Petition for a Writ of Certiorari — Riss & Co. v. United States

INDEX

Page

Opinions below 1

Jurisdiction 2

Questions presented 2

Statutes involved 4

Statement 4

Reasons for granting the writ 11

Conclusion 27

Appendix 28

CITATIONS

Cases:

Baldwin vy. Short, 125 N.Y. 553, 26 N.E. 928 15, 25

Causey v. United States, 240 U.S. 399 26

Central Trust Co. v. Garvan, 254 U.S. 554 18, 25

Commissioner v. Wilcox, 327 U.S. 404 24

Commonwealth Finance Corporation v. McHarg, 282 Fed.

560 RRP es .., 1,24

Cumm-ags v. Societe Suisse pour Valeurs de Metaux, 85

F. 2d 287 . e : 19

Federal Crop Ins. Corporation v. Merrill, 332 U.S. 380 19

The Floyd Acceptances, 7 Wall. 666 19

Hart v. United States, 95 U.S. 316 19

Hazel-Atlas Co. v. Hartford Co., 322 U.S. 238 22

Isenberg v. Biddle, 125 F. 2d 741 20

Keystone Driller Co. y. General Excavator Co., 290 U.S.

240 23

Kind vy. Clark, 161 F. 2d 36, certiorari denied, 332 U.S.

808 . a/R a Pen 15

Kitchen v. Rayburn, 19 Wall. 254 23

Lee v. Munroe and Thornton, 7 Cr. 366 ren : 19

Lowenstein v. Reikes, 60 F. 2d 933 15

Mammoth Oil Co. v. United States, 275 U.S. 13 25

Milwaukee 4 Minnesota R. Co. y. Soutter, 13 Wall. 517 15

North American Oil Consolidated vy. Burnet, 286 U.S.

417 24

Orvis v. McGranery, No. 404, this Term 17

Pan American Co. y. United States, 273 U.S. 456 24

Precision Inst. Mfg. Co. v. Automotive M.M. Co., 324 U.S.

806 a 23

Propper v. Clark, 337 U.S. 472 16,17

Rodiek v. United States, 117 F. 2d 588, 120 F. 2a 760,

affirmed, 315 U.S. 783 19

Rudin v. Steinbugler, 103 F. 2d 323 24

(1)

SM

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MOET ERE PD AME BE IE RE LON IEE HELE LE IT BOLLS IE LOE IFO NETS SIT .

Penn

II

Cases—Continued

Rutkin vy. United States, 343 U. S. 130

Schrijver v. Sutherland, 19 F. 2d 688

Societe Suisse pour Valeurs de Metaux v. Cummings, 99

F. 2d 387, certiorari denied, 306 U.S. 631 ........... 19

Standard Oil Co. v. Clark, 163 F. 2d 917, certiorari

My I OE ic os re cea oe nae ee 23, 25

Btoukb ¥.. Waeet, Boo U.6. FOO. . 2... es 15

Swiss Nat. Ins. Co. v. Crowley, 136 F. 2d 265, certiorari

denied, 320 U.S. 763 ............. eos EN ha Ne Saha 20

United States v. California, 332 U.S.19................ 19

United States v. Leiner, 143 F.2d 298... Sten 16

United States v. Lewis, 340 U.S. 590 ................. 24

United States v. Stewart, 311 U.S. 60 ................. 19

United States v. Trinidad Coal Co., 137 U S. 160 dig EN 26

Utah v. United States, 284 U.S. 534.................... 15

Whiteside v. United States, 93 U.S. 247... eats 19

Wickard v. Filburn, 317 U.S.111..... eee eee 19

Wilber Nat. Bank v. United States, 294 U.S. 120... ..... 19

Zittman v. McGrath, 341 U.S. 446 0 ee 17

Statutes and Executive Orders:

Trading with the Enemy Act, ¢. 106, 40 Stat. 411, as

amended, 50 U.S.C. App. 1 et seq:

ME Sb cick aes Bee Wide chaku Cou ecs

eek. eee mow. S

/ TEA Rat erate oOo en eed 16, 28

3 aon Fc adi 4 <den <icck pn 4k pine ba 16, 30

j SS a eee oe er pene a er a 3, 32

= ee eet are Ad os Sowa staat 25, 33

: a yas ican kay ces chess 24

2 Executive Order No. 8389, as amended ............. 16, 17, 34

5 No. 9095, as amended ...... ........ 35

3 No. 9193, as amended ............. 18

; Miscellaneous:

3 Pomeroy’s Equity Jurisprudence (5th ed., 1941), § 762... 16

q Restatement of the Law of Ageney (1933) §§ 34, 35, 52.. 15

: weoet On TrastetiGoe), S200... cc ik 15

3 Vesting Order No. 13853, 14 F.R. 5855 sss. Be 25

Bnthe Supreme Court of the Wnited States

OcTOBER TERM, 1952

No. 541

JAMES P. McGRANFRY, ATTORNEY GENERAL OF THE

UNITED STATES, AS SuccEssoR TO THE ALIEN

PROPERTY CUSTODIAN, PETITIONER

v.

Pavut Won. Vort, ERNEST NAUEN, AND PatL Wo.

Vort AND JuLIAN H. Bascu, as TRUSTEES u/Ww

oF FrRep BascH, DECEASED

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE DIS-

TRICT OF COLUMBIA CIRCUIT

The Solicitor General, on behalf of James P.

McGranery, Attorney General, as successor to the

Alien Property Custodian, prays that a writ of

certiorari issue to review the judgment of the

United States Court of Appeals for the District of

Columbia Circuit entered in the above-entitled

case on October 13, 1952.

OPINIONS BELOW

The opinion of the District Court filed on April

11, 1951 (R. 75-86) * is reported in 99 F. Supp. 57.

* References to the three-volume blue covered Joint Ap-

pendix will be designated “R.”; those to the Transcript of

Record (brown cover), containing the complete Markham

testimony, as “T. R.”.

(1)

2

The supplemental opinion filed on May 1, 1951

(R. 86-87) is reported at 108 F. Supp. 263. The

per curiam opinion of the Court of Appeals (R.

1302) is reported at 199 T°, 2d 782.

JURISDICTION

The judgment of the Court of Appeals was en-

tered on October 13, 1952 (R. 1304). The jurisdie-

tion of this Court is invoked under 28 U.S.C.

1254(1).

