Garvan v. Marconi Wireless Telegraph Co. of America

• Decision Date: 20 September 1921
• Citation: 275 F. 486
• Parties: GARVAN v. MARCONI WIRELESS TELEGRAPH CO. OF AMERICA.
• Court: U.S. District Court — District of New Jersey

275 F. 486

GARVAN v. MARCONI WIRELESS TELEGRAPH CO. OF AMERICA.

United States District Court, D. New Jersey.

September 20, 1921

Elmer H. Geran, U.S. Atty., of Asbury Park, N.J., and Lucien H Boggs and Dean Hill Stanley, Sp. Asst. Attys. Gen., both of Washington, D.C., for petitioner.

Griggs and Harding, of Paterson, N.J. (John W. Griggs, of Paterson N.J., of counsel), for respondent.

RELLSTAB District Judge.

Under section 7(a) of the Trading with the Enemy Act (Comp. St 1918, Comp. St. Ann. Supp. 1919, Sec. 3115 1/2d), the Marconi Wireless Telegraph Company reported that 2,945 shares of its common capital stock stood on its books in the name of the Dresdner Bank of Bremen, Germany. Upon investigation the Alien Property Custodian concluded that the bank was an alien enemy within the purview and meaning of the act, and accordingly demanded the Marconi Company to transfer the stock to him as Alien Property Custodian, cancel the old certificates of stock, issue new ones, and account to him for the dividends on the stock. The company refused to do so, and the Alien Property Custodian filed a petition to compel compliance with his demand on which rule to show cause was issued. The company made a return to that rule in the form of an answer setting out reasons for its refusal. These reasons constitute the issues before me.

The company gave six reasons for not complying with the demand which will be taken up in order.

1. The determination that the Dresdner Bank was an alien enemy should have been made by the President and not by the Alien Property Custodian.

Section 5(a) of the act (section 3115 1/2c) provides that the President may exercise any power or authority conferred by the act through such officer as he shall direct. Section 6 (section 3115 1/2cc) gives him the authority to appoint an Alien Property Custodian. By Executive Orders of October 12, 1917, and December 3, 1918, the President delegated to the Alien Property Custodian certain powers, among which is included the power and authority to make the determination in question. Under these the determination of the status of the Dresdner Bank as an alien enemy was properly made. Kahn v. Garvan (D.

C.) 263 F. 909; Stoehr v. Wallace et al., 255 U.S. 239, 41 Sup.Ct. 293, 65 L.Ed. . . . (decided February 28, 1921).

2. The seizure of the stock by the Alien Property Custodian was not complete without the seizure of the outstanding certificates.

The Alien Property Custodian served written demand on the Marconi Company to transfer, etc., the stock on its books to him. The certificates are merely evidence of the ownership of the stock, which has its situs here in New Jersey, and is deemed to be held by the company in this state for the benefit of the owner. Jellenik v. Huron Copper Min. Co., 177 U.S. 1, 20 Sup.Ct. 559, 44 L.Ed. 647. On February 26, 1918, the President, under the authority of section 5(a) of the act, promulgated certain rules. Rule 2(a) prescribes a 'demand' by the Alien Property Custodian as the proper method to effect a transfer of stock, and rule 2(c) provides that such a demand 'shall forthwith vest in the Alien Property Custodian such right, title, etc., in the money or other property demanded * * * as may be included in the demand. ' Congress intended that the President should cause property of every kind, tangible and intangible, to be seized. The act does not prescribe the mode of seizure, but a mode must have been intended which is both reasonable and effective. The mode used in this case and prescribed by the rules is reasonable, and when the demand was made the seizure was complete and effective. Kohn v. Jacob & Josef Kohn, Inc., et al. (D.C.) 264 F. 253; Miller v. United States, 78 U.S. (11 Wall.) 268, 20 L.Ed. 135.

3 and 4. Third persons might have claims upon or an interest in the stock, and the company would incur risk of liability in transferring it to the Alien Property Custodian.

Before the transfer is made in accordance with the demand, the Alien Property Custodian must determine whether or not the property belongs to an alien enemy. Of course, he may possibly make a mistake. If he does, section 9 (section 3115 1/2e) provides an adequate remedy for the true owner, and the corporation is completely protected by section 7(e) of the act, which provides that--

'No person shall be held liable in any court for or in respect to anything done or omitted in pursuance of any order, rule or regulation made by the President under the authority of this act.'

See Biesantz v. Alien Property Custodian, 106 Misc.Rep. 545, 175 N.Y.Supp. 46; Garvan v. Certain Shares of International Agricultural Corporation, 276 F. 206 (decided January 31, 1921).

5. The company should not be required to issue new certificates of stock until the outstanding ones are presented for cancellation.

Before outstanding certificates of stock may be cancelled and new ones issued in lieu thereof, in time of peace, a corporation is justified, both by reason and legislative enactment, to require the production of the old certificates. But the act under which the Alien Property Custodian is proceeding is a war measure. Under section 12, paragraph 4 (section 3115 1/2ff), it was the duty of every corporation issuing shares to transfer them upon its books to the name of the Alien Property Custodian 'upon demand accompanied by the presentation of the certificates which represent such shares of beneficial...