Silesian-American Corporation v. Markham, 225

• Decision Date: 14 October 1946
• Docket Number: No. 225,Docket 20121.,225
• Parties: SILESIAN-AMERICAN CORPORATION et al. v. MARKHAM, Allen Property Custodian.
• Court: U.S. Court of Appeals — Second Circuit

156 F.2d 793 (1946)

SILESIAN-AMERICAN CORPORATION et al. v. MARKHAM, Allen Property Custodian.

No. 225, Docket 20121.

Circuit Court of Appeals, Second Circuit.

July 3, 1946.

Writ of Certiorari Denied October 14, 1946.

COPYRIGHT MATERIAL OMITTED

Leonard P. Moore, of New York City (William Gilligan, of New York City, of counsel), for appellants.

James L. Morrisson and John F. Sonnett, Asst. Atty. Gen., John F. X. McGohey, United States Atty., of New York City, and Harry LeRoy Jones, and M. S. Isenbergh, Sp. Assts. to Atty. Gen. (Raoul Berger, General Counsel to Alien Property Custodian, of Washington, D. C., of counsel), for appellee.

Thomas A. McGrath, of New York City, for debtor, Silesian-American Corporation.

Chadbourne, Wallace, Parke & Whiteside, of New York City, for Silesian Holding Co.

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

Writ of Certiorari Denied October 14, 1946. See 67 S.Ct. 87.

L. HAND, Circuit Judge.

The Silesian-American Corporation, a debtor in a reorganization under Chapter X of the Bankruptcy Law, appeals from an order of the Bankruptcy Court, 11 U.S.C.A. § 501 et seq., answering its petition for instructions whether to comply with a demand made upon it by the Alien Property Custodian. The controversy arose over shares in the debtor which stood in the name of a Swiss corporation, but the certificates of which were held by certain Swiss banks as pledgees. The Alien Property Custodian, on November 17, 1942, passed a "vesting order" by which he "vested" in himself these shares of stock based upon a finding that, although they were "owned" by the Swiss corporation, that corporation "held" them "for the benefit of * * * a German corporation"; and on this account they were property of "a national of a designated enemy country." He also determined "that to the extent that * * * such nationals are persons not within a designated enemy country the national interest * * * requires that such persons be treated as nationals of the aforesaid designated enemy country." The Custodian served this order upon the debtor on January 18, 1943, and on February 12th, made a demand upon it to cancel the shares on the debtor's books, and "to issue in lieu thereof new certificates in the name of `the Alien Property Custodian.'" Not wishing to comply with this order, because it feared that it might not be protected against the registered shareholder, and particularly against the pledgees, the debtor applied to the Bankruptcy Court for instructions. The Swiss banks appeared at the hearing and opposed the demand of the Custodian; they also announced to the debtor their intention of holding it and its trustee personally responsible for any action which either might take to their prejudice. On October 30, 1945, the judge directed the debtor to cancel the shares upon its books and to issue new certificates in equal amount to the Custodian. The debtor has appealed from this order, but the Swiss banks have not.

The debtor has no interest in the controversy, legally recognizable, except to be protected against any claims by the pledgees, or by the Swiss corporation in whose name the shares are registered. It has no standing vicariously to assert against the claims of third persons, the interests of those who may appear on its books to be its shareholders; and our inquiry may therefore be confined to whether § 5(b) (2) of the Trading with the Enemy Act, 50 U.S.C.A.Appendix, § 5(b) (2), provides protection for the debtor. (In all that we say we mean to leave unanswered the question whether the pledgees were bound by their appearance in the district court.) The difficulties arise from the amendment in 1941 of § 5(b) of the Trading with the Enemy Act. Until that time § 7(c) was the only provision which gave power to the President to compel the transfer of alien property; and it was limited to property of an enemy or of an ally of an enemy; for, although § 5(b) authorized very wide power to investigate, it did not touch transfers. However, the amendment of 1941 — in subsection (B) of subdivision one — gave power to the President not only to investigate "transactions involving, any property in which any foreign country or national thereof has any interest," but to "compel * * * any * * * transfer" of such property; and as the section expressly covered all property "subject to the jurisdiction of the United States," it included shares of stock in a domestic corporation. Stoehr v. Wallace, 255 U.S. 239, 41 S.Ct. 293, 65 L.Ed. 404; Great Northern Railway Company v. Sutherland, 273 U.S. 182, 47 S.Ct. 315, 71 L.Ed. 596. The power of Congress to seize and confiscate enemy property rests upon Art. 1, § 8, Clause 11 of the Constitution. Stoehr v. Wallace, supra, 255 U.S. at page 242, 41 S.Ct. 293, 65 L.Ed. 404; United States v. Chemical Foundation, Inc., 272 U.S. 1, 11, 47 S.Ct. 1, 71 L.Ed. 131. Whether it exists at international law may be doubted; but nobody contends that the war power of Congress includes the seizure of the property of friendly aliens. The amendment of § 5(b) must therefore rest upon some other power of Congress, not only for that reason, but because the amendment itself was expressly not limited to time of war (although it was in fact passed flagrante bello) but was to go into effect upon any "national emergency declared." It can rest upon Art. 1, § 8, Clause 1: i.e. upon the power "to provide for the common Defence and general Welfare"; indeed, so far as we can see, the debtor does not challenge the power itself, but its exercise. It complains that the amendment delegates an unrestricted discretion to the President, and does not provide "just compensation" for seizures.

As to the first, it is true that the section gives the President an unrestricted power to be exercised at his discretion and without any standard except that he shall act through "rules and regulations." The only objection to this which can be raised is that it disturbs the constitutional "separation of powers"; for, since it is to be exercised by regulations, it cannot as such be said to subject individuals to unascertainable duties or penalties; that will depend upon the regulations themselves. The occasions upon which such a power should be exercised are incapable of catalogue or definition; or, indeed, of statement in any other terms than that the interest of the country demands the prescribed action. That is, however, enough. New York Central Securities Corporation v. United States, 287 U.S. 12, 53 S.Ct. 45, 77 L.Ed. 138. The separation of the executive from the legislative power is in the end a matter of degree anyway; thousands of decisions are made every day by administrative officers which involve a balance of conflicting interests — the characteristic field for legislation. That the power to seize property (call it executive or legislative as one will) may be lawfully conferred without attempting to fix the conditions, is proved by several other statutes of long standing and of universal acceptance: as for example, the power to condemn of the Federal Works Administrator (§ 341 of Title 40), that of any executive department in the District (§ 361 of Title 40), and that of the Secretary of War (§ 171 of Title 50). Indeed, the power conferred upon the President in § 7(c) of the Trading with the Enemy Act itself is without condition; and, so far as concerns unconstitutional delegation, it makes no difference that it is limited to enemy property. Nor does it matter that by Executive Order No. 9095, 50 U.S.C.A. Appendix, § 6 note, the President in turn delegated his powers to the Custodian, authorizing him to "vest" in himself the property of a friendly alien when he determined that this was "necessary in the national interest." That was in effect the same condition on which the President's own power was conferred; and in the nature of things the President cannot personally exercise the least fraction of the manifold powers of every description which are granted to him — more truly, which are imposed upon him. If he may not depute their exercise, they are as sterile as stones. Whether Executive Order No. 9095 was definite enough to be valid is separate from whether the power was improperly delegated by Congre...