QUESTIONS PRESENTED

In 1939, Fred Basch and respondents Vort and

Nauen conspired with other Americans and with

a German partnership to ‘‘cloak’’ or conceal the

ownership by the Germans of 375 shares of stock

in an American corporation. In 1943 and 1947,

respondents Vort and Nauen purported to pur-

chase for value and for their own account some of

the ‘‘cloaked’’ shares from other parties to the

conspiracy. There was no showing that the pur-

ported sellers had authority to make the sale,

and no license for the transaction was obtained

under the ‘‘freezing’’ regulations. Before any

purchases were made in 1943, all the parties to the

conspiracy filed affidavits and had representations

made on their behalf to the Treasury Department

and to the Office of Alien Property Custodian

that they were bona fide owners of the stock and

that there was no German ownership or interest in

it. They were then orally assured by the then

Deputy Alien Property Custodian that he did not

object to the 1943 sale, and that if it was later

LL a ee ey ee et

3

determined that the shares were German-owned,

he would vest the proceeds of the sale and not the

shares. The 1947 sales were consummated without

knowledge of them by the Government. The At-

torney General, as successor to the Alien Property

Custodian, subsequently vested under the Trading

with the Enemy Act all the stock that had been

‘*cloaked’’ in 1939, including the shares which

were sold in 1943 and 1947. The present suit is

under Section 9(a) of the Trading with the Enemy

Act for return of the vested shares. The courts

below, although finding a conspiracy to ‘‘cloak’’,

as stated above, have held that the shares sold in

1943 and 1947 must be returned.

The questions presented are:

1. Whether the Attorney General is bound with

respect to the shares purchased in 1943 and 1947

by the oral assurance given by the former Deputy

Custodian in 1943, so that respondents Vort and

Nauen may, by reason of that assurance, recover

the shares.

2. Whether, assuming that the Attorney Gen-

eral could ever be bound by such an assurance, the

present assurance should be disregarded because

induced by fraudulent misrepresentations.

3. Whether, the Attorney General having re-

covered from the respondents by counterclaims the

dividends which respondents received on the shares

they themselves took as ‘‘cloaks’’ in 1939, the

respondents may set off against his recovery the

amount by which the receipt of such dividends in-

ws - oe ee Be

x

creased their income tax payments, when those

payments were a necessary incident of the ‘‘cloak-

ing’’ scheme in which respondents were engaged.

STATUTES INVOLVED

The relevant provisions of the Trading with the

Enemy Act, as amended, and of the Executive Or-

ders are set forth in the Appendix, infra, pp. 28-35.

STATEMENT

On December 22, 1948, the Attorney General

vested, under the Trading with the Enemy Act,

1442 shares of Herman Basch & Co., Inc., a New

Jersey corporation, as the property of Thorer &

Co., a German partnership and an enemy national.

Of those 1442 shares, 518 stood in the name of re-

spondent Vort, 136 stood in the name of respondent

Nauen, and 156 stood in the name of the respond-

ents Vort and Julian Basch, as trustees of the

estate of one Fred Basch, who had died in 1943

(R. 5-8). On September 21, 1949, the Attorney

General vested the dividends paid on the vested

shares from January 1, 1939, to December 31, 1948

(R. 27-29).

The respondents brought suit under Section

9(a) of the Trading with the Enemy Act to recover

the shares vested from them. The district court

found! that at a February 1939 conference at

Trenton, New Jersey, the respondents Vort and

Nauen, and Fred Basch, agreed with others and

1 The court’s findings are embodied in its opinion (R. 75-86).

For purposes of this petition, we accept all of those findings;

we here present only questions of law.

«Rea a a rata apts ne dena nsien ei ALES

—

5)

with representatives of Thorer & Co., a German

partnership, to conceal or ‘‘cloak’’ (R. 81) the

continued ownership by the German partnership

of 375 shares of the 500 shares of Althor, Inc., a

New York corporation, which then held title to the

2000 outstanding shares of Herman Basch & Co.,

Inc., a New Jersey corporation (R. 79-82).° As

a part of the basic conspiracy, Thorer & Co. took a

repurchase option on the 375 shares, and the Amer-

icans to whom those shares were transferred, in-

cluding the respondents Vort and Nauen and also

Fred Basch, executed cross-options among them-

selves, so that no sales could be made outside of the

group. (R. 80) The district court found ‘‘that in

fact the money purported to have been paid to the

Germans was really their money,’’ (R. 80-81),

that the plaintiffs were ‘‘cognizant to a large ex-

tent of the plan to cloak’’ and willing ‘‘to join in

the conspiracy and assist in protecting the Ger-

man interest’? (R. 81), and that ‘‘[I]t is clear that

the whole Trenton transaction was a sham and that

the Germans still retained the control of the

[ Althor] company”’ (R. 82).

In December of 1940, the option to Thorer & Co.

was purportedly cancelled, upon a payment of

$63,000 by the Althor stockholders to Thorer &

Co. Concerning this cancellation, the district court

found that ‘‘a dividend of $64,000 was declared

[by Althor] to make this payment,” and ‘‘I am

2 As part of the same agreement, the Germans sold outright

to Vort 50 shares of Althor, 50 to Fred Basch, and 25 to

Nauen (R. 80).

Peete ROLE SG

satisfied that the cancellation of the options was

fictitious and that the Germans still remained in

control’? (R. 83). Finally, in August of 1941, the

cross-options among the stockholders were can-

celled, the cancellation being ‘* pre-dated to January

1941’ (R. 83, 84). This cancellation, the court

found, ‘‘was gone through evidently to prevent the

seizure of the [ Althor] stock by the United States”’

(R.83), and the pre-dating of the cancellation ** was

a continuation of the fraudulent concealment of the

German interests, when the stockholders were com-

pelled to file affidavits that they were the true own-

ers of the [ Althor] stock standing in their names”

(R. 84). °

In 1941, after Executive Order No. 8389—the

‘‘freezing’’ order—had been amended to cover Ger-

man assets, each of the Althor stockholders, inelud-

ing the respondents Vort and Nauen and Fred

Basch, filed reports on Form TFR-300 with the

Treasury Department stating that they held all

their Althor shares free and clear, with no interest

or claim in any fereign national. See e.g., TF R-300

filed by respondent Nauen (R. 1203-1207). In 1942

and 1943, they similarly caused representations to

be made to the Treasury Department and to the

Alien Property Custodian that they owned their

Althor shares free and clear and that there was no

other interest therein. For example, respondent

3 The court noted that certain “freezing controls” went into

effect in the Spring of 1940 and that the “conspirators were

evidently concerned about the extension” of them to German

property (R. 82).

Se

7

Nauen filed an affidavit on June 29, 1942, in which

he stated (R. 1199):

I have no understanding or agreement with

anyone, directly or indirectly in connection

with said stock, and no one but myself has any

interest in said shares. The entire interest

in said shares, both actual and beneficial, is

in myself.

Mr. Myron Cowen,* who was employed as attorney

to represent the Althor company and its share-

holders, specifically directed the Alien Property

Custodian’s attention to these representations in a

letter dated January 30, 1¥43 (R. 1011-1012):

Each shareholder has heretofore presented

affidavits to the Treasury Department, certify-

ing that they own-their shares in their own

‘right, and that no one else has any interest of

any kind, either directly or indirectly in such

shares. Even though we know such to be the

fact. it has been thought that, because of the

former business association ‘of some of the

stockholders with the former German owners,

a sale of a substantial part of their shares

would be looked upon with favor. While none

of the stockholders are desirous of disposing

of their shares, they are willing to place the in-

terests of the company above their own per-

sonal interests, if by so doing the company is

permitted to operate free of any governmental

4 There is no contention by the Government that Mr. Cowen

was cognizant of the conspiracy; or that either he or Mr.

