1. Petitioner, a Swiss corporation, sued in the District Court
for the return of certain of its property vested in 1942 by the
Alien Property Custodian under the Trading with the Enemy Act of
1917, as amended by the First War Power Act of 1941. Petitioner was
largely owned and controlled by a national of Germany, through a
son with whom he had a usufruct agreement. Petitioner had been
acquired with usufruct property for the purpose of enabling the
father to control and use his property as he saw fit. The father
had and used the substance, while the son had the bare legal title
except for a 20% interest in the income of the usufruct property.
Such right as the son had he exercised or failed to exercise in
complete subordination to the will of the father.
Held: Because of direct and indirect control and
domination by an enemy national, petitioner was affected with an
"enemy taint," and cannot recover under § 9(a). Pp.
343 U. S.
206-212.
(a) Under § 9(a) of the Act, one not an "enemy," as defined in §
2, can recover any interest, right, or title which he has in
property so vested; but corporations affected with an "enemy taint"
are included in the word "enemy."
Clark v. Uebersee
Finanz-Korp., 332 U. S. 480. Pp.
343 U. S.
211-212.
(b) Actual use by an enemy-tainted corporation of its power in
economic warfare against the United States is not the crucial fact
in determining whether vested property may be retained by the
Custodian under the Act. It is the existence of that power that is
controlling, and against which the Government may move. P.
343 U. S.
212.
2. At the end of the litigation in the District Court,
petitioner sought to have the case reopened for the purpose of
asserting and establishing the nonenemy status of the son of the
enemy national. Because of failure to diligently and timely assert
the interest of the son, the District Court refused to reopen the
case for further consideration of such separate interest.
Held: in view of the holding in
Kaufman v. Societe
Internationale, decided today,
ante, p.
343 U. S. 156, the
cause is remanded to the District Court for consideration, in
Page 343 U. S. 206
the light of that holding and this opinion, of any application
that may be made on behalf of the son within 30 days from the date
of remand.
Hormel v. Helvering, 312 U.
S. 552, applied. Pp.
343 U. S.
212-213.
88 U.S.App.D.C. 182, 191 F.2d 327, affirmed in part.
In a suit brought by petitioner to recover property vested by
the Alien Property Custodian under the Trading with the Enemy Act,
as amended, the District Court entered judgment for the Custodian.
82 F. Supp.
602. The Court of Appeals affirmed. 88 U.S.App.D.C. 182, 191
F.2d 327. This Court granted certiorari.
342 U.
S. 87.
Affirmed in part and vacated and remanded in
part, p.
343 U. S.
213.
MR. JUSTICE MINTON delivered the opinion of the Court.
Petitioner sued in the District Court for the District of
Columbia for the return of certain of its property vested by the
Alien Property Custodian in 1942 under the Trading with the Enemy
Act of 1917, 40 Stat. 411, as amended by the First War Powers Act,
1941, 55 Stat. 839. The District Court found for the Custodian,
82 F. Supp.
602, and the Court of Appeals affirmed, 89 U.S.App.D.C. 167,
196 F.2d 557. We granted certiorari, 342 U.S. 847.
The following facts were found by the District Court and
confirmed by the Court of Appeals upon an abundance of evidence in
the record. In 1931, Wilhelm von Opel, a citizen and resident
national of Germany, owned
Page 343 U. S. 207
certain shares of stock in the Adam Opel Works, a German
corporation largely owned by General Motors Corporation. Wilhelm
had an agreement with General Motors to sell his shares at a price.
In 1931, he became alarmed at business conditions in Germany, and
desired to get his stock out of the country to save his investment
for himself and his family from the economic and governmental
influences there prevailing. In that year, he and his wife entered
into what was known under German law as a usufruct agreement with
their only son, Fritz, who had not lived in Germany since 1929, and
for that reason was not subject to the German restrictions upon the
handling of this property. By this agreement, Wilhelm's title to
the shares in the Adam Opel Works was transferred to Fritz. The
instrument provided as follows:
"The usufruct in the shares is not assigned to Fritz von Opel.
It remains with Wilhelm von Opel and his wife . . . until the death
of the survivor of them. However, 20% of all dividends and interest
received will accrue to Fritz von Opel."
The instrument provided further that, if Fritz died before his
parents and without issue, the transfer was to be void, and was to
revert to his parents, the transferors. If the parents died before
Fritz, he was to have the property as an advancement, to be
deducted from his share in his parents' estate. The usufruct income
not drawn by the parents was also to be accounted for by Fritz as
an advancement.
