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UNITED STATES v. MOUNT VERNON MORTG. CORP.

October 22, 1954

The UNITED STATES as Parens Patriae by its Attorney General et al., Plaintiffs,
v.
MOUNT VERNON MORTGAGE CORPORATION et al., Defendants



The opinion of the court was delivered by: MATTHEWS

Findings of Fact

1. This suit was brought by the United States as parens patriae in behalf of the unknown beneficiaries of the National Home Library Foundation to cancel transfers its trustees made of 1600 shares of Longfellow Building Corporation stock. The return to the Foundation is sought of 1500 shares from the defendant, Mount Vernon Mortgage Corporation, and 100 shares from the defendant, Fannie Sessions Mittell.

 2. The National Home Library Foundation (hereinafter called the Foundation) is a charitable corporation organized in 1932 under the District of Columbia law relating to charitable, educational, religious and missionary societies. Its charter states:

 'The particular business and objects of this corporation are to promote and inculcate in more people the desire to read good literature; to make home libraries more easily available to greater numbers of our population; to urge the reading of good literature through printed announcements, radio broadcasts and newspapers; and to these ends to provide for the delivery and holding of lectures, exhibits, public meetings, classes and conferences, calculated to advance the cause of education and promote the general culture of the nation; and for these purposes to do and perform every lawful act and thing necessary and expedient to be done or performed and which may be convenient or advantageous for the efficient conduct of its affairs; and to have and exercise all powers conferred by the laws of the District of Columbia upon corporations organized under subchapter 3 (Code of March 4, 1929, Title 5, Chapter 5 of the incorporation laws of the District of Columbia.' *fn1"

 3. The Foundation by the spring of 1938 had an Advisory Board of sixty distinguished men and women representative of American culture and education. At that time the Foundation was a pioneer in publishing small, cheap, pocket editions of literary masterpieces. It provided these books free or at cost *fn2" to Army posts, lighthouses, ships, prisons, hospitals, libraries and universities. It also carried out a program to improve cultural conditions in rural sections in cooperation with farm bureau federations, churches, schools, and rural publications, and through the Carnegie Endowment for International Peace sent editions of English classics to interested folk throughout the world. *fn3" For a year it conducted an educational radio program. The 'Foundation seemed to have a reasonable chance of real success' until its work was interrupted by the Pearl Harbor Incident. *fn4"

 4. The Longfellow Building Corporation -- the corporation issuing the stock involved in this suit -- was organized in 1939 under the laws of Delaware, and began doing business in the District of Columbia. Its principal or only asset is a large, modern, twelve story office building in a desirable business area in Washington, D.C., being located on the northeast corner of Connecticut and Rhode Island Avenues, Northwest, about a block from the Mayflower Hotel and opposite the statue of the poet, Longfellow. From the time of its completion early in 1941 the building has been continuously rented to the United States except the first floor which since its release by the Government has been used for stores.

 5. The defendant, Mount Vernon Mortgage Corporation (hereinafter called Mt. Vernon), is a corporation organized under the laws of Delaware. It began operating in the District of Columbia in 1938, and is engaged in the real estate, investment and insurance business.

 6. The defendant, Fannie Sessions Mittell, now Mrs. Ludwig Caminita (hereinafter called Mrs. Mittell), became secretary of the Foundation on February 19, 1940 and a trustee of the Foundation on April 1, 1940. She became second vice-president and a director of Longfellow Building Corporation (hereinafter called Longfellow) on July 22, 1942, and has since continuously held such positions.

 7. The defendant, Robert T. Highfield (hereinafter called Mr. Highfield), was a trustee of the Foundation from April 1, 1940, until March 19, 1941. He has been a director of Mt. Vernon since March 5, 1938, its secretary-treasurer from March 5, 1938, until December, 1944, and its president and treasurer since December, 1944. He is and has been since April 2, 1940, a director and treasurer of Longfellow. He became president thereof in July, 1942 and still holds that office.

