Stoehr v. Wallace

Decision Date28 February 1921
Docket NumberNo. 546,546
Citation255 U.S. 239,65 L.Ed. 604,41 S.Ct. 293
PartiesSTOEHR v. WALLACE et al
CourtU.S. Supreme Court

Mr. Louis Marshall, of New York City, for appellant.

Messrs. Solicitor General Frierson, of Chattanooga, Tenn., and George L. Ingraham and John Quinn, both of New York City, for appellees.

Mr. Justice VAN DEVANTER delivered the opinion of the Court.

This is a suit to establish a claim to and prevent a sale of 14,900 shares of the capital stock of the Botany Worsted Mills, a New Jersey corporation, which were seized by the Alien Property Custodian under the Trading with the Enemy Act (Comp. St. 1918, Comp. St. Ann. Supp. 1919, §§ 3115 1/2a-3115 1/2j) as the property of a German corporation called Kammgarnspinnerei Stoehr & Co., Aktiengesellschaft. The plaintiff is a citizen of the United States, residing in New York, and sues in the right of Stoehr & Sons, Incorporated, a New York corporation, of which he is a stockholder; his asserted justification for so suing being that the directors of the corporation are agents of the Alien Property Custodian, and so far under his control that it would be useless to request them to bring the suit.

The grounds for relief urged in the bill are that the shares, although seized and proposed to be sold as the property of the German corporation, are in truth the property of the New York corporation; that, even if it does not own them, it has a substantial interest in them under a pre-war contract between it and the German corporation; that the shares cannot be taken from it consistently with due process of law as guaranteed by the Fifth Amendment, save through a judicial proceeding, wherein it has a right and an opportunity to be heard; that the shares were seized and are about to be sold without any such proceeding or hearing, and in violation of subsisting treaty provisions; and that the seizure as made did not conform to designated provisions of the Trading with the Enemy Act, and the sale as proposed will not be in accord with other provisions of the act.

After a full hearing the District Court overruled the objections urged against the initial seizure; found from the proofs that the German corporation was the beneficial owner, that the New York corporation had no actual interest in the shares, and that the contract between those corporations, stressed by the plaintiff, 'was not intended to represent the real purpose of the parties at all, but to serve as a cover for another purpose'; and as a result of the findings the court held that neither the plaintiff nor his corporation was entitled to any relief, and accordingly dismissed the bill. The plaintiff then asked and was allowed a direct appeal to this court. His assignments of error cover all the grounds on which the seizure and proposed sale were attacked in the bill.

We shall assume, as did the District Court, that a stockholder may bring a suit such as this in the right of his corporation, where there are circumstances justifying such representative action, and that the plaintiff has shown sufficient reason for suing in that capacity. See equity rule 27, 226 U. S. Appendix, p. 8, 33 Sup. Ct. xxv.

The Trading with the Enemy Act, whether taken as originally enacted, October 6, 1917 (40 Stat. 411, c. 106) or as since amended, March 28, 1918 (40 Stat. 459, 460, c. 28 [Comp. St. 1918, Comp. St. Ann. Supp. 1919, § 3115 1/2 ff]); November 4, 1918 (40 Stat. 1020, c. 201 [Comp. St. Ann. Supp. 1919, § 3115 1/2a]; July 11, 1919 (41 Stat. 35, c. 6), and June 5, 1920 (41 Stat. 977, c. 241), is strictly a war measure, and finds its sanction in the constitutional provision (article 1, § 8, cl. 11) empowering Congress 'to declare war, grant letters of marque and reprisal, and make rules concerning captures on land and water.' Brown v. United States, 8 Cranch, 110, 126, 3 L. Ed. 504; Miller v. United States, 11 Wall. 268, 305, 20 L. Ed. 135.

