Brief for the Respondent in Opposition — Cities Service Co. v. McGrath

Supreme Court brief1952

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Columbia Brewing C iller, 28 rin iT 0 : vs. nie 12

0. v. Miller, 281 Fed. 289°... :

ONY eased de Inver. Int. v, Inlustric! Bige Bank, 269 _

Cun gs 98 N.E. he ia tee wpa Sateedes 16°

Curry v. anless, 307 U.S. 857: Se

Disconte-Gesellachaft. v. United States Sag) Seen |

300 Fed. 741, affirmed, a U.S. 22 16

Finn at. Bank hg aine, 284 U.S . 812. G1

Great Northern "4 v. Sutherland, 278, U. S$. 182 12, 18

Harris v. Batk, 198 US. 216 MOTT ER SN a Er ee g

Hartmann v. United States, 106 a Cl. 686, 65 | ee

Supp. 397, certiofafi denied, 330 US. 842 86

Ae Palmer, 18 F. 2d 932’. Mes atstes 14

Kohn \ v. Jacob & Josef ont 264 Fed. 268° a Beaks

Manufacturers bo aa 388 U8; O41 oe

te 826 U it ie | RS

Rouse, 276 F tie Bday Se ke. 6

v. United States, 1 Wall. 2ne <j - 10, 12

tent cher. v. Ballard, 16 F@ 2d° “¥18, ‘affirmed, =

pL .¥- Central Leather coe 246 Uz. S. 297 | Seek Ee

™ ¥. Way 15 Wall. 196... jodie tratio a 20

lark, 837 U.S. 472- AS EY

Rai Railroad ‘on v. Collector, 100 U.S. 595 eae is aay 1D

Randfontein Mining Co. v. Custodian of nemy

hh peg of ] -So."Afr’ r, LR - p. Div. 576 Lb |

am ang states. 208 ed. 889, cerifotari de-

nied. 263 U.S. 713: °°" fey Wake es RS Se meh 6

Schrijver v. Sutherlen, 19 F. oa 688 Ro ABN Ce Ren. - 142

Silesian American Corp. v. Clark, 832. U.S. 469°

6, 9, 12, 13, 16

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: Chienae. Rock babel cic ete. Ry. v.: ee

pia y Od eee die ee Te eR OOF CRE eae ele kw ba

| CITATIONS. es

Alaniihete v. Fair az, 95 U.S. 9774 Fs ae ey

——— Exch,. a — v. Garvan, 278 Fed. 43,

BF he ger of ae i Five Nat. Bank, 258 U8. 112

B.& 0.

Alani 15 Wall. mn eV Ewe cy caNe. tee oye.

Brown

-Aatacs Me thern }- Co. v. G herd, jm tr

Central Has » 68 F

Oo a a ee SOR EO te Rae bile es pean

- * United States v. Pink, 315 U.S. 203°

5 Ware v. Hylton, 8. Dall. 199 eS PC TERwe Tye eae rie - 10

| Wn a a oF

- Confiscation Acts of 1861 and 1862, 12 Stat. 319, 589 , 10

: trading with the Enemy “Act, 40 Stat. 411,50 U.S.C. ~ 33

ection 5(b) as amended by First War Powers Act ee 7

® - _ of 1941, tle III, 65 Stat. 839 8, BAB. 4

Section 7? ........... Mee gett: ahve bene, Pe ama

weteee Tia) ce 7, 18

NN FOR se git 7, 18

- Begtion 7 ore: 2, 6, 6, 7

. orton Tle F a 7, 18, '19

Section 9(a) ws oe)

. Section 9(n) .....- 576 MEREUSL Os LE RES 7, 8°20 .

9 Section 17... pe Ree is SE Oe SUS Fhe 4

- Section 40 (Act of Sept. .28, 1950, c. 1094, 64... .

Stat. 107, Tearing sree: eco... 16, 1

_ Treaty of Berlin, 42 Stat. A Reon eo. RAO cap a

* : Executive Orders: ea ee

- 2729-A,. Oct. 12,:1917, Meares, The Trading with the

Enem Ast, , de eet aie See's ysis: , 6

2813, ab: 26, 18, Meares, The Trading with the’ as

"* 8016, Dee. 3,’ i9i8, Meares, The Trading with the ..

. . Enemy Act, p. 617... ioe Cepeare eee ede eo 4 eect 6

meat 6694, May 1, 1984; % C.F.R. (1st. ‘Ed! 1989) $4.1. “8

8136; May 15, 1939,4 FR 204. °° ee 6

arch 11, 1942, 7 F.R. 1971.” Oe EE ae

1, 1942, 7 F.R.. _i@ eae 6.

1942, 7 F.R.6205 _ oe 6

- 1945, 10 F.R. 6917 | 3 6

1946, 11 F.R. 11981 2, 6

Rea anna kercene Pinata: Sie pe See 10

ears ent, State Dept. Bull., Jan. 4, 1948, a

wis p. 6; idem, Feb. 19, 1951, ‘Vol. 24, .

seat the Enemy (1948 eae oren a ee teed i

* Powell, The Business Situs of Credits, 28 W. Va. E.Q. 89 9.

