1. In a summary proceeding under § 17 of the Trading with the
Enemy Act to enforce an order of the Alien Property Custodian to
turn over to him a fund belonging to an enemy alien, the Custodian
is not entitled to recover interest (at 6% or any other rate) from
the date of the turnover order where such interest is not a part
of, or an increment on, the fund owing to the enemy alien. Pp.
338 U. S.
246-249.
(a) Section 16 of the Act prescribes fines, sentences, and
forfeitures as sanctions for willful violations of vesting orders
and turnover directives, and nowhere in the Act is there provision
for the allowance of interest charges in connection with these
summary proceedings. Pp.
338 U. S.
247-248.
(b) In such a proceeding, the Government is not in the position
of a creditor collecting a debt owing to itself, and it is not
entitled to interest as upon a contractual obligation or one
arising out of customs duties or taxes. P.
338 U. S.
248.
(c) There is not involved here any issue regarding a claim for
interest constituting a part of, or an increment on, the fund owing
to the enemy alien. Pp.
338 U. S.
248-249.
2. Questions which would have been presented if the answer in
the summary proceeding under § 17 had contained a denial of the
alleged debt, an unequivocal plea of setoff, or a claim of a lien
upon the enemy creditor's interest in the debt or in its proceeds
need not here be considered, since the answer did not present those
issues. Pp.
338 U. S.
249-250.
169 F.2d 932, affirmed in part.
Page 338 U. S. 242
In a summary proceeding under § 17 of the Trading with the Enemy
Act, for enforcement of a turnover directive of the Alien Property
Custodian, the District Court directed the bank to pay to the
Custodian the sum of $25,581.49, plus interest at 6% from the date
of the turnover directive. The Court of Appeals disallowed the
interest, but otherwise affirmed. 169 F.2d 932. Petitions for
certiorari by both parties were at first denied by this Court, 335
U.S. 910, but subsequently granted, 337 U.S. 953.
No. 11
affirmed; No. 16 vacated, p.
338 U. S. 251.
MR. JUSTICE BURTON delivered the opinion of the Court.
Numbers 11 and 15 are cross-appeals from
Clark v.
Manufacturers Trust Co., 169 F.2d 932. [
Footnote 1] Certiorari was granted in No. 11, 337
U.S. 953, on petition of the Custodian, [
Footnote 2] to resolve a conflict between the judgment
below and that in
Clark v. E. J. Lavino & Co., 175
F.2d 897.
Page 338 U. S. 243
The conflict is confined to the Custodian's claim to the
allowance of interest, in his favor, in a summary proceeding under
§ 17 of the Trading with the Enemy Act. [
Footnote 3] He claims interest from the date that his
Turnover Directive [
Footnote 4]
was served upon the Manufacturers Trust Company, here referred to
as the bank, and computes such interest upon the sum which he
ordered turned over. For the reasons hereinafter stated, we agree
with the judgment below in its denial of interest. We granted
certiorari also on the cross-appeal of the bank in No. 15. 337 U.S.
953. This was to enable us to reexamine the pleadings and, if they
were found to permit it, to consider the bank's claim that the
District Court lacked authority to order it to turn over to the
Custodian the principal sum in question, in the face of the bank's
denial of its indebtedness to the enemy creditor for that sum, its
claim of a setoff in excess of the alleged debt, and its claim to a
lien upon the proceeds of the debt. We find that the record does
not permit us to reach that issue.
February 1, 1946, the Custodian issued his Vesting Order No.
5791, 11 Fed.Reg. 3005, under authority of
Page 338 U. S. 244
§ 5(b) of the Trading with the Enemy Act, [
Footnote 5] vesting himself with the following
described "property":
"That certain debt or other obligation owing to Deutsche
Reichsbank, by Manufacturers Trust Company, 55 Broad Street, New
York, New York, arising out of a dollar account, entitled
Reichsbank Direktorium Divisen Abteilung, and any and all rights to
demand, enforce and collect the same. . . ."
January 30, 1947, the Custodian served on the bank his Turnover
Directive based upon his Vesting Order and thereby directed that
the sum of $25,581.49,
"together with all accumulations to and increments thereon,
shall forthwith be turned over to the undersigned [the Custodian]
to be held, used, administered, liquidated, sold or otherwise dealt
with in the interest of and for the benefit of the United
States."
October 29, 1947, the Custodian filed in the United States
District Court for the Southern District of New York his petition
against the bank seeking summary enforcement of his order under §
17 of the Act,
supra. November 13, 1947, the bank
answered. [
Footnote 6]
Page 338 U. S. 245
December 12, 1947, the District Court, without opinion, directed
the bank to pay to the Custodian $25,581.49,
plus interest at
6% per annum from January 30, 1947. The Court of Appeals for
the Second Circuit struck out the interest, but otherwise affirmed
the judgment. One judge said he would have preferred to limit that
court's holding to the point that the answer did not allege a
sufficiently unequivocal claim to a setoff to raise that defense.
