Brief for the Respondent in Opposition — Chemical Bank New York Trust Co. v. Kennedy

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INDEX

ins iy Page

Opinions below---------------------------------- nese 1

Juriediction.......---..<.-- Scaceueusnhepenenn oesee=e 2

Question presented. ._-------- in ieee kaa lehewiaiagenartaits |

Statutes involved -------------.------------ Xeneeeeee--- 2

DR nc nc nccmewcccccccchkeacsescentenakseresesee 2

Argument...-...-.--------------- ------ rrrtttteenooe ;

Conclusion... --.----------------------------+------+--- 12

Appendix....-.--.--------+------.---- -------7---s+—-- 13

¢ IPVATIONS

» Cases:

yg Track Lines, luc v. United States, 371

a cine ninth baerenmenianah 10

Statutes: °° ° . - es

International Claims seo sigyel Act of 1949, as

amended, 64 Stat. 12, 69 Stat. i062, ¢f seq. 22 U.S:C.

1021, et seq------------------------------------ 2,5, 15

Section 202, 22 U.S.C. 1@31a_......-.2..,..--.- 2

Section 208; 22 U.S.C. 1631g_..-.------.---- 3,11, 12

Section 208(a), 22 USC. 1631¢( a)--- 6, 7,8, 10, 11,13

Section 208(b), 22 I.S.¢ ed 6, 11,15

Section 208(c), 2% USC. 1631g(c)----- Rath Sees 7.14

Section 302, 22 U.S.C. 1641a......------------ »

Section 303, 22 U.S.C. 1641b.----2----------- 5, 8, 14

M iscellAneous : : se

OE Fs Sivek nitcincusesnnevindwawnee ‘neiiehsnaiie 11

+ Be Caiinct cane datiabdisssncccmunneeigarthe 11

OI Wc acvatinca ese caunans eemdgnianes aa

OF i iis Snvkcantukentneeaemnlenemeniees 12.

PK i i hints scare acccniiaende iene sar ranma eal amare ‘Az

Sy SF iis SA cin conviction naeacastnneitaaintanicliaaionts 12

OE ind givcin ne rcnaneensiers ikea a

Wr tcnitpaieweeccnus aces acne a | a

25 FR. 253.__..--- aT Seer cd accnnac eats 12

re a aia aa

— BE eG gh eke kh nea eeiioeane 12

715-645 —63--—-1 ay

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Gn the Supreme Court of the Bnited States 4

- OCTOBER TERM, 1963

Wo. 550 ..

CuemicaL Baxk New York Trust Companys AND

‘ e /

MANUFACTMRERS Hanover Trust CoMPANY,/ For-

MERLY MANUFACTURERS .TRUsT COMPANY, -\PETI-

TIONERS Paes i |

: i

Rosert F. KENNEDY, ATTORNEY GENERAL QF THE

UniTep STATES Tea

ON PETITION FOR A WRIT, OF CERTIORARI TO THE UNITED

STATES COURT.OF APPEALS FOR THE DISTRICT OF COLUMBIA

CIRCUIT ate ;

- BRIEF FOR THE RESPONDENT IN OPPOSITION

—~\

© OPINIONS BELOW : ee

The. opinion of the District Court (R. 161; Pet.

App. B-1) is. reported at-199 F. Supp. 256. The

opinion of the Court of Appeals for the District of

Columbia Circuit (Pet. App. B-11) is reported at 319

F.2d 720. + ras ;

1“RS references are .o the Joint Appendix in the Court of

Appeals, filed as part of the record in this‘Court. “Pet. App.”

references are to the Appendix to the Petition For a Writ of

Certiorari. :

: (1).

.

-

JURISDICTION

The judgment ot the Jourt of Appeals was filed on

_ May 2, 1968, (Pet. App. B-14). A timely: “petition

for rehearing was, denied:on July 16, 1963. The

petition for certiorari was filed on October 14, 1963.

