Nielsen v. Secretary of Treasury

• Decision Date: 05 February 1970
• Docket Number: No. 21884-21886.,21884-21886.
• Citation: 424 F.2d 833
• Parties: Lucia Schueg NIELSEN, Appellant, v. The SECRETARY OF the TREASURY et al., Appellees. Edwin H. NIELSEN, Appellant, v. The SECRETARY OF the TREASURY et al., Appellees. Enriqueta Schueg BOSCH, Appellant, v. The SECRETARY OF the TREASURY et al., Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

424 F.2d 833 (1970)

Lucia Schueg NIELSEN, Appellant, v. The SECRETARY OF the TREASURY et al., Appellees.

Edwin H. NIELSEN, Appellant, v. The SECRETARY OF the TREASURY et al., Appellees.

Enriqueta Schueg BOSCH, Appellant, v. The SECRETARY OF the TREASURY et al., Appellees.

Nos. 21884-21886.

United States Court of Appeals, District of Columbia Circuit.

Argued September 29, 1969.

Decided February 5, 1970.

COPYRIGHT MATERIAL OMITTED

Mr. Joseph E. Casey, Washington, D. C., with whom Mr. Thomas B. Scott, Washington, D. C., was on the brief, for appellants.

Mr. Bruno A. Ristau, Atty., Department of Justice, with whom Asst. Atty. Gen., Edwin L. Weisl, Jr., at the time the brief was filed, Messrs. David G. Bress, U. S. Atty., at the time the brief was filed, and Morton Hollander, Atty., Department of Justice, were on the brief, for appellees.

Before McGOWAN, TAMM and LEVENTHAL, Circuit Judges.

LEVENTHAL, Circuit Judge:

Appellants are Cuban refugees who own 750 of the 1000 outstanding shares of Acueducto Yateritas, S.A., a Cuban corporation which until February 6, 1964 was engaged in the business of supplying water to the United States Naval Base at Guantanamo Bay. They brought this action to test the statutory and constitutional validity of the Cuban Assets Control Regulations insofar as they have been applied by the Secretary of the Treasury to prohibit appellants from obtaining their proportionate interest in the assets of Yateritas located in the United States. The court below dismissed appellants' complaint because it failed to state a claim for which relief could be granted. We agree that appellants have not alleged agency action in violation of either the Trading with the Enemy Act, 50 App. U.S.C. § 1 et seq., or the Constitution and accordingly we affirm.

The complaint and accompanying papers of record provide the material facts and may be summarized as follows: In 1937 Yateritas, entered into a long-term contract with the United States Navy to supply fresh water to the Guantanamo Naval Base in Cuba. The corporation continued to operate the water supply service for the Navy after the Cuban Revolution in 1957-1958. In August and September of 1960 appellants, accounting for three-fourths of the Yateritas stock, left Cuba with their families "to avoid the consequences of residing in Cuba under the Castro regime," and they now live in other places in the Western Hemisphere.¹ After appellants had fled Cuba the corporation continued to supply the naval base with water until its property was seized and shut down by the Castro government on February 6, 1964. At that time the corporation had not been paid by the United States Navy for water supplied between November 22, 1963 and February 6, 1964. On October 22, 1965 the United States Navy entered into an agreement of settlement with Yateritas as Contractor, described as a corporation organized and existing under the laws of Cuba, the corporation signing by its president and its treasurer.² The Navy agreed to pay Yateritas $34,450.20 for the water supplied and to return to the corporation a contract performance bond of $20,000. These moneys were deposited in the account of the corporation at the First National City Bank of New York. Pursuant to the Cuban Assets Control Regulations this account is blocked, and the funds deposited therein may not be withdrawn or disposed of without a license from the Secretary of the Treasury. The application by Yateritas for such a license was denied by the Office of Foreign Assets Control, in the Treasury Department, in June 1966 on the ground that "Transactions of this type are not consistent with the present policy of this government with respect to Cuba." Thereafter, in August 1967, appellants in their capacity as shareholders of Yateritas filed separate license applications in their own names with the Federal Reserve Bank in New York requesting (1) that each of them be declared an unblocked national within the meaning of 31 C.F.R. § 515.307, Cuban Assets Control Regulations; and (2) that the Secretary unblock and permit the transfer and payment to each of them of their "respective 25 percent interest in the assets of the corporation consisting of the bank account in the First National City Bank * * *." With respect to request (1) the bank directed their attention to 31 C.F.R. § 515.506 which by general license and without need for application unblocks Cuban refugees in friendly foreign countries who left Cuba before July 8, 1963 unless the Office of Foreign Assets Control has determined that the refugee has acted on behalf of the Castro regime. The bank denied request (2) for the same reason that the Office of Foreign Assets Control had denied the license application of Yateritas. Appellants then brought this action seeking a judgment directing the defendants to license each of the appellants to withdraw one-fourth of the balance in the bank account of Yateritas in the First National City Bank of New York. Additionally they sought a declaration that the action of the defendants had deprived them of property without due process of law and that each was an "unblocked national" and, as such, an "innocent stockholder" of Yateritas.

