United States v. Irving Trust Co.

• Decision Date: 19 April 1943
• Citation: 49 F. Supp. 663
• Parties: UNITED STATES et al. v. IRVING TRUST CO. et al.
• Court: U.S. District Court — Southern District of New York

49 F. Supp. 663

UNITED STATES et al. v. IRVING TRUST CO. et al.

District Court, S. D. New York.

April 19, 1943.

Mathias F. Correa, U. S. Atty., of New York City (George A. McNulty, Chief, Alien Property Unit, War Division, Department of Justice, of Washington, D. C., Albert E. Arent, Sp. Asst. to the Atty. Gen., William L. Lynch and Laurence H. Axman, Asst. U. S. Attys., both of New York City, and William Lawrence, II, of Boston, Mass., Atty., Alien Property Unit, of counsel), for plaintiffs.

Selden Bacon, of New York City (Nathan L. Miller and Selden Bacon, both of New York City, of counsel), for defendant Irving Trust Co.

GALSTON, District Judge.

This action is brought pursuant to § 24 (1) of the Judicial Code, 28 U.S.C.A. § 41 (1), and § 17 of the Trading With The Enemy Act, October 6, 1917, C. 106, 40 Stat. 425, 50 U.S.C.A.Appendix, § 17. The complaint is in the nature of a bill of review and seeks to vacate a decree in the action entitled John S. Sorenson and Thorleif S. B. Nielsen, as the surviving partners of the firm of Crossman & Sielcken, against Howard Sutherland, as Alien Property Custodian, Frank White, as Treasurer of the United States, and Zentral Einkaufs Gesellschaft, m. b. H., entered December 30, 1929, in the United States District Court for the Southern District of New York; and to recover from the defendants the sum of $726,681.40, with interest thereon, from April 10, 1930, which sum was paid to the plaintiffs in that suit pursuant to said decree.

It is charged that on December 21, 1927, the defendants in this suit, with intent to deceive and defraud the United States and this court, caused the complaint to be filed in the earlier suit without disclosing that the real parties in interest were the estate of one Hermann Sielcken, deceased, and the firm of Theodor Wille of Hamburg, Germany, both enemies within the meaning of the Trading With The Enemy Act, 50 U.S. C.A.Appendix, § 1 et seq. It is alleged herein that during March and April of 1928, the defendant Avery and representatives of Zentral Einkaufsgesellschaft (hereinafter referred to as "Z. E. G.") held conferences in Germany, knowing that the funds seized by the Alien Property Custodian as the property of Z. E. G. were not subject to lawful return to the real parties in interest under the Trading With The Enemy Act, and that in such conferences the said Avery discussed with officials of the German Government the possibility of securing a default judgment to the end that proceeds of the suit could be equally divided between the Estate of Sielcken, deceased, and the defendant, Z. E. G. It is alleged that Z. E. G. failed to appear and that a default was entered against it; but that Avery failed to convince officers in the Department of Justice that such a default judgment would be binding upon the officers of the United States. Thereafter, on August 9, 1929, Z. E. G. appeared and filed an answer. It is now charged that subsequent to the filing of the answer of the defendant Z. E. G., and in furtherance of a conspiracy to obtain a judgment therein for the plaintiffs, Avery, as attorney for Sorenson and Nielsen, the plaintiffs, and for the said Irving Trust Company and other attorneys associated with Avery in that capacity, and one Heinrich F. Albert, a German attorney, representing the German Government as successor to Z. E. G., and Carl von Lewinsky, agent for the German Government before the Mixed Claims Commission, and Arthur Garfield Hays as attorney for the said Z. E. G. and the German Government and for the firm of Theodor Wille & Co., and one William Abramson, a partner of Hays, conferred concerning the evidence to be offered or withheld at the trial of said case "for the purpose of obtaining a judgment in favor of the plaintiffs"; it is further alleged herein that the main defenses asserted by the defendant Z. E. G. were abandoned and that material facts were withheld from the evidence at the trial with the intent that the trial result in the entry of a decree in favor of the plaintiffs.

