Von Clemm v. Smith

Citation255 F. Supp. 353
Decision Date23 November 1965
Docket NumberNo. 60 Civ. 2696.,60 Civ. 2696.
PartiesWerner C. von CLEMM, and Rayford W. Alley, Trustee, co-partners under the name of Bridge Import Company, a co-partnership, and Werner C. von Clemm, individually, Plaintiffs, v. Elizabeth Rudel SMITH, Treasurer of the United States, Robert F. Kennedy, Attorney General of the United States, and Pioneer Import Corporation, Defendants, and International Mortgage & Investment Corporation (derivatively by Edward H. Heims, et al.), and all other shareholders similarly situated, et al., Intervenor Defendants.
CourtUnited States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York

Alexander Kahan, New York City, for plaintiffs; Abraham L. Wax, New York City, of counsel.

Robert M. Morgenthau, U. S. Atty., New York City, for defendants; Thomas H. Baer, Asst. U. S. Atty., Carl F. Goodman, Department of Justice, of counsel.

Butler, Koehler & Tausig, Washington, D. C., for intervenor defendants International Mortgage & Investment Corporation and Heims Group; John Geyer Tausig, Washington, D. C., of counsel.

George Eric Rosden, Washington, D. C., and Waldemar J. Dittmar, New York City, for intervenor-defendants (Kroch Group).

McLEAN, District Judge.

This is a suit in equity begun in July 1960 pursuant to Section 9(a) of the Trading with the Enemy Act ("the Act") (50 U.S.C. App. § 9(a)) to recover certain property, or the proceeds thereof, vested in the Alien Property Custodian under Section 5(b) of the Act (50 U.S.C. App. § 5(b)) by Vesting Orders No. 354 dated November 11, 1942, and 4754 and 4755 dated March 14, 1945. Vesting Orders No. 4754 and 4755 were subsequently amended on June 18, 1948. Section 9(a) of the Act authorizes the institution of such an action, which therefore arises under the laws of the United States. Jurisdiction is thus based upon 28 U.S.C. § 1331.

Although in form an action against the Attorney General as successor to the Custodian, the suit in substance is one against the United States. Banco Mexicano de Commercio e Industria v. Deutsche Bank, 263 U.S. 591, 44 S.Ct. 209, 68 L.Ed. 465 (1924).

The property vested consisted of (a) 95 shares, constituting all the outstanding stock, of Pioneer Import Corporation ("Pioneer"), a New York corporation, (b) 6 packages of diamonds, and (c) 270 packages of synthetic and semi-precious stones. The diamonds and the stones were sold by the Alien Property Custodian subsequent to the vesting for $350,129.45 and $941,866.72 respectively. Plaintiff von Clemm claims to be the owner of all the stock of Pioneer, of which he was president and general manager, and thus he claims to be entitled to its return. He also claims that Pioneer was the owner of the diamonds and of seven packages of the stones and that Pioneer is entitled to their proceeds. He further claims that Bridge Import Company ("Bridge"), a co-partnership of which he was the only general partner,1 was the owner of the remaining 263 packages of stones and is entitled to their proceeds.

Pioneer was originally a plaintiff in this action. By order of this court dated January 11, 1961, Pioneer was stricken as a party plaintiff on the theory that the Alien Property Custodian, who had been in control of the corporation since its vesting, had not authorized it to begin this suit. Pioneer was made a party defendant. Pioneer Import Corporation v. Rogers, 190 F.Supp. 529 (S.D.N.Y.1960).

The Alien Property Custodian has filed an answer on its behalf seeking dismissal of the complaint.

The parties agree that if this court holds that von Clemm has established his right to the Pioneer stock and if this court directs that the stock be returned to him, then Pioneer should be reinstated as a party plaintiff, in which event the court must pass upon Pioneer's claim to the proceeds of the diamonds and of the seven packages of stones, a claim which von Clemm has asserted on its behalf.

The intervenors are two different groups of stockholders of International Mortgage and Investment Company ("IMC"), a Maryland corporation. They assert that IMC owned the stock of Pioneer and that it also owned the diamonds and the stones. These parties were permitted to intervene for defensive purposes only, i. e., they may defend against plaintiff's claim, but they may not secure an affirmative determination in favor of their own claim. International Mortgage & Investment Corp. v. Von Clemm, 301 F.2d 857 (2d Cir. 1962).

Section 9(a) of the Act provides 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 * * * or paid to the Alien Property Custodian or seized by him hereunder and held by him * * * may file with the said custodian a notice of his claim under oath * * * and the President * * may order the payment * * * or delivery to said claimant of the money or other property so held by the Alien Property Custodian * * *. If the President shall not so order * * * said claimant may institute a suit in equity * * * in the district court of the United States * * * to establish the interest, right, title, or debt so claimed, and if so established the court shall order the payment * * * or delivery to said claimant of the money or other property so held by the Alien Property Custodian * * *."

It is conceded that plaintiff von Clemm made timely application for the return of the property which he claims and that the application was not granted.

There are two issues in this case, which are manifest from the language of the statute itself: (1) were plaintiffs an "enemy" or an "ally of enemy" within the meaning of the statute? (2) if not, were they the beneficial owners of the vested property at the time of its vesting?

