Propper v. Clark

• Decision Date: 20 June 1949
• Docket Number: No. 390,390
• Citation: 93 L.Ed. 1480,337 U.S. 472,69 S.Ct. 1333
• Parties: PROPPER v. CLARK, Attorney General
• Court: U.S. Supreme Court

337 U.S. 472

69 S.Ct. 1333

93 L.Ed. 1480

PROPPER

v CLARK, Attorney General.

No. 390.

Argued March 28, 29, 1949.

Decided June 20, 1949.

Rehearing Denied Oct. 10, 1949.

See 70 S.Ct. 33.

[Syllabus from pages 472-474 intentionally omitted] Messrs. A. Walter Socolow and Joseph M. Cohen, New York City, for petitioner.

Mr. David Schwartz, New York City, for respondent.

Mr. Louis D. Frohlich, New York City, for A.S.C.A.P.

Mr. Justice REED delivered the opinion of the Court.

The Alien Property Custodian¹ on April 22, 1946, began this action under § 17 of the Trading with the Enemy Act, 50 U.S.C.A.Appendix, § 17, in the United States District Court for the Southern District of New York to obtain the payment, and a declaration of title in him as against the petitioner as receiver, of certain royalties owed by the American Society of Composers, Authors and Publishers (ASCAP) to Staatlich Genehmigte Gesellschaft der Autoren, Komponisten and Musikverleger (AKM), an Austrian association, pursuant to the provisions of vesting order No. 2097, Office of Alien Property Custodian, September 4, 1943, 8 F.R. 16463, whereby the Custodian had vested in himself title to certain property of AKM, specifically claims for royalties under copyrights for the performance of musical compositions. By contract ASCAP had been authorized by AKM to license on royalty the use in this country of musical copyrights belonging to AKM. ASCAP and the petitioner, who is the state-appointed receiver of the royalties involved, were made defendants. The District Court, on motions for summary judgment or judgment on the pleadings, entered a judgment declaring that the petitioner had no right, title or interest in the claim in question, Markham v. Taylor, 70 F.Supp. 202, and later, a second judgment directing ASCAP to pay the debt to the Custodian. The United States Court of Appeals for the Second Circuit, on appeal by the petitioner,² affirmed. Clark v. Propper, 169 F.2d 324.

The pertinent facts underlying this controversy are as follows: On June 12, 1941, on an ex parte application by a creditor of AKM, the New York Supreme Court appointed petitioner temporary receiver of that association, pursuant to § 977-b of the New York Civil Practice Act, which provides for the liquidation of the local assets of a foreign corporation when it has ceased to do business for one reason or an ther not here important. Proceedings under this Act are to enable claimants against the foreign corporation to secure payment of their claims by an equitable apportionment of the available assets. The order of appointment directed him 'to take, receive, and reduce to his possession any and all assets * * * tangible and intangible, within the State of New York of the defendant (AKM), and hold the same until the further order of this Court.' On June 14, 1941, pursuant to § 5(b) of the Trading with the Enemy Act of 1917, 40 Stat. 411, 415, as amended,³ the President promulgated Executive Order No. 8785,⁴ a so-called freezing order, which prohibited certain transactions involving Austrian property except as they were specifically licensed by the Secretary of the Treasury. On July 29, 1941, petitioner, as receiver, began an action in the courts of New York against ASCAP to recover the royalties which it owed AKM.⁵ Its disposition is awaiting the outcome of this case. On September 29, 1941, petitioner, upon the default of AKM, was appointed permanent receiver of that association's assets. Thereafter followed the vesting order, September 4, 1943, and this suit, April 22, 1946.

Upon the limited grant of the petition for certiorari, 355 U.S. 902, 69 S.Ct. 405, the issues argued to this Court and now to be decided are whether the appointment of petitioner as temporary receiver on June 12, 1941, or his appointment as permanent receiver on September 29, 1941, by relation back, passed title to him of the claim for royalties as of June 12, 1941. Furthermore, since, as will subsequently appear, we conclude these issues against petitioner, we must consider whether the freezing order barred a subsequent unlicensed judicial transfer by the order appointing the petitioner permanent receiver.⁶

First. The appointment as permanent receiver on September 29, 1941, concededly would have vested in petitioner as permanent receiver all right, title and interest of AKM in its claim against ASCAP if the freezing order of June 14, 1941, had not intervened after petitioner's appointment as temporary receiver on June 12, 1941. Accepting that position, the question of whether the appointment as permanent receiver related back to the date of the temporary receivership, so as to place title to the claim in the permanent receiver as of June 12, 1941, and the question as to whether the appointment as permanent receiver itself vested title in the petitioner, notwithstanding the prior freezing order, depend alike upon a determination as to whether the freezing order made invalid any subsequent transfer of title by judicial action.

