National Malleable & Steel Castings Co. v. Goodlet (195 F.2d 8, 1952)

MAJOR, Chief Judge.

Plaintiff, a corporation organized and existing under the laws of the State of Ohio and a resident and citizen of that State, on October 6, 1949, filed in the District Court its bill of interpleader, alleging the existence of a dispute between appellees (Alfred P. Goodlet and Stella J. Carter) and appellant (Katherine Simpson, executrix of the will of George L. Laux, deceased), as to the ownership of 942 shares of plaintiff’s corporate stock, the certificates for which were deposited with the clerk of the District Court, with the request that plaintiff be discharged from any liability in the matter except to make transfer of the stock on its records and to issue certificates therefor to the person or persons adjudged to be legally entitled thereto. Appellees, by answer to said complaint, asserted that they were each the owners of one-half of said stock. Likewise, appellant by answer asserted ownership in all of such stock. Thereupon, the proceeding was dismissed as to the corporate plaintiff.

The matter came on for hearing before the District Court which made its findings of fact, largely upon a stipulation entered into by the parties, entered its conclusions of law and, by its judgment of June 29, 1951, decided that the shares of stock were owned in equal parts by appellees, and directed that such stock be transferred to them on the books of the corporation. It is from this judgment the appeal comes to this court.

Obviously, the primary issue for decision is whether the corporate stock is owned by appellees or by appellant. Each side lays claim to ownership by reason of the last will and testament of James Goodlet, together with certain court proceedings previously had, asserted to have adjudicated the rights of the parties.

Prior to a discussion of the subsidiary issues upon which the parties rely in support of their respective claims to ownership, it appears appropriate to make a statement of the facts. James Goodlet died testate December 7, 1894, and left surviving him his widow, Martha Goodlet, and three minor children, a son, Alfred P. Goodlet, and two daughters, Stella J. Goodlet and Lillian B. Goodlet. Stella afterward married Carter, and she and her brother Alfred are the appellees in the instant case. They claim ownership of the stock under their father’s will as construed by the Probate Court of Marion County, Indiana, subsequently discussed. Lillian afterward married George Laux who, upon her death, was appointed administrator of her estate. Upon his death, the appellant Katherine Simpson was appointed executrix of his estate. Appellant claims that Lillian inherited the stock through the will of her father, that upon her death the stock descended to her husband, George Laux, and upon his death to appellant as executrix of his estate. Other claims to ownership are made by the appellant by reason of certain court proceedings subsequently discussed.

In the view which we take of the ultimate result to be reached, we find no occasion to decide or discuss in detail numerous contentions advanced in support of appellant’s claim. Perhaps they should be 'briefly mentioned.

The will of James Goodlet was, on December 17, 1894, admitted to probate in the Marion Circuit Court of Marion County, Indiana. At this point we need not be concerned with the terms of the will other than that the testator devised to his three children all his stock in the National Malleable Castings Company (corporate predecessor of the interpleading plaintiff) under certain conditions and restrictions giving rise to this law suit. For reasons shortly to be disclosed, the restrictions and conditions thus imposed do not become material unless and until we reach the point where we are required to determine the ownership of the stock from a construction of the will. Even so, it is pertinent to note that it is the contention of appellees that Lillian Laux, who died without issue, took by her father’s will only a life interest in the disputed stock, and at her death it reverted to appellees. On the other hand, it is the contention of appellant that Lillian took the stock without restriction.

Appellant’s first contention is based upon the following facts. By the testator’s will, the three children were each to receive one-third of the corporate stock. They all being minors, Martha Goodlet, their mother, was appointed as their guardian. On September 27, 1898, the final report in the estate of James Goodlet was filed and approved. It recited that pursuant to the will the corporate stock was transferred to her as guardian for' and on behalf of the three children, the respective shares of which were to be transferred by her to each of the three children as they reached the age of their majority. It is pointed ■out that this order of court by which the stock was transferred from the executor to the guardian contained no restriction or indication other than that the guardian took such stock on behalf of the children as the absolute owners thereof. It is contended by appellant that this was a judgment that Lillian Goodlet became and was the absolute owner of the stock inherited by her.

Appellant’s second contention is based upon the following facts. Martha Goodlet, in her capacity as guardian, as the three children respectively became of age transferred to them their share in the stock. Each of these transfers was made under an order of the appropriate court and was without restriction and condition as to ownership. It is contended by the appellant that the transfer thus made to Lillian Good-let was a judgment of the court that she was the absolute owner of the stock inherited by and delivered to her.

Appellant’s third contention rests upon the following facts. Lillian was married to George Laux shortly after she became of age, and she and her husband moved to and became residents of King County, State of Washington. There they resided until May 26, 1942, when Lillian died. The shares of stock now in dispute had been delivered to her by her guardian on March 6, 1901, and remained in her possession until the date of her death. Lillian left no children. Her husband was appointed administrator of her estate in the Superior Court of King County, Washington. The possession of the certificates for this stock passed to her husband, and while the record does not definitely disclose, it appears they were considered and treated by him as assets of her estate.

