The judgment below is reversed on the authority of Zittman
v. McGrath, 341 U. S. 471
Reversed. Zittman v. McGrath, 341 U.
THE CHIEF JUSTICE did not participate in the consideration or
decision of this case.
* Together with No. 402, Superintendent of Banks of the
State of New York, Liquidator v. Singer,
also on certiorari to
the same court.
MR. JUSTICE JACKSON, with whom MR. JUSTICE FRANKFURTER and MR.
JUSTICE DOUGLAS join, dissenting.
The Court's one-word decision reverses concurring judgments of
three highly respected courts -- the Court of Appeals of New York,
the Appellate Division of the
Page 347 U. S. 404
Supreme Court, First Department, and the Supreme Court, Special
Term, New York County. It cites a single case, the implication
being that the cited authority settled the question so fully and
plainly that a contrary result could have been reached by the three
lower courts only by failure to read or heed it. I think this Court
owes those courts and the legal profession something more than a
reference to an inapplicable decision. The facts of this case
present novel questions that this Court should face, and on which
it should render a reasoned decision.
The Yokohama Specie Bank established its New York agency,
pursuant to the State's permission, under a statute which provided
that the bank's assets in the State should be subject to the claims
of creditors arising out of transactions with the New York agency
in preference to other claims. On December 8, 1941, when war was
declared with Japan, this agency was in the possession of the
United States Treasury, which was supervising freezing controls
over Japanese nationals. The agency was immediately surrendered to
the New York Superintendent of Banks for liquidation under state
law. This respondent's claim was established thereafter as entitled
to the preferences of the New York law, but was payable only after
a federal license therefor, and that position was confirmed by this
Court. Lyon v. Singer, 339 U. S. 841
In 1942, the President, pursuant to statutory authority, created
the Office of Alien Property Custodian. As to property in the
process of administration under judicial supervision, the Custodian
was authorized to seize only that "which is payable or deliverable
to, or claimed by, a designated enemy country or national thereof."
This fund, earmarked for payment to an American creditor, is not
within that description. No other authority for demanding its
turnover can be found.
Page 347 U. S. 405
In September of 1942, the Custodian asserted power of
supervision over the liquidation of the New York agency, but
advised the Superintendent of Banks to continue his liquidation of
the business and property in New York. He requested the
Superintendent to advise him of all claims which he intended to
accept and to notify him when he had liquidated assets sufficient
to pay and had paid all accepted and established claims and
expenses of liquidation in order that the Custodian might take such
action "at that time with respect to the assets remaining in your
hands" as he might deem necessary. Thereafter, as various claims
were allowed payable to preferred creditors who were enemy
nationals, the Custodian issued vesting orders seizing such funds
as were set aside for their payment. Of course, he cannot seize
this claim on such a basis, for the claimant is not an enemy
On February 15, 1943, the Custodian issued vesting order No.
915. By it, he only purported to vest in himself the excess
proceeds of the liquidation remaining after the payment of
creditors having claims accepted or established in accordance with
the Banking Law of New York. Since such excess funds, under that
law, were payable to the Japanese bank, this was obviously a proper
vesting. But the limitation of the vesting order to such excess was
no accident or oversight. In annual reports to the President and
Congress, the Custodian repeatedly stated, in substance, that
rights of creditors preferred by state laws would be respected, and
only the excess vested.
The turnover order now sustained by the Court is quite contrary
to this policy, and was not issued until September 5, 1950, over
five years after the cessation of hostilities with Japan and over
eight years after the task of administration was left to the
Superintendent of Banks.
The fund of over a half-million dollars which the Attorney
General, as successor to the Alien Property Custodian,
Page 347 U. S. 406
now demands be paid over to him is a fund specifically held and
earmarked by the Superintendent of Banks for the payment of the
claim which we have previously upheld as entitled to a preference
under New York law. Lyon v. Singer, supra.
All funds in the hands of the Superintendent in excess of
allowed or established claims have been demanded by the Custodian,
and the New York Supreme Court has authorized their payment, as,
under New York law, such excess is payable to the Japanese bank.
The New York courts, however, have refused to allow the
Superintendent to turn over the funds allocated to the satisfaction
of the judgment in favor of respondent and affirmed by us, to be
paid if and when licensed by the Attorney General.
Zittman v. McGrath, 341 U. S. 471
cannot serve as a supporting authority for this decision. In
the Custodian demanded transfer of a credit from
a debtor bank which had no interest in the credit except that of a
stakeholder. Here, the Custodian would seize a fund from an officer
of the State of New York who is administering it pursuant to his
statutory duty and under the supervision of the Supreme Court of
that State. In Zittman,
the claims adverse to the
Custodian rested on an assertion of private rights and in no other
way involving the public interest. Here, there is a clash between
two public interests. New York, through its Superintendent of
Banks, took possession of the Yokohama Bank assets for
administration pursuant to its own public policy of protecting
creditors of institutions allowed to do business in the State of
New York. After a lapse of many years, the Attorney General now
would seize it from him to apply a different public policy -- that
of the Federal Government.
Moreover, in Zittman,
the vesting order specifically
vested debts owed to a foreign national by a New York
Page 347 U. S. 407
debtor bank and debts evidenced by instruments endorsed by the
foreign national and held by a Federal Reserve Bank. Those debts
constituted the precise funds sought by the litigant. In this case,
the vesting order purported to vest only such excess proceeds as
remained after payment of established claims, and respondent shows
that his is such a claim. His position, that the funds he seeks
were never vested by the Custodian, is not analogous to that of the
petitioner in Zittman.
Some effort was made on argument to reconsider whether this
claim is entitled to a preference under the Banking Law of New
York. The claim arose out of a foreign exchange transaction. Prior
to the war, the Standard Vacuum Oil Company
oil to Japanese purchasers who paid in yen. It is not questioned
that such sales were in accordance with the national policy of the
United States at that time. Standard entered into an agreement with
the Yokohama Bank under which it sold the yen to the bank in Japan
and was to receive credit in dollars in New York. This manner of
remitting funds was conventional, and was the function which the
New York branch of a foreign bank would be expected to facilitate.
The New York courts held that creditors created by such a foreign
exchange transaction, including respondent, were among those whom
the New York statutes sought to protect out of the New York assets.
In the Singer
we approved that
holding. Unless every principle of res judicata
is to be
disregarded by this Court, it is bound by its holding that this is
a preferred claim under the New York Banking Law.
It was intimated in argument that the purpose of seizure of this
fund is to defeat the preference for this claim in the interest of
other creditors outside of New York who will not be paid in full.
This would mean a distribution of the New York assets at odds with
the New York Banking
Page 347 U. S. 408
Law. But it is apparent that a large number of New York
creditors have been paid in full from the New York assets, and just
why this creditor, who stands on an equality with them, should be
deprived of his claim of preference while the others retain theirs
is hard to understand.
This Court has been rather insistent that state courts disclose
the reasoning behind their judgments.* I think the Court should
reciprocate when faced with issues as serious and as doubtful as
those raised in this case.
* E.g., Minnesota v. National Tea Co., 309 U.
; Loftus v. Illinois, 334 U.
; Chicago v. Willett Co.,