Another dissented from the denial of interest. Petitions for
certiorari were denied to both parties, January 17, 1949. 335 U.S.
910.
June 16, 1949, the Custodian asked leave to file a petition for
rehearing and for a writ of certiorari on the ground that, on June
1, 1949, the Court of Appeals for the Third Circuit had decided
Clark v. E. J. Lavino & Co., supra, in which it had
expressly allowed interest to the Custodian, under circumstances
largely comparable to those in the case below. The bank asked leave
to present its contentions
Page 338 U. S. 246
should the Custodian's petition for certiorari be granted. All
applications were granted. 337 U.S. 953.
I
The Trading with the Enemy Act is a war measure. [
Footnote 7] It creates powerful and swift
executive and summary procedures, particularly for the seizure of
the property of enemies by legal process as an effective
alternative to seizure by military force. The Act expressly
provides for the seizure of enemy-held claims to money owed on
debts.
Kohn v. Jacob & Josef Kohn, Inc., 264 F. 253.
Special proceedings are provided to try the merits of claims to
property seized in such summary possessory procedures. [
Footnote 8] The present action is a
summary
Page 338 U. S. 247
possessory proceeding under § 17. [
Footnote 9] Section 16, which has accompanied § 17 in the
Act since 1917, prescribes fines, sentences, and forfeitures as
special sanctions to punish willful violations of vesting orders or
turnover directives as follows:
"That whoever shall willfully violate any of the provisions of
this Act or of any license, rule, or regulation issued thereunder,
and whoever shall willfully violate, neglect, or refuse to comply
with any order of the President issued in compliance with the
provisions of this Act shall, upon conviction, be fined not more
than $10,000, or, if a natural person, imprisoned for not more than
ten years, of both, and the officer, director, or agent of any
corporation who knowingly participates in such violation shall be
punished by a like fine, imprisonment, or both, and any property,
funds, securities, papers, or other articles or documents, . . .
concerned in such violation shall be forfeited to the United
States."
40 Stat. 425, 50 U.S.C. App. § 16. [
Footnote 10]
Page 338 U. S. 248
The Act makes no mention of interest charges in connection with
the enforcement of these summary procedures. We recognize that, in
the absence of express statutory provision for it, interest
sometimes has been allowed in favor of the Government under other
statutes when the Government's position has been primarily that of
a creditor collecting from a debtor. [
Footnote 11]
See Rodgers v. United States,
332 U. S. 371,
332 U. S. 373,
in which the rule was stated and interest disallowed. In the
present case, however, we are not dealing with interest accruing to
the Government upon contractual indebtedness or upon indebtedness
such as that arising out of customs duties or taxes. We have here
quite a different matter -- the violation of a summary order of the
Alien Property Custodian to turn over to him the physical
possession of certain funds as a protective war measure. The
Turnover Directive in the instant case is, in its essence, the same
kind of an order as would have been issued to compel the delivery
to the Custodian of the physical possession of a $25,000 bond owned
by the Deutsche Reichsbank, but held by the Manufacturers Trust
Company in the latter's safe deposit vaults. Statutory fines,
sentences, and forfeitures are prescribed for willful violation of
such an order, and, in the case of the bond, it is obvious that
there would be no basis for the addition of an interest charge,
computed at a statutory or judicially determined rate on the face
or estimated value of the bond and running merely from the date of
the Turnover Directive. Similarly, we find no basis for adding such
an interest charge in the instant case.
Page 338 U. S. 249
No claim of the Custodian for any interest accruing under the
terms of the agreement of deposit is before us. The Custodian, in
his Turnover Directive and in his petition, called for the delivery
to him of the $25,581.49 owing to Deutsche Reichsbank on the date
of the Vesting Order, February 1, 1946, together with all
accumulations and increments thereon since that date. He made no
showing of a contractual basis for any additions to such principal
sum, and, accordingly, judgment was rendered for the delivery to
him of precisely $25,581.49, and no claim is made here that such
sum is not the correct total amount of the indebtedness. The
District Court, however, also ordered the bank to turn over to the
Custodian 6% interest on $25,581.49 from January 30, 1947. This
additional item reflected no terms of the deposit agreement.
Whatever those terms may have been, they had not changed since
February 1, 1946, so that any possible basis for the 6% interest
from January 30, 1947, must be sought in the Trading with the Enemy
Act. We find no authority in that Act for a 6% rate, or for any
other rate of coercive interest, to be added as an incident to a
summary order for the transfer of possession of funds. Accordingly,
in No. 11, we affirm the judgment of the Court of Appeals, which
omitted the interest.