It is with parts of the act which relate to captures on land that we now are concerned. They invest the President with extensive powers respecting the sequestration, custody and disposal of enemy property. By section 5 (Comp. St. 1918 Comp. St. Ann. Supp. 1919, § 3115 1/2 c) he is in terms authorized to exercise 'any' of these powers 'through such officer or officers as he shall direct.' By section 6 (section 3115 1/2 cc) he is authorized to appoint and 'prescribe the duties of' an officer to be known as the Alien Property Custodian. By section 7c, as amended November 4, 1918, direct provision for sequestering enemy property is made as follows:

'If the President shall so require any money or other property including * * * choses in action, and rights and claims of every character and description owing or belonging to or held for, by, on account of, or on behalf of, or for the benefit, of an enemy or ally of enemy not holding a license granted by the President hereunder, which the President after investigation shall determine is so owing or so belongs or is so held, shall be conveyed, transferred, assigned, delivered, or paid over to the Alien Property Custodian, or the same may be seized by the Alien Property Custodian; and all property thus acquired shall be held, administered and disposed of as elsewhere provided in this act. * * *

'Whenever any such property shall consist of shares of stock or other beneficial interest in any corporation association, or company or trust, it shall be the duty of the corporation, association, or company or trustee or trustees issuing such shares or any certificates or other instruments representing the same or any other beneficial interest to cancel upon its, his, or their books all shares of stock or other beneficial interest standing upon its, his, or their books in the name of any person or persons, or held for, on account of, or on behalf of, or for the benefit of any person or persons who shall have been determined by the President, after investigation, to be an enemy or ally of enemy, and which shall have been required to be conveyed, transferred, assigned, or delivered to the Alien Property Custodian or seized by him, and in lieu thereof to issue certificates or other instrument for such shares or other beneficial interest to the Alien Property Custodian or otherwise, as the Alien Property Custodian shall require.

'The sole relief and remedy of any person having any claim to any money or other property heretofore or hereafter conveyed, transferred, assigned, delivered, or paid over to the Alien Property Custodian, or required so to be, or seized by him shall be that provided by the terms of this act, and in the event of sale or other disposition of such property by the Alien Property Custodian, shall be limited to and enforced against the net proceeds received therefrom and held by the Alien Property Custodian or by the Treasurer of the United States.'

By section 9 (section 3115 1/2 e), as twice amended, any one, 'not an enemy or ally of enemy,' claiming any interest, right or title in any money or other property so sequestered and held may give notice of his claim and institute a suit in equity against the Custodian or the Treasurer, as the case may be, to establish and enforce his claim; and where suit is brought the money or property is to be retained by the Custodian or in the Treasury to abide the final decree. By section 12, as amended March 28, 1918, the Custodian is clothed with 'all of the powers of a commonlaw trustee' in respect of all enemy property coming into his hands and is given authority, subject to the President's supervision, to manage and dispose of the same, by sale or otherwise, as if he were the absolute owner, save as the power of disposal may be suspended by a suit under section 9. As respects the ultimate disposition of the property or its proceeds section 12 says:

'After the end of the war any claim of any enemy or of an ally of enemy to any money or other property received and held by the Alien Property Custodian or deposited in the United States Treasury, shall be settled as Congress shall direct.'

The President, by orders of October 12, 1917, and February 26, 1918, committed to the Alien Property Custodian the executive administration of section 7c, including the power to determine after investigation whether property was enemy-owned, etc., and to require the surrender or seizure of such as he should determine was so owned. In exercising this power the Custodian after investigation determined, in substance, that the shares now in question, which then stood in the name of the New York corporation on the books of the Botany Worsted Mills, belonged to the German corporation, that it was an enemy not holding a presidential license, and that the New York corporation held the shares for its benefit; and in further exercising this power the Custodian seized the shares and required the Botany Worsted Mills to transfer them to his name on its books in accordance with the provision in section 7c before quoted.

One objection urged by the plaintiff is that the seizure permitted by the act is confined to money or property 'which the President after investigation shall determine' is enemy-owned, etc., and that here there was no such determination by the President, but only by the Custodian. Whether the objection would be good if it turned entirely on the words of section 7c, on which the plaintiff relies, we need not consider; for they obviously are qualified and explained by section 5 which very plainly enables the President to exercise his power under section 7c 'through such officer or officers as he may direct.' By the orders already...

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