Source: https://supreme.justia.com/cases/federal/us/255/239/
Timestamp: 2019-04-24 16:39:09+00:00

Document:
1. The Trading With the Enemy Act, originally and as amended, is strictly a war measure, and finds its sanction in the provision empowering Congress "to declare war, grant letters of marque and reprisal, and make rules concerning captures on land and water." Const. Art. I, § 8, cl. 11. P. 255 U. S. 241.
2. Under § 7c of the act, as qualified by § 5, the power vested in the President to determine enemy ownership, precedent to a seizure of property, may be delegated by him to the Alien Property Custodian, whose determination then becomes in effect the act of the President. P. 255 U. S. 244.
3. The provision made for ex parte executive seizure, without prior judicial determination of enemy ownership, does not violate the rights of the owner, if a citizen, under the due process clause of the Fifth Amendment, since ample provision is also made whereby any claimant who is neither an enemy nor an ally of an enemy may establish his right in a court of equity and compel a return of the property if wrongly sequestered. P. 255 U. S. 245.
4. A transfer of shares upon the books of the corporation to the name of the Custodian is a proper incident to their effective seizure by him. P. 255 U. S. 246.
5. A contract between a German corporation and a New York corporation, made in anticipation of this country's entry into the World War, whereby certain corporate shares in another domestic corporation, owned by the German corporation, were in purport sold to the New York corporation and were transferred to the latter on the books of the third company not as a genuine business transaction but as a mere cover to avoid inconveniences of a state of war and with no intent to change the beneficial ownership, held not to have passed any interest entitling the New York corporation, or a stockholder asserting its rights, to demand release of such shares from seizure by the Alien Property Custodian. Pp. 255 U. S. 246-251.
6. The provisions of the Treaty with Prussia of July 11, 1799, Arts. 23, 24, 8 Stat. 174, granting right to the merchant of either country "residing in the other" when war arise, held inapplicable. P. 255 U. S. 251.
7. Objection to a proposed sale by the Alien Property Custodian cannot be heard from one who has no interest in the property. Id.
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 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.
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.
or as since amended, March 28, 1918, c. 28, 40 Stat. 459, 460, c. 28; November 4, 1918, c. 201, 40 Stat. 1020; July 11, 1919 (41 Stat. 35, c. 6), and June 5, 1920, c. 241, 41 Stat. 977, is strictly a war measure, and finds its sanction in the constitutional provision, Art. I, § 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, 12 U. S. 126; Miller v. United States, 11 Wall. 268, 78 U. S. 305.
"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."
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."
"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 § 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 § 7c before quoted.
not consider, for they obviously are qualified and explained by § 5, which very plainly enables the President to exercise his power under § 7c "through such officer or officers as he may direct." By the orders already noticed, the President directed that this power be exercised through the Alien Property Custodian. It therefore is as if the words relied on had been "which the President, acting through the Alien Property Custodian, shall determine after investigation" is enemy-owned, etc. In short, a personal determination by the President is not required; he may act through the Custodian, and a determination by the latter is in effect the act of the President. Central Union Trust Co. v. Garvan, 254 U. S. 554; The Confiscation Cases, 20 Wall. 92, 87 U. S. 109.
The plaintiff further objects that the shares, although claimed by and standing in the name of the New York corporation, which concededly was neither an enemy nor an ally of an enemy, were seized and transferred to the name of the Alien Property Custodian in virtue of a determination by an executive officer in an ex parte administrative proceeding that they belonged to an alien enemy -- the gist of the objection being that the shares could not be taken from the New York corporation consistently with due process of law without first according it a hearing on its claim in a court of justice. The objection rests on erroneous assumptions, and is not tenable.
he acts, but it does not make his action final. On the contrary, it distinctly reserves to any claimant who is neither an enemy nor an ally of an enemy a right to assert and establish his claim by a suit in equity unembarrassed by the precedent executive determination. Not only so, but, pending the suit, which the claimant may bring so promptly after the seizure as he chooses, the property is to be retained by the Custodian to abide the result and, if the claimant prevails, is to be forthwith returned to him. Thus, there is provision for the return of property mistakenly sequestered, and we have no hesitation in pronouncing it adequate, for it enables the claimant, as of right, to obtain a full hearing on his claim in a court having power to enforce it if found meritorious.