The jurisdiction of this Court is invoked under 28

US C1 1254(1)> ‘fi:

: QUESTION ‘PRESENTED

Ww Aiiner, in light -of the provisions of section

208 ( n) of the International Claims Settlement Act of

1949, as amended, 22 USC. 1631g(a), prohibiting

‘the.allowance by the Attorney General of debt claims

asserted against an agency of the Hungarian Govern-

ment, the Court of Appeals erred in directing that

the case ‘be remanded for a finding by the Attorney

General as to whether the instant claims were in fact

asserted against an agency of the Hungarian Govern- .

ment.

Ra ee STATUTES INVOLVED

The pertinent provisions of the International

Praga Settlement Act of Prag, as amended, 64 Stat.

2, 69 Stat. 562, et seq., 22 U. S.C." 1621, et seqg., are

set forth in the Appendix, infra, pp. 13-15.

Sop aTEMENT

Cada pr operty. of the National Bank of Hungary

was vested by the Attorney General on May 28, 1956,

| pursuant to section 202 of the International Claims |

Settlement Act of 1949, as amended, 22 U.S.C. 1631a

(R. 53-67)... Subsequently, the New Y ork Trust Com-

pany (now the Chemieal Bank New York Trust .

Company) and the Manufacturers» Trust Company

: (now the Mauutacturers Hanover Trust Company )

filed with the Office of Alien Property of the Depart-

ment of Justice notices of debt claims. in the respec-

tive sums of $684,142.98 and $159,833.04 (R. 68-85).

Both claims, filed under seetion 208 of the Interna-

tional Claims Settlement Act of 1949, as amended,

22, U.S.C. 1631g, were asserted against the National

Bank of Hungary atid payment was sought from the

“vested property of that- bank (R. 68-85). The net

amount in the bank’s vested account available for .the

payment of debt claims is $168,158.07 (R. 157). The

facts underlying these claims can be summarized as

follows: ?

The petitioners’ ‘iia were based on “unpaid bal-

ances’ on loans made under an agreement of Decem-

ber 39,°1928 (hereinafter called the Hungarian Ex-

| port Agreement) which provided for a self-liquidat-

‘ ing, revolving $5,000,000 export credit to be furnished

by petitioners to enable Hungarian exporters to ob-,

tain payment in dollars for products exported from

Hungary. .Eight Hungarian banks guaranteed the

due payment at maturity of any and all drafts drawn

by their customers against this fund and accepted by

New York Trust Company (R: 16-20). By a ‘con-

current agreement the Royal Hungarian Government

also guaranteed that the Hungarian firms taking the

credits would remit to. the credit of the special ac-

.count of the Hungarian banks with the New York

Trust Company amounts sufficient for the payment

of .their obligations on the basis of bills accepted

and discounted by the New York Trust Company,

and that, should such firms fail to do so, the Hui-

4

garian Government would remit the necessary amounts

(R. 20-26). .

The provisions of the Hungarian Expert Agree-

ment were duly carried out without significant: inei-

dent until early August 1931. At that tinie the Hun-.

garian Government enacted moratorium laws which

provided that. payments ‘of foreign currency outside

of Hungary required permission of the National Bank

of Hungary, a bank partly owned by the Hungarian

Government and designated by it as its national

administrator of foriegn exchange (R. 96). On Au-

gust Hy, L931, counsel for the Hungarian Commer-

eidl Bank of Pest, the syndicate ‘manager for the

eight Hungarian banks that. guaranteed the Hun- -

garian export credit, wrote to the National Bank of

‘Hungary, - requesting a written statement that thé

moratorium decrees would not prevent the continuance

of business under the Hungarian export agreement

(R. 32-33).

pack response, on August 25, 1931, the National Bank -

Uungary wrote to the Hungarian Commercial

met of Pest and gave. its consent that the counter

value in foreign exehange of bills discounted within

the $5,000,000 export credit granted. by the New York

‘Trust Company could. be claimed by the exporters |

from. the National Bank of Hungary at the time these

bills fell dive CR. 35-36).