- S. Rept. 278 on H.R. 7201, 70th Cong. Ist Sess., p. 30 8

Vesting ‘der No. 12960, 14 F.R..1405 . ofS 3

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Ocronen TERM, 1951

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Crrtes Ranwecss Comteany, AND Tue CHASE Na ATIONAL.

_ BANK.oF THE City or New York, PETITIONERS

“ar |

EP f Hives McGratu, ATTORNEY Guwenar, AS

Successor TO THE ALIEN PROPERTY CusTopIAN

: @

—_

YON PETITION FOR A’ WRIT OF ‘certiorari TO THE .

UNITED STATES COURT OF APPEALS FOR THE

: SECOND ciRcuIT |

eo.

BRIEF FOR rm nEePONDENT IN OPPOSITION’

‘oD |

z “OPENIONS' BELOW ae

| The opinion. of the United States District Court ane

for the Southern District of New York, ,CR. 43)

‘is reported at 93 F. Supp. 408. The opinion of the.

‘United States Court of. Appeals for the Second

Cireuit (R. 55) is reported at 189 F 2a 744,

JURISDICTION

o°

The is of the Court of Appeals was

| entered on June 13, 1951 (R- (it.-62). The petition

for a writ of’ certiorari was filed on September 8,

1951. The jurisdiction -of this Court ‘is # Invoked |

_iinder 28 U.S.C. rispae eg fA

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pee ae STATUTE INVOLVED _ a

‘ithe’ statute here involved is the Trading with |

‘te Enemy Act, 40 Stat. 411, as amended, 50 U‘S.C.

App. §§1-40. Petitioners have set forth in the

Appendix to their Petition, Sections 5(b), .7(e) |

‘and 9(a) of the Act. Otherertinent provisions —

= care Section’ 7(a), (b), (e), 9(n) and 40, which.

are set forth in the Appendix hereto, at pp. 18-21.

| QUESTIONS PRI , an

1, Whether the. provisions of the Trading with

the Enemy Act which authorize the vesting of ‘‘any

: property or interest’, including ‘‘choses iri action

and rights and claims of denen Y and de-

scription’’, confer the right to enforc@an obliga- :

tion of a domestic corporation evidenced by a nego-

tiable bearer bond not itself seized. yea

"2, Where the Custodian has vested an obligation.

_- determined to be enemy owned, is the certain avail- -

ability of a remedy to protect the American obligor —

- . from the’ consequence of a foreign ¢ourt’s possible _

_ refusal to recognize. the’ seizure necessary to the.

: constitutional validity of the Custodian’s action. _

= On March 11, 1949, the respondent, ‘as successor

to the Alien Property -Custodian,’ issued Vesting

* Order No. 12960, 14 FR. 1405 (R. 8-10). ' By that:

____* By Exeeutive Order No. 9788 (11 F:R- 11981, October 14,

_.., 1946), thes Attorney General succeeded to the powers and

* duties of the ‘Alien Property >Custodian. In this brief, the -

~ term ‘‘Custodian’’ wilt be used, as the context may require,

. to refer either to the Alien Property Custodian or to the

_ + Attorney General as his successor. 3 .

¢ .

e %

Order, he vested in himself the debts or“obligations

_ evidenced by three Cities Service Company 5% *

- Gold Debenture Bearer Bonds of $1,000 face value

pach, upon findings that the obligations were owned

- hy, or owing to, a named resident of Germany and

| national of a designated enemy country. The Order

' further identified the bonds. as bearing serial num- .

- bers.M 23293, M 23318 and M 7029 (R. 8-9). -A_

copy of the Order was served on the Company

~ (R. 11) and, by subsequent letters, the Company |

» Was directed to caneel two of the bonds which had:

' been called for redemption, and_to issue in lien :

- thereof its check representing the proceeds~f re-

demption with accrued. interest. The Company _.

"Was also directed to cancel the third bond ‘and to

. issu®in lieu thereof a new] ond and to have affixed

> * thereto.the number of coupons which had not been.”

presented for payment. (R, 13-20, ) ‘y

Orie of the bonds (M 23293) had been paid prior

to the issuance of the vesting order, and, with _re-

spect to this one, the Custodian withdrew,his claim.

(R. 32). Neither of the two bonds remaining if issue

-s, is i the ‘possession:or contiol of the Custodian.

"tie (M 7029) is apparently in possession of Domi--

. nick & Dominick, a brokerage firm in New York

- - City.. The presént location of the other (M 23318)

* is unknown. The bonds were ‘reported to have

~ been-in Berlin prior to the issuance of the vesting |

order.: (R. 32-33)

~ The ‘indentures under which 3 the bonds weye 9

. issued designated tlie Chase. National Bank of the

City of New York as trustée and paying agent (R.,

, v

Ror

’

. fe ES

25). Upon the Company’s failure to comply with.

the Custodian’s demand, the Custodian instituted

the present action under Section 17 of the Trading

with the Enémy Act (40 Stat. 425, 50 U.S.C. App.

