Petitioner for ReHearing — Standard Commercial Tobacco Co. v. Snyder

Office - Supreme Court, U. 3

FiILwDD |

APR11 1950

CHARLES ELMORE CROPLEY

FILE Copy

IN THE

Supreme Court of the Wnited States

OCTOBER TERM, 1949

No. 561

STANDARD COMMERCIAL TOBACCO COMPANY

and STANDARD COMMERCIAL STEAMSHIP CORP.,

Petitioners,

v.

JOHN W. SNYDER, Secretary of the Treasury, and

UNITED STATES OF AMERICA.

PETITION FOR REHEARING ON A PETITION

FOR A WRIT OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE DIS-

TRICT OF COLUMBIA CIRCUIT, AND BRIEF IN

SUPPORT THEREOF

Harotp G. Aron,

726 Jackson Place, N. W.,

Washington, D. C.,

RayMonp L. WIsE,

80 Broad Street,

New York, N. Y.,

Ricearp L. Merrick,

1025 Vermont Ave., N. W.,

Washington, D. C.,

Attorneys for Petitioners.

epee ee CNTR TE I NC A TS AR TR EAT SORA TMI NI ORHE NE

APPEAL PRINTING CO., INC., 130 CEDAR STREET, NEW YORK, wo 4-3033

INDEX

PeritioN FOR REHEARING ON A PETITION FoR A WRIT

or CERTIORARI TO THE Unitep States Court or

APPEALS FOR THE District or CoLuMBIA CrRcult........

py | a

Reasons FoR PETITION FoR REHEARING

fe |

(CERTIFICATE OF COUNSEL .......

BrizF IN SUPPORT OF PETITION .

Table of Cases Cited

Bradford v. Chase National Bank of New York,

24 Fed. Sup. 28, 309 U. S. 632, 84 L. Ed. 990............

Carl Byoir Associates v. Tsune-Chi, 1142 F. 2nd 885

Hartford Accident and Indemnity Co. v. Petroleum

Royalties Co. of Oklahoma, et al., 24 Fed. Sup. 759,

a hc FR Ge Ra Bas GO ec ntrirrrnetetesetninieene

Parker State Bank v. Pennington, 9 F. 2d 966..........

Williams v. Heard, 140 U. S. 528, 35 L. Ed. 530

RRL Re KURI SSW Wr ee ease

PAGE

13

6

ii

Statutes, Treaties, Reports, Etc.

Act of Feb. 27, 1896, 31 USCA 547 .0.u 4

Communication of Sec. of State Hughes on Hearing

Before Ways and Means Com., 69th Cong., Nov.

BE, SE Se AD deeersnincreshcnsitcictnesnteieniticiindneacalophinisioaaaeie 10

Court of Claims Act, as Amended June 25, 1948,

Sie PNR IIIIUNN ss csssonsioshesbcimsacsacpseionotmaluegdinn nbonccieopeainaplahietiaees: 3

Federal Tort Claims Act, 28 USC 921 ou... 3, 12

Harrison Resolution, 48 Stat. 1277.22...

House Doc. No. 483, 69th Cong., p. 16 202... 10

Messages of Pres. Coolidge, Dee. 6, and 7, 1926 ........ 10

Rep. of Sec. of Treas, 1928, p. 356 -..................ene 10

Senate Doc., No. 99, 69th Cong., p. 2.2... eeeeeceeeenes 10

Statement of Mr. Bankhead re H.R. 7201, Cong.

Ree., Vol. 69, Part I, 70th Cong., Ist Sess., p. 897 10

Statement of Sec. of Treas. Andrew Mellon re H.R.

es Ie ES oh ocedanthcaieindbndinieanbombasanatendiniancsiad 10

Statement of Pres. Truman, Cong. Ree. App., Aug.

Bly Ses i IIE scoscpcccan ees aieiaigpiobaiiavcuienciataastuen 10

Trading with the Mnemy Act of L917 2... 12

OG EE SENNNEES occreneecnancntenocenaieeniaanins 4, 10

Settlement of War Claims Act of 1928 0002... 12

War Claims Act, 80th Cong., 2d Sess., Ch. 826, See.

—_

IN THE

Supreme Court of the United States

OCTOBER TERM, 1949

No. 561

—— a

Sranparp ComMMERCIAL Topacco COMPANY and

Sranparp CoMMERCIAL STEAMSHIP CorpP.,

Petitioners,

v.

