the title to the certificates to the Public Trustee by English law and as, by the law of New Jersey and the law of England, the owner of such certificates may write a name in the blank endorsement and thus entitle the nominee to obtain registration on the books of the corporation and issuance of new certificates to himself, the Trustee was entitled to pursue this cause as against the German corporations, there being no assertion of power by the United States to the contrary. P. 267 U. S. 28.

2. Consequently, a decree of the district court recognizing this right and directing the New Jersey corporation to issue new certificates to such nominee on surrender of the old ones properly endorsed did not deprive the German corporations of property without due process of law. Id.

300 F.7d 1 affirmed.

Appeals from two decrees of the district court in suits brought by the appellant German corporations to establish their titles to shares of stock of the steel corporation the certificates for which, endorsed in blank, were seized at London during the war and passed to the Public Trustee of England, as custodian of alien property. The defendants were the steel corporation, the Public Trustee, and stockholders of record who disclaimed interest. The title to the shares, with the right to registration and accrued dividends, was adjudged to be in the Public Trustee.

Page 267 U. S. 27

MR. JUSTICE HOLMES delivered the opinion of the Court.

These are bills in equity in similar form each raising the same question. In each, the plaintiff is a German corporation and the interested defendants are the Public Trustee, an English corporation sole appointed to be custodian of enemy property during the late war, and the United States Steel Corporation. Each plaintiff claims one hundred identified shares in the steel corporation and seeks to be declared owner of the same, to have new certificates issued to it and the outstanding certificates cancelled on the books of the corporation, and to recover past dividends declared but unpaid. The cases were submitted by them upon an agreed statement of facts, and the district court, after a discussion that leaves nothing to be added, dismissed the bills. The decree declared the Public Trustee to be entitled to the shares and directed the steel corporation to issue new certificates to his nominee on surrender of the old ones properly endorsed. 300 F.7d 1.

As is usual with shares which it is desired to deal in abroad, these shares were registered by tens on the steel corporation's books in the name of some well known broker or the like domiciled in England, and the assignment and power of attorney to transfer the shares printed on the back of the certificate was signed by the broker in blank, so that the certificate passed from hand to hand. The Disconto-Gesellschaft had bought a hundred shares, and held the certificates thus indorsed in its London branch. The Bank fur Handel had bought the same number and pledged them with an English banking house in a running account. On March 27, 1918, an order of the Board of Trade in pursuance of statutory powers purported to vest in the Public Trustee the rights of the

Page 267 U. S. 28

Disconto-Gesellschaft to the shares and the right to take possession of the documents of title. On April 30, 1917, a similar order had been made as to the Bank fur Handel's stock. The Public Trustee thereupon seized the certificates in London, as was regular and lawful under the laws of England while the war was going on, and freed the pledged securities from the lien upon them by a sale of other stocks. He claims a title confirmed by the Treaty of Berlin and the Treaty of Versailles. The plaintiffs set up that a decree recognizing his title would deprive them of their property without due process of law.

The appellants, starting from the sound proposition that jurisdiction is founded upon power, overwork the argument drawn from the power of the United States over the steel corporation. Taking the United States in this connection to mean the total powers of the central and the state governments, no doubt theoretically it could draw a line of fire around its boundaries and recognize nothing concerning the corporation or any interest in it that happened outside. But it prefers to consider itself civilized, and to act accordingly. Therefore, New Jersey having authorized this corporation, like others, to issue certificates that so far represent the stock that, ordinarily, at least, no one can get the benefits of ownership except through and by means of the paper, it recognizes as owner anyone to whom the person declared by the paper to be owner has transferred it by the indorsement provided for wherever it takes place. It allows an indorsement in blank, and, by its law as well as by the law of England, an indorsement in blank authorizes anyone who is the lawful owner of the paper to write in a name, and thereby entitle the person so named to demand registration as owner in his turn upon the corporation's books. But the question who is the owner of the paper depends upon the law of the place where the paper is. It does not depend upon the holder's having given value or taking without notice of

Page 267 U. S. 29

outstanding claims, but upon the things done being sufficient by the law of the place to transfer the title. An execution locally valid is as effectual as an ordinary purchase. Yazoo & Mississippi Valley R. Co. v. Clarksdale, 257 U. S. 10. The things done in England transferred the title to the Public Trustee by English law.

If the United States had taken steps to assert its paramount power, as in Miller v. Kaliwerke Aschersleben Aktien-Gesellschaft, 283 F.7d 6, a different question would arise that we have no occasion to deal with. The United States has taken no such steps. It therefore stands in its usual attitude of indifference when title to the certificate is lawfully obtained. There is no conflict in matter of fact or matter of law between the United States and England, and therefore Baker v. Baker, Eccles & Co., 242 U. S. 394, does not apply. We deem it so plain that the Public Trustee got a title good as against the plaintiffs by the original seizure that we deem it unnecessary to advert to the treaties upon which he also relies, or to the subsequent dealings between England and Germany showing that both of those nations have assumed without doubt that the Trustee could sell the stock. We think it unnecessary also to repeat what was said below as to the possibility of the United States making a claim at some future time.

Decree affirmed.

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