17), in’which the Bank was joined as defendant,

- seeking payment of the obligations or the issuance —

of new bonds (R. 3-7). Each party moved for.

summary judgment (R. 37, 39, 41). The District

~ Court held that the location of the bonds outside —

the United States placed the obligations they rep-

ge resented beyond the reach of the Custodian’s au-

__ thority on the ground that the obligations have no

‘ existence apart from the bonds (R. 47-48). Ace

cordingly, it granted the petitioners’ motions for

summary judgment (R. 49-50). os ea Noe es

_. . The Court. of Appeals . reversed-and directed o

‘summary judgment: for the respondent (R. 62).

_ The court held that the Trading with the Enemy |

Act granted the power to reach obligations of an 3

American debtor evidenced ‘‘by bonds outside the —

country, as well ds any of other alien held choses in

_ action” (R. 58). It further held that the power

of the United States to do.so is not affected by the

physical location. outside the United States of

__ the bond, so long as the obligor is present in this -

-. Country. The Court ‘of Appeals also indicated

_ that the petitioners will have a claim against the

_ government in the event that a foreign court refuses - .

_ to recognize payment to the respondent asadefense —

and enters judgment against them in a suit, by. the

bondholder. The court assumed “for argument _

| that, if it were true that [petitioners] remain ex-

posed to such a recovery, and will have no conse-

_ quent ciaim against the Treasury for-recoupment,

a judgment against them will ‘take’ their property

without-compensation in. violation of the Fifth

_ Amendment’’ (R.59). Since the court was satis-

fied that petitioners would have a claim, it did not -

reach the constitutional question which it assumed

~ the absence of a claim would raise.

oe lL. The court below held that the obligation : of

a domestic. corporation to.an enemy national may ae 7

be vested under the provisions of the Trading with

the Enemy Act, notwithstanding that it is evidenced

by a negotiable bearer bond not itself seized: This

holding is in accordance with the comprehensive

language of the Act and its purpose, repeatedly

acknowledged-by this and other courts, to reduce to

possession all property from which the enemy could —

} draw advantage. « raf Rous —— ae

_ Seetion 5(b) of the Act, as amended by Title.

IIT of the First War Powers Act of 1941, in broad

terms confers the authority to vest “any property

or interest of any foreign country or national there- _

of * * *.” Section 7(¢) more explicitly provides |

that ‘If the President shall so require any money |

or other property including * * * choses in action,

' and rights and claims of every character-and de-

scription owing or belonging to * * * an enemy eet

shall be * * * paid over to the * * * Custodian, or

_" * * may be seized’’-by him.? As this Court has

ee authority under Section 5(b) is delegated to the

Custodian by Executive Order No. 9095, March 11, 1942,

ret rade 6 2

’ Tepeatedly declared, these provisions are designed .

_to reduce to possession all enemy property that -

-- ean be reachéd so as to prevent enemy use thereof

and to permit affirmative use by the United States.

Propper v. Clark, 337 U.S. 472, 481, 484; Silesian-

American Corp. v. Clark, 332 U.S, 469, 476 ; United

States v. Chemical Foundation, 272 U.S. 1, 9-10.

Unquestionably, the Aet authorizes the seizure ‘

ar”. “debts.” McGrath v. Manufacturers Trust Co., -

338 U.S, 241, 246; Propper v. Clark, 337 U.S. 472,4-

And the comprehensivé statutory language and the

7 FR. 1971; as amended by Executive Order No: 9193, July

a6, 1942, 7 F.R..5205, and Executive Order No. 9567, June 8,

1945, 10 F.R. 6917.

1918, id. p. 617; No. 6694, May 1, 1934, 26 C.F.R. (1st. ed.

1939) § 4.1; No, 8136, May 15, 1939, 4 F.R. 2044; No. 9142,

April 21, 1942, 7 F.R. 2985; No, 9788, October 14, 1946, 11

F.R. 11981, | Noy LAE wees eee

| That the Custodian, ‘‘in taking over the administration of

the Trading-with the Enemy Act, is entitled to the full seope

ef its permanent provisions whether found in Section 5(b)

*.* * or elsewhere” is not open to question. Markham vy,

Cabell, 326 U.S. 404, 423-424 (eoneurring opinion).

* To the same effect : Mutzenbecher y. Ballard; 16 F. 24 172

(S.D.N.Y.), affirmed, 16 F. 2d 174 (C.A. 2); Rumely v. United

' States, 293 Fed. 532, 548 (C.A. 2), certiorari denied, 263

‘U.S. 713; American Exch. Nat. Bank. Vv. Garvan, 273 Fed. 43

(C.A. 2), affirmed sub nom. Simon v. American Exchange

Nat. - Bank, 260 U.S: 706; Miller vy. Rouse, 276 Fed. 715

“(S.D.N.Y,); Kohn v.. Jacob & Josef Kohn, 264 Fed. 253

Brak (tS 8 oe take bee Wiis:

seheme of Section 7 leave no doubt of a legislative )

purpose to. include all debts, however evidenced.

