1. Pursuant to the Trading with the Enemy Act, as amended by the
First War Powers Act of 1941, and Executive Order 9095, as amended,
the Alien Property Custodian issued an order vesting in himself
title to certain shares of stock in petitioner, a Delaware
corporation, and directing petitioner to cancel the certificates
for such stock outstanding on its books and to issue new
certificates to the Custodian. The order contained a finding that,
although, prior to August 31, 1939, the shares stood on the books
of petitioner in the name of a Swiss corporation, they were held
for the benefit of a German corporation, and constituted property
belonging to a national of Germany. It was contended that the
shares were pledged to certain Swiss banks as collateral for a
loan.
Held: the Custodian's order is valid, and must be
complied with. Pp.
332 U. S.
474-479.
Page 332 U. S. 470
2. Petitioner has no legal interest in the issue as to ownership
of its stock, and no standing to represent the interests of its
shareholders or pledgees of its stock. P.
332 U. S.
474.
3. Under the war power, which includes reasonable preparation
for war, the United States, acting under a statute, may summarily
reduce to possession in furtherance of the war effort any property
in this country of any alien, and the problems of compensation may
await the judicial process. Pp.
332 U. S.
474-477.
4. The vesting order of the Custodian was authorized by §
5(b)(1) of the Trading with the Enemy Act, as amended, and
Executive Order 9095, as amended. P.
332 U.S. 477.
(a) The fact that the stock certificates did not come into the
hands of the Custodian is immaterial. P.
332 U.S. 477.
(b) The power to require the issuance of new certificates was
incidental to the Custodian's power to vest in himself the property
of a foreign national, including stock ownership in an American
corporation. P.
332 U.S.
477.
5. Sections 5(b)(2) and 7(e) of the Trading with the Enemy Act,
as amended, protect petitioner from any liability to
bona
fide holders of its shares by reason of any infirmity in the
Custodian's vesting order or his direction that new certificates be
issued to him. Pp.
332 U.S.
477-478.
6. The Custodian's vesting order was not contrary to § 8(a) of
the Trading with the Enemy Act, which formerly exempted property
pledged to "any person not an enemy or ally of enemy;" because the
later enactment of § 5(b)(1) rendered § 8(a) inapplicable to the
property of friendly aliens. Pp.
332 U. S.
478-479.
7. The Constitution guarantees to friendly aliens the right to
just compensation for the requisitioning of their property by the
United States, and it must be assumed that the United States will
meet its obligations under the Constitution. Pp.
332 U. S.
479-480.
156 F.2d 793, affirmed.
A Bankruptcy Court instructed a corporation in reorganization
proceedings under Chapter X to comply with an order of the Alien
Property Custodian vesting in himself shares of the corporation's
stock outstanding in the name of a friendly alien and directing the
corporation to cancel the shares on its books and to issue new
certificates therefor to the Custodian. The Circuit Court of
Appeals affirmed. 156 F.2d 793. This Court denied
Page 332 U. S. 471
certiorari, 329 U.S. 730, but, on rehearing, granted certiorari
and substituted the Attorney General, successor to the Alien
Property Custodian, as the party respondent. 330 U.S. 852.
Affirmed, p.
332 U. S. 480.
MR. JUSTICE REED delivered the opinion of the Court.
The Alien Property Custodian, on November 17, 1942, executed
Vesting Order No. 370. This order was issued under the authority of
the Trading with the Enemy Act, 40 Stat. 411, as amended, and
Executive Order No. 9095, as amended, and, in terms, vested the
property therein described in the Alien Property Custodian in the
interest and for the benefit of the United States. The order found
the property to belong to a national of Germany. The property
covered by the order was two blocks of stock -- one common, one
preferred -- in the Silesian American Corporation, a Delaware
corporation, hereinafter called Silesian. The stock, prior to
August 31, 1939, stood in the stock book of Silesian in the name of
Non Ferrum Gesellschaft zur Finanzierung von Unternehmungen des
Bergbaues und der Industrie der Nichteisenmetalle, Zurich,
Switzerland, a Swiss corporation,
Page 332 U. S. 472
hereinafter referred to as the Non Ferrum Company. Non Ferrum,
it was determined by the Custodian's order, held the stock for the
benefit of Bergwerksgesellschaft Georg von Giesche's Erben, a
German corporation. The certificates, it is asserted, had been
deposited as security for loans with a group of banks, all of which
apparently were chartered by Switzerland and are hereinafter
referred to as the Swiss Banks. [
Footnote 1]
To carry out the purpose of his vesting order, the Custodian
directed Silesian to cancel on its books the outstanding Non Ferrum
certificates, above referred to, and to issue in lieu thereof new
certificates to the Custodian. This controversy revolves around the
objection of Silesian so to act because the Custodian did not have
physical possession of the pledged Non Ferrum certificates so as to
be able to surrender them for cancellation, as the corporation's
bylaws required. Silesian feared liability to the holders of the
Non Ferrum certificates for issuing other certificates in such
circumstances.