However, shortly before January 15, 1932, appar-

ently as aeresult of further moratorium laws, the.

Hungarian Minister: of Finance advised the New

“York Trust Company that payments in foreign

currencies were prohibited and that the commitment

eomimission due the New York ‘Prust Company on

<g

a)

5

January 15, 1932, would not be paid. On January

lth, the .New York Trust Company ‘abled beth

the Hungarian Commerciai Bank of Pest and the

Hungarian Minister of Finanee, and notified them

that payment was not received, that the Hungarian

Export Agreement of 1928 was thus im default, and

that the Trust Company's obligations thereunder had

terminated (R: 36). Following these cablegrams,

the National Bank of Hungary, on January 20, 1932,

informed the Hungarian Commercial Bank of Pest

by letter that the National Bank’s letter of August

25, 1931, would have to be considered null and void

fe. 37). Although various expedients were under-

taken in the ensuing vears to reduce the amount of

the unpaid debt (R. 3848), at the“fime the subject

claims were filed with the Office of Alien Property

#684,142.98 was still due to the New Work Trust.

~ Company and the.other banks it represented (R. 69)‘

and $159,885.04 remained due to the Manufacturers

Trust Company (R. 80)... |

Based upon the above-deseribed events during the

period 1928-1932, the petitioners filed claims under

the International Claims Settlemetit Act of 1949, as

amended, 22 U.S.C. 1621,. et seq., infra, pp. 13415,

with two different. governmental agencies. Pursuant

to seetion 303 of the Aet, 22 U.S.C. 1641b. infra,

p. 14 they filed elaims against the Governnient of

Hungary with the Foreign Claims Settlement. Com-,

-mission, and these claims were allowed bythe Cem-

mission (R. 85: Petitioners’ brief itr ‘the Court of °

Appeals, pp. 16-17). These claims were specifically

grounded upon the Hungarian Government's breach

of its 1928 guaranty of the Hungarian Export Agree-

ment (ibid.). In addition, petitioners filed the in-

stant claims against the National Bank of Hungary

with the Office of Alien Property (R. 68-85). These

claims against the bank were grounded. upon the as-

sertion that the August 25, 1931, letter from the’

National Bank, giving its consent for operations

under the Hungarian Export Agreement to continue, —

gave rise to a contractual obligation from the Na-

tional Bank to the New York ‘Trist — (R.

- 70, 75-78, 80, 84-85).

‘On December 22, 1960, the Attorney ‘Genus or-

dered that. these claims be dismissed because there

was 10 debi due arid owing to petitioners by the

National Bank of Hungary (R. 151-155). There-

upon, pursuant. to section 208(b) of the International

Claims Settlement Act, 22 U.S.C. 1631g(b), petition-

ers instituted this action for review in the District

Court (R. 3). 2

The District Court held that the ‘August 25, 1931,

‘Jetter from the National Bank of Hungary gave rise

to aWtontract between the «National Bank and thé

New York Trust Company which the bank breached

and ordered petitioners’ claims paid. (R. 161-170;

Pet. App. B1-10). The Court of Appeals reversed.

Pointing to section 208(a) of the Act, 23 U.S.C.

1631g(a), which provides that the Attorney General

shall not allow a claym if it is asserted against

an agency of thy’Hungarian Government and noting

that the Ports dagen had failed to pass upon

the question, She court ordered that the case

e -

| 7

be remanded to the Attorney General for a determi-

nation as to whether the petitioners’ claims against

the National Bank of Hungary were claims: against

an agency of the Hungarian Government and ‘thus

barred by the statute (Pet, App. B11-13). -

| ARGUMENT 4

The decision of the court below is correct and con-

cerns a matter of no continuing importance. - Fur-

ther review of that decision bs this Court is therefore

unwarranted. ‘ ne

1. (a), Section 208(a) of the International Claims

Settlement Act of 1949, as amended, 22) U.S.C.