_ Thus, Section 7(a) requires any person ‘indebted

In any way” to an.enemy-to report’ the fact to the

Custodian. Section 7(b),: which ‘was aimed at

transfers to neutrals by enemy obligees, declares

~ that the transferee shall have no right or remedy

_ against the. obligor by virtue “of any assignment, —

indorsement, or delivery to him of any debt, bill,

note, or other obligation or chose in action bye.

an enemy.’’ Section 7(c) as already noted, au-

thorizes seizure of “any * * * property including -

* * * choses in action, and rights and claims of

every character and description.” - Section 7 (e), |

, dealing with the discharge of the obligation. paid’

over to the Custodian, provides that the Custodian

“shall, in case of payment to * * * [him] of any .

debt or obligation-owed to an enemy * * * deliver

“up any notes, bonds, or other evidences of indebted- _

ness’ or obligation * * * that. may haye eome into

_ [his] possession * * *,”

_ The -authority. conferred by Section 7 (e) to

"reach a bonded indebtedness without seizure of

_ the bond itself is explicitly reaffirmed by the pro- -

Visions of Section 9(n) of the Act. 45 Stat. 272, t

50 U:S.C. App. $(n). That Section was added ee |

1928 by the Settlement of War Claims Act which ze

.. provided in! general for the return of 80% of all

seized property. . For the cases where a stocle or

bond interest had been seized without actual seizure

of the-stock certificate or the bond, Section 9(n) »

provided for an 80% yeturn to the current owner

;

pee ie

of the instrument.‘ By. this provision, Congress —

_ In terms affirnied the Custodian’s power to seize’ -

an intere.i represented by a bond irrespective of

whether he had taken the actual instrument.*

| There*is not a word,in any of these statutory

, Provisions which would warrant attributing to °

Congress a purpose to except from the broad au- |

thority thus conferred the power of the Custodian. |

to seize an interest because it is represented by a .

negotiable bond or because the holder of the bond.

_ is not within the United States. Indeed, to impute

such a purpose to Congress would be, pro tanto,

* Section 9(n) provides: ; ea sae 2 . : ety

‘In the case of property consisting of stock or other interest

in any corporation * * * or of bonded or other indebtedness «

thereof, evidenced by certificates of stock or by bonds * * *.-

where. the right, title, and interest in the property (but not |

the actual certificate or bond * * *) was * * * seized by {the

Custodian],’’ the current owner would be entitled to.an 80 ~~

per cent return as provided in Section 9(b). ee Sep ee

_ . ‘Congressional awareness of the authority to seize stock

- and bond -interests without seizure of the actual instrument

is shown by Report No. 273 of the Senate Committee on

Finance on H.R. 7201, 70th Cong.,, Ist Sess., p. 30, whieh

‘Subsection (n) meets the situation which -has arisen by

reason of the fact. that certain corporate interests were seized

° without obtaining custody of the certificate evidencing those

interests. - As @ result the certificate has been sold’ in Germany

and is being dealt in daily on the German exchanges, Although »

_ the committee-was convinced that it could not adopt a policy,

of general recognition of assignments, it seemed imperative sot

that this situation be met. Accordingly, subsection (n) pro- |.

vides for the recognition of the various assignments and for

payment to the present owner of the certificate. In order to

prevent evasion, however, ‘it is ‘heeessary to limit the return. .

irtespective of the citizenship of. the present owner, to the

80 percent. © 97 = : etgeas

~ ey

s :

= :

to frustrate its eRe: aim in enacting’ t the Trad- Ss

ing with the Enemy’ Act: to permit of. reduction .

““to possession by the United States in furtherance

of the war effort’’ of - “any property i in this coun- 2

.try. of any alien.” ‘Silesian- American Corp. ¥ &

| Clark, 332 U.S» 469, 475-476. | ee

* It is, of course, true that the property of the .

alien must be “‘in this.country.” ’ Ibid. -And it is '

_. submitted that the court below properly held that

that. requirement was met in this: case... Of course,

_° an intangible obligation to pay, whether’ evidenced

. sg a bond or negotiable instrument or not, has no

“‘situs”’ in the sense of location in space. See First

‘Nat. Bank v. Maine, 284 U.S. 312, 328, 332; Powell, . -

The Business Situs of Credits, 98 W. Va. LQ. 89.

What matters for purposes of ‘‘jurisdiction”’, as

the decisions of this Court have established, is that

the obligor i is here: and can be made to pay. Stand- ~

ard Oil Co. v. New Jersey/341 U.S. 428; Curry v.

“ McCanless, 307 U.S. 357, 365-367; “State Taw

- Oomm’n v. Aldrich, 316 U.S. 174 iuverviline First

- Nat. Bank v. Maine, supra, on other grounds). In

> @ real sensé, there is property here which can be

effectually dealt with ‘when an obligor is here.

* Harris vy. ‘Balk, 198: U.S. 215° 222-223; Chicago,

_ Rock Island ete. Ry. v. Sturm, 174 US. 710,.715- .

716. Cf. Canada Southern Ry. Co. v. Gebhard, -

- 109 U.S. 527. The bond itself would be substan- _

tially worthless if the United States would not |

. -enforce ‘its ‘Tecognition by the obligor.*

6 The presence of the obligor has been held a sufficient basis

for the attachment of a debt represented by a: siegotiable * od

eee

The seizure during time of ‘war of a debt evi-

denced by a bond not itself. taken represents no _

new policy." It was sanctioned in the days of this .

-countgy’s struggle for independence (See Ware v.

