Plaintiff strenuously argues that the statements and interoffice communications of his German employer and the correspondence of branches of the German government which dealt with the establishment of the American corporation are not admissible in evidence and should be stricken from the record. Some of the foregoing facts are found and others materially corroborated by this documentary evidence. Plaintiff contends earnestly that these negotiations and statements are not relevant unless and until it is shown that a conspiracy to violate the Trading with the Enemy Act was entered into by the parties, including the plaintiff. We think this proposition predicates admissibility too narrowly.
From a review of the admissions, statements and correspondence of the plaintiff, and his actions and the other circumstances, we have found that plaintiff was a party, along with SAG and the Devisenstelle, to an agreement made in 1937 to conceal SAG'S ownership of a proposed American corporation for business reasons. Therefore, the declarations of the German parties to this agreement are admissible in evidence against the plaintiff. The agreement need not amount to a conspiracy. Hitchman Coal & Coke Co. v. Mitchell, 1917, 245 U.S. 229, 38 S. Ct. 65, 62 L. Ed. 260. An agreement once proved is presumed to continue until the contrary is established, and we have found plaintiff did not abandon the agreement to conceal. See United States v. Perlstein, 3 Cir., 1942, 126 F.2d 789, 798. For these reasons plaintiff's Motion to Strike the written declarations of the German parties to the agreement and certain admissions of the plaintiff as specified therein is denied.
The objections by plaintiff to Dr. Entschel's memoranda of telephone conversations (Exhibits FF and DDD) with plaintiff should have been sustained and have not been considered; neither have we considered the contents of Exhibit 22 and plaintiff's Exhibit 10, and believe the objections to these exhibits should have been sustained.
Even if we should agree with plaintiff that the agreement to conceal was not established, the facts and circumstances still show that SAG was the beneficial owner of the stock upon a resulting trust and that plaintiff held the legal title to same as a resulting trustee. These facts are:
1. Plaintiff admits that the negotiations contemplated that SAG send $ 50,000.00 to him to be paid to the American corporation. In August of 1939, plaintiff received this amount through Goldman-Sachs (see Exhibits B and C), a New York banking house and known to plaintiff as the correspondent of Kleinwort Sons & Co. He knew that in the prior negotiations SAG considered Kleinwort Sons & Co. as the intermediary for an unlimited 'loan with option' of $ 50,000.00. Although plaintiff testified
that he did not know that the $ 50,000.00 came from SAG, this is simply incredible;
as also is his statement made to investigators (R. 686) that if the money came from SAG he did not know whether it was sent to him as a loan or as compensation for services he rendered in a deal between Mesta Machine Company and SAG.
If plaintiff actually did not know why the $ 50,000 was sent to him it is a singular circumstance that for a period of two and one half years immediately following its receipt he did not inquire concerning its purpose from either Kleinwort Sons & Co., whom he knew were SAG'S English bankers, or from the officials of SAG. As he states in his Supplemental Memorandum, from August, 1939 until December, 1941 'diplomatic relations and communication facilities were maintained' between Germany and the United States. He testified that he had many conversations with SAG after the corporation was formed. (R. 88.) During that period he displayed no curiosity whatsoever about why the money was sent.
He did not inquire of Kleinwort Sons & Co. until 1945, after the end of the war, although communication with England was possible.
It is significant also that parties who have been engaged in voluminous correspondence and meticulous planning suddenly become economy minded paperwise and did not correspond about the actual transmittal or receipt of this considerable amount of money. All we find in the testimony in this respect is some vague conversation over the transatlantic telephone. (R. 116 et seq.)
2. Plaintiff admits he deposited the $ 50,000 in the bank account of the American corporation, after which he secured possession of the disputed stock which he had previously deposited with Goldman-Sachs in May, 1939, pending the execution of the voting trust agreement or other instructions from SAG. (Exhibit BB, pages 3-4.)
3. Plaintiff's present contention that the $ 50,000 must have been a loan is untenable. No note or written acknowledgment was given; no interest paid; and no terms of repayment agreed upon. Only upon the books of SAG and in the post-war statements of its officials is there evidence that this money was a personal loan or a 'trust loan' to plaintiff. In view of the conspiracy between the Devisenstelle and SAG to cloak the German ownership of this American corporation, these declarations carry no weight.
In the 1939 negotiations the 'loan' was to be secured by an unlimited option which in effect was ownership of the stock. Mr. Feller and later the Germans realized that a loan subject to this option or to a voting trust, was obviously counterfeit, and these conditions were ultimately discarded, but the duplicitous characteristic of the appellation is not so easily shed. It still remained a counterfeit loan.
Plaintiff argues that the 'loan' was negotiated at arm's length; but the force of this contention abates with the provision in his contract of guaranty
limiting this liability to the value of the shares.