Markham acted otherwise than in good faith.

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8

supervision or restriction not common to all

American corporations.

On the facts found by the district court, these

representations were false.

Several of the persons who had taken some of the

375 Althor shares in 1939 had been attorneys for

the German Thorer & Co. and one was a cousin of

one of the leading partners in Thorer & Co. (R. 84).

Because of those facts, the Treasury and the Cus-

todian were investigating the ownership of the

Althor shares in 1942 and 1943. The suggestion

was then made ® that the attorneys and Theodore

Koch should sell some of their shares to the re-

spondents Vort and Nauen and to Curt Mahler

(T. R. 6-7).° The stated reasons for this proposed

sale are indicated in the letter of Mr. Cowen, quoted

above.

Mr. Cowen discussed this proposal with Mr.

James EK. Markham, the Deputy Alien Property

Custodian. The sole evidence, other than hearsay,

5 The record does not indicate who made the suggestion for

a sale. Although respondents urged below that the sale was

made upon the suggestion of the Custodian, the district court

did not so find, but found merely that Mr. Markham “did

not object” to it. (R. 84). Mr. Markham’s testimony was

that during discussions with Mr. Cowen “a suggestion was

made” for a sale; that he advised Mr. Cowen “that he ought

to write a letter to the office telling what he proposed to do”

(T. R. 7); and that he told him that he “had no objection” to

a sale. (T. R. 8).

® The attorneys and Koch made up part of what was termed

the “investment group” of Althor stockholders (R. 84).

Mahler was also a member of the “investment group”

(R. 108, 109, 275). There are pending in the District Court

for the Southern District of New York, suits brought by him

and his wife under Section 9(a) of the Act to recover shares

vested from them.

9

as to Mr. Markham’s attitude toward the 1943 sale

is his own testimony in this suit (T. R. 2-65). He

stated to Mr. Cowen that he did not object to the

proposed sale ; that, since the Althor shares had not

been vested, the holders could sell and the pur-

chasers would get a good title; and that, if the Alien

Property Custodian later decided that the shares in

question were German-owned, he would vest the

proceeds of the sales and not the shares (T. R. 8-9).

However, he testified that this assurance was made

‘‘on the information that I had at the time”’ (T. R.

42), which, of course, included the numerous false

affidavits filed. He refused to give a letter stating

that he would not vest, saying ‘‘it was not my prac-

tice to tell what I would do in the future” (T. R.10).

As to a license under ‘“‘freezing’’ controls for the

transaction, he said, ‘‘We gave them no license.

They could act on their own.”’ (T. R. 19.)

Mr. Markham made no written memorandum or

other record of the assurance which he had given.

He testified that he gave no information of it to his

successors as Custodian ?—Mr. Donald C. Cook,

and Mr. (now Circuit Judge) David L. Bazelon.

(T. R. 38, 43, 44.) * Apparently, the first time he

7 Mr. Markham became Custodian in 1944, succeeding Mr.

Leo T. Crowley.

8 Mr. Markham disclaimed any intention to bind a suc-

cessor. He testified (T. R. 16):

Q. Well, did you tell him [Mr. Cowen] that the Office

would never vest the shares?

A. I spoke for myself only.

Q. Well, I don’t think that is responsive.

A. I told him while I was Alien Property Custodian

that I was not going to vest the shares. That if they

wanted to sell, sell them, and tell the whole story, and

4

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=

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10

told anyone about the commitment was when he told

Mr. Berger, respondents’ counsel, ‘‘when he [ Ber-

ger | had this case’’ (T. R. 15).

Upon receiving this assurance from Mr. Mark-

ham, respondent Vort bought shares of Althor

from George Ward and William Lancaster, who

were other parties to the 1939 agreement (R. 84).

Vort purchased these shares with his own money

and intended to hold the shares as his own property,

with the intent that he, together with respondent

Nauen and Fred Basch, should control the Althor

corporation (R. 85).

In 1944, Althor, Inc., was dissolved, and the 2000

shares of Herman Basch & Co., Inc., held by Althor

were distributed among its stockholders, including

the respondents Vort and Nauen, and the estate of

Fred Basch, at the rate of 4 shares of Basch for

each share of Althor (R. 24, 30, 33, 36, 38, 40).

In 1947, respondent Vort bought 118 shares of

Basch from other parties to the 1939 agreement and

respondent Nauen bought 40.° There was no evi-

dence of any additional assurance given to re-

spondents in 1947 or of any knowledge by the Gov-

ernment of the 1947 sales. Indeed by letter of

November 28, 1945 (R. 1178), the respondents had

been put on notice that the Government was still

investigating the matter. Again, the respondents

paid with their own money. (R. 85.)

ass a letter in here and tell us what they were going

to do.

Q. Did you intend to bind the Office so that no suc-

ceeding Custodian could vest?

A. I only intended what the words import.

®Fred Basch died in January, 1943, and made no pur-

chases subsequent to the agreement of February, 1939.

Sen Ns ee

11

The district court held that the Attorney Gen-

eral was entitled to retain the vested shares that the

respondents Vort and Nauen, and Fred Basch, had

acquired by transfers from the Germans in 1939,

but that the respondents Vort and Nauen were en-

titled to recover the shares they bought in 19438 and

1947 from other parties to the 1939 agreement (R.

85). It also held that the Attorney General was

entitled to recover from the respondents on his

counterclaims the amounts of the dividends re-

ceived by Vort, Nauen, Fred Basch, and his estate,”

from 1939 to 1948, on the 408 shares the Attorney

General was held entitled to retain, but that the

respondents could set off against those counter-

claims the amounts by which the income taxes paid

by them had been increased by reason of those

dividends (R. 86-87, 93). The result was to allow a

recovery to respondents Vort and Nauen of 402

shares, to allow the Attorney General to retain 408

shares, and to allow a $57,600 set-off to all of the re-

spondents on the Attorney’s General’s counter-

claims (R. 90-92).

Both sides appealed. The court of appeals, in a

per curiam opinion, held that the findings and con-

clusions of the district court were in all respects

correct, and affirmed. It held that the respondents

Vort and Nauen acquired by ‘‘bona fide purchase”’

the shares they bought in 1943 and 1947 (R. 1302).

REASONS FOR GRANTING THE WRIT

1. The courts below have given almost conclusive

effect, as limiting the power of the United States

1 Fred Basch’s estate is represented herein by its trustees,

viz., respondents Vort and Julian Basch.

Bae: Mie

12

to seize and retain enemy property, to an oral as-

surance, given by the Deputy Alien Property Cus-

todian and never recorded in writing or communi-

cated to the successor Custodians, that he would

not vest these shares." They have done so, more-

over, despite the fact that the Deputy Custodian’s

action was induced by false representations made

by or on behalf of the respondents as part of what

the courts below have found to be a ‘‘conspiracy”’

(R. 81) for the ‘‘fraudulent concealment of the

German interests’’ (R. 84).