The defendant Sorenson answered by denying participation in any scheme or conspiracy and asked the court to protect his interests; the defendant Avery has not been served and has not appeared. The Irving Trust Company appeared individually and as executor of the Estate of Hermann Sielcken, deceased, and its answer, besides making material denials, sets up first a partial defense of estoppel, alleging that the plaintiffs herein are privies of the Alien Property Custodian and the Treasurer named in the former suit, and are estopped and barred by the decree of December 30, 1929, which was entered with full jurisdiction of the court, from disputing the decree or any of the matters thereby adjudged, including not only matters that were actually pleaded, "but also all matters that might have been pleaded in answer to the claim asserted in and by the original bill therein, whether pleaded or not".

Another separate partial defense is that in 1934 the United States assessed on the firm of Crossman & Sielcken in liquidation an income tax, and so much of the entire recovery under the aforesaid decree of December 30, 1929, as constituted income, which sum, amounting to $22,092.65, the Irving Trust Company, as executor of the Sielcken Estate, paid to the Treasurer of the United States on July 12, 1934.

As a further separate defense it is alleged that in 1917 and 1918, the Alien Property Custodian was fully advised of all the terms of the articles of co-partnership of the firm of Crossman & Sielcken, of the provisions of the will of Hermann Sielcken of March 23, 1914, of its admission to probate, and of the issue of letters testamentary to the Irving Trust Company in January, 1918; also that in 1919 and 1920 the Alien Property Custodian was fully advised of the claim of Clara Sielcken, the widow of Hermann Sielcken, that she was not an enemy and that Hermann Sielcken was not an enemy and never had been an enemy, but was a citizen of the United States and retained his domicile in New York City until his death. The defense also asserts that the Alien Property Custodian, together with the then Attorney General of the United States, investigated those claims and in March, 1921, decided that Sielcken had been a citizen of the United States and retained his domicile in the City of New York until his death, and had never been an enemy and that Clara Sielcken was a citizen of the United States and had had her domicile in the City of New York and was not and had never been an enemy. Moreover, it is alleged that the Alien Property Custodian and the Attorney General of the United States had been fully advised of the nature and extent of the interest of the Estate of Hermann Sielcken in the assets and property of the firm of Crossman & Sielcken; and for more than a year prior to the trial of said suit had been advised by the attorneys for the plaintiff of all the defenses which said Z. E. G. had caused to be asserted in Germany's answer to the Memorial before the Mixed Claims Commission on the same claim, together with all the evidence filed in support of that answer by Germany. It is also alleged that the American Agent before the Mixed Claims Commission, Bonynge, and his counsel Martin, and the Alien Property Custodian, and the Treasurer of the United States, and their counsel in the former suit, were at all times informed in advance of trial of all proposals for settlement of the litigation and of all stipulations and agreements made or entered in that suit with regard to the facts or production of proof. It is alleged that despite the full information of all facts that had occurred, no notice of claim was given prior to January 6, 1938, to the Irving Trust Company, either individually or as executor of any impropriety on the part of anyone in any of the transactions before trial or in the conduct of the suit, or in the payments made on sums recovered under the decree. It is further alleged that the defendant, as executor, prior to January 1, 1938, and in good faith, and without notice of any such claim of fraud in procuring such decree, and in reliance upon the decree, had disbursed for expenses of administration of the Estate of Sielcken, and by distribution to his residuary legatee, the whole amount received by the defendant as executor, and prior to February 1, 1941, had incurred obligations for additional lawful and unpaid expenses of such administration all in excess of the total value of all property of the Estate still held by it.

In addition it is alleged that in the Surrogate's Court of the County of New York, in the accounting proceeding of the Irving Trust Company as executor of the Sielcken Estate, the Attorney General of the United States, as successor to the Alien Property Custodian, had intervened in 1938, and admitted that the claims made by him were subordinate to any lawful expenditures of the administration of the estate, and consented to the orders of that court directing payments of over $59,000 out of funds then remaining in the hands of the Chase National Bank as security for certain refunding bonds given by the residuary legatee to the Irving Trust Company as executor for such expenses of administration, and had consented to the approval of items of disbursement and distribution shown in the account of the Irving Trust Company as executor, as of December 31, 1937.

To revert to the allegations of the complaint, it is there alleged that the collusive scheme and conspiracy charged in the complaint were not discovered, and could not, by the exercise of reasonable diligence, have been discovered by the United States or its officers until on or about January 6, 1938, and that on May 19, 1938, the United States by its officers, moved, in the United States District Court for the Southern District of New York, to vacate the original decree of December 30, 1929; that on January 30, 1939, the said motion was granted and an order...