Hylton, 3 Dall. 199,. 264-265) as well as by the —

"Confiscation ‘Acts of 1861 and 1862 (Act of August

, 6, 1861, 12 Stat..319; Act of July 17, 1862, :idem. <

589). Miller v. United States, 11 Wall. 268, 296;

Alexandria v. Fairfax, 95 U.S._774, 7795 Brown.v._

Kennedy, 15 Wall. 591; see also Pelham: v. Way,,

“15 Wall. 196, 201-202, ‘It is also the policy of other. 2

countries, notably South Africa, Great Britaih an rf 4

instrument not itself seized, although many states have statutes . _

' whieh have been interpreted not to. permit ah: attachment: in’ °

_ the case of negotiable instruments because of a policy against.

subjecting the obligor to the danger of double: liability. See

the cases noted in 38 @.J.S. §,102 and 71 ALL.R. 58%,

Since Bank of Jasper v.- First Nat, Bank, 258 US, 12s -

relied on by petitioners (Pet. 12), concerned the power of a

court “to determine the liability of maker to holder’? in a

case in which neither the holder nor thé negotiable instrufnent

was within the court’s jurisdiction, it ean have no application

"here. For there has been no attempt in this case to secure a °

determination that the petitionersthe ‘‘makér’’, are not liable

to the holders of the bond instruments. Indeed, it. is the

petitioners’ fear that they remain liable to the “‘holders’’ that ~

gives rise to their complaint discussed tafra, pp: 12-16.

* The absence of World’ War I caseé involving domesti¢

bearer bonds ldcated abroad has not been dye to any supposed »

lack of authority with respect to such bonds. ‘At that time,

vesting of bonded debts. without seizure of the instruments was:

the exception because of the difficulty of adequate identifiea- |

‘ion. This difficulty, however, ha& to a large extent been.

overcome in World War II by the requirement of the Allied

vecupying powers of the reporting of such property by the

enemy: . Thus, the enemy ownership arid serial numbers of the

bonds can be readily’established. fear Sibeaes

Sea JACEE Seer

& .

Canada. Randfontein Gold Min thing Co. v. Custodian

oe of Enémy Property, [1923] So. Afr, L.R., App.

: Div. 576; Sutherland v. Administrater of German -

Property [1934] Court of Appeal, 103 ‘LJ. (K.B.)

244, [1934] 1 K.B. ; 50 T.LR. 107, 150 L.T.R.

247; Canadian Revised itahcgsegead “Bespoctinig”

Trading with the Enemy (1943).*. wt

The rule that the bond: itself -i ig to be treated ’

as the property, and. that the. “situs” of the obli-

gation is the. location of-the paper, is admittedly |

adlation. anda statement of the results edlirts’have zs

teached in other contexts. for reasons of policy... a

ee _ See the dissenting opinion of Mr. Justice Stone in -

First National Bank v. Maine, 284 U.S. 312, 33%; -

iS overruled by State Tax Comm’n v../ Aldrich, 316

U. Se 174. ‘The concept of “situs” is ‘pot: to be

employ ed to thwart the poliey of the United States,

United States v. Pink; 315, U.S. Go: 234, 240.

‘In the analogous situation of the seizure of in

” tangible obligations représerited, by: stock. certifi-

- cates, this Court has upheld the ‘authority of the

Custodian ® seize thotigh the certificates are be-

ee 7

® The | Catfadian regulations provide for the vesting of ‘‘all.

: _enemy»property. ”* 4 (Reg. 21(1)). ‘Property’? is deftied to

‘te @ bonds, dabieatteeia O90 or aihas obligutions or rights. :

inelade securities (Reg. (i) ) which. in turn are defined i...

€ xtend to:

~ whether ' registered | or in bearer form * ® e: -and 8vhether the. <

eee

instruments representing the securities is in Canada or not.’ :

place of registration or the. : of the certificates or

Ce. Bitter vy, Secretary of State of Canada (1944) 3 Dom.

LR. 482 ( Exch.) }; Braun v, The Custodian ( 1944) 3 Dom. LR. ;

412 (Exch.), ‘appeal: dinmianed . »- (1944) 4 Dom. BR 209... °°

Ci sy

% .

s 12

yond his reach. Silesian-American Corp. v..Clark, —

332 U.S. 469; Great Northern ‘Ry. v. Sutherland, :

ag): 23 U.S, 182. The same result has been reached.

P \ _ even when the-certifieates are’endorsed jn blank,

a 4 gid henee pass. by. delivery* . Schrijver v."Suther-.

1. . and, 19 F. 2d 688 (C.A,D.C.); B. & O. R. Co. v. -:

, _, .Sutherlqnd, 18 F. 2d 560 (C.A. 4).° pgs os

Viewed against the decisions under'the Act rati-

fying the seizure of intangibles, the decision, below.

does not reach a novel result and, we submit, calls _

* for no further review. oe ne

2. Given -a plain Congressional purpose to au-

thorize the Custodian to enforce an obligation of

: “a domestic corporation even though that obliga-- ;

@ —_, tidn is evidenced by.a negotiable bond which may be .

‘held abroad, it is submitted that there. is no con-

~” stitutional-obstacle to the enforcement by the Cus.