 8. The defendant, L. Harold Sothoron (hereinafter called Mr. Sothoron), was a trustee of the Foundation from April 1, 1940, until March 19, 1941. He is and has been a director and the general counsel of Mt. Vernon since 1938 and is also a vice-president of it at the present time. He has been a director and vice-president of Longfellow since 1940 and holds such positions at the present time.

 9. The defendant, E. Flavelle Koss (hereinafter called Mr. Koss), has been a director and officer of Mt. Vernon since 1938, and at present is a director thereof and its secretary and vice-president. He is and has been a director and assistant secretary and assistant treasurer of Longfellow since April, 1940.

 10. Sherman F. Mittell (hereinafter called Mr. Mittell) is the deceased husband of the defendant, Mrs. Mittell. He was the principal founder of the Foundation and of Longfellow, and was president of each from its inception until his death July 12, 1942.

 11. Sidney Acey Carraway (hereinafter called Mr. Carraway) was elected a trustee and president of the Foundation in August, 1942, to fill the vacancy created by the death of Mr. Mittell.

 12. Robert C. Craig (hereinafter called Mr. Craig) was elected a trustee of the Foundation in July, 1940.

 13. In December, 1943, there were three trustees of the Foundation, Mrs. Mittell, Mr. Carraway and Mr. Craig. The last meeting of the trustees was on December 9, 1943. Each of them from that day forward considered that the Foundation had ceased to exist and that their trusteeship had ended. The Foundation's charter declares the term of its existence as perpetual, however, and no dissolution has been judicially decreed. Of the three trustees, only Mrs. Mittell is a party to this action. The other two were witnesses at the trial and are informed as to the issues involved.

 14. The early history of the Longfellow building is tied in with the acquaintanceship of Mr. Mittell and Mr. Craig. In 1938 and 1939 Mr. Craig was deputy administrator of the Rural Electrification Administration. He was charged with locating office quarters for that administration. After considerable frustration in that task he suggested to Mr. Mittell the idea of constructing an office building to be financed primarily by a first trust loan from Reconstruction Finance Corporation. Neither Mr. Mittell nor the Foundation had any funds. Nevertheless, Mr. Mittell set out to bring the idea to realization. Mr. Craig was not then a trustee of the Foundation.

  15. To. Mr. Mittell the work of the Foundation 'was a great crusade.' *fn5" He planned the Longfellow building as a source of income for the Foundation. It was his view that from its Longfellow stock the Foundation 'should be able in future years to derive a material income available for use in carrying forward the Foundation's purposes and program.' *fn6" The plan as of April 1940 was for the Foundation to 'own 864 shares of stock of the building corporation', Mt. Vernon to 'receive 667 shares out of the 2000 shares of stock of the building corporation' and 'other parties who * * * participated in the necessary work' to 'receive in the aggregate 469 shares.' *fn7"

 16. The Foundation, Mr. Highfield and Mr. Sothoron, on April 2, 1940, ratified said plan and authorized the officers of the Foundation to execute the same.

 17. The financing of the Longfellow building was arranged as follows: The Reconstruction Finance Corporation gave a commitment to Longfellow to make a first trust loan of $ 1,500,000 toward the acquisition of the land and the erection of the building, subject to the conditions among others that Longfellow have cash capital of $ 150,000 and that a guaranty be given by a financially responsible party to furnish such sums, if any, as might be needed over and above the aforementioned $ 1,650,000 to complete the building and discharge the obligations of Longfellow until 80 per centum of the office space should be leased to tenants satisfactory to the Reconstruction Finance Corporation. This guaranty was given by Mt. Vernon pursuant to an agreement between Mt. Vernon, Longfellow and the Foundation whereby Mt. Vernon for any such funds it might advance would receive a note or notes from Longfellow carrying 6% interest to be secured by a second deed of trust on the building; Mt. Vernon would pay to the Foundation $ 5,000; the Foundation would transfer to Mt. Vernon 667 shares of Longfellow stock; Mt. Vernon would have the right to place all insurance and be employed to operate and manage the building for a management fee of $ 4,500 or $ 9,000 per ...


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