The vesting order here in question, Vesting Order No. 2097, was executed on September 4, 1943, a date subsequent to the appointment of petitioner as permanent receiver. So far as the parties to this litigation are concerned, by its specific terms it vested in the Custodian title to the property of AKM only.⁷ Nothing presented in this case calls our attention to any effort made by the Custodian to vest in himself any title to the claim that might be in the perm nent receiver for the benefit of creditors and ultimately for AKM or those entitled to its assets on distribution,⁸ nor do we adjudicate his right to do so. The order, so far as is pertinent, vested in the Custodian 'All * * * claim (of AKM to) all right to receive monies * * * by way of royalty, share of profits or other emolument,' together with 'all causes of action * * * with respect to' the aforesaid copyrights. This claim was a debt of ASCAP to AKM, property of AKM, as defined in the regulations of April 10, 1940, 5 F.R. 1401(c), and June 14, 1941, 6 F.R. 2905. The latter citation refers to the regulation defining property, under the Trading with the Enemy Act, effective at the time of the vesting order.⁹

Prior to petitioner's appointment as permanent receiver and the later vesting order, the President, on June 14, 1941, had prescribed by Executive Order No. 8785, 6 F.R. 2897, that certain transactions by or on behalf of Austrian associations such as AKM were prohibited unless licensed. No license for the judicial order appointing petitioner as permanent receiver was asked for or obtained.

Order No. 8785 was issued pursuant to the authority granted the President by § 5(b) of the Act of October 6, 1917, as amended, particularly by the Joint Resolution of May 7, 1940.¹⁰ The order forbade, § 1(A), 'All transfers of credit between any banking institutions within the United States; * * *.' Authority during war or any other period of national emergency to prohibit such transfers was given the President by the Joint Resolution. Order No. 8785 declared 'the existence of a period of unlimited national emergency.'

The same resolution authorized the President to issue rules and regulations and specifically to define 'banking institutions.' The President had on April 10, 1940, issued a similar order prohibiting similar transfers applicable to nationals of Norway and Denmark to guard against such transfers brought about by the German invasion of those countries. Executive Order No. 8389, 5 F.R. 1400. It contained to all intents and purposes the same definition of 'banking institutions.' See § 11C thereof. The order and regulations thereunder and therefor the definition were approved by the Joint Resolution.¹¹ The definition applicable to transactions of this Austrian national, AKM, under the freezing order of June 14, 1941, is set out below.¹² We accept this definition as authorized by the Resolution.

By the order appointing a permanent receiver the claim of AKM against ASCAP was directed to be transferred from AKM to the petitioner. From ASCAP's point of view it was a debt; from AKM's a claim. The shift of obligation contemplated by the order for a per- manent receiver was a transaction that involved 'property in which' there was an 'interest of any nature whatsoever, direct or indirect' in aliens of designated countries, including Austria.¹³ But the Executive Order of June 14, 1941, did not prohibit all transactions without license involving Austrian-owned property. It specified the prohibited transactions, however, by categories so all-inclusive as to make it clear the purpose was to require transactions involving property of nationals of designated foreign countries to be carried out under regulations of this Government except certain transactions such as are provided for in General Ruling No. 12, April 21, 1942, 7 F.R. 2991. The Executive Order forbids transfers of credit. As 'credit' is not defined by the Order or regulation, we, in considering credits as property subject to vesting under the Trading with the Enemy Act, give it is ordinary meaning of the obligation due on accounting between parties to transactions. This credit, owed by ASCAP to AKM, was in effect directed to be transferred by the permanent receiver order from AKM to the petitioner as receiver. There is, we think, no doubt that a voluntary transfer by a bank of a credit in the transferring bank from the account of a known Austrian to the account of another banking institution would violate Executive Order No. 8785 as a transfer of credit between banking institutions.

It remains, then, to determine whether ASCAP and petitioner are banking institutions of such a character as to be subject to the prohibition of Executive Order No. 8785, § 1A against 'transfers of credit between any banking institutions.' A reading of the President's definition, note 12 supra, shows that they do fall within the words 'any person holding credits for others as a direct or...