Hartmann v. Federal Reserve Bank of Philadelphia, 3443.

• Decision Date: 18 April 1944
• Docket Number: No. 3443.,3443.
• Parties: HARTMANN v. FEDERAL RESERVE BANK OF PHILADELPHIA.
• Court: U.S. District Court — Western District of Pennsylvania

55 F. Supp. 801

HARTMANN v. FEDERAL RESERVE BANK OF PHILADELPHIA.

No. 3443.

District Court, E. D. Pennsylvania.

April 18, 1944.

T. Henry Walnut and Francis Fisher Kane, both of Philadelphia, Pa., for plaintiff.

MacCoy, Brittain, Evans & Lewis, and John E. Forsythe, all of Philadelphia, Pa., for defendant.

KALODNER, District Judge.

Plaintiff filed a complaint against the Federal Reserve Bank of Philadelphia seeking injunctive relief by reason of the "blocking" or "freezing" of his bank account by the Secretary of the Treasury of the United States.

Complainant alleges that the defendant by letter¹ advised him of the "blocking" of his account and stated therein that the action of the Secretary was predicated on his "determination" that the plaintiff "was a national of a foreign country designated in Executive Order 8389, as amended, and within the meaning of Section 5(b) of the Trading with the Enemy Act".² The letter also advised the plaintiff he could appeal under General Ruling No. 13³ from the "blocking" of his account and the "determination" that he was a "national" of a foreign country.

Alleging he is a citizen of the United States and not a "national" of a foreign country, the plaintiff complains he is being deprived of his property without due process of law, and attacks the legal authority of the defendant "whether acting as an agency of the United States or otherwise" to "block" his bank account. He seeks an injunction. "* * * restraining the defendant, the Federal Reserve Bank either as agent or as principal from exercising any control of or any authority over the plaintiff's money or assets and from directing plaintiff's domestic bank wherein his money may be deposited as to the manner in which payments may be made out of the plaintiff's account."

Defendant filed a motion to dismiss raising two questions of law: (1) that the Secretary of the Treasury is an indispensable party and neither is nor can be joined as a party-defendant in this action, and (2) that the complaint discloses the plaintiff has an administrative remedy under Rules and Regulations of General Application prescribed by the Secretary of the Treasury and that he has failed to exhaust such administrative remedy.

Since this is a case of first impression it is necessary to consider with great care the very interesting questions presented by the complaint and the motion to dismiss.

Before proceeding to further consideration of that always vexatious problem of "indispensable party" it is essential to discuss the relevant provisions of the Trading with the Enemy Act and Executive Order 8389, as amended, under which the "blocking" of the plaintiff's account took place.

Subsection (1) of Section 5(b) of the Trading with the Enemy Act provides:

"The President may, through any agency that he may designate * * * and under such rules and regulations as he may prescribe * * * regulate * * * any * * * use * * * withdrawal * * * 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."

Subsection (3) of Section 5(b) confers upon the President "the power * * * to prescribe * * * definitions * * * for any or all of the terms used in this subdivision."

Acting under Section 5(b) the President promulgated Executive Order No. 8389, as amended, 12 U.S.C.A. § 95 note which in Section 5E provides:

"The term `national' shall include, * * *

"(iii). Any person to the extent that such person is or has been, * * * acting or purporting to act directly or indirectly for the benefit or on behalf of any national of such foreign country, * * *."

Section 5E(iv) further declares:

"* * * The Secretary of the Treasury shall have full power to determine that any person is or shall be deemed to be a `national' within the meaning of this definition, and the foreign country of which such person is or shall be deemed to be a national. Without limitation of the foregoing, the term `national' shall also include any other person who is determined by the Secretary of the Treasury to be, or to have been, since such effective date, acting or purporting to act directly or indirectly for the benefit or under the direction of a foreign country designated in this Order or national thereof, as herein defined." (emphasis supplied)

Section 7 of Executive Order 8389, as amended, provides:

"* * * the Secretary of the Treasury is authorized and empowered to prescribe from time to time regulations, rulings, and instructions to carry out the purposes of this Order and to provide therein or otherwise the conditions under which licenses may be granted by or through such officers or agencies as the Secretary of the Treasury may designate, and the decision of the Secretary with respect to the granting, denial or other disposition of an application or license shall be final."

