The opinion of the court was delivered by: GALSTON
The motion is to remand the cause to the Supreme Court of the State of New York, from which court it was removed.
The complaint recites that on June 1, 1926 the United Steel Works Corporation (Vereinigte Stahlwerke Aktiengesellschaft), a German corporation, made and delivered in the United States a series of negotiable bonds in the aggregate principal sum of thirty million dollars. By the terms of the bonds the Steel Corporation agreed to pay at maturity, June 1, 1951, at the principal office of Dillon, Read & Company, in the Borough of Manhattan, the face value thereof; and to pay interest semi-annually from June 1, 1926 to and including June 1, 1951, at the rate of six and one-half per cent. per annum on June 1 and December 1 of each year. Sinking fund provisions provided that the Steel Corporation was to pay to the fiscal agent for the benefit of the holders the redemption of the bonds by lot, the sum of three hundred thousand dollars semi-annually, beginning on December 1, 1926 to and including December 1, 1938, and thereafter the sum of nine hundred thousand dollars semi-annually to and including December 1, 1950.
The plaintiff alleges that she is the owner and holder of eleven bearer bonds of the face amount of one thousand dollars, and brings this action on behalf of herself and all holders similarly situated.
It is alleged that an agreement was entered into between the Steel Corporation and the National City Bank, the defendant; as American trustee, and Darmstaedter Und Nationalbank Kommanditgesellschaft Auf Aktien, of Berlin, a German corporation, as German trustee, wherein the defendant was designated as trustee for the benefit of the bondholders, and undertook to perform the duties imposed upon it as trustee. The bonds and agreement recite that they be deemed to be New York contracts and that the obligations thereunder be governed by the laws of the State of New York and the United States of America. The agreement empowered the defendant, in the event of default of payment of interest or of any sinking fund instalment, to protect the rights of the defendant as trustee and the rights of the holders of the bonds, by appropriate legal action.
Prior to December 1, 1933 the Steel Corporation announced to the holders of these bonds that the interest would not be paid; tht it had failed to provide the fiscal agent with funds for payment accruing on December, 1, 1933 and thereafter. No interest has been paid on the bonds except such interest as has been recovered by interest coupon holders in actions against the United States corporation in the courts of the State of New York. Judgments were recovered and paid out of property of the Steel Corporation. No instalment on the sinking fund was paid on December 1, 1933 nor any thereafter. There follows then the allegation of violation of the duty of the defendant as trustee. It is alleged that it is guilty of gross and wilful breach in that it failed to exercise the rights and powers given to it as trustee and committed acts in breach of the trust created. It is asserted: (a) that the defendant preferred its own claims over those of the bondholders; that since the time of the aforesaid defaults the defendant has received substantial amounts of money in reduction of indebtedness owing to it in its individual capacity; (b) that the defendant refused to apportion the sums received by it from the Steel Works Corporation or its subsidiaries between itself, individually, and the bondholders for which it acted as trustee; (c) that it refused to take any action with respect to the property and assets of the Steel Corporation and allowed the Steel Corporation, while in default, to withdraw and remove funds from its possession and from the jurisdiction of the courts of the State.
Other derelictions of duty of the trustee are alleged which need not be referred to.
The plaintiff alleging that it has no adequate remedy at law seeks to have the defendant removed as trustee and a successor trustee appointed, an accounting and other relief. The answer denies that the defendant was a substantial creditor of the Steel Corporation and denies dereliction of duty. It recites that on June 9, 1933 the German Reich promulgated a law which became efective July 1, 1933, in consequence of which it is alleged that there has been no default by the Steel Corporation under the indenture.
The defendant alleges that it never received from holders of twenty-five percent notice of any default by the Steel Corporation; also that no written request of the holders of one-fourth in interest in the principal amount of the bonds had been made to the trustee to take any steps for the enforcement of the rights of the trustees or bondholders.
The status of the plaintiff as the alleged holder of the eleven bonds sued on is challenged. It is alleged that they were held by one Charles H. Albers as receiver for the North Avenue State Bank and the First Italian State Bank of Chicago; that Albers had been appointed under the Illinois Banking Act, Ill.Rev.Stat.1937, c. 16 1/2, § 1 et seq. At the time the plaintiff became the holder by assignment, she was a stenographer in the law office of the plaintiff's former attorney of record. It is alleged that the plaintiff became the holder at the instance and request of such former attorney of record or of the present attorney of record, and that at no time was she the owner of these bonds, or the owner of any legal title therein.
The petition for removal to this court shows that the defendant is a banking corporation organized and existing under the laws of the United States under the National Banking Act, 12 U.S.C.A. § 21 et seq.; that since its organization on or about July 17, 1865 its principal office for the transaction of business is in the State of New York; that since October 1, 1925 it has maintained continuously and now maintains in Berlin, Germany, an office which it established and has used and uses to facilitate and direct its financial operations in Germany and other countries of central Europe.
The petition further recites that from the pleadings it appears that the suit is of a civil nature in equity to which a corporation, organized under the laws of the United States, is a party; that it arises out of transactions involving international banking and out of other international or foreign financial operations; and that it is therefore removable into the District Court of the United States pursuant to the United States Code, title 12, § 632, 12 U.S.C.A. § 632, being the act of Congress of June 16, 1933, c. 89, § 15 Stat. 184, as a new section, 25(b), to the act of Dec. 23, 1913, c. 6.
Title 12 U.S. Code, § 632, 12 U.S.C.A. § 632, provides:
"Jurisdiction of United States district courts in cases arising out of foreign banking; jurisdiction where ...