Joun W. Snyper, SECRETARY OF THE TREASURY, and

Unirep States oF AMERICA.

en <> sm

PETITION FOR REHEARING ON A PETITION

FOR A WRIT OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE DIS-

TRICT OF COLUMBIA

To the Honorable Chief Justice, and the Associate Justices

of the Supreme Court of the United States:

Come now the petitioners and present this petition for

a rehearing on the petition for a writ of certiorari filed in

this case.

Jurisdiction

The petition for certiorari was filed on February 3, 1950,

and denied on March 27, 1950. This petition for rehearing

is filed within fifteen days from March 27, 1950, in accord-

ance with Rule 33 of this Court.

Reasons for Petition for Rehearing

In applying for this rehearing, your petitioners reiterate

each and every ground set forth in the original petition,

and further suggest to the Court the matters hereinafter

discussed.

This petition is made because the petitioner’s reply brief

was not completed until the very day on which the Court

denied this application. The contents of the Reply Brief

are printed at the end of this application for rehearing

of the petition, exactly as the brief was about to be sent

to the printer on March 27, 1950. The Clerk of the Court

had been informed by telegram, immediately on receipt of

the Respondents’ Brief, of the intention to file a Reply

Brief.

The necessity for the Reply Brief and its chief purpose

was to bring to the attention of this Court the fact, which

was not disclosed in either brief, before the Court, that

Williams v. Heard, 140 U. S. 528, on which the Respond-

ents appeared chiefly to rely, had been, in effect, nullified

five years later by an act of Congress on February 27,

1896 (31 USCA 547). Both sides had cited the Williams

case; the appellants, by inadvertence, had not referred to

the subsequent statute, as they had alluded to the Williams

ease only as one of fifteen authorities (page 21 of the

Petitioners’ Brief) supporting the principle recognized

by Chief Justice Marshall in the Bank of United States

case (9 Wheat. 904) that the United States could be held

to performance of the duties of a trustee. The Respond-

ents cited the Williams case, twice on page 12 of their

brief, as the controlling authority and nowhere made

mention of the subsequent and countervailing statute of

1896.

_ ——

3

Through the entire Federal judicature, the opinions

announced in this case have totalled merely three sen-

tences, yet it must be admitted that the case is of novel

impression; that it involves upwards of $100,000,000 indis-

putably due to American citizens; that it brings before the

Court historic and recent precedents in its own decisions

and those of the English courts; that it calls for the first

time for the construction by this Court of a far reaching

statute of great and immediate importance, enacted in

1996, five years after the Williams case and, perhaps, as

the result thereof; and presents for the first time the

question of the reconciliation of the Federal Tort Claims

Act (28 USC 921) and the Court of Claims Act, as

amended June 25, 1948 (28 USCA 1491).

That these petitioners have suffered a wrong has been

repeatedly and recently conceded by officials of the highest

rank in the government of the United States, as shown

in the appended proposed Reply Brief. There has been

a wrong, there appears to be no remedy, in view of the

denial of this petition, even though the United States

has shed its robes of sovereignty and subjected itself to

suit for any wrong ‘under cireumstances where the

United States, if a private person, would be liable.’’ It

would seem that in such circumstances an even higher

duty rests upon the officials of government than on private

counsel to aid in. rectifying this wrong, and vet the

Department of Justice has, before this Court, relied on

the Williams case, without disclosing to the Court the

subsequent action of the Congress as to the disposition

of funds received from foreign governments for citizens

of the United States.

In denying this petition, the Court has sanctioned the

dismissal of the complaint with ro opportunity to amend

and has deprived the plaintiffs of any possibility of

4

presenting their evidence or curing any defect in the

allegations of the complaint by, supplying the proof of

any missing essential of their causes of action. The Court

has thereby answered in the negative these questions:

Have these petitioners any remedy for the wrong

done them?

If they are not within the Federal Tort Claims

Act, are they, by virture of statute (28 USCA

1346 and 1491), entitled to sue in the United States

District Court and/or the Court of Claims under

the fourth and fifth provisions for its jurisdiction

—for money had and received for their benefit

under the Act of February 27, 1886, clearly a cause

of action ‘‘founded upon any express or implied

contract with the United States’’ or ‘‘for liquidated

or unliquidated damages in cases not sounding in

tort’’?

ARGUMENT

POINT I

Since the Treaty of Berlin the United States (by

virtue of the Act of February 27, 1896 (31 USCA

547)), has held in trust all German assets delivered

under it.

This legislation, enacted after the decision of this court

in Williams v. Heard, on May 25, 1891, provides:

‘*All moneys received by the United States from

foreign governments and other sources in trust for

citizens of the United States and others, shall be

deposited and covered into the Treasury.

