Clark v. Propper

• Decision Date: 03 August 1948
• Docket Number: No. 294,Docket 21018.,294
• Parties: CLARK, Atty. Gen. v. PROPPER.
• Court: U.S. Court of Appeals — Second Circuit

169 F.2d 324 (1948)

CLARK, Atty. Gen. v. PROPPER.

No. 294, Docket 21018.

Circuit Court of Appeals Second Circuit.

August 3, 1948.

A. Walter Socolow, of New York City, for Henry M. Propper, defendant-appellant.

Herbert P. Jacoby, of New York City (Schwartz & Frohlich and Louis D. Frohlich, all of New York City, on the brief), for Deems Taylor, defendant-appellee.

David Schwartz, Atty., Office of Alien Property, Dept. of Justice, of Washington, D. C. (David L. Bazelon, Asst. Atty. Gen., Dir., Office of Alien Property, Max Isenbergh, Sp. Asst. to the Atty. Gen., and James L. Morrisson and David E. Feller, Attys., Office of Alien Property, Dept. of Justice, both of Washington, D.C., and John F. X. McGohey, U. S. Atty., of New York City, on the brief), for Tom C. Clark, Atty. Gen., plaintiff-appellee.

Before AUGUSTUS N. HAND, CLARK, and FRANK, Circuit Judges.

CLARK, Circuit Judge.

This appeal raises the questions whether a temporary receiver appointed by a New York state court over assets of German nationals has such title as to defeat a later freezing order of the Executive prohibiting the transfer of enemy funds and a still later seizure by the Alien Property Custodian or, if not, whether the appointment of a permanent receiver after the effective date of the order is a bar to the Custodian's claim. The district court decided against the claims of the receiver, defendant Propper, and dismissed him from the case. Markham v. Taylor, D.C.S.D.N.Y., 70 F.Supp. 202. He appealed, but since no final judgment had been entered against the other defendant for the amount due, we dismissed the appeal. Clark v. Taylor, 2 Cir., 163 F.2d 940. Final judgment now having been entered, this appeal by Propper tests its validity as well as that of the earlier judgment against him alone.

Since the two previously published opinions just cited contain a review of the facts, we shall limit ourselves to such further statement as is here immediately necessary. The subject matter of the controversy is a sum of money owed as royalties by the American Society of Composers, Authors and Publishers, an unincorporated association, to a similar Austrian organization, A KM, under a contract between the two. Deems Taylor, as president of ASCAP, and Tom C. Clark, Attorney General, as successor to the Alien Property Custodian, have stipulated the amount due to be $46,839.54; and the final judgment ordered the payment of that sum to the Attorney General. On June 12, 1941, defendant Propper was appointed temporary receiver of the assets of AKM located in the State of New York; and this appointment was made permanent by the state court on September 29 of the same year. Meanwhile, on June 14, 1941, the President of the United States by Exec. Order 8389, 5 F.R. 1400, as amended by Exec. Order 8785, 12 U.S.C.A. § 95a note, 3 C.F.R., 1941 Supp., p. 225, 6 F.R. 2897, prohibited the transfer of Austrian property unless authorized by the Secretary of the Treasury. The Secretary has not authorized any transfer of AKM assets. On July 29, 1941, Propper sued Taylor, representing ASCAP, in the New York state courts to recover the sums allegedly due. This suit has not yet been finally adjudicated. On September 4, 1943, the Alien Property Custodian, plaintiff's predecessor, vested in himself all assets held by ASCAP for the Austrian organization. ASCAP, however, refused the Custodian's demand for a turnover of the sums allegedly due; and the Custodian then brought suit in the District Court, against both Taylor, as president of ASCAP, and Propper, to secure the turnover and a declaration that Propper had no right to the fund. The court there held that Propper, as a temporary receiver appointed under § 977-b of the N. Y. Civil Practice Act, had no title or interest in the funds held by ASCAP, that the Executive Order prohibiting the unlicensed transfer of property owned by Austrian nationals was effective prior to the appointment of Propper as permanent receiver, and that he could receive no title to these assets by virtue of such appointment, the prohibition being applicable alike to transfers of a judicial character and those of a voluntary nature. Markham v. Taylor, supra. Hence the court entered the summary judgment against Propper from which the earlier appeal was taken.

After the dismissal of this appeal and the filing of the stipulation between plaintiff and ASCAP settling the amount due as between them, the district judge at a hearing on pre-trial determined that there was no further obstacle to final judgment, and therefore entered summary judgment for plaintiff. On this appeal Propper is of course confined to his claims of law, but he asserts that the stipulated amount represents a sum much less than that actually owed by ASCAP to AKM.

The first question is therefore whether Propper's appointment as temporary receiver before the Executive freezing order gave him such title to the chose in action in question as to prevent its seizure by the Custodian. The authority for the appointment, N. Y. Civil Practice Act, § 977-b, is a statute passed in 1936 for the appointment of "Receivers to liquidate local assets of foreign corporations." It authorizes the appointment of a temporary receiver "pending the determination of the action"; it specifies the mode of service of process on the defendant; and it provides for the entry of judgment and the appointment of a permanent receiver upon default of the defendant, or after trial. Judge Coxe held that this section did not depart from the general New York rule, applicable to chancery as well as statutory receiverships, namely, that a temporary receiver does not obtain title by virtue of his appointment. We agree.

The New York courts have consistently ruled that a temporary receiver pendente lite does not obtain title to the property, but has only a right of possession. Keeney v. Home Ins. Co., 71 N.Y. 396, 27 Am.Rep. 60; Herring v. New York, L. E. & W. R. Co., 105 N.Y. 340, 12 N.E. 763; Decker v. Gardner, 124 N.Y. 334, 26 N.E. 814, 11 L. R.A. 480; Stokes v Hoffman House, 167 N.Y. 554, 60 N.E. 667, 53 L.R.A. 870; Sigua Iron Co. v. Brown, 171 N.Y. 488, 64 N. E. 194; Mutual Brewing Co. v. New York & College Point Ferry Co., 16 App.Div. 149, 45 N.Y.S. 101; In re French, 181 App.Div. 719, 168 N.Y.S. 988, affirmed 224 N.Y. 555, 120 N.E. 863. See N. Y. General Corporation Law, Consol.Laws, c. 23, §§ 162, 163, 168. Since these precedents show such general understanding in New York of the restricted rights of a temporary receiver, we should look for clear statutory language to disclose a different intent for this one situation here. None is to be found in § 977-b of the N. Y. Civil Practice Act. Nowhere in that statute is the temporary receiver in terms given the title, as appellant contends. Indeed, the only provision spelling out what the temporary receiver takes is subd. 4 of the section, which states that he "shall take, receive and reduce to his possession any and all assets, credits, choses in action and property" in the state of New York. This, as we have seen, is no more than what the chancery receiver took in accordance with the well-settled principles of New York law.

Appellant, however, relying largely on sub. 12, tries to establish that the temporary receiver has the powers of a permanent receiver and hence takes title to the property. In its entirety that subdivision reads: "Any receiver appointed pursuant to this section shall have all the powers and duties, in addition to those herein provided for, as are possessed by and conferred upon receivers and trustees by the laws of the state of New York." Appellant reasons that "any receiver" includes a temporary one and accordingly that he has the powers of a permanent receiver. We think his argument proves too much. Subd. 4 defines the...