I The blocking of the United States assets of the Cuban corporation is in accordance with regulations, which are authorized by statute applicable in times of war or emergency.

The Treasury officials have "blocked" the United States assets of a Cuban corporation. Do they have authority to take this action? Reserving certain questions of constitutionality we conclude that the blocking action is authorized by applicable regulations, which are in turn authorized by statute.

1. Section 5(b) of the Trading with the Enemy Act, as amended,³ provides that during time of emergency the President may prohibit any transfer in "any property in which any foreign country or a national thereof has an interest" if the property is "subject to the jurisdiction of the United States."

2. Since 1950 the United States has officially been in a state of emergency,⁴ and so the authority described in § 5 of the Trading with the Enemy Act was available to, and validly invoked by, the Secretary of the Treasury when on July 8, 1963, he issued the Cuban Assets Control Regulations, 31 C.F.R., Part 515 (1969). The pertinent provisions, of the regulations, set forth in the footnote,⁵ prohibit any transfer — unless specifically authorized by a license — which involves property in which a "designated" foreign country "or any national thereof has * * * any interest of any nature whatever, direct or indirect." Cuba has been "designated." The term national is defined specifically to include any corporation organized under the laws of the foreign country, as well as a corporation which has had its principal place of business in the foreign country on or since the appropriate "effective date" (July 8, 1963 in the case of Cuba).

3. There is an unblocking provision in the regulations.⁶ It provides for unblocking "on the ground that no person having an interest in the property is a designated national."

The Secretary construes this unblocking provision to be inapplicable where the property was owned by a Cuban corporation since the 1963 effective date, in view of the interest of that national of a designated foreign country. We need not now concern ourselves with the problem of a case where the corporation's interest was purely nominal, akin, say, to the legal title of the trustee of a dry trust, and where the only meaningful ownership interest under applicable foreign law was in the shareholders.⁷ In the case before us Yateritas was in active business, as a corporation, subsequent to the effective date. The larger part of the funds involved in this action consists of moneys earned for water delivered between November 1963 and February 1964, earned by the corporation after the appellants had fled Cuba through the efforts of the corporate employees who remained behind. The balance consists of the proceeds of securities of the corporation, which the Government was holding to secure contract performance in Cuba subsequent to the effective date of July 8, 1963.

4. The work done by the Cuban corporation between November 1963 and February 1964 was work which the United States desired to be done. The United States did not desire a complete cessation of commercial intercourse with Cuba, since its forces on Guantanamo needed supplies from Cuban sources. We need not consider the transfer of payments from the Navy to the Cuban corporation while the work was going on; these were presumably authorized.⁸ All this does not make the corporation furnishing the desired supplies any less Cuban, or its assets within the United States any less blocked.

II There are no constitutional requirements entitling the non-Cuban shareholders to withdraw a proportionate share of the blocked assets of the Cuban corporation.

The plaintiff-applicants present in somewhat general terms the contention that they have been deprived of their property without due process of law. Their somewhat diffused complaints relate to the deprivation involved in extended prolongation of a freezing action. We have taken a broad view of the constitutional aspects of the case to consider whether on these or other grounds there has been unfairness to plaintiffs which rises to constitutional dimensions, or presents such serious constitutional questions as to dictate an application of the regulations contrary to that of the Secretary.

1. We see no general constitutional inhibition that overrides a statute authorizing the institution, during time of national emergency, of a program that freezes the status within the United States of assets of a national of a foreign country "designated" by the President.

No standards are provided as to which country shall be "designated," but if there is any vitality to the doctrine that a statute may not confer undue latitude in the President it has...