Consideration of the foregoing provisions of the Trading with the Enemy Act and Executive Order 8389, as amended, makes it clear that only the Secretary of the Treasury can "determine" who is a "national" and further that only the Secretary of the Treasury can "block" the funds of the "determined" "nationals".

This view was taken in Carbone Corp. v. First National Bank of Jersey City, 1941, 130 N.J.Eq. 111, 21 A.2d 366, 369. Said the court in discussing a complaint of a depositor seeking to enjoin a bank from "blocking" his account under Executive Order 8389, as amended:

"* * * The Secretary of the Treasury * * * appears to possess the power to determine who is a `national' and who is not a `national' in the situation here existing. * * *"

It is all important to note that Congress on two separate occasions, once by Joint Resolution, May 7, 1940, and again by the Act of December 18, 1941, ratified Executive Order 8389.

By Joint Resolution May 7, 1940, 54 Stat. 179, Sec. 2, 12 U.S.C.A. § 95 note, Congress specifically "approved and confirmed" the original Executive Order 8389 of April 10, 1940⁴ as follows:

"Executive Order Numbered 8389 of April 10, 1940, and the regulations and general rulings issued thereunder by the Secretary of the Treasury are hereby approved and confirmed."

By the Act of December 18, 1941, c. 593, Title III, Sec. 302, 55 Stat. 840, 50 U.S.C.A. Appendix § 617, Congress specifically "approved, ratified, and confirmed" all of the Orders promulgated by the President, as follows:

"All acts, actions, regulations, rules, orders, and proclamations heretofore taken, promulgated, made, or issued by, or pursuant to the direction of, the President or the Secretary of the Treasury under the Trading With the Enemy Act of October 6, 1917 (40 Stat. 411), as amended, which would have been authorized if the provisions of this Act and the amendments made by it had been in effect, are hereby approved, ratified, and confirmed. * * *"

While the Executive Order as it existed when the Act was passed has since been amended,⁵ as pointed out in United States v. Von Clemm, 2 Cir., 136 F.2d 968, 970, certiorari denied 320 U.S. 769, 64 S.Ct. 81, such amendment "* * * merely extended to new subject matter, upon facts warranting the extension, a set of regulations already approved by Congress. * * *"

It is plain that Executive Order 8389 as amended is not in conflict with the Constitution. As was pointed out in the Von Clemm case, 136 F.2d at page 970, "* * * the constitutionality of Executive Orders under these statutes has often been assumed by courts of the highest authority," and further, "* * * there is much persuasive force in the appellee's argument that the power exerted by the Executive with regard to property of foreign nationals in a time of proclaimed emergency falls within the sphere of foreign relations and is thus free from the limitations imposed on delegated authority."

Clearly the Joint Resolution and the Act of December 18, 1941 and their retroactive ratification of Executive Order 8389 conclusively eliminate all possible question of any improper delegation.

With this background of the authority of the Secretary of the Treasury to "determine" who is a "national" and the power of the Secretary to "block" accounts of designated nationals we come now to a consideration of the question whether the Secretary is an indispensable party in the instant suit.

A regrettable discord exists in the decisions on the issue of indispensable parties. In Brooks v. Dewar, 313 U.S. 354, at page 359, 61 S.Ct. 979, at page 981, 85 L.Ed. 1399, Mr. Justice Roberts stated:

"* * * As this Court remarked nearly sixty years ago respecting questions of this kind, they `have rarely been free from difficulty' and it is not `an easy matter to reconcile all the decisions of the court in this class of cases.' * * *"

The difficulty in these cases arises from the general venue provision of the Judicial Code, Section 51, 28 U.S.C.A. § 112, providing that an action in the Federal Court that is not based solely upon diversity of citizenship may not be brought against any defendant in a district of which he is not an inhabitant. Since the legal residence of a superior Federal officer is, in general, at the seat of the Government, suit must necessarily be brought in the District of Columbia where the superior officer is held to be indispensable. Obviously the expense, inconvenience and delay of instituting proceedings in Washington make the problem one occurring frequently in the lower courts, since these factors may operate to interfere with access to the Federal Courts.

The history of the doctrine that a superior officer must be joined as an indispensable party in a suit against a subordinate begins with the English case, Vernon v. Blackerby, Ch. 1740, 2 Atk. 144, where Lord Hardwicke considered preposterous a bill against a minor official, whose duties were ministerial, praying that he distribute funds which Parliament had placed under control of his superiors.

In the United States, the principle first...