After much expert testimony, the District Court found the law of
Germany pertaining to such usufruct agreement to be as follows (82
F.Supp. 605):
"52. A right of usufruct, once established, is under German law
an
in rem right in property. A person having a usufruct in
property has a right: "
Page 343 U. S. 208
"(a) to the enjoyment of the property or, in the case of money
or securities, to the income from the securities;"
"(b) to co-ossession of the property together with the person
holding legal title to the property;"
"(c) to a voice in the management of the property insofar as the
maintenance and preservation of the usufructuary's rights under
subsection (a) above are concerned;"
"(d) to prevent the sale or disposition of the property as a
result of his right to co-ossession;"
"(e) the German Civil Code does not mention whether the
usufructuary, for the protection of his income, has any voting
rights. In the absence of a decided case, the legal commentaries
speculate in three different directions. One position is that the
title owner has all voting rights, and the usufructuary no voting
rights whatsoever. The second position is that the title owner has
a voting right for all measures which have nothing to do with
income, while the usufructuary can vote in regard to income. The
third position is that the usufructuary has all the voting
rights."
R. 60-61;
82 F. Supp.
602, 605.
Under this agreement, Wilhelm and his wife had a usufruct in the
Adam Opel stock transferred to Fritz. The latter, on October 17,
1931, sold the usufruct property to General Motors, in accordance
with the contract which Wilhelm had with that company. In order to
protect the several interests involved, the proceeds of the sale
were transferred to petitioner, a Swiss corporation acquired by
Fritz for this purpose. Eventually these funds were used to
purchase stocks, later transferred to petitioner, in corporations
organized under the various states of the United States, from which
derived the stocks vested by the Alien Property Custodian. Fritz
owned 97% of
Page 343 U. S. 209
the stock of petitioner. Under the German law, as found by the
District Court, a usufructuary may follow the ascertainable
proceeds of the original property subject to the usufruct.
Therefore, the stocks purchased by petitioner with the proceeds of
the sale of the usufruct property were subject to, and were treated
as subject to, the usufruct agreement.
On June 7, 1935, Fritz placed all but three shares of the
capital stock of petitioner in a safety deposit box in Zurich,
Switzerland, and gave the key thereto to Hans Frankenberg, who
received it as agent of Wilhelm von Opel. Frankenberg had become
the managing director of petitioner at Wilhelm's request in 1932,
and exercised control over petitioner's investments until the
vesting of the property herein involved. By the delivery to
Wilhelm's agent of the key to the box containing petitioner's
stock, there was thus transferred to Wilhelm possession of the
res, subject to the usufruct, and the usufruct agreement
was thereby consummated. Fritz also engaged in activities on behalf
of petitioner concerning its investments, but under the guidance of
Wilhelm or his agent, Frankenberg.
Neither Wilhelm nor his wife ever drew any income from the
usufruct. An oil lease, owned by one of the American corporations
whose stock was purchased with proceeds from the sale of the Adam
Opel shares to General Motors, was sold, and the proceeds of that
sale used to pay a fine of Wilhelm in Germany. Expenses of a trip
by Wilhelm to South America and one to Hungary were paid by
petitioner and charged against the income account of Fritz.
Petitioner owned all the stock of a subsidiary Hungarian
corporation engaged in the mining of bauxite in Hungary, and, in
1939 and 1940, guaranteed a loan by a Swiss bank to this
corporation for its operations. The loan was repaid in November,
1942. The United States
Page 343 U. S. 210
was at war with Hungary from December 13, 1941. During October,
November, and December, 1941, the Hungarian corporation shipped
bauxite to Germany, and had a contract to do so until the end of
1942.
In 1942, the Alien Property Custodian vested the stocks held by
petitioner in several American corporations and all the right,
title, and interest of petitioner in and to a certain contract with
another American corporation. All of the stocks had been acquired
from the proceeds of the original usufruct property.
From October 5, 1931, the date of the usufruct agreement, the
usufruct property was controlled, used, and in all ways handled and
directed by Wilhelm and his managing agents. The interest of Fritz
in petitioner was wholly subordinated to that of Wilhelm. Fritz had
the bare legal title and the right to 20% of the income from the
property. Wilhelm is now dead. His wife, a daughter, and the son,
Fritz, still survive.
Petitioner was in this Court on the pleadings in this case in
Clark v. Uebersee Finanz-orp., A.G., 332 U.
