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STERLING BOX CO. v. TOURETZ

May 7, 1984

STERLING BOX COMPANY, a Pennsylvania Corporation, Plaintiff,
v.
LILLIAN TOURETZ, EXECUTRIX OF THE ESTATE OF PHILIP STETSKY, Defendant



The opinion of the court was delivered by: COHILL

 Presently before us is Defendant's Motion to Dismiss, or in the alternative, for Change of Venue, filed pursuant to Fed. R. Civ. P. 12(b) (1) and (2) and 28 U.S.C. § 1404, in which the defendant asserts that this court lacks jurisdiction over the instant action.

 This lawsuit involves a stock option contract executed in 1957 between the decedent, Philip Stetsky (a New York resident) and Morris Ruskin, then president of Sterling Box Company (a Pennsylvania corporation). The contract provided that the plaintiff would employ Mr. Stetsky for three years, then year to year, on a fixed salary, and that if Mr. Stetsky were continually employed by the plaintiff until his death, the plaintiff had the right to purchase his 75 shares of Sterling Box Company stock for $7,500.00.

 On May 22, 1983, Mr. Stetsky died leaving a will which devised the 75 shares of stock to his daughter. *fn1"

 On June 9, 1983, the plaintiff exercised its option to purchase Mr. Stetsky's shares in accordance with the terms of the 1957 agreement. The defendant, as executrix of Mr. Stetsky's estate, has refused to transfer the shares. Therefore, the plaintiff filed this complaint, on the basis of diversity jurisdiction, in which it seeks a declaratory judgment as to the enforceability of the contract and specific performance of the agreement.

 The defendant now asks that we dismiss the plaintiff's complaint on the grounds that we do not have personal jurisdiction over the decedent, nor do we have quasi-in-rem jurisdiction over the shares of stock.

 The starting point for determining whether we have quasi-in-rem jurisdiction over diversity actions involving corporate shares is 42 Pa. C.S.A. § 5305 which provides in pertinent part:

 
The tribunals of this Commonwealth shall have jurisdiction, whether or not the persons owning or claiming interests in the shares or share certificates are subject to the jurisdiction of the tribunals of this Commonwealth:
 
(1) Over shares in a corporation incorporated under the laws of this Commonwealth (subject to the limitations of Title 13 (relating to Commercial Code)).
 
(2) Over share certificates which are located within this Commonwealth.

 The first sentence of § 5305 states that this statute applies to situations where the purported owner of the shares is not subject to personal jurisdiction. Even if a Pennsylvania court does not have jurisdiction over the owner, it will have quasi-in-rem jurisdiction over the action so long as the shares at issue are from a Pennsylvania corporation (subsection (1)), or the share certificate is located within the Commonwealth (subsection (2)).

 In the case sub judice, the plaintiff contends that subsection (1) of this statute is applicable and gives us jurisdiction since the 75 shares at issue are shares of Sterling Box Company, "a corporation incorporated under the laws of this Commonwealth." 42 Pa. C.S.A. § 5305(1). Thus, it is the plaintiff's contention that, even if the decedent were a New York resident and the stock certificate is in New York, we have jurisdiction since Sterling Box Company is a Pennsylvania corporation. The defendant argues, however, that 5305(1) does not give us jurisdiction since the parenthetical phrase, "(subject to the limitations of Title 13 (relating to Commercial Code))," places strict limitations of the applicability of subsection (1). It is the defendant's contention that Title 13 requires the share certificate to be in Pennsylvania before a Pennsylvania court can obtain jurisdiction pursuant to (1).

 Title 13 of the Commercial Code is embodied in 13 Pa. C.S.A. § 8-101, et seq. This statute adopts the provisions of the repealed Uniform Stock Transfer Act of 1911 which defined, inter alia, the legal situs of a share certificate. The limitations imposed by the Uniform Stock Transfer Act have been addressed by few courts. Though these decisions are rare and fairly old, they still remain as ...


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