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KUERSCHNER & RAUCHWARENFABRIK, A.G. v. NEW YORK TR

December 13, 1954

KUERSCHNER & RAUCHWARENFABRIK, A.G., Julius Tsuk & Rudolf Tsuk, Plaintiffs,
v.
The NEW YORK TRUST COMPANY, Defendant



The opinion of the court was delivered by: DAWSON

Defendant has moved, pursuant to Rule 12(b) of the Rules of Civil Procedure, 28 U.S.C.A., to dismiss the amended complaint as to the plaintiffs Julius Tsuk and Rudolf Tsuk upon the grounds that (1) it fails to state a claim upon which relief can be granted with respect to Julius Tsuk and Rudolf Tsuk and (2) this Court lacks jurisdiction over the claims asserted by Julius Tsuk and Rudolf Tsuk.

Additionally, defendant seeks security for costs, pursuant to Rule 2 of the Civil Rules of this Court; oral examination of the corporation Kuerschner & Rauchwarenfabrik, A.G. and the individuals Julius Tsuk and Rudolf Tsuk in this District, pursuant to Rule 26 of the Rules of Civil Procedure; and permission to give notice, as provided by Section 51(a) of the New York Civil Practice Act, to Kuerschner & Rauchwarenfabrik, A.G., a Hungarian corporation, Mezo Ferenc, who defendant claims may be the agent of the Hungarian corporation Kuerschner & Rauchwarenfabrik, A.G. for collection of the funds deposited with it, and the Attorney General of the United States of America.

 This is an action to recover the sum of $ 9,895.75 admittedly held by the defendant The New York Trust Company for the account of the plaintiff corporation Kuerschner & Rauchwarenfabrik, A.G., which funds were frozen as of March 13, 1941, pursuant to Executive Order 8389. *fn1"

 In its first complaint and in an amended complaint, plaintiff stated that jurisdiction existed under Section 1332 of Title 28 U.S.C.A. because this was a controversy between parties of diverse citizenship and the amount in controversy exceeded $ 3,000. Thereafter, without leave of Court, one day before this motion came on to be heard, plaintiff amended its complaint for the second time so as to allege that this was a controversy arising under the laws of the United States, the Trading With The Enemy Act, 50 U.S.C.A.Appendix, § 1 et seq., and therefore jurisdiction existed under Section 1331 of Title 28 U.S.C.A. In a memorandum opinion handed down on November 3, 1954, I said that I would treat this motion as being directed to the second amended complaint so as to avoid unnecessary duplication of effort.

 The second amended complaint alleges that the individual plaintiffs Julius Tsuk and Rudolf Tsuk were the sole stockholders of the corporate plaintiff Kuerschner & Rauchwarenfabrik, A.G., a Hungarian corporation and have been appointed officers of that corporation; that the plaintiff Julius Tsuk was a citizen and resident of Hungary but now resides in, and is a subject of, Canada; that the plaintiff Rudolf Tsuk was a citizen and resident of Hungary but now resides in, and is a subject of, France; that the President, pursuant to the provisions of the Trading With The Enemy Act and Executive Order No. 8389, as amended, issued thereunder, blocked certain funds in the sum of $ 9,895.75 which were on deposit with defendant bank 'in the name of plaintiff corporation'; that the Department of Justice, pursuant to authority of the Trading With the Enemy Act, while said account was under the jurisdiction of the United States, determined the right of plaintiffs to possession of said funds on deposit in defendant bank and issued a license authorizing defendant bank to pay said funds 'to the plaintiffs'; that the plaintiffs have duly demanded said funds and defendant has refused to pay them 'to the plaintiffs'.

 The affidavits and exhibits submitted on behalf of the defendant state that in 1948, Kuerschner & Rauchwarenfabrik, A.G. was nationalized by the Hungarian Government, and in that year it received correspondence from the plaintiff corporation notifying it that one Mezo Ferenc was the only person authorized to sign and receive payment, on behalf of the corporation, of funds held by it in an account of the corporation, and that under no circumstances was the defendant to make payment to either of the individual plaintiffs Rudolf Tsuk or Julius Tsuk, since they were no longer connected with the corporation and had no authorization to make any transfers.

 Defendant does not dispute that it has the funds, or that on proper demand and license it should pay them to the corporate depositor. It does dispute the right of the individual plaintiffs to receive funds held for the account of the corporate plaintiff.

 The primary issue, therefore, is whether this is a controversy arising under the Trading With The Enemy Act so as to give this Court jurisdiction over the claim of the plaintiffs Julius Tsuk and Rudolf Tsuk under Section 1331 of Title 28 U.S.C.A. Plaintiff contends that this Court has jurisdiction over this action with respect to the plaintiffs Julius Tsuk and Rudolf Tsuk on the ground that they seek to exercise a right arising out of Section 5(b)(1) of the Trading With The Enemy Act, 50 U.S.C.A.Appendix, § 5, which section states in substance:

 
'During the time of war or during any other period of national emergency declared by the President, the President may, through any agency that he may designate, or otherwise, and under such rules and regulations as he may prescribe, by means of instructions, licenses, or otherwise --
 
'(A) investigate, regulate, or prohibit, any transactions in foreign exchange, transfers of credit or payments between, by, through, or to any banking institution, * * *
 
by any person, or with respect to any property, subject to the jurisdiction of the United States * * *.'

 On April 21, 1942, General Ruling No. 12 *fn2" was issued under Executive Order No. 8389. This Ruling stated, in substance, that after the effective date of the Order, transfer of any property in a blocked account at the time of such transfer was null and void unless licensed or otherwise authorized by the Secretary of the Treasury, and that unless otherwise provided, an appropriate license or other authorization issued by the Secretary of the Treasury before a transfer would validate such transfer or render it enforceable to the extent that it would be valid or enforceable but for the provisions of Sec. 5(b) of the Treading With The Enemy Act, as amended, and the Rulings and Regulations issued thereunder.

 The complaint does not allege that the individual plaintiffs deposited any funds in defendant bank. It alleges that the deposit was made by the plaintiff corporation. The complaint does not allege that this deposit was at any time transferred from the plaintiff corporation to the individual plaintiffs or that they have any right or interest therein except as officers and stockholders of plaintiff corporation. It is, of course, obvious that if individual plaintiffs are suing in the right of the corporation, the individuals are neither necessary nor proper parties plaintiff. If the individual plaintiffs claim a right other than that of the plaintiff corporation, they have not alleged that there has been a transfer of title to the deposit or other facts which would give them any such right. Under the circumstances, the complaint does not state any facts upon which relief can be granted to the individual plaintiffs.

 The complaint alleges that the Office of Alien Property has 'determined the right of plaintiffs to possession of said funds on deposit in defendant bank'. If by this the plaintiffs intend to imply that the Office of Alien Property has determined that the individual plaintiffs have some right and title to the deposit, they have misconceived the power of the Office of Alien Property. Under Section 5 of the Trading With The Enemy Act and General Regulation 12 cited above, a license issued by the Office of Alien Property is not a determination of title to property; it is merely a condition precedent to a transfer of property. From the beginning of the 'freezing' controls, no attempt has been made to limit the bringing of suits in the Courts of the United States or of any State to determine title to property which has been frozen. *fn3" However, a license would have to be secured before payment ...


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