II
In No. 15, the parties have discussed several questions which
would have been presented if the answer had contained a denial of
the alleged debt, an unequivocal plea of setoff, or a claim of a
lien upon the Deutsche Reichsbank's interest in the debt or in its
proceeds. The answer, however, did not present those issues, and we
do not consider them. When read as a whole, the answer did not deny
the existence of the credit balance of $25,581.49, which the
Custodian claimed was on deposit and which was the subject of the
Custodian's Vesting Order. Nor
Page 338 U. S. 250
did it unequivocally assert a setoff. Instead, the answering
bank alleged, on information and belief, that an offsetting
indebtedness of the Deutsche Reichsbank to it arose from the fact
that the Deutsche Reichsbank was an instrumentality, and part of,
the German Government, that the German Government had guaranteed to
the answering bank the payment to it of the debts of various German
banks, and that, on the date of the Vesting Order, the indebtedness
of said German banks to the answering bank was in excess of
$25,581.49. Those allegations did not state that the Deutsche
Reichsbank was such an instrumentality and such a part of the
German Government as would make the Reichsbank automatically the
guarantor of the debts of other German banks to the answering bank.
[
Footnote 12] The answer did
not even allege the status of the guaranteed debts to be such as to
entitle the answering bank to resort to the alleged guaranty of
their payment by the Deutsche Reichsbank. [
Footnote 13] The bank's claim to a lien upon the
deposit depended, likewise, upon the inadequately alleged
indebtedness of the Deutsche Reichsbank to it.
Page 338 U. S. 251
For the foregoing reasons, the judgment in No. 11 is affirmed,
and the judgment in No. 15 is vacated so as to permit such
amendments of the pleadings or further proceedings as shall be
consistent with this opinion.
It is so ordered.
MR. JUSTICE DOUGLAS and MR. JUSTICE CLARK took no part in the
consideration or decision of either of these cases.
* Together with No. 15,
Manufacturers Trust Co. v. McGrath,
Attorney General, as Successor to the Alien Property
Custodian, also on certiorari to the United States Court of
Appeals for the Second Circuit.
[
Footnote 1]
J. Howard McGrath was substituted for Tom C. Clark, as Attorney
General, 338 U.S. 807.
[
Footnote 2]
The term "Custodian" is used to refer either to the Alien
Property Custodian or to the Attorney General, who succeeded to the
powers and duties of the Alien Property Custodian under Executive
Order No. 9788, effective October 15, 1946, 1 C.F.R.1946 Supp.
169.
[
Footnote 3]
"SEC. 17. That the district courts of the United States are
hereby given jurisdiction to make and enter all such rules us to
notice and otherwise, and all such orders and decrees, and to issue
such process as may be necessary and proper in the premises to
enforce the provisions of this Act, with a right of appeal from the
final order or decree of such court as provided in sections one
hundred and twenty-eight and two hundred and thirty-eight of the
Act of March third, nineteen hundred and eleven, entitled 'An Act
to codify, revise, and amend the laws relating to the
judiciary.'"
40 Stat. 425, 50 U.S.C. App. § 17.
[
Footnote 4]
Issued under § 7(c), 40 Stat. 418, as amended, 40 Stat. 1020, 50
U.S.C. App. § 7(c), and Executive Order No. 9193, 1 C.F.R.Cum.Supp.
1174, as amended by Executive Order No. 9567, 1 C.F.R.1945 Supp.
77.
[
Footnote 5]
§ 5(b), 40 Stat. 415, as amended, 55 Stat. 839, 50 U.S.C. App. §
5(b), and Executive Order No. 9095, 1 C.F.R.Cum.Supp. 1121.
[
Footnote 6]
The following parts of the answer are especially material to our
decision in No. 15:
"7. Furthermore, by a vesting order, the Alien Property
Custodian can only vest property or a debt which was in existence
at the time of the issuance of the Vesting Order. Manufacturers
Trust Company did not hold any property for or on behalf of the
Deutsche Reichsbank. The relationship between Manufacturers Trust
Company, as a depository, and the Deutsche Reichsbank, as a
depositor of Manufacturers Trust Company, is a debtor and creditor
relationship. The existence of a debt from Manufacturers Trust
Company to the Deutsche Reichsbank cannot be predicated upon the
status of a particular account. Manufacturers Trust Company cannot
be a debtor of the Deutsche Reichsbank unless the total of their
mutual credits exceeds the total of their mutual debits. At the
time of the issuance of the Vesting Order No. 5791, Deutsche
Reichsbank's indebtedness to Manufacturers Trust Company was in
excess of $25,581.49, and therefore there was no debt owing from
Manufacturers Trust Company to Deutsche Reichsbank arising out of
the Reichsbank Direktorium Divisen Ab[t]eilung account.