- | Arie & Bae >

o If the Aet confers upon the Custodian the authority

~ vest the obligations in suit, there can be ng question of his

rs :power to requite cancellation of the outstanding bonds:and the

aN issuance of new ones. Silesian-American Corp. vy. Clark, 332

Bec) = ~ i ean the provisions of the indentures under |

Which the bonds were issued or those of the Negotiable Instra:

ments Law justify the failufe to,comply with that requirement.

' “Federal officers and Federal courts are not dependént upon

State legislation for power to lay hold of property.’’ Miller v.

tTnited*’States, 11 Wall. 268, 297; Columbia Brewing Co. ¥,

Miller, 281 Fed. 289, 291-(C.A. 5). Any ineonsistent pro-

oF '___ vision of state law, such as the Negotiable Instruments Law or

- ‘.- the’ Stock Transfer Act, must yield. Silesian-American Corp:

_« 4v. Clark, supra; Gt. Northern Ry. v. Sutherland, 273 U.S. 182:

Central Hanover Bk: & Trust Co. v. Markham, 68 F. Supp.

~. > Congress has ‘done everything within its me

- 829, 831-882 (S.D.NY.), | ne

‘tiable inggrument

- 3

- as" es : c

. . . é

o : id ~)

. . ogy

to immunize ‘petitioners from’ the risk of £ being

held liable a second time.- - Sections 5(b) (2) and.

7( e) of the Trading with the Enemy Act exonerate

“, frori liabitity anf person turning over property’

or otherwise’ acting in compliance with .any ‘re-

-quirement made ‘pursuant to the Act. Under sueh

circumstances, it ‘is submitted that euforcement of . -

petitioners’ obligations is’ not to. be frustrated Bees

their fears that a foreign court may deny effect ee

ve these exculpatory provisions,’° ” Sy - ee

~The very reach of. petitioners” constitutional ca

argument suggests its infirmity. For possibilities

of. double liability such as petitioners envisage are

not peculiar to eal this, ihvolving a nego-

: tendered ag, reason for holding . the Trading with

the Enemy Act invalid in every instance in which

suit ig brought to Rergsaake bailee, trustee, agent

or obligor to comply awit? a vesting order, if the —

defendant or his property might come within the —

= jurisdiction of a foreign court.. If an ‘assurance

_of non-liability abroad—an. assurance Congress

cannot grant—were ° essential to the validity of

seizures under the Act, one would suppose that in

the course of the long history of alien property

10 There i is no question but. That these provisions edeitaty

"protec. the petitioners against suit in any court of the United

. States hy’a holder of these bends. Silesian-American Corp. v.

Clark, 332 U.S. 469 ;-Gt. Northern Ry: v. Sutherland, 273_U.8..

182; American Bach. Natl.’ Bank. v. Garvan, 273 Fed. 43, 47

(CLA. 2), affirmed sub nom: Gunes v. American Exch. Nat.

Bank, 260 U.S. 106

y held abroad. . No reason’

is #pparent why sueh possibilities could not be

a rag ee 14,

_ seizures, that point would have been made and «

Congress put to the choice of providing. recourse a

_ for-one who might twiee be'held liable or foregoing +

‘seizures as a’ weapon of economic warfare. arene b

* The Constitution forced no such choice upon the —-

Congress. This Court has held, in very:similar —_;

circumstances, that whethey provision should. be.

_ ‘made fer relief against foxeign liability is a ques-

tion for decision by Congress, and that the absence.

. Of such provision is no bar to enforcement: of;a

-: fedeyal statute. In Railroad Co. v. Collector, 100-

_ "U.S. 595, an early farm of “withholding tax” on

_ interest or dividends was upheld again’t the objec: —

tion that the “company might not -be protected

abroad, The Court, in an opinion by. Mr. Justice .

Miller, said (100 U.S. at 598-599): SATE

| Whether, as a question of international. coud ee

this declaration would relieve the corporation. .

froy the obligation to pay its foreign bond-

holder the full sum for whieh it contracted, |

_ We‘need not discuss ;-for this court, on all such.

_ Subjects, is bound by the legislative and politi-

cal departments of its own government. .* * *> -

being lawfully assessed and paid, it gannot be —

recovered back by reason of any inefficiency or at

ethical objection to the remedy over against.

thebondhoMder, = = 2 7 i

_. The fact that, following ‘World - War I,*suits:

“by former enemy nationals in the courts of their

own country or elsewhere for seizures by the-Cus-

- todian were outlawed by the Treaty-of- Berlin,” a,

‘142 Stat. 1939, 1948.5 See United States v. Chemical =.

Foundation, 272 U.S. 1, 11; Klein v. Palmer, #8 F. 2d 932 — ~

(CA. 8). — : Beene ea vat

wT 4.

. ys e @

> 5 s . 4

+ : : ~ be 2 a

ae Soe

2 15°

. aks to confirm, this Court’ s apparent belief, ex-

pressed in Ratlroad Co. v. Collector, supra, that:

athe problem of potential foreign liability should be -

‘resolved in the diplomatic sphere and-not in terms

of constitufional law. , This view would seem to be

. Implicit also in Section 40 of the Trading with the - _ |

7 : Enemy Act (Act of Sept. 28, 1950, c. 1094, 64 Stat.