The effect which was given to this oral assurance

appears from the district court’s opinion, which

embodied its findings and conclusions. ‘Those

findings and conclusions were expressly approved

by the court of appeals. (R. 1302). Although the

district court’s opinion is not wholly explicit, it

seems clear on its face that it held binding on the

Government what the then Deputy Alien Property

Custodian, Mr. Markham, told the respondents’

attorney, Mr. Cowen, in 1943, and that it was

because of Mr. Markham’s statements that the

courts below held the respondents entitled to stand

as bona fide purchasers.

The district court said with respect to the 1943

sale (R. 84-85) :

11 We believe that a fair reading of Mr. Markham’s testi-

mony, taken as a whole, is that he was not doing anything

more than stating informally how the matter of Herman

Basch & Co. stood in his mind at the time. The informality

with which he treated the matter certainly supports this im-

pression. But even if he intended to make a binding commit-

ment, such a commitment could not, for reasons which we

shall develop at length, have the effect which we believe the

courts below have given it.

13

. a suggestion was made that what was

called the ‘‘management group’’, consisting

of the plaintiff Vort and his associates, should

buy certain of the stock held by Ward and

Koch and their associates, who were members

of the ‘‘investment group’’, so as to oust them

from the controlling interest. The Alien

Property Custodian did not object to this sale

and so advised Mr. Cowen, who was represent-

ing the stockholders. He also told Mr. Cowen

thav «ince the stock was not vested, the parties

had a right to make this sale, and that the pur-

chasers would get a good title to the property ;

also, that if at any later time the Alien Prop-

erty Custodian determined that this particu-

lar stock was German owned, he would vest the

proceeds of the sale, rather than the stock.

The plaintiffs claim that as they acted upon

the suggestion and with the approval of the

Alien Property Custodian, the Government

is estopped from vesting the stock itself. How-

ever that may be, the transaction was an open

one with full knowledge of it by the Alien

Property Custodian * and the money used in

the purchase apparently was the money of the

purchasers. As the stock was to be sold there

12 We read, “with full knowledge of it by the Alien Prop-

erty Custodian” to mean no more than that in 1943, before

making the purchases, the stockholders advised the Custodian

of the proposed sales (See, R. 1011-1075, 1152-1154). The

stockholders never disclosed to the Custodian that the shares

in question were “cloaked” for the German Thorer & Co.; to

the contrary, their attorney, Mr. Cowen, “was representing

that there was no German ownership in the company”

(T. R. 6), and they had filed numerous affidavits making like

representations (see infra, pp. 21-22).

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14

was no reason why the plaintiffs should not be

the purchasers. They were seeking to get the

control of the company and it does not seem

that they were doing that in the interest of the

Germans.

Thus the district court’s opinion, although for-

mally disclaiming any holding that the United

States was estopped by Mr. Markham’s statements,

in effect gave almost controlling force to those

statements. The scant space devoted to the 1947

sales (R. 85) is indicative that the court’s con-

clusion as to them was deemed to flow from its con-

clusion as to the 1943 sales. Moreover, analysis

of both transactions demonstrates that the result

a reached can be explained only on the ground that

‘ in some way what Mr. Markham told Mr. Cowen

made the sales ‘‘bona fide’’ and bound the Govern-

ment, for it is clear that, absent the statements

2 made by Mr. Markham, the sales would have been

3 invalid both as a matter of private law and under

the Trading with the Enemy Act. We shall illus-

trate these propositions by reference to the 1943

sales, pointing out, however, that essentially the

same considerations are applicable to the 1947

sales.

a. In 1943, respondent Vort bought from George

Ward shares which he knew Ward held as a

‘‘cloak’’ for the Germans under an agreement to

which Vort, as well as respondent Nauen and Fred

Basch, was himself a party (R. 81-84). That is,

Vort knew that Ward held only the record title

and that Thorer & Co. was the beneficial owner.

15

Stoehr v. Wallace, 255 U.S. 239, 251; Kind v.

Clark, 161 F. 2d 36, 46-47 (C.A. 2), certiorari

denied, 332 U.S. 808. In the absence of some ele-

ment of estoppel, Ward could not transfer to Vort

more than he held, the bare record title. Insofar as

Ward held as an agent for the Germans, he was

an agent to conceal and not to sell, and authority to

transfer the real ownership would not be implied.

Restatement of the Law of Agency (1933) §§ 34,

39, 52. And, since Vort and Nauen knew when

they purchased that the beneficial ownership was

in Thorer & Co., that ownership would not be cut

off. Utah v. United States, 284 U.S. 534, 548-544;

Scott on Trusts (1939), § 288. As against the Ger-

mans, to whose rights the Attorney General suc-

ceeded by the vesting order, the fact that the re-

spondents bought with intent to make the property

their own, would add nothing; nor would the fact

that they paid their own money make an otherwise

fraudulent and inequitable transaction bona fide

and valid.“ Milwaukee & Minnesota R. Co. v.

Soutter 13 Wall. 517, 546; Lowenstein v. Reikes,

60 F. 2d 933 (C.A. 2); Commonwealth Finance

Corporation v. McHarg, 282 Fed. 560, 569 (C.A.

2); Baldwin v. Short, 125 N.Y. 553, 560, 26 N.E.

928. In all these circumstances there is nothing to

stamp the transaction as what the Court of Ap-

‘8 In no sense were the purchases ‘“‘bona fide”. The pur-

chasers intended to prevent the United States from vesting

property they knew to be enemy owned. Moreover, any effort

by them to acquire beneficial ownership of the shares would

have been a breach of faith with their German co-conspirators,

for whose benefit they had agreed with the sellers to “cloak”

the shares.

peals termed a ‘‘bona fide purchase’’. See, Pome-

roy’s Equity Jurisprudence (5th ed., 1941), § 762.

b. Under the Trading with the Enemy Act—

leaving aside the assurance given by Mr. Mark-

ham—the purchases would have been equally in-

valid. Buying property from an enemy is ‘‘trade’”’

with the enemy (Trading with the Enemy Act,

See. 2(d), infra, p. 28) and such ‘‘trade”’ is unlaw-

ful. Section 3(a), infra, p. 28. Evenif Vort had

believed that Ward was selling ‘‘on account of”’

Thorer & Co., the transaction would have been pro- |

hibited. On such a purchase, Vort could base no |

‘right or remedy’’. See. 7(b) (infra, pp. 30-32). ;

The same result follows under Executive Order |

|

16

No. 8389, as amended (infra, pp. 34-35. That

order prohibits except as licensed, all ‘‘trans-

fers’’ and ‘‘dealings in’’ evidences of ownership, 7

such as stock certificates (see, United States v.

Leiner, 143 F. 2d 298, 300 (C.A. 2)), of foreign

property subject to the order. An _ unlicensed

transfer is void. Propper v. Clark, 337 U.S. 472,

484. Indeed, even apart from statute or regula-

tion, a sale of enemy property during wartime is

ineffective against the sovereign. Schrijver Vv.

Sutherland, 19 F. 2d 688 (C.A.D.C.).

