Sielcken-Schwarz v. American Factors, 415

• Decision Date: 11 July 1932
• Docket Number: No. 415,416.,415
• Citation: 60 F.2d 43
• Parties: SIELCKEN-SCHWARZ v. AMERICAN FACTORS, Limited. ISENBERG v. SAME.
• Court: U.S. Court of Appeals — Second Circuit

60 F.2d 43 (1932)

SIELCKEN-SCHWARZ v. AMERICAN FACTORS, Limited.

ISENBERG v. SAME.

Nos. 415, 416.

Circuit Court of Appeals, Second Circuit.

July 11, 1932.

Brainard Avery and Jay E. Whiting, both of New York City (Dean Hill Stanley, of Washington, D. C., and Albert G. Avery, of New York City, of counsel), for appellants.

Hughes, Schurman & Dwight, of New York City (Allen S. Hubbard and L. Homer Surbeck, both of New York City, and Alfred Sutro, W. H. Lawrence, and Eugene M. Prince, all of San Francisco, Cal., of counsel), for appellee.

Before L. HAND, AUGUSTUS N. HAND, and CHASE, Circuit Judges.

L. HAND, Circuit Judge.

The bills in equity which the judge dismissed for insufficiency are alike. Each alleged that the plaintiff, a citizen of the United States, not domiciled in enemy territory, was a stockholder in a Hawaiian company, and that the alien property custodian wrongfully seized her shares on January 28, 1918, and had them issued in the name of a trust company as depositary for him. That on April 20, 1918, he voted upon them for a new board of directors, and in July, after the new board had so recommended, again voted, this time to sell the assets of the company to the defendant, a new company organized in Hawaii, in exchange for its shares. For such corporate action the laws of Hawaii required the unanimous consent of all the shareholders, so that the validity of the sale depended upon the custodian's power to vote. The new shares, when received, were to "be deemed to be of the approximate value of $7,500,000," and were transferred to voting trustees, who gave trust certificates in their stead, which the custodian received and held. The agreement also provided that these should be sold for $150, and this was done with the custodian's consent; his depositary thereupon dissolved the original company, though it has not wholly distributed the property or money received. While the bill alleges that the assets were worth more than $17,500,000, and were therefore sold "at a grossly inadequate consideration," it nowhere charges that the parties contrived a fraud; for all that appears they may have been honestly mistaken, and supposed that the transaction was to the advantage of the original shareholders. The prayer is that the defendant account to the plaintiff for the actual value of her wrongfully seized shares, and that she have judgment for the amount found due.

The only defect in the defendant's title is the putative invalidity of the custodian's vote; if he had power to act as the plaintiffs' surrogate, the shareholders unanimously approved the sale, and it was valid, however unwise. The argument is that as the seizure was wrongful, it could confer no such power; that the Trading with the Enemy Act (50 USCA Appendix § 1 et seq.) did not authorize the sale of non-enemy property, and it would not have been constitutional if it had. We may take it so. The power to seize, granted by section 7 (c) of the act (50 USCA Appendix § 7 (c), and note), was merely to gain possession, and for this reason the issue whether the property was enemy held, could be taken from the courts, and left with the custodian. Central Union Trust Co. v. Garvan, 254 U. S. 554, 41 S. Ct. 214, 65 L. Ed. 403; Commercial Trust Co. v. Miller, 262 U. S. 51, 43 S. Ct. 486, 67 L. Ed. 858. The case at bar involves the question as to what powers were made ancillary to that possession; more exactly whether the custodian might vote to dispose of the property.

That he had such power by the terms of the statute admits no doubt; whether it was valid if extended to the property of a citizen is another matter. Section 12, as amended by Act March 28, 1918, § 1 (50 USCA Appendix § 12) — before the custodian attempted to vote on the shares — not only gave him the powers of "a common-law trustee," which alone would have been enough, but explicitly provided that he should "in addition thereto, * * * have power to manage such property and do any act or things in respect thereof or make any disposition thereof * * * by sale or otherwise, and exercise any rights or powers which may be or become appurtenant thereto * * * in like manner as though he were the absolute owner." There is not the slightest reason to suppose that this was intended to apply only to property which was in fact enemy held, and it would have been impossible to execute the purposes of the act if it had been. The custodian, having determined that the property was subject to the act, might never discover his mistake; the...