Pursuant to § 5(b) of the Trading with the Enemy Act, as
amended, the President promulgated Executive Order No. 8389
prohibiting certain transactions in property of nationals of
certain foreign countries except when licensed by the Secretary of
the Treasury. Two days before this was made applicable to Austria
by Executive Order No. 8785, petitioner was designated by a New
York court as temporary receiver of the assets of an Austrian
national (AKM). The asset was a debt owed by the American Society
of Composers, Authors and Publishers (ASCAP), and no license
permitting its transfer was issued. After issuance of Executive
order No. 8785, petitioner was designated permanent receiver.
Subsequently, the Alien Property Custodian issued an order vesting
in himself title to the claim of AKM against ASCAP.
Held: in a suit by the Custodian against petitioner and
ASCAP, judgments were properly entered declaring that petitioner
had no right, title, or interest in the claim and directing ASCAP
to pay it to the Custodian. Pp.
337 U. S.
474-493.
1. The Joint Resolution of May 7, 1940, amending § 5(b) of the
Trading with the Enemy Act, and Executive Order No. 8389, issued
April 10, 1940, put into effect a valid plan for control of the
property covered by the Executive Order that prohibited any change
of title to the property here involved by reason of the subsequent
appointment of petitioner as permanent receiver. Pp.
337 U. S.
476-486.
(a) The Joint Resolution of May 7, 1940, ratified Executive
Order No. 8389, issued April 10, 1940, including the broad
definition of "banking institution" as including "any person
holding credits for others as a direct or incidental part of his
business." P.
337 U. S.
478-479.
(b) Not being defined, the term "credit," as used in the Trading
with the Enemy Act, the Executive Orders and the regulations
thereunder, is given its ordinary meaning of the obligation due on
accounting between parties to transactions. P.
337 U. S.
480.
Page 337 U. S. 473
(c) Petitioner and ASCAP are "banking institutions" within the
meaning of the definitions of that term in the Executive Orders and
the prohibition against "transfers of credit between any banking
institutions." Pp.
337 U. S.
480-482.
(d) A transfer of the credit here involved from a liability owed
by ASCAP to AKM to a liability owed by ASCAP to petitioner would
violate the prohibition against "transfers of credit." P.
337 U. S.
482.
(e) Although title to the claim in question had not been vested
in the Custodian when petitioner was appointed permanent receiver,
the Executive Orders prevented title from being transferred to
petitioner, even by judicial action. Pp.
337 U. S.
482-485.
(f) A different result is not required by the administrative
interpretation of the Executive Orders. Pp.
337 U. S.
485-486.
2. Under § 977-b of the New York Civil Practice Act, title to
the claim did not pass to petitioner by virtue of his appointment
as temporary receiver before issuance of Executive Order No. 8785.
Pp. 486-492.
(a) Although the state statute is susceptible of varying
interpretations and the point has not been ruled upon by the state
courts, this Court accepts the reasonable interpretation given to
it by the Federal District Court and Court of Appeals, which are
skilled in the laws of New York. Pp.
337 U. S.
486-489.
(b) This Court rejects petitioner's suggestion that a decision
in the federal courts should be delayed until the courts of New
York have settled the issue of state law. Pp.
337 U.S. 489-492.
3. The federal courts were not precluded from adjudging the
rights of the respective parties in this case on the ground that
the property was in the hands of the state court by virtue of a
state receivership. Pp.
337 U. S.
492-493.
169 F.2d 324 affirmed.
In a suit by the Alien Property Custodian under § 17 of the
Trading with the Enemy Act, a Federal District Court entered
judgments declaring that a receiver appointed by a state court had
no right, title, or interest in a debt owed to an Austrian
national, and directing the debtor to pay the debt to the
Custodian.
70 F. Supp.
202. The Court of Appeals affirmed. 169 F.2d 324. This Court
granted certiorari, limited to two issues. 335 U.S. 902.
Affirmed, p.
337 U. S.
493.
Page 337 U. S. 474
MR. JUSTICE REED delivered the opinion of the Court.