Silesian had been a debtor under Chapter X of the Bankruptcy Act
since July 30, 1941. It therefore asked the Bankruptcy Court for
instructions as to its compliance with the Custodian's direction.
The other petitioner here, Silesian Holding Company, a Delaware
corporation also, appeared, and throughout has remained as a party
to this litigation. It is the majority stockholder of Silesian, but
claims no different or other interest in the issue than Silesian.
For the purpose of this case, it may and will be treated as having
no more interest in the issue than Silesian has. The Swiss Banks
asked the Reorganization Court to give instructions to the Debtor
that no new shares be issued until the controversy between the
Swiss Banks and the Custodian could be "fully, firmly and finally
adjudicated."
Page 332 U. S. 473
This prayer was based on a verified answer to Silesian's request
for instruction, which answer alleged that the "Swiss Banks were
the owners of the "Non Ferrum" stock." The Swiss Banks notified
Silesian that any issue of new certificates representing the Non
Ferrum stock, with or without court direction, would be at
Silesian's risk. Affidavits supporting the objection of the Swiss
Banks to instructions to Silesian to issue the new certificates to
the Custodian were filed with the District Court. These affidavits
declared the Non Ferrum stock was pledged, prior to 1938, to groups
of Swiss banks. It is not clear whether they are the same
institutions that are named in the answer of the Swiss Banks to the
Debtor's request for instructions. For the purpose of this case, we
assume that the groups are identical.
The District Court instructed the debtor to issue new
certificates to the Alien Property Custodian. The court said:
"The vesting order of the Custodian found that the stock was
held for the benefit of an enemy. The statutory discharge from
liability, § 5(b) or § 7(e), [Trading with the Enemy Ac] protects
the debtor corporation and relieves it of doubt in the
premises."
The court added:
"Whatever may be the interests or rights of the Swiss banks,
they cannot be considered here. Hearsay statements, unsupported by
documents, allege that these banks are pledgees of the stock. These
statements create no issue for our consideration. The banks are
parties herein only to the extent that they have been recognized in
the reorganization proceeding as possible owners of a claimed
interest which they have never been called upon to prove. They are
not here because of any action taken against them
Page 332 U. S. 474
or any recognition given them by the Custodian or even by reason
of any established interest in the stock."
No appeal to the Circuit Court of Appeals was taken by the Swiss
Banks. They do not appear here as parties to this writ of
certiorari or otherwise. We therefore express no opinion as to the
effect of the order and decision of the District Court upon the
claims of the Swiss Banks as pledgees of the Non Ferrum stock.
See Silesian-American Corporation v. Markham, 156 F.2d
793, 795.
An appeal was taken to the Circuit Court of Appeals by Silesian.
That court affirmed the order of the Bankruptcy Court. We first
denied a petition for certiorari and then granted it so that this
case might be considered in relation to other issues, thereafter
presented here, in connection with the administration of the
Trading with the Enemy Act. 329 U.S. 730 and 330 U.S. 852;
Clark v. Uebersee Finanz-Korporation, 330 U.S. 813.
It was held by the Circuit Court of Appeals that Silesian had no
"standing vicariously" to assert the interests of its shareholders.
We agree. Silesian has no legal interest in the issue as to the
ownership of its stock. It follows that Silesian has no standing to
represent the interests of the pledgees of the Non Ferrum shares,
if that is the present position of those shares.
See Anderson
Nat. Bank v. Luckett, 321 U. S. 233,
321 U. S. 242.
This reduces petitioners' objection to the order directing the
issue of new certificates in favor of the Custodian for the Non
Ferrum stock to the claim that the sections of the Trading with the
Enemy Act under which the Custodian acted are invalid as applied to
Silesian in these circumstances. If the provisions do not authorize
the order and direction, Silesian, over its own objections, cannot
be compelled to obey.
The Custodian vested the stock in himself by virtue of the
Trading with the Enemy Act, as amended by the First
Page 332 U. S. 475
War Powers Act of 1941, including, of course, § 5(b)(1),
[
Footnote 2] and Executive
Order No. 9095, C.F.R. Cum.Supp. p. 1121, as amended, p. 1174. This
property was vested during war. There is no doubt but that, under
the war power, [
Footnote 3] as
heretofore interpreted by this Court, the United States, acting
under a statute, may vest in itself the property of a national of
an enemy nation. Unquestionably, to wage war successfully, the
United States may confiscate enemy property.