Vort knew when he purchased from Ward that

he was buying German property ; therefore, unless

he obtained a license, he knew that he was engaged

14 Section 3 of the Act has been held to be still vital, except

as to transactions authorized under Section 5(b) and the

freezing regulations. United States v. Leiner, 143 F. 2d 298

(C.A. 2).

PEN in te Raa Shs aden Ghee Tes ee ee

17

in a prohibited transaction.” No license was applied

for, and no one regarded what Mr. Markham said

as a license. To have applied for a license would

have been to admit what the respondents were then

denying, that the property was German; thus, as

James Stevenson, one of the other participants in

the conspiracy, testified, the question of a license

did not arise (R. 268). Mr. Markham testified

without contradiction, referring to Executive Or-

der No. 8389, that he gave no license (T. R. 19) ™

and neither opinion below suggests that a license

was given. For this reason also, the purchasers

of the German-owned shares got nothing.”

15 We take the statement of the district court that “the

shares were not blocked” in 1947 (R. 85) to be a conclusion

of law based, presumably, on the fact that no specific order

had been issued with respect to the shares, while such an

order had been issued with respect to the accounts of the cor-

poration in 1942 and later revoked (R. 1044-1045). But if

the shares were in fact German-owned, Executive Order No.

8389 applied by its terms without the necessity of a specific

order. Moreover, the removal of a specific blocking order on

the corporate accounts, in order to permit the corporation to

continue to operate, obviously did not have the effect of un-

blocking the shares so as to permit ownership of the corpora-

tion to change hands without a license.

16 We do not question Mr. Markham’s authority as Deputy

Alien Property Custodian to give an oral license, had he in-

tended to do so, which he clearly did not. A license by inad-

vertence would seem to raise questions of estoppel, as to

which see infra, pp. } 8-23 .

17 The interest claimed here, as in Propper v. Clark, 337

US. 472. is one of title adverse to the Custodian and obtained

after freezing and without a license. In Propper, this Court

held that such a claim could not stand as against the federal

program. Such a title transfer does not present the considera-

tions to which this Court alluded in Zittman v. McGrath, 341

US. 446, 452-459. Compare Orvis v. McGranery, No. 404,

this Term.

SPEEA RE RAE HA al

tt net

18

ce. Thus, apart from Mr. Markham’s statements,

the sales were ineffective to transfer title to these

respondents. The district court’s opinion, how-

ever, apparently regards these defects in respond-

ents’ title as having been swept aside by Mr. Mark-

ham’s oral assurance not to vest. We do not be-

lieve that Mr. Markham intended to make a bind-

ing commitment; we think he was merely stating

his present intentions. (See p.12,n.11 supra.) But

in any event, in holding that what Mr. Markham

said in 1943 bound the Government in this suit, we

believe that the decisions below were erroneous, for

the reason that Mr. Markham had no authority to

bind the then Alien Property Custodian or a sue-

cessor to refrain from exercising the authority to

vest.

The authority to seize, or vest, enemy property

_is an attribute of the United States in its capacity

as sovereign. Central Trust Co. v. Garvan, 254 U.S.

504, 566. The delegation of that authority to the

Custodian is found in Executive Order No. 9193,

as amended (infra, p. 35), which provides:

The Alien Property Custodian is author-

ized and empowered to take such action as he

deems necessary in the national interest, in-

cluding, ... the power to ... vest. [Sec-

tion 2; italics added. ]

A power to act ‘‘in the national interest’’ is not to

be surrendered or waived without express author-

ity. Nothing in the Trading with the Enemy Act

even hints that the Custodian or his subordinate

19

may waive or bargain away this power. If a suc-

cessor Custodian deemed it necessary in the na-

tional interest to vest the Basch shares, it was his

duty to do so. ** In holding, in effect, that the state-

ments of Mr. Markham were binding on the Gov-

ernment in this proceeding, the decisions below run

counter to a long line of decisions of this Court that

the United States is not to be prejudiced in its prop-

erty interests by the unauthorized acts or declara-

tions of its agents. Federal Crop Ins. Corporation

v. Merrill, 332 U.S. 380, 384; United States v. Cali-

fornia, 332 U.S. 19, 39-40; Wickard v. Filburn, 317

U.S.111, 118; United States v. Stewart, 31 U.S. 60,

70; Wilber Nat. Bank vy. United States, 294 U.S.

120; Hart v. United States, 95 U.S. 316,318: White-

side v. United States, 93 U.S. 247; The Floyd Ac-

ceptances, 7 Wall. 666, 676; Lee v. Munroe and

Thornton,7 Cr. 366, 368-369.

d. The foregoing rule is applied even where the

facts were fully disclosed. <A fortiori, the United

States is not bound where the action of its agent is

affected by misrepresentation or mistake of fact.

It is well settled that the United States is not bound

by the action of the President or of the Custodian

in returning seized enemy property when the action

results from mistake or fraud. Cummings v. Soci-

ete Suisse pour Valeurs de Metauwr, 85 F. 2d 287,

289 (C.A.D.C.); Societe Suisse pour Valeurs de

Metaur v. Cummings, 99 F. 2d 887 (C.A.D.C.), cer-

tiorari denied, 306 U. S. 631; Rodiek v. United

18 Indeed, Mr. Markham disclaimed any intention to bind

his successor, see n. 8, supra.

el NE REE bas

20

States, 117 F. 2d 588, 120 F. 2e 760 (C.A. 2), af-

firmed, 315 U.S. 783; Isenberg v. Biddle, 125 F. 2d

741, 743 (CLA. D.C.) ; Swiss Nat. Ins. Co. v. Crow-

ley, 136 F. 2d 265 (C.A.D.C.), certiorari denied, 320

U. S. 763. A like rule would seem clearly appli-

cable here. It is clear from the findings and from

undisputed facts that Mr. Markham’s statements

were influenced by concealment and affirmative mis-

representation both as to the real ownership of the

shares held by the sellers, Ward, Lancaster, and

Koch, and as to the character and status of the pur-

chasers, in 1943, respondent Vort and Curt Mahler.

Respondents and the other Althor stockholders had

two aims: to conceal the German ownership of the

Althor shares to be sold by Ward, Lancaster, and

Koch; and to convice the Government that the

purchasers were not themselves acting for the Ger-

mans and therefore were what Mr. Markham called

‘appropriate purchasers’’ (T. R. 37-38). "

19 In 1943 Ward, Lancaster, and Koch were under some sus-

picion, while the “management”, Vort and Nauen (Fred

Basch died in January, 1943) were under no suspicion at all.