That the shares were transferred to the Custodian's name does not affect the question, for, considering the nature of the property, that was but an incident of an effective seizure and, if a return of the shares were ordered, a retransfer would follow as of course.
sons, were engaged in business in New York as copartners under the name of Stoehr & Sons. The father and one son were German subjects residing in Germany; one son, Hans E. Stoehr, was a German subject residing in the United States, and the remaining son, Max W. Stoehr, was a naturalized citizen of the United States residing therein. All were shareholders in the German corporation, and the father and son in Germany were among its chief officers. All were directors of the Botany Worsted Mills, and Hans E. Stoehr and Max W. Stoehr were directing and controlling its affairs, one being its treasurer and the other its secretary. It was a manufacturing concern with large holdings, had a well established and extensive business, had been paying large dividends, and gave promise of continuing to do so. The German corporation acquired the 14,900 shares in that company long prior to the war, and in 1915, after the war became flagrant in Europe, transferred them to Hans E. Stoehr and Max W. Stoehr, be be held in trust for it as the beneficial owner. Stoehr & Sons, the copartnership, also had 5,690 shares in that company, and these, with the 14,900, constituted a majority of its stock.
Diplomatic relations between the United States and Germany were severed February 3, 1917, and, as was commonly understood, war between them was then imminent. The Stoehrs took that view and began to adjust their affairs accordingly. They caused the New York corporation to be organized, and on February 19, 1917, transferred to it the entire assets and business of their copartnership, taking in exchange all of its capital stock and putting the same in a five-year voting trust as a means of protecting and preventing a severance of their interests. On the following day, February 20, 1917, the contract relating to the 14,900 shares in the Botany Worsted Mills was made, and the shares were immediately transferred on its books to the name of the New York corporation.
In that transaction, Hans E. Stoehr acted for the German corporation and the directors of the New York corporation for it, the directors being Hans E. Stoehr, Max W. Stoehr, George G. Roehlig, and Alfred de Liagre, the last two being relatives of the Stoehrs. The attorney who had advised and assisted them in transferring the copartnership assets and business also advised and assisted them in this. The shares were worth approximately $5,000,000, and yet the initial payment was only $5,000, and even that was paid by mere book entries. The full stipulated price was the book value of the shares, with goodwill and other intangible assets eliminated, and was payable in five future annual installments. The stock certificates, transferred as just stated, were left in the custody of the German corporation as collateral security. If payment was not made when due, nor within 60 days after demand, the shares were to be retransferred, the $5,000 was to be retained by the German corporation, and neither corporation was to have "any further claim against the other" by reason of the contract. Possibly the stipulated price was less than the actual value; but, however this may have been, the assets and situation of the New York corporation were such that it reasonably could not have been expected to make the required payments.
After the contract, the dividends accruing on the shares were not paid to the New York corporation, but were credited to it in a "special" account on the books of the Botany Worsted Mills, this being directed by Hans E. Stoehr, president of the former and treasurer of the latter.
being dissolved by reason of the alien enemy character of Eduard Stoehr, the father, and Geo. Stoehr, the brother, the results of such dissolution being, of course, obviously unfortunate and conceivably disastrous"
"Regarding the contract for the purchase of said 14,900 shares of Stoehr & Sons, Incorporated, from Stoehr & Co., of Leipzig, Germany, it has been fully explained that the control of Botany might be imperiled by a state of war, because the voting right on stock of alien enemies or in which alien enemies had the beneficial interests (as was the case with said 14,900 shares) was doubtful under the decisions of the courts, and, if deprived of the voting right, the control of Botany might be lost. This contract was made with reference to the control of Botany as between its stockholders, and had, of course, no reference to the status of such control so far as the alien Property Custodian is concerned. Such status is not affected whether such shares are in Stoehr & Co., the Leipzig corporation, or in Stoehr & Sons, Incorporated, the New York corporation. . . . While Botany is managed in this country, considerably more than a majority of its stock is controlled by alien enemy interests."
ceased to be an officer of the corporation did he manifest any opposition to the seizure. His only explanation of his silence while he remained a director is that he feared he would lose that position if he took any other course.
The district court, after reviewing the proofs at length, concluded that the contract was not prompted by commercial motives, nor based on an estimate of mutual advantages, and was not intended as a genuine business transaction, but was made to avoid inconveniences which otherwise might ensue from a state of war, and that the parties intended to leave the beneficial ownership in the German corporation, and not to pass it to the New York corporation. We reach the same conclusion. On no other theory can the acts of those who were concerned be explained, or their declarations reconciled. The mere recitation of the facts makes this so plain that we refrain from any special discussion of them.
The treaty provisions relied on (Articles 23 and 24, 8 Stat. 174) relate only to the rights of merchants of either country "residing in the other" when war arises, and therefore are without present application.
Of the objections specially directed against the proposed sale, it is enough to observe that, as the New York corporation does not own or have any interest in the shares, it is not in a position to criticize or attack the sale, and, of course, a stockholder suing in its right is in no better position.

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