United States v.
Chemical Foundation, 272 U. S. 1,
272 U. S. 11. Nor
can there, we think, be any doubt that any property in this country
of any alien may be summarily reduced to possession by the United
States in furtherance
Page 332 U. S. 476
of the war effort. Every resource within the ambit of sovereign
power is subject to use for the national defense. This section was
amended during war to cover the taking of alien property. It is
limited to a war or a declared emergency period. While a natural
hesitancy exists against so interpreting the war power clause as to
expand its scope to cover incidents not intimately connected with
war, we think reasonable preparation for the storm of war is a
proper exercise of the war power. This seizure of alien property,
in a time of emergency, is of that character. We need not consider
whether the general welfare clause could be a source of
congressional power over alien property. [
Footnote 4] This taking may be done as a means of
avoiding the use of the property to draw earnings or wealth out of
this country to territory where it may more likely be used to
assist the enemy than if it remains in the hands of this
government. Or the commandeered property of a friendly alien may be
used to prosecute the war. The problems of compensation may await
the judicial process.
Central Union Trust Co. of
New York v.
Page 332 U. S. 477
Garvan, 254 U. S. 554,
254 U. S.
567-568. War brooks no delay. The Constitution imposes
none.
The section, 5(b)(1), and Executive Order under which the
Custodian acted authorized the vesting in him by his order of the
property of a foreign national. This description covered stock
ownership of a foreign national in Silesian. The fact that the
certificates did not come into the hands of the Custodian is
immaterial. They are evidences of the property right of the foreign
national in Silesian that is subject to be vested in the Custodian
by the Act.
See Great Northern R. Co. v. Sutherland,
273 U. S. 182.
Section 5(b)(1) specifically states, "and such designated agency or
person may perform any and all acts incident to the accomplishment
or furtherance of these purposes."
See note 2 above. Since the Custodian was authorized
to vest and to sell the property by § 5, we think that the power to
require the issue of new certificates was incidental to that
authority. As one purpose of § 5(b)(1) was to authorize the seizure
of the interests of foreign nationals in domestic corporations so
that such interest could be used or sold, such authority to
participate in management or to transfer the stock interests would
be frustrated if customary evidences of the ownership could not be
required from the corporation. The power of the Custodian to demand
the certificates is plain. The correlative duty to obey the order
equally so, if the effect of obedience does not do violence to
other valid requirements of the statute or make Silesian liable to
bona fide holders of the old stock.
Silesian, in specific terms, is protected from any liability to
bona fide holders such as Non Ferrum or the Swiss Banks by
reason of any infirmity in the Custodian's vesting order or his
direction to Silesian to issue new certificates for the Non Ferrum
stock. The applicable language of § 7(e) of the Trading with the
Enemy Act, 40
Page 332 U. S. 478
Stat. 418, and § 5(b)(2), as amended, 55 Stat. 839, 840, are set
out in the margin. [
Footnote 5]
But Silesian argues that protection cannot follow from an order
contrary to the Trading with the Enemy Act. The order to issue the
new certificates is said to be unauthorized because it allows the
property of friendly alien pledgees, the Swiss Banks, to be taken
contrary to § 8(a). [
Footnote
6] Section 8(a) is said to be a limitation on the Custodian's
power to seize property pledged to "any person not an enemy or ally
of enemy." It is suggested that, if § 7(e) or § 5(b)(2) is
interpreted to require Silesian to carry out the Custodian's
Page 332 U. S. 479
direction, even though this seizure is contrary to § 8(a), a way
has been found to "coerce an interested party [Silesian] into
compliance with his [the Custodian's] unlawful actions." The answer
to this contention is made by the Circuit Court of Appeals. It
makes unnecessary any discussion of the protection afforded
Silesian by § 7(e) and § 5(b)(2) from the claims of a pledge of
stock exempted by statute from seizure. 156 F.2d at 797. When §
5(b)(1) was enacted as an amendment in the First War Powers Act of
1941, it authorized the taking of any property or interest therein
of any foreign national. This broadening of the scope of the
Custodian's power to vest so as to include interests of friendly
aliens in property includes the power to vest the interest which
friendly aliens have from pledges. As the Circuit Court of Appeals
said, p. 797:
"Any other interpretation of the section would make the pledges
of friendly aliens a wholly irrational exception to the general
purpose to subject all alien interests to seizure."