Ward and Lancaster (and, probably, his associate Stevenson),

were under some suspicion because they had acted as attorneys

for Thorer & Co. and because they had received “fees” suffi-

cient to finance the purchases of shares they claimed to have

made in February, 1939 (T. R. 4-8, 21-22, 35-36). Koch

had also received “fees” and was a relative of Paul Hollender,

one of the heads of Thorer & Co. (R. 77, 79). They were

also under investigation because Ward and Koch at. least

were connected with the companion Thorer company of Thorer

& Hollender, Inc. (T. R. 4, 64). On the other hand, accord-

ing to Mr. Markham, no question arose at that time as to the

“management”, Vort and Nauen (T. R. 36, 64), and he un-

derstood that the proposed sales meant that the people in-

volved in Thorer & Hollender were getting out and Vort was

staying in (T. R. 64). If Vort had in fact no connection with

g

21

What the district court found was that in 1939,

all the stockholders, including the respondents as

well as Ward, Lancaster, and Koch, acquired the

Althor shares under the one agreement to **cloak”’

for the Germans. The sole difference was that

Vort, for example, was ‘‘cloaking’’ the title to only

39 of his 89 shares, while Ward was ‘‘cloaking”’ all

of his 95. It further found that in entering into

this sale and the subsequent option cancellations

of 1940 and 1941 respondents joined in the cloaking

‘“conspiracy’’ (R. 81) and participated in **fraud-

ulent concealment of the German interests.”

(R. 84.)

From these findings, it follows inescapably that

the affidavits and statements filed by the respond-

ents and their confederates with the Treasury and

the Alien Property Custodian in 1941 and 1945

were false and intended to conceal the continuing

German interests. All the stockholders acted in

concert in making those affidavits and representa-

tions, they consulted about what to say, they re-

viewed the drafts ef each other's affidavits, and

they exchanged copies (R. 1158-1159, 1140-1141.

1143, 1147, 1157, 1191, 1192, 1193, 1273-1274, 1274).

The affidavits represented to the Government that

the Trenton transaction had been an outright and

bona fide sale, and that all the stockholders held

their Althor shares in their own right, with no one

any “cloaking” scheme, then he could have been a bona fide

purchaser, and Mr. Markham’s statement that the purchasers

would get a good title (T. R. 9) would have been correct,

apart from the question of a Treasury license with which

Mr. Markham did not concern himself.

We

“

ethan SHY

Ce ee ee oe ee Bee

22

else having any interest of any kind, direct or in-

direct. (R. 1011). The attorney-stockholders,

Ward, Lancaster, and Klein, were particularly ex-

plicit to that effect (R. 1041, 1049, 1144, 1189, 1292).

Respondent Nauen’s affidavit makes the same point

(R. 1199). That respondent Vort knew of those

representations is not open to question. He tes-

tified that he asked the attorney-stockholders to

give him copies of the affidavits (R. 169), and the

affidavits of Ward and Lancaster were specitically

mentioned (R. 169, 171).

It is also clear that Mr. Markham was influenced

by these misrepresentations. *° Mr. Markham, who

was called as a witness by the respondents and

who was not in this respect contradicted, testified

that in 1943, ‘‘I decided to the best of my belief

on the information I had at the time” (‘T. R. 42).

That information necessarily included the affida-

vits, as is confirmed by the report of the Custodian’s

investigators approved in June 1945 (R. 1176-

1178).*' Mr. Markham testified that he read the

affidavits or was told about them by his subordinates

(T.R.21). Moreover, Mr. Cowen specifically called

Mr. Markham’s attention to these affidavits by let-

2° Respondents, having made false representations to the

Government, have no standing to insist that reliance on those

statements and on nothing else at all must be established ex-

actly. Having set out to deceive the Government and ob-

tained the result they desired, they should not now be heard

to urge that in a proceeding some eight years later the Gov-

ernment failed to show that their fraud was the only proxi-

mate cause. Hazel-Atlas Co. v. Hartford Co., 322 US. 238,

246.

21Tt was not until the investigation by Bliss and Orr of

Koch’s files in St. Paul in 1945 that more evidence was se-

cured (T. R. 48-49, 66-67).

23

ter (supra, p. 7) and, presumablyg on the basis of

those affidavits and statements made to him by his

client, ‘‘was representing that there was no Ger-

man ownership in the company.’ (R. 6) Mr. Mark-

ham regarded Mr. Cowen as a man whom he had

reason to trust, for Mr. Cowan was a friend of.

and had been introduced to him by, one of his own

friends (T. R. 10, 54, 58-61).

On these facts, we believe that the decisions be-

low permit respondents to profit by their own mis-

representations and are therefore erroneous.

Equity requires that its suitors shall have acted

fairly and without fraud or deceit as to the con-

troversy inissue. Precision Inst. Mfg. Co. v. Auto-

motive M. M. Co., 324 U.S. 806, 814-815. See also,

Keystone Driller Co. v. General Excavator ¢ "0., 290

U.S. 240, 245; Kitchen v. Rayburn, 19 Wall. 254.

263; Standard Oil Co. v. Clark, 163 F. 2d 917, 934-

935 (C.A. 2), certiorari denied, 333 U.S. 873.

These considerations, at a minimum, require that a

suitor in equity be not allowed to take advantage

of official action induced by his own misrepresen-

tations. See cases cited pp. 19, 20, supra, and cf.

Standard Oil Co. v. Clark, supra.

2. Related considerations apply to the income

tax credit which the courts below allowed to the

respondents. According to the decisions below, the

Custodian rightly vested 408 shares of Basch stock

as German-owned.” From 1939 to the vesting of

the shares in 1948 the respondents received in

2 Those were the product of the 102 shares of Althor stock

Which respondents Vort and Nauen, with Fred Basch, took in

February, 1939, as “cloaks” for the Germans.

o--

24

i

dividends on those shares some $93,000 (R. 90-92).

In 1949, the Attorney General vested the right to

those dividends (R. 27-29).

As fraudulent grantees, respondents were bound

to aceount for the income they received from the

property. Rudin y. Steinbugler, 103 F. 2d 323

(C.A. 2); Commonwealth Finance Corporation Vv.

McHarg, 282 Fed. 560 (C.A. 2). The courts be-

low so held in allowing petitioner’s counterclaims.

As against this recovery by the petitioner on his

counterclaims, however, the courts below allowed

to respondents, as a credit, @ the amount by which

the receipt of the dividends on the 408 ‘‘cloaked”

shares increased their income tax payments (R.

86-87). ** In that we believe that they erred. Toa

successful ‘‘cloaking’’ of the German ownership

of those shares it was absolutely necessary that the

respondents should treat the shares in every way

as their own. To report the taxes on those shares

as income to Thorer & Co. was unthinkable; to fail

to pay the taxes was to invite investigation. The

taxes had to be paid and were paid as part of a

scheme to circumvent the law and to conceal enemy

property, and as an expense of an unlawful scheme

they may not be recovered from the United States.

Pan American Co. v. United States, 273 U.S. 456,

231t seems clear that the dividends were “income” to the

respondents within the statutes. 26 U.S.C. 22(a). Commis-

sioner v. Wilcox, 327 US. 404; Rutkin v. United States, 343

U.S. 130. Respondents received the dividends under a “elaim

of right” and were taxable thereon, even though they might

be held liable later to others for what they received. North

American Oil Consolidated v. Burnet, 286 U.S. 417; United

States v. Lewis, 340 U.S. 590.