1079, 50 U.S. C. App., Supp. IV 40 infra, p: 21),

which, authorizes the negotiation: of agreements to

settle ‘‘inter sttstodial conflicts’? concerning enemy:

property. The Brussels Agreemefit, to which the

. United States. ahd five other countries are parties

and the signing of which was aiithorized by Section

‘40, attempts to resolve such questions as may arise”

when, for example, the United States vests_ the

obligation evidenced by a bond of American i issue

-and France seizes the bond itself. “Article 1 of |

the Annex to the Agreement relates to securities, —

: including bonds, and provides that the country in

which the security was issued. shall be entitled to

‘retain the underlyipg obligation as against the st i

sountry in which the paper is-focated.”

It should be noted, moreover, that the foreign ae

diability of the petitioners is hypothétical and may

never inaterialize.. The bonds in question are pay-

4 able i in the United States: (see p. 2" of each inden-

ture), and foreign courts may hold. that. the. bonds

were intended to be governed by our law. See the — ae

12 The’ text of. the iat is set ‘forth | in State Dépt.

Bull., Jan. 4, 1948, Vol. 18, No. 444, p. 6; Arti@e I of ‘the

~ Annex appears on page 7. For ‘announcement of the going .

‘into effect of the Agreement, see State Dept. Bull., Feb. 19,

1951, Vol. 24, No. 607, p. oct . °

e «

j-*

‘am

Oak Fie Cie

foreign “gold clause”

soo a

‘

. £4

pania de Inver. Int. vy. In

dpeisone discussed in Com-

dustrial Mtge. Bank, 269, ,

_ N.Y."22, 198 N-E. 617; to the samé effect, Hart- xe

mann VB nited States, 106 Ct. CL 686,65 F; Supp.

~ 397, certiorari denied,.330-U.S, 842, The courts of

the ‘United States,. at least; have -regarded. it as

- a well-settled rule of international law that the’

courts of one country will not sit in judgment on

_ the acts of the government of ano

3 its own territory. (Oetjen vy. Ken Fal Leather Co,, -

246 U.S. 297, 303-304; United States v.. Pink, 315

US. 208, 233; Bernstein

v. Van Heyghen Freres,

163 F.2d 246 ( C.A. 22, certiorari denied, 332 U8.

: ’ mines

‘sion.

et Ee

_ #172), and have applied that rule in cases of foreign

reorganizations of corporations

(Canada Southern

Ry. Co. v. Gebhard, 109 U.S; 527, 536) and foreign.

'. Seizures under a statute equivalent to the Trading

-. With‘ the dinemy Act.

Disconto-Gesellschaft v.

United States Steel’ Corporgtion, 300 Fed, 741 .

(S.D.N.Y.), affirmed, 267 U.8.:29, :

Thus it appears not only that petitioners have, as

- Yet, nof been subjested to

a second liability abroad

but that they may never be. If there is-no second

: liability,

* ableif sue

_ "In their statement of the questions Sree nied (Pet. 5-6):

: petitioners suggest that the vesting of foreign sagen e

deprive ‘a non-enemy bondholder of his property’ with y

. Notice or opportunity. to be heard. Whatever rights the bond. ~~

holder may have, clearly petitioners Have no’ standing vicar-

. lously to assert them, Silesian

U.S. 469, 474, eu)

-American Corp. v. Clark, 382° -

_ EN ae ?

er done within _ s

mod

. The court bedi correctly eversed the decision

of the district court denying\ thé Custodian the

relief sought. There is no conflict of decisions. The _

"+ petition should be denied. (Ae pane.

SoG _-Respeetfully submitted,

| s | Puiup B. PERLMAN,

Nisa : ' - Solicitor General.

Nes / Harorp I, Baynvon, - oe

: Assistant Attorney General. .-

o° \ °° +) Sranuey M. SILVERBERG,

\ Special Assistant to

| - the Attorney’ General.

Ri _ Georae B. SEARLS, — ae

__ Irwin A. Sepa, = i,

ee ae Ce Attorneys. ve

OcToBER 1951.

s? i ¢

oes 3 a “©

‘ a

+ 5 ;

S :

ee ere 8k -

Trading ‘with the Enemy: Act, ¢..166, 40 Stat. -

-_ 411,_as amended, 50°U.S.C. App. 1, et eq.:

| Se MR res pee RIES oo :

We | An} person in the United sie whoholds =:

4 . OY has*6x shall hold 6r have stody.orcon- ~~

a _ trol of any property beneficial or otherwise, -

~~. alon@ or jointly with others, of, for, or on -

behalf of an enemy or ally 6f enemy, or of aA

any person whom he may. have Yeasonable

: | ‘cause to believe to. be ‘an énemy or.ally of

, eee ' enemy and any person in the United States

| > *..wh6. is or shall be indebted in vp eig a an

enemy or ally of enemy, or to any person

_% whom he may have reasonable cause tohe-

__ - lieve to be an enemy or ally of enemy, shall, °° «

y . “with stich exceptions and under such rules. =

- _ and regulations as the P?sident shall pre- «. ~

~" sage of this Act, or within thirty. days after

~-- - - Such property. shall come within his eustody _

/ .. or control, or after.such debt shall become

due, report the fact tg the Alien Property

Custodian by written statement under vath

containing such particulars as: said cus-_-

“Sey todian shall require. * ** ° | Lage Se Dan aay Vera es

(b). Nothing in this Act contained shall

' render valid or legal, or be.econstrued to .