4. There was some suggestion (R. 686 and 523 et seq.) that the money sent by SAG was appropriated by plaintiff as compensation for services rendered in the Mesta deal. (See footnote 30). SAG in sending the money to plaintiff plainly intended to rely upon plaintiff's 'oral promise, to deliver the sh#:. to us when required in settlement of his debt'
in order that 'Feller could state at any time, that the company was his property.'
In this regard, SAG acted upon the order of the Devisenstelle.
It may be inferred that SAG communicated this order to Feller by telephone about August 9, 1939, when the money was released. If so, he had no right to appropriate it otherwise. He admits that there was no agreement reached with SAG for such compensation. (R. 417).
Even if plaintiff's contention that he applied the money to his compensation for the Mesta deal is accepted, it is again most peculiar that for two and one half years he did not so inform SAG of that fact. A confidential agent, such as Feller appeared to have been as manager of SAG'S American branch for twelve years- under a tenuous legal setup for most of it, would hardly pull down the curtain of silence in such abrupt fashion upon such an important item. Meticulous correspondence dealing with less important details had theretofore been the rule.
But plaintiff did not report the $ 50,000 as income in his 1939 income tax return. In 1942, after investigation, he stated to the revenue investigators (R. 686) that if the money came from SAG he appropriated it as compensation. He was then assessed and in 1945 paid income tax upon this money. (R. 689-691.)
5. On August 15, 1939, it seems that SAG'S $ 50,000 constituted the only tangible asset and was in fact the purchase price for the 5,000 shares. Evidently the liabilities assumed by the new corporation exceeded the cash on hand and accounts receivable of the old Schloemann Company.
SAG also contributed additional value to its American corporation such as good will and the accumulated patterns, designs and patents which were transferred. Apparently no assets or consideration passed from plaintiff to SAG. As stated, SAG intended to retain the beneficial ownership of the stock of its giving financial life to the new corporation.
As set forth in the Restatement of the Law of Trust, § 440: 'Where a transfer of property is made to one person and the purchase price is paid by another, a resulting trust arises in favor of the person by whom the purchase price is paid * * *.' An in comment 'h' of the same section, the statement is made that a resulting trust arises where the purchase price is paid to the vendor by the transferee with money or other property belonging to another person with the consent of the other person.
As to the burden of proof the Restatement at § 458, comment 'a', states that the 'ultimate burden of proof is on the payor to establish the fact that the money was his money and was paid as his money; but if he shows that it was his money, the burden of going forward with evidence that it was paid by way of loan to the transferee is on the transferee.'
In the instant case the defendant, as successor to the interest of SAG, has by clear, precise and satisfactory evidence established the fact that the money and property paid to the American corporation by Mr. Feller in consideration for the stock belonged to SAG, and that it was paid to the American corporation with SAG'S consent and at its direction. The burden of going forward with evidence to establish that the $ 50,000.00 was a loan or compensation rested upon plaintiff, and he has failed to sustain this burden. Therefore, a resulting trust in the shares was established in favor of SAG.
In this connection it is the court's opinion that the statements, declarations, memoranda and inter-office communications of the officers of SAG are admissible as evidence of the intention of the directors of SAG in 1939 to retain ownership of the American corporation and to rebut any suggestion that the money sent was a loan or compensation.
As a witness Mr. Feller's sincerity was impressive and made our solution of the case most difficult. He rendered important wartime services to the United States. Under his direction Schloemann Engineering Corporation prospered greatly, especially during the war. The Government delayed seizure of the stock until 1944 after the vital extrusion presses had been designed and built. Notwithstanding, in our opinion he failed to overcome the fact that the life blood of Schlowmann Engineering Corporation was furnished to him by SAG in the form of $ 50,000 so that he could purchase the disputed shares which were issued in his name and delivered to him; and he failed to establish that this money was furnished by SAG as a loan or as compensation. On the other hand, it is clearly and satisfactorily shown that it was furnished by SAG in order to activate its American branch as a corporation. Mr. Feller's persuasive sincerity relating to his ownership of the stock can only be reconciled upon a basis that he does not recognize the doctrine of resulting trusts.
The burden of proof is on plaintiff to establish his claim: Thorsch v. Miller, supra. He must satisfy the court by a preponderance of evidence that he holds the full beneficial ownership. Here plaintiff proved prima facie that he had legal title to the stock in question. The defendant then went forward with the evidence and shattered the weight of plaintiff's evidence- indeed, defendant proved by clear and satisfactory evidence that the German corporation was the beneficial owner of the stock. Consequently, we find plaintiff did not sustain his burden of proof, and plaintiff's record ownership of the stock is a simulacrum. See Stoehr v. Wallace, supra.
Appropriate findings of fact, conclusions of law and a decree will be filed herewith.