After "transfers" of assets of German nationals had been
forbidden by Executive Orders issued pursuant to the Trading with
the Enemy Act, petitioners, American holders of claims against a
German bank, levied attachments on accounts of the debtor in a New
York bank and prosecuted the claims to judgments in New York state
courts. The Alien Property Custodian served on the New York bank
Vesting Orders and also a "turnover directive" requiring that all
funds in the accounts be turned over to him "to be held,
administered, and accounted for as provided by law." In an action
in the Federal District Court, the Custodian sought a declaratory
judgment that he is "entitled to possession" of the funds in the
accounts.
Held: the Custodian is entitled to possession of the
funds and to administer them.
Zittman v. McGrath, ante, p.
341 U. S. 446,
distinguished. Pp. 472-
341 U. S.
474.
182 F.2d 349 affirmed.
In declaratory judgment actions against petitioners by the Alien
Property Custodian, the District Court granted the relief sought.
82 F. Supp. 740. The Court of Appeals affirmed. 182 F.2d 349. This
Court granted certiorari. 340 U.S. 882.
Affirmed, p.
341 U. S.
474.
Page 341 U. S. 472
MR. JUSTICE JACKSON delivered the opinion of the Court.
These are companion cases to Nos. 298 and 314,
ante, p.
341 U. S. 446.
Here, the petitioners attached the accounts of the Deutsche
Reichsbank with the Federal Reserve Bank of New York. The
attachments were levied at the same time as those levied on the
Chase Bank accounts, and were also followed by state court actions
against the Reichsbank, culminating in default judgments that have
not been satisfied because of the Federal Government's freezing
program. The Alien Property Custodian served on the Federal Reserve
Bank Vesting Orders similar to those served on the Chase Bank in
Nos. 298 and 314. But he also served on the Federal Reserve Bank a
"turnover directive" describing the specific property which he
required to be "turned over to the undersigned to be held,
administered and accounted for as provided by law," and calling
attention to the protection which §5(b) of the Trading With the
Enemy Act, gives for compliance. No such directive was served on
the Chase Bank in the companion cases. The Federal Reserve Bank
refused to release to him the portion of the accounts that had been
subjected to the attachment levies. The Custodian has been
sustained by the courts below, as he was in Nos. 298 and 314, on
the basis of
Propper v. Clark, 337 U.
S. 472. [
Footnote
1]
Page 341 U. S. 473
All that we have said in subdivisions numbered I, II, and III in
Nos. 298 and 314 respecting the nature of the rights acquired under
New York law by an attaching creditor, and the position occupied by
those rights consistent with the freezing program, is equally
applicable to the attachments here involved. The important
distinction between these cases and their companions is in the
Vesting Orders issued by the Custodian and the nature of the
judgment he has sought in each. The only order issued to the Chase
Bank was a "right, title, and interest" Vesting Order, which, as we
understand the Custodian to concede, put him in the place of the
German banks and left open to judicial determination whether any
valid interests as against anyone were created by the attachments.
In the litigation involving the Chase Bank, the Custodian sought a
declaratory judgment that the freezing program precluded attaching
creditors from obtaining any interest in the blocked property good
as against the debtors.
In these cases, the Custodian pursued a different course, not
only in that he served on the Federal Reserve Bank a "turnover
directive," but also in that the relief asked in this case omits
any request for a declaration that the attachments are invalid. He
asks a decree only that the Custodian is "entitled to possession"
of the accounts in their entirety. In other words, in the actions
involving the Chase Bank, the Custodian stepped into the shoes of
the German banks and sought to free their titles of the state
liens; here, he seeks to step into the shoes of the Federal Reserve
Bank as possessor of the credits and funds, leaving unadjudicated
the effect of such substitution of custody upon the attaching
creditors' rights.
While the statute under which the funds are to be "held,
administered and accounted for" authorizes the vesting of such
foreign-owned property in the Custodian and its administration "in
the interest of and for the benefit of
Page 341 U. S. 474
the United States," [
Footnote
2] it is not a confiscation measure, but a liquidation measure
for the protection of American creditors. It provides for the
filing and proving of claims and states that the funds "shall be
equitably applied'" for the payment of debts. [Footnote 3] If the Custodian disallows a
claim, or if he disallows a claim of priority where claims exceed
assets, the claimant may seek relief in the United States District
Court for the District of Columbia. [Footnote 4] The transfer of possession of these funds does
not purport to work any automatic deprivation of rights of any
class of creditors, but takes over the estate for
administration.
In view of these facts, we decide, and decide only, that the
Custodian has power to possess himself of these funds and to
administer them. To hold otherwise would be incompatible with the
federal program. The consequences, if any, that flow from the
substitution of the Custodian in place of the Bank as holder of the
funds, upon rights derived from valid state court judgments secured
by attachment, are not ripe for determination. They may never come
into controversy. All questions as to the petitioners' claims,
judgments, or priorities are reserved for decision in the
proceedings prescribed by statute.
The power of the United States to take and administer the fund
is paramount. The judgment below must therefore be
Affirmed.
MR. JUSTICE CLARK took no part in the consideration or decision
of these cases.
[
Footnote 1]
82 F. Supp. 740; 182 F.2d 349.
[
Footnote 2]
Trading With the Enemy Act of 1917, 40 Stat. 411, as amended, §
5(b)(1), 55 Stat. 839.
[
Footnote 3]
Id., § 34(a), 60 Stat. 925.
[
Footnote 4]
Id. § 34(e), (f).