The Alien Property Custodian [
Footnote 1] on April 22, 1946, began this action under §
17 of the Trading with the Enemy Act in the United States District
Court for the Southern District of New York to obtain the payment,
and a declaration of title in him as against the petitioner as
receiver, of certain royalties owed by the American Society of
Composers, Authors, and Publishers (ASCAP) to Staatlich Genehmigte
Gesellschaft der Autoren, Komponisten, und Musikverleger (AKM), an
Austrian association, pursuant to the provisions of vesting order
No. 2097, Office of Alien Property Custodian, September 4, 1943, 8
F.R. 16463, whereby the Custodian had vested in himself title to
certain property of AKM, specifically claims for royalties under
copyrights for the performance of musical compositions. By
contract, ASCAP had been authorized by AKM to license on royalty
the use in this country of musical copyrights belonging to AKM.
ASCAP and the petitioner, who is the state-appointed receiver of
the royalties involved, were made defendants. The District Court,
on motions for summary judgment or judgment on the pleadings,
entered a judgment declaring
Page 337 U. S. 475
that the petitioner had no right, title or interest in the claim
in question,
Markham v. Taylor, 70 F. Supp.
202, and later, a second judgment directing ASCAP to pay the
debt to the Custodian. The United States Court of Appeals for the
Second Circuit, on appeal by the petitioner, [
Footnote 2] affirmed.
Clark v. Propper,
169 F.2d 324.
The pertinent facts underlying this controversy are as follows:
on June 12, 1941, on an
ex parte application by a creditor
of AKM, the New York Supreme Court appointed petitioner temporary
receiver of that association, pursuant to § 977-b of the New York
Civil Practice Act, which provides for the liquidation of the local
assets of a foreign corporation when it has ceased to do business
for one reason or another not here important. Proceedings under
this Act are to enable claimants against the foreign corporation to
secure payment of their claims by an equitable apportionment of the
available assets. The order of appointment directed him
"to take, receive, and reduce to his possession any and all
assets . . . tangible and intangible, within the New York of the
defendant [AKM], and hold the same until the further order of this
Court."
On June 14, 1941, pursuant to § 5(b) of the Trading with the
Enemy Act of 1917, 40 Stat. 411, 415, as amended, [
Footnote 3] the President promulgated
Executive Order No. 8785, [
Footnote
4] a so-called freezing order, which prohibited certain
transactions involving Austrian property except as they were
specifically licensed by the Secretary of the Treasury. On July 29,
1941, petitioner, as receiver, began an action in the courts of
New
Page 337 U. S. 476
York against ASCAP to recover the royalties which it owed AKM.
[
Footnote 5] Its disposition is
awaiting the outcome of this case. On September 29, 1941,
petitioner, upon the default of AKM, was appointed permanent
receiver of that association's assets. Thereafter followed the
vesting order, September 4, 1943, and this suit, April 22,
1946.
Upon the limited grant of the petition for certiorari, 355 U.S.
902, the issues argued to this Court and now to be decided are
whether the appointment of petitioner as temporary receiver on June
12, 1941, or his appointment as permanent receiver on September 29,
1941, by relation back, passed title to him of the claim for
royalties as of June 12, 1941. Furthermore, since, as will
subsequently appear, we conclude these issues against petitioner,
we must consider whether the freezing order barred a subsequent
unlicensed judicial transfer by the order appointing the petitioner
permanent receiver. [
Footnote
6]
First. The appointment as permanent receiver on
September 29, 1941, concededly would have vested in petitioner, as
permanent receiver, all right, title, and interest of AKM in its
claim against ASCAP if the freezing order of June 14, 1941, had not
intervened after petitioner's appointment as temporary receiver on
June 12, 1941.
Page 337 U. S. 477
Accepting that position, the question of whether the appointment
as permanent receiver related back to the date of the temporary
receivership so as to place title to the claim in the permanent
receiver as of June 12, 1941, and the question as to whether the
appointment as permanent receiver itself vested title in the
petitioner notwithstanding the prior freezing order, depend alike
upon a determination as to whether the freezing order made invalid
any subsequent transfer of title by judicial action.