Therefore, as we hold that § 5(b)(1) rendered § 8(a)
inapplicable to the property of friendly aliens, the order of the
Custodian was valid and Silesian's objection disappears.
Finally, there is the argument that Silesian cannot be compelled
to issue the new certificates because the friendly aliens who claim
interests in the Non Ferrum stock may not succeed in recovering the
just compensation for the taking.
See Russian Volunteer Fleet
v. United States, 282 U. S. 481,
282 U. S. 489.
[
Footnote 7] The Constitution
guarantees to friendly aliens the right to just compensation
Page 332 U. S. 480
for the requisitioning of their property by the United States.
Russian Volunteer Fleet v. United States, supra. We must
assume that the United States will meet its obligations under the
Constitution. Consequently, friendly aliens will be compensated for
any property taken, and Silesian is protected by the exculpatory
clauses of the Act from any claim from its alien stockholders.
Judgment affirmed.
THE CHIEF JUSTICE took no part in the consideration or decision
of this case.
[
Footnote 1]
They are Union Bank of Switzerland, LaRoche & Company Banque
Cantonale de Berne, and Aktiengesellschaft Leu & Company.
[
Footnote 2]
Trading with the Enemy Act, 40 Stat. 411, as amended by the
First War Powers Act of 1941, 55 Stat. 839, § 5(b)(1):
"During the time of war or during any other period of national
emergency declared by the President, the President may, through any
agency that he may designate, or otherwise, and under such rules
and regulations as he may prescribe, by means of instructions,
licenses, or otherwise. . ."
"
* * * *"
" (B) investigate, regulate, direct and compel, nullify, void,
prevent or prohibit, any acquisition holding, withholding, use,
transfer, withdrawal, transportation, importation or exportation
of, or dealing in, or exercising any right, power, or privilege
with respect to, or transactions involving, any property in which
any foreign country or a national thereof has any interest,"
"by any person, or with respect to any property, subject to the
jurisdiction of the United States, and any property or interest of
any foreign country or national thereof shall vest, when, as, and
upon the terms directed by the President, in such agency or person
as may be designated from time to time by the President, and upon
such terms and conditions as the President may prescribe such
interest or property shall be held, used, administered, liquidated,
sold, or otherwise dealt with in the interest of and for the
benefit of the United States, and such designated agency or person
may perform any and all acts incident to the accomplishment or
furtherance of these purposes. . . ."
[
Footnote 3]
Art. 1, § 8, cl. 11.
[
Footnote 4]
Compare with the statement below:
"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
255 U. S.
242;
United States v. Chemical Foundation,
Inc., 272 U. S. 1,
272 U. S.
11. 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."
156 F.2d 793, 796.
[
Footnote 5]
40 Stat. 418, § 7(e):
"No person shall be held liable in any court for or in respect
to anything done or omitted in pursuance of any order, rule, or
regulation made by the President under the authority of this
Act."
55 Stat. 840, § 5(b)(2):
"Any payment, conveyance, transfer, assignment, or delivery of
property or interest therein, made to or for the account of the
United States, or as otherwise directed, pursuant to this
subdivision or any rule, regulation, instruction, or direction
issued hereunder shall to the extent thereof be a full acquittance
and discharge for all purposes of the obligation of the person
making the same, and no person shall be held liable in any court
for or in respect to anything done or omitted in good faith in
connection with the administration of, or in pursuance of and in
reliance on, this subdivision, or any rule, regulation,
instruction, or direction issued hereunder."
[
Footnote 6]
40 Stat. 418, 419, § 8(a):
"That any person not an enemy or ally of enemy holding a lawful
mortgage, pledge, or lien, or other right in the nature of security
in property of an enemy or ally of enemy which, by law or by the
terms of the instrument creating such mortgage, pledge, or lien, or
right, may be disposed of on notice or presentation or demand . . .
may continue to hold said property, and, after default, may dispose
of the property. . . .
Provided further, That if, on any
such disposition of property, a surplus shall remain after the
satisfaction of the mortgage, pledge, lien, or other right in the
nature of security, notice of that fact shall be given to the
President pursuant to such rules and regulations as he may
prescribe, and such surplus shall be held subject to his further
order."
[
Footnote 7]
The Circuit Court of Appeals said:
"Thus, it can be argued with much force that, unless some
provision can be found by which he may secure compensation, § 5(b)
is unconstitutional; and, if so, it would at best, be doubtful
whether the protection given by subsection (2) would be valid."
156 F.2d 793, 797.