S. 480. There, it was alleged in the complaint that
petitioner was not an enemy or ally of an enemy, and that at no
time specified in the complaint had the property in question been
owned or controlled, directly or indirectly, in whole or in part,
by an enemy, an ally of an enemy, or a national of a designated
enemy country; that none of the property had been owing or
belonging to or held on account of or for the benefit of any such
person or interest. This Court construed these allegations
"to mean that the property is free of all enemy taint and
particularly that the corporations whose shares have been seized,
the corporations which have a contract in which respondent has an
interest, and respondent itself are companies in which no enemy,
ally of an enemy, nor any national of either has any interest of
any kind whatsoever, and that respondent has not done business in
the territory of the
Page 343 U. S. 211
enemy or any ally of an enemy."
332 U.S. at
332 U. S. 482.
The complaint alleging such facts was held to be sufficient as
against a motion to dismiss, and the case was sent back for trial.
Upon the trial, the facts were found as above stated.
However, from the facts found, it is clear that petitioner, for
all practical purposes, was, to the extent of 97%, largely owned,
managed, used, and controlled by Wilhelm von Opel, a national of
Germany. The findings demonstrate that petitioner was a corporate
holding company acquired for the purpose of enabling Wilhelm to
control and use his property as he saw fit. His interest was
paramount and controlling. The interest of Fritz was wholly and in
reality subordinated to Wilhelm's, except as to the right of Fritz
to receive 20% of the income from the usufruct property. Petitioner
was neutral in name only. Its enemy taint was all but complete
because of the predominant influence and control of Wilhelm.
Wilhelm had and used the substance, while Fritz had the bare legal
title, and such right as this gave Fritz he exercised or failed to
exercise in complete subordination to the will of his father. We
agree with the Court of Appeals when it said: "This case does not
involve a diluted
taint;' it involves the ownership by enemy
nationals of the economic benefits of American business." 88
U.S.App.D.C. 183, 191 F.2d at 328.
Before 1941, the property here involved could not have been
vested, because this petitioner was a corporation of a neutral
country, Switzerland, unless such corporation was shown to be doing
business in an enemy country or in the country of an ally of an
enemy.
Behn, Meyer & Co. v. Miller, 266 U.
S. 457;
Clark v. Uebersee Finanz-orp., A.G.,
supra. But on December 18, 1941, Congress amended the Trading
with the Enemy Act by the passage
Page 343 U. S. 212
of the First War Powers Act, 1941, 55 Stat. 839, and gave
respondent power to vest and property or interest of any foreign
country or national thereof in said property. However, under § 9(a)
of the Trading with the Enemy Act, one not an enemy, as defined in
§ 2 of said Act, can recover any interest, right, or title which he
has in the property so vested. As construed by this Court in
Clark v. Uebersee Finanz-orp., A.G., supra, § 2 included
in the word "enemy" all corporations affected with an "enemy
taint." Since we find petitioner to be so affected because of the
direct and indirect control and domination by an enemy national,
Wilhelm von Opel, petitioner cannot recover under § 9(a).
It is suggested that vested property must be returned unless
there is proof of actual use of the property for economic warfare
against the United States. The crucial fact is not the actual use
by an enemy-ainted corporation of its power in economic warfare
against the United States. It is the existence of that power that
is controlling, and against which the Government of the United
States may move. The Government does not have to wait for the enemy
to do its worst before it acts.
Cf. 78 U.
S. United States, 11 Wall. 268 at
78 U. S.
306.
As the District Court said, it would be difficult
"to find a stronger case of enemy taint in vested property short
of full ownership by an enemy than exists in this case. The neutral
aspect of ownership in the property is insignificant. . . ."
82 F. Supp. at 606.
In view of the decision today in
Kaufman v. Societe
Internationale, ante, p.
343 U. S. 156,
consideration must be given to an effort of petitioner to open the
case for the assertion of the rights of Fritz von Opel.
Petitioner attempted at the end of the litigation in the
District Court to have the case reopened for the purpose of
asserting and establishing the nonenemy status of Fritz von Opel.
Because of the failure to diligently and timely
Page 343 U. S. 213
assert the interest of Fritz, the District Court refused to
reopen the case for further consideration of such separate
interest.
The judgment of the Court of Appeals is affirmed as to
petitioner, but, in view of the novel holding in
Kaufman,
the Court is of the opinion that its decision in
Hormel v.
Helvering, 312 U. S. 552, is
applicable. We accordingly vacate the judgment of the court below
and remand the cause to the District Court for consideration, in
the light of
Kaufman and this opinion, of any application
that may be made on behalf of Fritz von Opel within 30 days from
the date of remand, and, in all other respects, the judgment is
affirmed.
It is so ordered.
MR. JUSTICE CLARK took no part in the consideration or decision
of this case.