The vesting order here in question, Vesting Order No. 2097, was
executed on September 4, 1943, a date subsequent to the appointment
of petitioner as permanent receiver. So far as the parties to this
litigation are concerned, by its specific terms, it vested in the
Custodian title to the property of AKM only. [
Footnote 7] Nothing presented in this case calls
our attention to any effort made by the Custodian to vest in
himself any title to the claim that might be in the permanent
receiver for the benefit of creditors and ultimately for AKM or
those entitled to its assets on distribution, [
Footnote 8] nor do we adjudicate
Page 337 U. S. 478
his right to do so. The order, so far as is pertinent, vested in
the Custodian "All . . . claim [of AKM to] all right to receive
monies . . . by way of royalty, share of profits, or other
emolument," together with "all causes of action . . . with respect
to" the aforesaid copyrights. This claim was a debt of ASCAP to
AKM, property of AKM, as defined in the regulations of April 10,
1940, 5 F.R. 1401(c), and June 14, 1941, 6 F.R. 2905. The latter
citation refers to the regulation defining property, under the
Trading with the Enemy Act, effective at the time of the vesting
order. [
Footnote 9]
Prior to petitioner's appointment as permanent receiver and the
later vesting order, the President, on June 14, 1941, had
prescribed by Executive Order No. 8785, 6 F.R. 2897, that certain
transactions by or on behalf of Austrian associations such as AKM
were prohibited unless licensed. No license for the judicial order
appointing petitioner as permanent receiver was asked for or
obtained.
Order No. 8785 was issued pursuant to the authority granted the
President by § 5(b) of the Act of October 6, 1917, as amended,
particularly by the Joint Resolution of May 7, 1940. [
Footnote 10] The order forbade, §
1(A), "All transfers of credit between any banking institutions
within the United States. . . ." Authority during war
Page 337 U. S. 479
or any other period of national emergency to prohibit such
transfers was given the President by the Joint Resolution. Order
No. 8785 declared "the existence of a period of unlimited national
emergency."
The same resolution authorized the President to issue rules and
regulations and specifically to define "banking institutions." The
President had, on April 10, 1940, issued a similar order
prohibiting similar transfers applicable to nationals of Norway and
Denmark to guard against such transfers brought about by the German
invasion of those countries. Executive Order No. 8389, 5 F.R. 1400.
It contained, to all intents and purposes, the same definition of
"banking institutions."
See § 11C thereof. The order and
regulations thereunder, and therefore the definition, were approved
by the Joint Resolution. [
Footnote 11] The definition applicable to transactions of
this Austrian national, AKM, under the freezing order of June 14,
1941, is set out below. [
Footnote 12] We accept this definition as authorized by
the Resolution.
By the order appointing a permanent receiver, the claim of AKM
against ASCAP was directed to be transferred from AKM to the
petitioner. From ASCAP's point of view. it was a debt; from AKM's,
a claim. The shift of obligation contemplated by the order for a
permanent
Page 337 U. S. 480
receiver was a transaction that involved "property in which"
there was an "interest of any nature whatsoever, direct or
indirect" in aliens of designated countries, including Austria.
[
Footnote 13] But the
Executive Order of June 14, 1941, did not prohibit all transactions
without license involving Austrian-owned property. It specified the
prohibited transactions, however, by categories so all-inclusive as
to make it clear the purpose was to require transactions involving
property of nationals of designated foreign countries to be carried
out under regulations of this Government except certain
transactions such as are provided for in General Ruling No. 12,
April 21, 1942, 7 F.R. 2991. The Executive Order forbids transfers
of credit. As "credit" is not defined by the Order or regulation,
we, in considering credits as property subject to vesting under the
Trading with the Enemy Act, give it is ordinary meaning of the
obligation due on accounting between parties to transactions. This
credit, owed by ASCAP to AKM, was in effect directed to be
transferred by the permanent receiver order from AKM to the
petitioner as receiver. There is, we think, no doubt that a
voluntary transfer by a bank of a credit in the transferring bank
from the account of a known Austrian to the account of another
banking institution would violate Executive Order No. 8785 as a
transfer of credit between banking institutions.