Each of the trust funds covered into the Treasury

as aforesaid is hereby appropriated for the pay-

ment of the ascertained beneficiaries thereof.’’

—7_

5

The language in the text of the act reads ‘‘from foreign

governments and other sources.”’ Certainly it can not be

argued that the seized German assets from the First

World War were received for any other purpose, in view

of the language of the Treaty of Berlin, the Debt Settle-

ment Agreement and contemporary action by the Con-

gress, particularly in view of the fact that it had been

the traditional and avowed policy of this country from its

inception not to confiscate private property as war booty.

The words ‘‘other sources’’ are here too significant to

be sloughed off. Concededly, the assets from the Second

World War come from ‘‘other sources’’ for there is as

yet no treaty and in fact no surviving German government

to make one. We believe it absolutely sound, or at least

sufficiently serious for this Court to hear argument

thereon, for us to contend that with a half billion defaulted

German bonds in the hands of the United States, held for

the benefit of these awardholders, it follows as a matter of

law that the German assets seized in the Second World

War are funds ‘‘in trust for citizens of the United States.”’

POINT Il

Petitioners believe they have the right to elect

whether they would proceed (a) in equity for specific

enforcement of the trustee’s duties, as they have en.

deavored to do in their second prayer for relief; (b)

under the Federal Tort Claims act for the conversion

of trust funds held for their benefit as they do under

their first prayer for relief; and as implied in the Re.

spondent’s Brief and the cases cited by them at page

16 (Carl Byoir Associates v. Tsune-Chi, 112 F. 2d 885,

and Parker State Bank v. Pennington, 9 F. 2d 966)

for money had and received, by virtue of the provision

of the Act of April 27, 1896, aided by the practical

construction placed upon it by the accounting methods

adopted by the Secretary of the Treasury in the dis-

position of the funds resulting from the liquidation

of the German assets and the recent action of the

Congress in the War Claims Act (Chapter 826, 80th

Cong., 2d Session), which retains in the Congress the

control and disposition of the funds resulting from

seizure during World War II and does not put them

under the Act of February 27, 1896.

The foregoing two points, added to those set out in

our petition for writ of certiorari and the briefs below,

indicate the problems which have confronted counsel for

the petitioners. To them it has seemed clear that these

petitioners, clearly wronged as they are by act of the

United States, have some right or rights and, believing

that the ancient maxim—awubi jus, ibi remedium—has not

become obsolete are convinced, through careful study,

that these petitioners have available to them alternate

causes of action, as to which the doctrine of election of

7

remedies does not apply; that they may sue both at law

and in equity; ex contractu and ex delicto; under treaty

and statutes of the United States; and that the complaint

states good causes of action and should not be summarily

dismissed without the plaintiffs being afforded a right

to amend, if there has been an omission in their pleadings,

as they would be in any ordinary case fraught with no

such intricacies as is the instant action. We have faith

that on re-consideration the Court will agree that this

case merits a full hearing by the full court, and, on full

presentation of the treaties, statutes and legal principles

involved, that it should not be disposed of on a neces-

sarily limited and inadequate presentation by petition for

writ of certiorari on which counsel are inarticulate. Hap-

pily to tvo members of the Court this is not a new issue:

the Chief Justice, then as Secretary of the Treasury, was

cognizant of the origin of the action, and another, as

Attorney General, of its initial defense.

Conclusion

For the foregoing reasons and those set forth in the

following brief, the petitioners respectfully urge that a

rehearing be granted; that upon further consideration that

the order of March 27, 1950, denying the petition for

certiorari be revoked, and that the writ of certiorari issue

as prayed.

Haroitp G. Aron,

Raymonp L. Wiss,

Ricwarp L. Merrick,

Attorneys for Petitioners.

8

I, Harold G. Aron, of counsel for petitioners, Standard

Commercial Tobacco Company and Standard Commercial]

Steamship Corp., do hereby certify that the foregoing

petition for rehearing of this cause is presented in good

faith and not for the purpose of delay.

Haroitp G. Aron,

Of Counsel for Petitioners,

——_——

9

PROPOSED REPLY BRIEF FOR APPELLANTS

The sole purpose of this brief is to answer three state-

ments made in Respondents’ brief.