25

509; Mammoth Oil Co. v. United States, 275 U.S.

13, 55; Standard Oil Co. v. Clark, 163 F. 2d 917,

928, 934-935 (C.A. 2), certiorari denied, 335 US.

873. Thus in the Standard Oil case the Court

of Appeals disallowed a claim of a plaintiff for

money paid to acquire record title to certain

shares, on the ground that ‘*. . . the money ad-

vanced was just a step in misrepresenting the own-

ership of the stoeck’’. (/bid.) The same rule is

applied in the ordinary case of a fraudulent con-

veyance:

Almost invariably some honest considera-

tion is made the agency for floating a scheme

of fraud against creditors, and if that may al-

ways be saved, nothing is lost by the effort and

the temptation to venture it is increased.

[ Baldwin v. Short, 125 N.Y. 553, 560; 26 N.E.

928. ] **

24 By a similar line of reasoning, the Government might be

held entitled to retain both the shares of stock purchased by

respondents and the proceeds of the sale received by the

vendors. Mr. Markham recognized that both could be vested

(T. R. 22), and that was the course actually followed. The

proceeds were vested by Vesting Order No. 13853, dated Sep-

tember 21, 1949, 14 F.R. 5855, and by settlements the vendors

have relinquished any interest they might claim to such

monies. The vesting, of course, concludes nothing (C entral

Trust Company v. Garvan, 254 U.S. 554, 567), and, as we have

indicated, a bona fide purchaser for value without notice of the

“cloaking” would be entitled to recover the shares, but a pur-

chaser who knew what he was buying might be held to have

taken the chance of losing both the stock and the money used

as an expense of an illegal scheme. Cf. Section 16 of the

Trading with the Enemy Act, which provides that “any prop-

erty, funds .. . concerned” in a_ willful violation of the

Act shall be forfeited to the United States. In an analogous

situntion where the Government has sued to annul land patents

procured by fraud, the ordinary rule that a vendor seeking to

annul a sale fraudulently induced must offer and be ready

26

3. The questions are important. In giving to

the unrecorded oral statement of Mr. Markham

the practical effect of an estoppel, the courts below

departed from the settled principle, which is of

vital importance in the conduct of all aspects of

government, that sovereign powers may not be

waived or surrendered by agents of the United

States except with express statutory authority.

Moreover, even assuming power in Mr. Markham

to make a binding commitment, the result below

does violence to another fundamental principle of

government—that official action induced by fraud-

ulent misrepresentation does not bind the govern-

ment. Finally, in allowing the respondent to set

off expenses—the increased tax payments—inci-

dent to the effectuation of their fraudulent scheme,

the courts below appear to have departed from

settled principles of equity. The principles in-

volved in this case are of general application to all

governmental activities; their vindication is of

especial importance in a case involving a con-

spiracy with our enemies to defeat the exercise of

the war powers.

to return the consideration received has been held not to apply

to suits by the United States, since the purpose of such a suit

is to “enforce a public statute against those who have violated

its provisions.” United States v. Trinidad Coal Co., 137 US.

160, 170. And see Causey v. United States, 240 U.S. 399, 402.

However, this question was not presented in the district court

in this case because no proceeds were collected by the Gov-

ernment until after trial herein. In any event, the fact that

the proceeds were vested does not entitle respondents to re-

cover the shares; at most it might require that upon remand

some order be entered with respect to the proceeds.

27

CONCLUSION

For the foregoing reasons, this petition for a

writ of certiorari should be granted.

Respectfully submitted.

WALTER J. CUMMINGS, JR.,

Solicitor General.

JANUARY, 1953.

es 0 vee 59 See

Sy ht Mihs RRDC EGE a = SEP PNET OD 86 BONE

28 |

APPENDIX

Trading with the Enemy Act, ec. 106, 40 Stat. 411,

as amended, 50 U.S. C. App. 1 et seq.:

Sec. 2 * * * The words ‘‘to trade,’’ as used

herein, shall be deemed to mean—

* * * * *

(c) Enter into, carry on, complete, or perform

any contract, agreement, or obligation.

(d) Buy or sell, loan or extend credit, trade in,

deal with, exchange, transmit, transfer, assign, or

otherwise dispose of, or receive any form of prop-

erty.

(e) To have any form of business or commercial

communication or intercourse with.

See. 3. That it shall be unlawful—

(a) For any person in the United States, except

with a license of the President, granted to such

person, or to the enemy, or ally of enemy, as pro-

vided in this Act, to trade, or attempt to trade,

either directly or indirectly, with, to, or from, or

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

benefit of, any other person, with knowledge or

reasonable cause to believe that such other person

is an enemy or ally of enemy, or is conducting or

taking part in such trade, directly or indirectly,

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

benefit of, an enemy or ally of enemy.

* * * * *

Sec. 5(b) (1) During the time of war or dur-

ing any other period of national emergency de-

clared by the President, the President may,

29

through any agency that he may designate, or other-

wise, and under such rules and regulations as he

may prescribe, by means of instructions, licenses,

or otherwise—

(A) investigate, regulate, or prohibit, any

transactions in foreign exchange, transfers of

credit or payments between, by, through, or to

any banking institution, and the importing,

exporting, hoarding, melting, or earmarking

of gold or silver coin or bullion, currency or

securities, and

(B) investigate, regulate, direct and com-

pel, nullify, void, prevent or prohibit, any ac-

quisition holding, withholding, use, transfer,

withdrawal, transportation, importation or

exportation of, or dealing in, or exercising any

right, power, or privilege with respect to, or

transactions involving, any property in which

any foreign country or a national thereof has

any interest,

by any person, or with respect to any property,

subject to the jurisdiction of the United States;

and any property or interest of any foreign coun-

try or national thereof shall vest, when, as, and

upon the terms, directed by the President, in such

agency or person as may be designated from time

to time by the President, and upon such terms and

conditions as the President may prescribe such

interest or property shall be held, used, adminis-

tered, liquidated, sold, or otherwise dealt with in

the interest of and for the benefit of the United

States, and such designated agency or person may

perform any and all acts incident to the acecom-

Oe ae

30

plishment or furtherance of these purposes; and

the President shall, in the manner hereinabove pro-

vided, require any person to keep a full record

of, and to furnish under oath, in the form of re-

ports or otherwise, complete information relative

to any act or transaction referred to in this sub-

division either before, during, or after the com-

pletion thereof, or relative to any interest in for-

eign property, or relative to any property in which

any foreign country or any national thereof has or

has had any interest, or as may be otherwise neces-

sary to enforce the provisions of this subdivision,

and in any case in which a report could be required,

the President may, in the manner hereinabove

provided, require the production, or if necessary

to the national security or defense, the seizure, of

any books of account, records, contracts, letters,

memoranda, or other papers, in the custody or con-

trol of such person; and the President may, in the

manner hereinabove provided, take other and

further measures not inconsistent herewith for the

enforcement of this subdivision.

