Garvan v. $20,000 Bonds

• Decision Date: 03 March 1920
• Docket Number: 170.,157,158,169,
• Parties: GARVAN v. $20,000 BONDS and three other cases.
• Court: U.S. Court of Appeals — Second Circuit

265 F. 477

GARVAN v. $20,000 BONDS and three other cases.

Nos. 157, 158, 169,, 170.

United States Court of Appeals, Second Circuit.

March 3, 1920

Francis G. Caffey, U.S. Atty., of New York City (Spier Whitaker, Sp Asst. Atty. Gen., and Earl B. Barnes, Asst. U.S. Atty., of New York City, of counsel), for libelant.

Miller King, Lane & Trafford, of New York City (Perry D. Trafford of New York City, of counsel), for appellants Central Union Trust Co. and Merrill and others.

Root Clark, Buckner & Howland, of New York City (Emory R. Buckner and H. H. Nordlinger, both of New York City, of counsel), for appellants Marshall and others.

Before WARD, HOUGH, and MANTON, Circuit Judges.

WARD Circuit Judge.

Connecticut and Massachusetts require, as do almost all the states, that insurance companies of foreign nations, before doing business in the state, shall deposit funds or securities for the protection of the company's policy holders and creditors in the United States. The exact terms of the statutes need not be stated. The Munich Reinsurance Company, a German corporation did deposit a quantity of securities with trustees in conformity with the law of the state of Connecticut. The Frankfort General Insurance Company and the Allianz Insurance Company, both German companies, deposited securities with trustees in conformity with the requirements of the law of Massachusetts.

It will not be necessary to set out the terms of the trusts at length; it is enough to say that, although the income of the securities is payable to the companies and they can withdraw them, or any of them, upon substituting others equally good, and can change the trustees, still the trustees hold the securities in trust to pay the claim of any policy holder or creditor admitted to be due by the company or established by the claimant in due course of law. It is apparent that the trustees hold primarily for the benefit of the policy holders and creditors, and secondarily for the benefit of the companies; but their duties are active, and they are not merely lienholders. The companies cannot take the securities out of their possession until the rights, absolute or contingent, of all policy holders and creditors in this country are secured, and in the meantime the trustees have the active duty of collecting and paying over the income, investing and reinvesting, and paying claims properly proved.

The President, through the Secretary of the Treasury, issued licenses to the companies in question, not to continue to do business in the United States, but for the purpose of being liquidated. In November, 1918, the Alien Property Custodian filed libels of information in the District Court of the United States for the Southern District of New York against the securities in question, alleging his demand for the same of the trustees and their refusal, and praying the court to order the United States marshal to seize the same and deliver them to him to be held and applied in accordance with law. The court made the decrees prayed for, and the securities have been seized by the marshal and delivered to the Alien Property Custodian; the trustees appeal.

We have no doubt of the right of the Alien Property Custodian to apply to the court for aid; if he did not know where the securities were, he would evidently be entitled to the aid of the court to compel the trustees to discover and deliver them. In this case he did know where they were, but it was much more orderly and decent to obtain possession by the aid of the court than to seize them by violence and the strong hand. Section 17 of the Act of October 6, 1917 (40 Statutes at Large, 411 (Comp. St. 1918, Comp. St. Ann. Supp. 1919, Sec. 3115 1/2i)), known as the Trading with the Enemy Act, gives the court full power in the premises:

'That the District Courts of the United States are hereby given jurisdiction to make and enter all such rules as to notice and otherwise, and all such orders and decrees, and to issue such process as may be necessary and proper in the premises to enforce the provisions of this act, with a right of appeal from the final order or decree of such court as provided in sections 128 and 238 of the act of March 3d, 1911, entitled 'An Act to codify, revise, and amend the laws relating to the judiciary.''

The material parts of section 7 (c) of the act as amended November 4, 1918 (40 Statutes at Large, 1020 (Comp. St. Ann. Supp. 1919, Sec. 3115 1/2d)), read:

'(c) If the President shall so require any money or other property, including (but not thereby limiting the generality of the above) patents, copyrights, applications therefor, and rights to apply for the same, trade-marks, choses in action, the rights and claims of every character and description owing or belonging to or held for, by, on account of, or on behalf of, or for the benefit of, an enemy or ally of enemy not holding a license granted by the President hereunder, which the President after investigation shall determine is so owing or so belongs or is so held, shall be conveyed, transferred, assigned, delivered, or paid over to the Alien

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