163lela). mitra,. }’. 13, prevides that: "Ne debt clainr

shall be allowed under this seetion—(1) if it is as-

serted against * * * Hunigary * * * (ineluding ‘the

vovernment or any political subdivisions, agencies, or

" instrumentalities thereof) * * *.°° Section 208(¢),

22 USC. WGSlg ce), ified, ». 14, provides 1pht the

Attorney General ‘shall make a. determination, with

respect to each claim, of allowance or disallowance’

and that his ‘determination * * * that a claim is

* & &

sss ot subsection (a)

within paragraph (1)

of this section shal! be final and shall not be subject

to judicial review, and such claim’ shall net be con-

sidered a debt claim for any ‘purpose under this

section.” Thus, as the court of appeals held, the .

statute: contemplates. that. tie claim should be granted

unless the Attarney General has first determined that

the claim is not being asserted against a governmental

agency. This is at the heart of the statutory scheme

~under which claims of Americans against. foreign

715-645 —63—+--2 sy ‘

. 8

governments ‘or governmental agencies are not to he

considered by the ‘fice of Alien Property. Instead,

such claims are to be considered by the Foreign |

Claims Settlement Commission. The Office of Alien

Property is eonecerned solely with elaims against pri-

vate persons and organizations. See sections 208(a),

302, and 303 of the Act, 22 U.S.C. 1631ge(2), li41a,

and 1641b, fre, pp. 138-15. ‘

In the present case, the pleaditigs and doctiments

submitted by “petitioners were replete with ev idence

that the National Bank of Hungary, in issuing its

letter of August 2 5, 1931 (on which petitioners rely

for their contractual claim), was acting in the ea-

pacity of a governmental ageney. In these cireum-—

stances, the Court of Appeals was fully Warranted in

ordering that the case be remanded for the Attorney

General to determine whéthe: petitioners’ claims were

being asserted against. an agenev of the Government

of Hungary : ,

Every eire ‘umistane ‘e of this case indicates that the

National Bank was acting as a governmental agency.

Petitioners’ claimis were said in their complaint to be

based upon“the August 25, 1931 exemption from the |

Moratorium Laws of Hungary" granted by the N Na

tional Bank of Hungary (R. 4). It would seem that

an eXemption- from governmental decrees could only

be granted by an organization acting as a govern-.

mental agency. In both ‘the objections filed by: peti- |

tioners: at the administrative level to the proposed

dismissal of their claims and. in their district court

complaint, the National Bank of Hungary i is described

9 .

_as “owned in part by the Hungarian Governinent and

being its agent for the administration «f foreign ex-

change” (R. 6, 96). Correspondence from the New.

York Trust Company during 1932 described the-Ya-.

tional Bank of Hungary as the “national administra-

tor of the foreign exchange” (R. 46). An agreement

of September 9, 1933, referred to the role of “the Na-

tional Bank of Hungary in its capacity as Central

Authority of foreign exchange administration” (R.

52). The New York Trust Company's Notice of

Claim filed with the Office of Alien Property «stated

that the National Lank “was and is an instrume nt of

the Government of Hungary” (R. 78)-

In addition, petitioners’ very elaim against the Na-

tional Bank of Hungary was inseparable from. the

claims against the Hungarian Government which they |

had ‘snecessfully asserted before the Foreign Claims

Settlement Commission, the proper agency for hear-

ing Claims against governmental bodies. See State-

ment, supra, pp. 3-9.