In the meantime, on November 16, 1942, the appellee Alfred P. Goodlet filed in the Probate Court of Marion County, Indiana, his complaint to construe the will of his father, James Goodlet. Named as defendants were the corporation, Stella J. Carter and George L. Laux, both in his capacity as an individual and as administrator of the estate of Lillian B. Laux. Personal service was had upon the corporation by serving its authorized agent in the State of Indiana, and Stella J. Carter. George L. Laux, individually and as administrator, being a. resident of the State of Washington, was. given notice by publication.

Returning to the probate proceedings in the estate of Lillian Laux in the Superior Court of the State of Washington, there was entered, on August 11, 1944, an order approving the final report and decreeing distribution. The order stated that notice to creditors was published as required by law and, among other things, recited a summary of the proceedings which had been commenced in the Probate Court of Marion County, Indiana, by Alfred P. Goodlet, that no personal service had been had upon George L. Laux as administrator, that no claim had been filed by Alfred P. Goodlet or any other person claiming any of the assets of said estate, that the time for filing said claims had long since passed, and that the administrator upon the advice of his attorneys had ignored said litigation in the State of Indiana and proposed to make distribution of the estate without reference thereto. On the same date an order was entered by that court directing that all the assets of the estate of Lillian B. Laux be transferred and conveyed to George L» Laux.

Shortly thereafter, George L. Laux moved to the State of Montana and while a citizen and resident of that State died November 28, 1944. Katherine Simpson, the instant appellant and a sister of George L. Laux, was appointed executrix of his estate on November 19, 1947, by the District Court for the County of Fergus, State of Montana. Thereupon, the certificates of stock in the possession of George L. Laux prior to his death passed to her as executrix of his estate. Such certificates remained in her possession until on or about June 19, 1949, when she delivered the same by letter to the home office of the corporation at Cleveland, Ohio, with the demand that they be transferred on the books of the corporation to her as such executrix. It may be observed that George L. Laux had actual notice of the will construction action commenced in Indiana, November 16, 1942, by Alfred P. Goodlet, and also that Alfred P. Goodlet had actual notice of the probate proceedings in the estate of Lillian B. Laux, that the shares of stock in controversy were claimed as a part of the assets of.her estate and that such stock, pursuant to a court order, was transferred and delivered to her husband, George L. Laux, as her only heir. Appellant contends that the proceeding in the Superior Court of the State of Washington was an adjudication that the corporate stock in question was owned without reservation by Lillian B. Laux and that unencumbered title to such stock passed to George Laux — more specifically, that the decree or order entered in that matter is res ad judicata of the question now in litigation.

So far as the record discloses, the proceeding instituted by the appellee Goodlet on November 16, 1942, in the Probate Court of Marion County, Indiana, to construe the will of his father, remained dormant until February 21, 1947, almost three years after the final report had been made in the Washington court by George Laux, administrator of the estate of his wife. In the meantime, George Laux had, on November 28, 1944, died, while a citizen and resident of the State of Montana. On February 21, 1947, the Probate Court of Marion County, Indiana, on the affidavit of the appellee Goodlet (plaintiff in that action), entered an order directing that service be had by publication upon the unknown heirs of George L. Laux. No question is raised but that this service by publication was had in accordance with the law of the State of Indiana. As already noted, Katherine Simpson was appointed executrix of the will of George L. Laux on November 19, 1947, in an appropriate court in the'State of Montana and had in her possession the stock certificates in controversy. Thus, no service was had upon Simpson as executrix and only constructive service was had upon her as one of the unknown heirs of George L. Laux.

On June 26, 1947, a decree was entered in the Marion Probate Court, which recited in effect that service had been had by publication upon the unknown heirs of George L. Laux and, upon their failure to answer, a default was taken as to them. The decree construes the will of James Goodlet and concludes that Lillian took only a de-feasible interest in and to the shares of stock in controversy, subject to divestment upon her death without issue. The decree recited that Lillian died without issue and that all her right, title and interest in said stock went to, vested and became the property of Alfred 'P. Goodlet and Stella J. Carter (appellees here), share and share alike, with the right on their part to have said stock transferred to them on the books of the corporation.

Appellees contend that this decree of the Probate Court of Marion County, Indiana, is res adjudicata as to the rights of the parties and that such being the case it was determinative of the issue presented to the District Court. On the other hand, appellant contends that the Marion Probate Court was without jurisdiction to hear and decide the rights of the parties and particularly was without jurisdiction to enter a decree binding upon the unknown heirs of George Laux.

Appellant Simpson further argues that if the decree of the Marion Probate Court be held to be without force and effect as to the heirs of George L. Laux, and even though all the other contentions heretofore related are decided adversely to her, she is entitled to the stock under a fair construction of the Goodlet will, and, finally, that in any event appellees under the undisputed facts are estopped from claiming ownership in the shares of stock.

The District Court, after finding the evi-dentiary facts, found that the appellees were each the owners of one-half of the shares of stock in suit, made