- Tecognize as valid or legal, any act or trans- ,

»_-action constituting trade with, to, from, for. °

- or-on account of, or on behalf or for the:

_ benefit of an enemy performed or engaged

* ~~. in sinee the-beginning of the war and prior

_to the passage’ of this Act or any such act

or transactién hereafter performed or ‘en-

‘

ah ta ae eT Tk 4, LARD ia

<nhane My gn Crm a da be

et ins ty te

19-

e 5 ; 2. ‘ ae

wate gaged in except as authorized hereunder,

which would otherwise have been or be void, —

_¢ dllegal, or invalid at Iaw. No conveyahce, ,

_ etransfer,’ deliveay, payment, or loan of

é> money or other property, in violation of _

section three hereof, made after the passage

of this Act and not under license as herein

_ providéd shall confer or create any right or -

: - vdtnedy in gespect thereof; and no. person s

2 shall by virtue of any assignment, indorse- |

_ ment, or delivery to him of any debt, bill,

~~~ gneote, or other obligation or. chose ‘Yh action

by, from, or on behalf of: or-on account of,

or for, the bénefit of an enemy or ally of |

y res R : ‘

enemy have any right or remedy: against

, .the debtor, obligor, or other person liable to-

‘pay, fulfill, qr perform the same unless said

assignment, Indorsement, or delivery was

‘made prior to the beginning of the Kar or

_ + Shall be iaade under license as herein ‘pro-

vided, or unless, if made after the beginning .

of the War and prior to the date of passage

of this Act, the person to whom the samé was . -

made shall prove lack‘of knowlédge and of | -

_ Teasonable cause to believe 6n his part that~, :

_ the same was madé.by, from oron behalf of,

_ or on account-of, or -for the benefit of an

enemy or ally of enemy; and any person

who knowingly pays,. discharges; -or satis...

fies any such debt, note, bill, or other obliga-

' tion or chose in action shall, on conviction

thereof, be deemed to violate section three

{MM TR Gira On eA kos ty

- Pi? a) * ae Be Shree

-{e) No person shall be held liable in any

court for or fh respect to anything done or.@

omitted in pursuance of any order, rule, or

regulation made by the President ander the

authority of this Act. .: me

Any. payment, conveyance, transfer, as-

_ signment, or delivery of money or property

made to the Alien Property Custodian here-

under shall be a fvll acquittance and: dis-

charge for all purposes of the obligation of

the person making the same to the extent

of same. The Alien Property Custodian and _

such other persons as the President may .

- appoint. shall have. power to execute, ac-

__ knowledge, and deliver any such: instrument

-or instruments as may be necessary or prop-

__/ex to evidence upon the record or ctherwise .

/ such aquittance and discharge, and shall, in

_ case of payment to the Alien. Property Cus- .

todian of any debt or obligation owed to an

enemy or ally of enemy, deliver up any notes, —/.

‘bonds, or other evidences of indebtedness or- /

| obligation, or any security therefor in which

such enemy or ally of enemy had any right

or interest that may have come into the:

possession of the Alien Property Custodian,

. with like effect as if he or they, respectively,

. were duly appointed by the enemy orally of ;

enemy, creditor, or obligee. | / :

SEc. 9. ° be if “4 ; ; ‘

* * * . om Sd

(n) ‘In the case of property consisting of . °

stock or other interest in any corporation,’ .

association, co y, or trust, or of bonded. -

. ov other indebtedness thereof, evidenced. by_

certificates of stock or by bonds or by other

/eertificates of interest therein or indebted-

~~ ‘ress thereof, dr consisting cf dividends or _

i OO eh eee

NEA 6 RG Menten Peep oc: ae See we:

property * We 7

_ ‘ interest or other accruals thereon, where the —

right, title, and -interest in the property

(but not the actual certificate or bond ‘or _

other certtficate of interest'or indebtedness) — -

was conveyed, transferred, assigned, de-

livered, or paid to the Atien Property Cus- _

todian, or seizéd by him, if the President

‘determines that the owner thereof or of any

interest therein has acquired such ‘owner-

- ship by assignment, transfer, or sale of such

- Certificate or bond or other certificate of in--

terest or indebtedness, (it being the intent’

of this subsection that such assignment, -

‘transfer; or sale shall not be deemed ‘invalid .

. hereunder by Yeason of such conveyance, °°

transfer, assignment, delivery, or payment

to the Alien Property Custodian or seizure

by him) and that the written consent pro-

vided for in. subsection (m) has been filed,

then the President may make in respect of _

.such property an order of the same charac- —

ter, upon the same conditions, and with the’

same effect, as in cases provided for in sub-

section (b), including the ber ‘fits of sub- .

'. section (c). / |

Sec. 40 [50 U.S. C. App., Supp TV, 40].

The President, or such officer or agency as

he may designate, is authorized to conclude

and give effect to agreements to further the .

~ amicable and expeditious settlement of

intercustodial conflicts involving enemy

: .

- ‘ / y A:

? °

: nthe:

- %0U/&. ‘Government Printing Omce, 1951 J3960807/280

i /, ea ° —_— F

——

. /

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.