Plaintiffs have the burden of proof on both issues. Societe Internationale, etc. v. Rogers, 357 U.S. 197, 78 S.Ct. 1087, 2 L.Ed.2d 1255 (1958); Manufacturers Trust Company v. Kennedy, 291 F.2d 460 (2d Cir. 1961).

The Issue of Enemy Status

This issue comes down to whether or not von Clemm, individually, was an enemy or an ally of an enemy, for if he was, then he cannot recover the stock of Pioneer, and in that case Pioneer cannot be considered to be a plaintiff, and hence cannot recover the proceeds of the diamonds and the seven packages of stones. Similarly, if von Clemm was an enemy or an ally of an enemy, Bridge cannot recover the proceeds of the 263 packages of stones, for under such circumstances von Clemm could not assert a claim for the proceeds as general partner of Bridge, and Alley, a limited partner, does not have a property interest in Bridge's assets sufficient to entitle him to prosecute this action under Section 9(a). Alley v. Clark, 71 F.Supp. 521 (E.D.N.Y.1947).

Section 2 of the Act (50 U.S.C. App. § 2) provides as follows:

"The word `enemy,' as used herein, shall be deemed to mean, for the purposes of such trading and of this Act
(b) The government of any nation with which the United States is at war, or any political or municipal subdivision thereof, or any officer, official, agent, or agency thereof."2

The government contends that von Clemm was an agent of Germany, a country with which the United States was at war after December 11, 1941. It concedes that to come within the statute, von Clemm must have been such an agent after war was declared. The government also contends that even if von Clemm was not an agent of the German government, he was "enemy tainted," a more elusive concept which has its origin in certain cases hereinafter discussed. Von Clemm, on the other hand, contends that at no time was he an agent of Germany. He says that he was merely an American citizen engaged in the import business. He contends further that in any event he did nothing after war was declared on December 11, 1941, and hence could not be an agent of an enemy, whatever he might have done for Germany before the war. He contends that the doctrine of enemy taint is wholly inapplicable to this case.

The testimony in this action was voluminous and the exhibits were numerous. Much of this material turns out to be irrelevant to the critical issues which determine the case. Upon the basis of all this evidence, I find the essential facts to be as follows.

Werner C. von Clemm, whose name at birth was Werner Clemm von Hohenberg, was born in Mainz, Germany, in 1898. He lived in Germany until 1922. After serving in the German Army in World War I, he had various employment in Germany, including a job with Hardy & Co., a firm of private bankers in Berlin, the senior partner of which von Clemm knew socially. His contact with this firm was to prove useful to him in later years.

Von Clemm's family was well established in Germany. One of his sisters was married to a general in the German Army. Another was married to a general in the German Air Force. A cousin was the wife of von Ribbentrop, ultimately Hitler's foreign minister. Another cousin was a "right-hand man" of Admiral Canaris, a high official in German intelligence under Hitler. Leising and Hoepfner, two business associates who figure prominently in the events hereinafter related, were members of the Nazi party. Von Clemm's twin brother, Carl von Clemm, who figures even more prominently in these events, was obviously on good terms with Hitler's government, whether or not he was a member of the Nazi party, for during the early years of the war, he was an official in the German Embassy in Rome. The relation between von Clemm and his twin brother was at all times very close.

In 1922, von Clemm emigrated to the United States. When he did so, he dropped the "von Hohenberg" from his name. He has lived in the United States ever since. He married an American wife. Their children were born and educated here. He became a naturalized American citizen on September 8, 1932.

Carl von Clemm came to the United States with Werner in 1922 but stayed only a few years. In 1929 he returned to Germany where he has since lived.

Between 1922 and 1938 von Clemm had a...

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    • United States
    • Court of Federal Claims
    • February 19, 1971
    ...Pour Participations, Industrielles Et Commerciales v. Rogers, 357 U.S. 197, 78 S.Ct. 1087, 2 L.Ed.2d 1255 (1958); von Clemm v. Smith, 255 F.Supp. 353 (1965), aff'd 363 F.2d 19 (2d Cir. 1966); Feller v. McGrath, 106 F.Supp. 147 (W.D.Pa. 1952), aff'd sub nom. Feller v. Brownell, 201 F.2d 670 ......
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    ...been indicated, the record did not disclose. Ingram v. United States, 360 U.S. 672-678, 79 S.Ct. 1314, 3 L.Ed.2d 1503; von Clemm v. Smith, D.C., 255 F.Supp. 353, 368, aff'd 2 Cir., 363 F.2d 19. The fact that the government, in the introduction of exhibit G-16, showed that Ivanov had filed a......
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    • United States
    • United States Courts of Appeals. United States Court of Appeals (1st Circuit)
    • June 3, 1974
    ...1945, for well over one million dollars.2 The history of appellant's business transactions is complex. It is set forth in Von Clemm v. Smith, 255 F.Supp. 353 (1965). For our purposes it is sufficient to note that, in 1938, appellant, an American citizen born in Germany, undertook to import ......
  • Von Clemm v. Smith
    • United States
    • United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
    • June 22, 1966
    ...District of New York, Edward C. McLean, Judge, held that von Clemm was an enemy under the Act, and therefore not entitled to recover. 255 F.Supp. 353. The court did not reach the question of title. We find no error and affirm the Von Clemm sought recovery of shares of stock in Pioneer Impor......
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