Pages 2 and 14: The only provision the Congress has

made as to enemy property, seized during the Second

World War, is contained in Sec. 13 (a) of the War Claims

Act (Chapter 826, 80th Cong., 2d Sess.) which reads as

follows :

War Ciamms Funp

Src. 13. (a) There is hereby created on the books

of the Treasury of the United States a trust fund to

be known as the War Claims Fund. The War Claims

Fund shall consist of all sums covered into the

Treasury pursuant to the provisions of section 39

of the Trading With the Enemy Act of October 6,

1917, as amended. The moneys in such fund shall

be available for expenditure only as provided in this

Act or as may be provided hereafter by the Congress.

Due to the amounts of property seized during the Second

World War, this does not appear to impinge on the rights

of the petitioners, now here; were it found to do so, the

constitutionality of the Act would be attacked on the

ground that the Congress was without power to make any

disposition of the enemy property seized during the Second

World War, except subject to the trust with which it was

impressed in favor of these petitioners and others simi-

larly situated, because of the default in the German bonds

held for their benefit.

Page 12: Williams v. Heard, 140 U.S. 529, does not

conflict with the petitioners’ position; if it is to be cited

against them, then some reference should have been made

10

by Respondent to the fact that it was decided in 1891 and

was directly affected by act of Congress on February 27,

1896 (31 USCA 547) and also to Administrative Decision

No. V (Parker, Umpire) of the Mixed Claims Commission.

United States and Germany.

Page 13: The trust res, as here referred to, had no such

origin as is stated by respondent. Historically, as far as

these awardholders are affected, the res originated on

August 21, 1921, in the Treaty of Berlin which embodied

the provisions of the earlier Treaty of Versailles (Art,

297), and has been so regarded since that time. ( Messages

of Calvin Coolidge as President of the United States of

December 6 and 7, 1926, Sen. Doc. No. 99, 69th Congress,

page 2; H. Doe. 483, 69th Congress, p. 16; Report of the

Secretary of the Treasury for 1928, page 356; Communi-

cation of Charles Evans Hughes as Secretary of State on

hearing before Ways and Means Committee of the House

of Representatives, 69th Congress, November 19, 1926,

page 203; statement of Andrew W. Mellon as Secretary of

the Treasury on hearings before sub-committee on Ways

and Means, HR 10820, 69th Congress: Secretary of the

Treasury, Sen. Doc. No. 99, 69th Congress, page 2; Report

of Secretary of the Treasury for 1928, page 356; statement

of Mr. Bankhead on H.R. 7201 Cong. Record, Vol. 69, Part

l, 70th Congress, Ist session, page 897; President Truman,

Cong. Record App. August 12, 1947, p. A 5252.)

It is not necessary, under the present complaints, how-

ever, to go back to these early origins or further than the

Settlement of War Claims Act of 1928, when the United

States, as it was under the compulsion of doing by the

paramount law of the Treaty of Berlin, affirmed its duties

as trustee for the awardholders and committed the great

blunder and breach of faith, while the claims of its own

nationals were still in litigation before a tribunal which

11

it had itself created (Executive Agreement August 10,

1922 (42 Stat. 99(00)), of releasing 80% of the German

assets held in trust for American nationals, under the

Treaty of Berlin, and substituting therefor the since

proved worthless unsecured bonds of the German Reic!, as

guarantee of the petment of awards (the amount of which

was not then known) which the United States had bound

itself to collect as trustee for present and then future

awardholders. The United States let those bonds go to

default in 1931, not only without action on its part but

with its passive acquiescence, and piled Ossa on Pelion

by continuing until the passage of the Harrison Resolution

three years later (48 Stat. 1277) to pay out millions of

dollars to German nationals, while its “own nationals re-

ceived nothing. Then, through seizure of enemy assets

in the Second World War, having become possessed of

outright ownership, without cost to itself, of a vast

amount of assets of Germany, the defaulting debtor, the

United States converted these assets to its own use (see

paragraph 6, pages 30, 31 of Transcript of Record in this

Court) and here denies, and by every artifice of specious

argument and misleading citation, seeks to evade any

liability to these awardholders.

Is it to over-simplify, to use this illustration: If Smith

owed Brown One hundred Dollars and gave him a note

for it and Brown gave the note to Black who agreed to

collect it: later Black turned up with the past due note

unpaid but also in personal possession and ownership,

without cost to himself, of Five hundred dollars worth

of Smith’s assets, does it need argument to show that no

civilized tribunal would permit Black to keep for himself

Smith’s assets and apply no part of them to the note

Smith had given Brown and Brown had in turn delivered

to Black under Black’s agreement to collect it?

12

Page 16: The Respondents grasp at a straw in contend.

ing that the Settlement of War Claims Act was an amend.

ment to the Trading with the Enemy Act of 1917 and,

hence, subject to the exception as to the latter act, set

forth in See. 491 (e) of the Federal Tort Claims Act.