The
indebtedness of the Deutsche Reichsbank arose from the fact that
Deutsche Reichsbank was, upon information and belief, an
instrumentality and part of the German Government. The German
Government guaranteed to Manufacturers Trust Company the payment of
debts of various German Banks to Manufacturers Trust Company. On
June 1st, 1940 and June 14th, 1941, the indebtedness of the said
banks to Manufacturers Trust Company was in excess of
$25,581.49."
"8. In addition to the foregoing, Manufacturers Trust Company is
advised by counsel that a lien of a bank on a depositor's balance
for the amount of depositor's indebtedness to the bank is well
recognized by law. Manufacturers Trust Company is further advised
by counsel that Section 8 of the Trading with the Enemy Act
recognizes the lien of any person who is not an enemy or an ally of
an enemy and the lienor's right to realize thereon in satisfaction
of the lienor's claims."
(Emphasis supplied.)
[
Footnote 7]
"The Trading with the Enemy Act, whether taken as originally
enacted, October 6, 1917, . . . or as since amended, March 28,
1918, . . . November 4, 1918, . . . July 11, 1919, . . . June 5,
1920, . . . 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.' . . ."
"It is with parts of the act which relate to captures on land
that we now are concerned. . . . [After discussing particularly §§
7(c), 9, and 12]: "
"That Congress, in time of war, may authorize and provide for
the seizure and sequestration through executive channels of
property believed to be enemy-owned, if adequate provision be made
for a return in case of mistake, is not debatable. . . . There is
no warrant for saying that the enemy ownership must be determined
judicially before the property can be seized, and the practice has
been the other way. The present act commits the determination of
that question to the President, or the representative through whom
he acts, but it does not make his action final."
Stoehr v. Wallace, 255 U. S. 239,
255 U. S.
241-242,
255 U. S.
245-246.
See also Central Union Trust Co. v.
Garvan, 254 U. S. 554,
254 U. S. 568;
Rubin, "Inviolability" of Enemy Private Property, 11 Law and
Contemp. Prob. 166 (1945).
[
Footnote 8]
Section 9(a) of the Act, 42 Stat. 1511, 50 U.S.C. App. § 9(a),
provides for the administrative consideration and allowance of
claims to property transferred to the Custodian. A claimant also
may sue in a District Court for an adjudication of the validity of
his claim. Section 32, 60 Stat. 50, as amended, 60 Stat. 930, 50
U.S.C. App. § 32, authorizes the administrative recognition of
claims to property in the possession of the Custodian, and § 34, 60
Stat. 925, 50 U.S.C. App. § 34, authorizes a procedure for the
allowance, and payment to claimants, of debts owed by the person
whose property has been seized by the Custodian.
See also
Central Union Trust Co. v. Garvan, 254 U.
S. 554,
254 U. S. 568;
Garvan v. $20,000 Bonds, 265 F. 477;
Simon v.
Miller, 298 F. 520, 524;
Kahn v. Garvan, 263 F. 909,
916.
[
Footnote 9]
Petition filed October 29, 1947. Order to show cause issued that
day. Answer filed November 13. Case heard and decided that day.
Judgment entered December 12.
[
Footnote 10]
See also penalties for willful violation added to § 5,
48 Stat. 1, 50 U.S.C. App. § 5(b)(3). The Custodian may make the
required Presidential determinations under § 7(c).
"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."
Stoehr v. Wallace, 255 U. S. 239,
255 U. S. 245,
and see Central Union Trust Co. of New York v. Garvan,
254 U. S. 554,
254 U. S.
567.
[
Footnote 11]
E.g., Royal Indemnity Co. v. United States,
313 U. S. 289,
313 U. S. 296;
Billings v. United States, 232 U.
S. 261;
see also Board of Commissioners v. United
States, 308 U. S. 343,
308 U. S. 350,
308 U. S.
352.
[
Footnote 12]
For a description of the contemporary monetary and banking
system of Germany and of the part played in it by the Deutsche
Reichsbank,
see Military Government Handbook, Germany,
Section 5: Money and Banking. Army Service Forces Manual, M356-5
Revised (March 1945), pp. 4, 66-73. For examples of differences
between the liabilities of foreign public or semi-public
corporations and those of the foreign governments to which they are
related,
see United States v. Deutsches Kalisyndikat
Gesellschaft, 31 F.2d
199, and
Coale v. Societe Co-op., 21 F.2d 180.
[
Footnote 13]
5 Michie, Banks and Banking, Perm. Ed., §§ 126-128, and cases
cited; 7 Zollmann, Banks and Banking, Perm. Ed., §§ 4392, 4563,
4590.
See also restrictions on assertion, without a
federal license, of any right of setoff which did not exist before
June 14, 1941. Executive Order No. 8785, §§ 1A and 1E, 1
C.F.R.Cum.Supp. 948,
and see Propper v. Clark,
337 U. S. 472.