(b) There is no merit to petitioners’ remaining

grounds of attack upon the decision of the Court of

? Some other statements by the petitioners fo the Office of

-Ahen Property showing the capacity in which the National

Bank of Hungary acted. are found in the record on the fol-

lowing pages: R. 104 (stating that the Bank was “ap instru-

mentality of the Hungarian Government”): R. 105) (deserib-

ing the Bank as the “Agent” of the Government): R. 116

(describing the National Bank of Hungary as the “adminis-

trator” of the Moratorium Laws): R. 117 (pointing out that

the Hungarian Government. “ordered National Bank of Hun-.

gary, its instrumentality, to grant the exemption’): R. 123:

R. 133-154; R. 136; R. 149: R. 150. oo

10

Appeals. It is urged that the Court of Appeals

should not have considered the Attorney General’s

contention, raised for the first time in te Court of

Appeals, that petitioners’ claims were barred bv sec-

tion 208(a) of the Act. Reliance is placed pon the

recent opinion in Burlington Truck Lines, Ine. v.

United States, 371 U.S. 156, 168-169, where this Court

pointed out that an agency's . discretionary: order

Should be upheld only on grounds articulated by the

agency. The short answer is that the Court of Appeals

did not uphold the administrative determination on

a ground not considered by the agency. Instead, the

case: Was, remanded to, the ageney with directions to

consider whether petitioners’ claims . fell within a

statutory. imitation upon the agenev’s own jurisdie-

tion. As pointed: out above, under section 208(a)

the Office of Alen prope rty has no authority to allow

a vlain asserted against an instrumentality or agency

‘of the Hungarian Government..

ce) Tt is- alse argued that the remand deprives

petitioners of due process .- because it “‘permits a

biased ‘and prejudiced review of the Attorney Gen-

eral’s disatlowance of the claims, for it is a foregone

conclusion in light of the bistury of this dispute that

“he will ne w make an unreviewable determination

that Petitioners’ claims are against an agency of Hun- .

gary’ (Pet. 13). To be sure, the Attorney General did

take the position in the Court of Appeals ‘that the

vustaut record shows the claims to be asserted against

an ageney of the Hungarian Government. In light

—

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11

of this record, such a conclusion is virtually inescap-

able. It is true that if the petitioners fail to amplify

the. record upon remand, the Attorney General will

presumably determine that their claims are asserted —

against a. governmental agency. . On the other hand,

petitioners may submit to the Office of Alien Prop-

erty any further evidence which they may have bear-

ing upon the capacity of the National Bank of Hun-

- gary and tending to show a contractual obligation owed.

_ by the National Bank te the New York Trust Company

-- which is not barred by section.208(a) of the Act. Any

~ evidence or arguments submitted by ‘petitioners will

be fully and fairly. considered .by-the Attorney Gen-

eral in making the determination which, under the

statute, he is required to make. . es

2. The issues raised by ‘the petitioners with respect

to section 208: of the International, Claims Settlement

Act as amended, 22 U.S.C. 1631g, infra, pp. 13-14,

relating to Rumanian, Bulgarian’ and Hungarian

Claims, have no continuing. importance. Other than |

. the petitioners’ cluims, there are now no section 208

claims pending before the Office of Alien Property.

Under sectign 208(b) of the Act, 1631g(b),- infra, |

p. 13, the Attorney General is authorized to fix the.”

_ dates in respect to which the filing of particular debt

claims under the section shall be barred. By a series.

of “Bar Orders,”” which have been published ‘in the

Federal Register, the filine of any future claims

against vested property under section 208(b) has been

barred. See, 21 F. R. 10183 ; 22 F. R. 88 ; 22.F.R. 2512;

12

22 F.R. 7802; 23 F.R. 489: 23° F.R. 5531; 24 F.R.

_ 399; 24 F.R. 5661; 25 F.R. 253; 25 F.R. 8384; 26 PLR.

8259." |

* CONCLUSION

For the foregoing reasons, it is respectfully sub-

mitted that the petition for a writ of certiorari should

be denied.

ACHIBALD Cox,

Solicitor Geiecral. .

| JOHN W. Doveras,

fr

Assistant Attorney Géneral.

- ALAN S. Rosextuat,

JoHN C. ELprmae, —

Attorneys.