But were this a fair and defensible construction of the

last named act, it does not affect the case now here.

There are only two references in the complaints to the

Settlement of War Claims Act in Paragraph 16, it is stated

that by virtue of the Settlement of War Claims Act, the

United States “‘had and claims to have no interest except

as trustee’’ in the German bonds or the proceeds thereof,

‘for the sole and exclusive benefit of the holders of awards

of the Mixed Claims Commission, United States and

Germany.’’ The only other reference is in the first prayer

for relief ‘‘in such amounts as are respectively due them

on awards of the Mixed Claims Commission, United States

and Germany under the Settlement of War Claims Act.”

By no conceivable distortion of the allegations of these

complaints can it be argued that the petitioners are claim-

ing under the Settlement of War Claims Act.

To restate succinctly the position of the petitioners, it

is this:

By the Treaty of Berlin, Germany relinquished

any claim on behalf of its nationals to a huge

amount of seized enemy property for the declared

purpose of paying the private war losses of Ameri-

can nationals and the United States received and

accepted it for that express purpose. The United

States diverted over 80% of this property to other

uses and in December 1948 there was none lefi

to pay approximately $100,000,000 still due on legal

awards to American nationals. In the interval,

the United States had become vested with another

huge amount of German property as the result of

—

13

the Second World War. These petitioners in 1947,

having foreseen the inevitable result, as to World

War I German assets, which was demonstrated in

fact at the end of 1948, began this action to impress

a trust on the property of Germany seized in

World War II, before any use or disposition had

been made of it and before any other claims, legal

or equitable, existed or were asserted against it.

Two causes of complaint were stated, with a

single objective but with alternative relief asked:

either that, to the extent necessary to make whole

these petitioners and other holders of awards, the

United States pay off the German bonds out of

the German assets in its possession; or, if it failed

in that duty, that the United States respond as

woud any private trustee for the violation of the

trust for these awardholders.

The legal philosophy of the petitioners’ prayer is indi-

cated in two cases, not cited as here factually in point, but

for their learned opinions, both of which cases have been

before this court.

Bradford (also cited as Berger) v. Chase National

Bank of the City of New York, 24 Fed. Supp.

28; 309 U. S. 632, 84 L. Ed. 990;

Hartford Accident and Indemnity Company v.

Petroleum Royalties Company of Oklahoma, et

al., 24 Fed. Supp. 759; 308 U. S. 626, 84 L. Ed.

522.

In the former, the late Judge Woolsey wrote:

‘“‘The basis of constructive trusts, such as the

plaintiffs seek, is knowledge of wrongdoing. This

knowledge may be inherent in the situation as in

eases of constructive trusts imposed on malefactors

or it may be based on notice, as where a party has

en et oe ee

14

received a res innocently, and, after notice, refuges

to return it or make restitution for it.

‘*Put at their highest for the plaintiffs, these

causes are of the latter kind, and, assuming all the

plaintiffs’ contentions herein, nothing occurred to

make it against conscience for the Phiiippine Goy-

ernment to take the bonds voluntarily turned over

to it as pledges by their owners, or to sell them in

due course with the consent of their owners so as

to liquidate those pledges, and thereafter to deposit

the proceeds of such liquidation in a bank of deposit

and to use the proceeds in the ordinary course of its

business, until it received notice from the several

plaintiffs of their claims for restitution. In causes

of this kind it is only retention after notice which

would constitute a wrong in equity. Adams »,

Champion, 294 U. S. 231, 236, 55 S. Ct. 399, 401,

79 L. Ed. 880; Holley v. Missionary Society, 180

U.S. 284, 290, 21 S. Ct. 395, 45 L. Ed. 531.”’

In the latter, the opinion reads in part: Uni

**Constructive trusts are children of equity and

they are recognized by all the courts, as evidenced

by the many authorities quoted by the defendants, Peti

[ am convinced, therefore, that the corporation was

by the District Court, in its decision, supra, created

as a constructive trustee for the trust estate and

was as said in Rollow v. Taylor, 104 Okl. 275, 231

P. 224, svllabi 1 and 2:

‘Trusts ar children of equity, and equity de-

lights especiatiy, when the ease has a flavor of

fraud, in protecting trusts and in obliging trustees

and trust estates to render to all men their dues.

‘**Constructive trusts’’ are such as raised by

equity in respect of property which has been

acquired by fraud, or where, though acquired

without fraud, it is against equity that it should

be retained by him who holds it.’ ’’

Sas UE a a eS Ria ar