* * * i *

Sec. 7(b) Nothing in this Act contained shall

render valid or legal, or be construed to recognize

as valid or legal, any act or transaction constitut-

ing trade with, to, from, for or on account of, or on

behalf or for the benefit of an enemy performed

or engaged in since the beginning of the war and

prior to the passage of this Act, or any such act or

transaction hereafter performed or engaged in ex-

cept as authorized hereunder, which would other-

wise have been or be void, illegal, or invalid at law.

s)

i

3

el hea ei i

— Ee ae DE eee

31

No conveyance, transfer, delivery, payment, or

loan of money or other property, in violation of

section three hereof, made after the passage of this

Act, and not under license as herein provided shall

confer or create any right or remedy in respect

thereof; and no person shall by virtue of any as-

signment, indorsement, or delivery to him of any

debt, bill, note, or other obligation or chose in ac-

tion by, from, or on behalf of, or on account of, or

for the benefit of an enemy or ally of enemy have

any right or remedy against the debtor, obligor,

or other person liable to pay, fulfill, or perform

the same unless said assignment, indorsement, or

delivery was made prior to the beginning of the

war or shall be made 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 same was made shall prove lack

of knowledge and of reasonable cause to believe on

his part that the same was made by, from or on be-

half of, or on account of, or for the benefit of an

enemy or ally of enemy; and any person who

knowingly pays, discharges, or satisfies any such

debt, note, bill, or other obligation or chose in ac-

tion shall, on conviction thereof, be deemed to vio-

late section three hereof: Provided, That nothing

in this Act contained shall prevent the carrying

out, completion, or performance of any contract,

agreement, or obligation originally made with or

entered into by an enemy or ally of enemy where,

prior to the beginning of the war and not in con-

templation thereof, the interest of such enemy or

ally of enemy devolved by assignment or otherwise

upon a person not an enemy or ally of enemy, and

ee eee——eEeEeEeEeEeEeEeEeEeEeEeEeEeEeEeeeEeEeEEeEw

EP teu tian

petanaask:

SNR SF RT FENOPY ERIE IE AL LAR LSA ATARI ELAM LOLS EEE IH NO TNG

no enemy or ally of enemy will be benefited by

such carrying out, completion, or performance

otherwise than by release from obligation there-

under.

* * * * *

Sec. 9(a) That any person not an enemy or ally

of enemy claiming any interest, right, or title

in any money or other property which may have

been conveyed, transferred, assigned, delivered, or

paid to the Alien Property Custodian or seized by

him hereunder and held by him or by the Treasurer

of the United States, or to whom any debt may be

owing from an enemy or ally of enemy whose prop-

erty or any part thereof shall have been conveyed,

transferred, assigned, delivered, or paid to the

Alien Property Custodian or seized by him here-

under and held by him or by the Treasurer of the

United States may file with the said custodian a

notice of his claim under oath and in such form and

containing such particulars as the said custodian

shall require; and the President, if application is

made therefor by the claimant, may order the pay-

ment, conveyance, transfer, assignment, or delivery

to said claimant of the money or other property

so held by the Alien Property Custodian or by the

Treasurer of the United States, or of the interest

therein to which the President shall determine said

claimant is entitled: Provided, That no such order

by the President shall bar any person from the

prosecution of any suit at law or in equity against

the claimant to establish any right, title, or interest

which he may have in such money or other prop-

erty. If the President shall not so order within

sixty days after the filing of such application or if

do

the claimant shall have filed the notice as above -

required and shall have made no application to

the President, said claimant may institute a suit

in equity in the Supreme Court of the District

of Columbia or in the district court of the United

States for the district in which such claimant re-

sides, or, if a corporation, where it has its principal

place of business (to which suit the Alien Property

Custodian or the Treasurer of the United States,

as the case may be, shall be made a party defend-

ant), to establish the interest, right, title, or debt

so claimed, and if so established the court shall

order the payment, conveyance, transfer, assign-

ment, or delivery to said claimant of the money or

other property so held by the Alien Property Cus-

todian or by the Treasurer of the United States

or the interest therein to which the court shall de-

termine said claimant is entitled. If suit shall

be so instituted, then such money or property shall

be retained in the custody of the Alien Property

Custodian, or in the Treasury of the United States,

as provided in this Act, and until any final judg-

ment or decree which shall be entered in favor of

the claimant shall be fully satisfied by payment or

conveyance, transfer, assignment, or delivery by

the defendant, or by the Alien Property Custodian,

or Treasurer of the United States on order of the

court, or until final judgment or decree shall be

entered against the claimant or suit otherwise ter-

minated.

* * * * *

See. 16. That whoever shall willfully violate

any of the provisions of this Act or of any license,

34

rule, or regulation issued thereunder, and whoever

shall willfully violate, neglect, or refuse to comply

with any order of the President issued in compli-

ance with the provisions of this Act, shall, upon

conviction, be fined not more than $10,000, or, if a

natural person, imprisoned for not more than ten

years, or both; and the officer, director, or agent of

any corporation who knowingly participates in

such violation shall be punished by a like fine, im-

prisoned, or both, and any property, funds, secu-

rities, papers, or other articles or documents, or

any vessel, together with her tackle, apparel, furni-

ture, and equipment, concerned in such violation

shall be forfeited to the United States.

* * * * *

Executive Order No. 8389, April 10, 1940, 5

F. R. 1400, as amended by Executive Order No.

8785, June 14, 1941, 6 F. R. 2897:

See. 1. All of the following transactions are

prohibited, except as specifically authorized by the

Secretary of the Treasury by means of regulations,

rulings, instructions, licenses, or otherwise, if (i)

such transactions are by, or on behalf of, or pur-

suant to the direction of any foreign country de-

signated in this Order, or any national thereof,

or (ii) such transactions involve property in which

any foreign country designated in this Order, or

any national thereof, has at any time on or since

the effective date of this Order had any interest

of any nature whatsoever, direct or indirect:

* * * * *

EK. All transfers, withdrawals, or exportations

of, or dealings in, any evidences of indebtedness

ee

35

or evidences of ownership of property by any per-

son within the United States; and

F. Any transaction for the purpose or which has

the effect of evading or avoiding the foregoing

prohibitions.

* * * * *

Executive Order No. 9095, of March 11, 1942,

7 F. R. 1971, as amended by Executive Order No.

9193, of July 6, 1942, 7 F.R. 5205, and by Executive

Order No. 9567, of June 8, 1945, 10 F. R. 6917:

* # * * *

2. The Alien Property Custodian is authorized

and empowered to take such action as he deems

necessary in the national interest, including, but

not limited to, the power to direct, manage, super-

vise, control or vest, with respect to:

(a) Any business enterprise within the

United States which is a national of a desig-

nated enemy country and any property of any

nature whatsoever owned or controlled by,

payable or deliverable to, held on behalf of or

on account of or owing to or which is evidence

of ownership or control of any such business

enterprise, and any interest of any nature

whatsoever in such business enterprise held by

an enemy country or national thereof ;

* * * * *

wv U. S. GOVERNMENT PRINTING OFFICE. 1953 asraso oes