DECEMBER 1963."

oe

’ The only way in which any future litigation under section

208 could arise would be if: further Rumanian, Bo! arian or

Hungarian property were to be vested under the Act. It is our

) understanding that any, further vesting of? Rumanian, Bul-

garian or Hungarian property which would come under this —

section is extremely unlikély.

*

APPENDIX

The pertinent -pro isions of the -Internationai

Claims Settlement Act of 1949, as amended, 64 Stat.

12,.69 Stat. 562, ef seq., 22 U.S.C. 1621, ef seq., are

as follows: |

«“

;

Ve

See, 208 [22 C.S8.C) 16381g].

-* (a) Any property vested in thé designee of

+ the President pursnant to section 202(a),° or.

Mahe net proceeds thereof, shall be equitably ap-

plied by such designee in accordance with this

section to the payment of debts owed by the

. | person whe owned such property immediately

prior to its vesting in such designee. No debt

claim shall be allowed under this section—-

(1) if it is. asserted against) Bulgaria,

‘Hungary, or Rumania Cineluding the govern-

* . + ment or any political subdivisions, agencies, or

instrumentalities thereof) ; or ;

(2) if it is based upon anyobligation ex-

pressed or payable in any eurreney other than

the curreney of the United States; or

(3) if it was not due and owing—

*

* "2 * . .

(b) The desigriee of the President under this

title shall fix a date or dates after which

the filing of debt claims in respect of any or all

‘debtors shall be barred, and may extend the

. ~+time so fixed, and‘ shall give at least sitty days’

_ notice thereof by publication in the Federal

Register. In no event shall the tume extend

hevond the expiration of one yedr from the

date of the last vesting im the designee of the

(13)

«

o

y

‘dred and twenty days after

“the record, and shall make g@ determination,

under this section.

ally sustained;

14

‘President of any property: of-a. debtor in re-

spect ‘to whose debts the date is fixed. No debt ae

shall be paid prior ‘to the expiration of one hun- ?

hablics ation of. the

first such natice in respect of thé debtor, nor in

any event shali any payment of a debt-claun be

made out of any property or proceeds in re-

spect of which a suit or proceeding for return

© pursuant to this title is pending. N bay

(c) The designee shall examine.the claims... 9 ~ 2

and such evidence in respect thereof as may he — ea

presented to him-or-as he may introdiice into Pa

with respect to each claim, of : Nowance or dis;

allowance, in whole or in part. The deteyyi-

nation of the designee that a claim is Atithin

either paragraph (1) or (2) of subsection (a)

of this section shall be final and shall not be

‘subject to judicial review, and such claim,Shall :

not. be considered a deht claim for any purpose :

* *- . * * -

_ Src. 303 [22 U.S.C. 1641]. ‘The Commis-

sion shall receive, and determine in accordance

with applicable substantive law, ineluding inter-

national Jaw, the validity and amounts of claims

of nationals of the United States against the

Governments: of. Bulgaria. Hungary, and Ru-

mania, or any of then: arising: out of the f failure

to-- ;

(1) restore or pay ‘compensation for prop- se

erty of hationals of the United States as re- . .

$26 and 27 of the treaty of

gary, and articles 24 and 2 25 of

ulgaria, a

peace with

* quired by tee 23 of the’ treaty af: peace with

thé treaty of peace with Rumania. Awards

under this paragraph shall be in amounts not

to exceed two-thirds cf the loss or damage actu- Be

(2) par: effective compensation” for the na-

tionalization, compulsory liquidation, or other

*

fe

-% 2°

15

taking, prior to the effective date of this title,

of property of nationals of -the United States

w Bulgaria; Hungary, and Rumania; and

(3) meet obligations expressed in currency —

of the United States arising out of contractual .

or other rights acquired by nationals of, the.

United States prior to April 24, 1941, in “the

case of ‘Bulgaria, and prior to Septémber a.

1939, in the case of Hungary and Rumania, and

ree became payable prior to September 19,

» 194

i i . le * ;

-U S$ SOvkw nO MT PAINTING OFF) (k 1863