It remains, then, to determine whether ASCAP and petitioner are
banking institutions of such a character as to be subject to the
prohibition of Executive Order No. 8785, § 1A, against "transfers
of credit between any banking institutions." A reading of the
President's definition,
note
12 supra, shows that they do fall within the words
"any person holding credits for others as a direct or incidental
part of his business. . . ." It is true that
Page 337 U. S. 481
to make ASCAP or the petitioner a banking institution by
definition is a departure from the ordinary conception of the
meaning of "banking institution." Petitioner says to so construe
the definition is "utter fantasy." The definition, however, as we
have pointed out, has had congressional ratification. Furthermore,
the obvious intention of Congress to allow flexibility to the term
"banking institution" by leaving its definition to the President
sheds light on its purpose. The phrase "banking institution" used
and defined in the Bank Holiday Proclamation of March 6, 1933, 48
Stat. 1689, 1690, was adopted by the Emergency Banking Relief Act
of March 9, 1933, 48 Stat. 1, with a delegation to the President of
the power of definition. Evidently the delegation was to permit him
to bring atypical forms of financial institutions within the reach
of the emergency act. The Act of March 9 was grafted on to the
Trading with the Enemy Act of 1917, and, when that Act was again
extended to meet the foreign assets problem, the President's wide
power to define banking institution was a ready instrument to cope
with the myriad circumstances arising in the control of shifts of
foreign assets. The power in peace and in war must be given
generous scope to accomplish its purpose. Through the Trading with
the Enemy Act, in its various forms, the nation sought to deprive
enemies, actual or potential, of the opportunity to secure
advantages to themselves or to perpetrate wrongs against the United
States or its citizens through the use of assets that happened to
be in this country. [
Footnote
14] To do so has necessitated some inconvenience to our
citizens and others who, as here, are not involved in any actions
adverse to the nation's interest. That fact, however, cannot
lead
Page 337 U. S. 482
us to narrow the broad coverage of the Executive Order. Our
prior decisions have made that clear. [
Footnote 15] ASCAP and petitioner, the receiver, each
hold credits for others as an "incidental part of [their]
business," and are therefore "banking institutions." ASCAP held a
credit for AKM, and, after the permanent receivership order, held
that credit for the receiver, who, in turn, would hold it for AKM's
creditors and AKM.
We hold that the transfer of this credit from a liability owed
by ASCAP to AKM to a liability owed by ASCAP to the receiver
violates the prohibition against transfers of credit.
We turn now to an examination of the effect of the federal
Executive Order No. 8785 of June 14, 1941, the so-called "freezing
order" on the subsequent state court order of September 29, 1941,
appointing the petitioner permanent receiver. That examination is
to be made with recognition of the fact that, at the time of the
state order, title to the AKM claim against ASCAP had not been
vested in the Custodian. That development did not take place until
the vesting order of September 4, 1943.
It is petitioner's contention that a mere freezing order does
not prohibit a subsequent judicial order transferring title to
blocked assets covered by the previous freezing order. We will deal
subsequently in this opinion with the question of whether the title
to the claim passed to the temporary receiver, under New York law,
on his appointment. At this point, we assume this did not happen,
and examine only the question of the effect of a freezing order on
the subsequent judicial order. Petitioner's argument is that such a
construction would immobilize frozen property until it suits the
Custodian's convenience
Page 337 U. S. 483
to vest, contrary to the need for protection against transfers
of foreign funds. These needs, petitioner says, will be served by
the provision against payments to claimants from frozen funds
without a license. E.O. 8785, § 1B. [
Footnote 16] He further argues that, by the Joint
Resolution, Congress did not empower the President to deprive New
York of all power to deal with the ASCAP debt in a proceeding under
Civil Practice Act § 977-b, covering actions of receivers to
liquidate local assets of defunct foreign corporations.
It is true that state litigation between local claimants and
foreign owners or those in possession of blocked or frozen assets
could proceed to a determination of rights between the claimant and
the foreign national without the blocked property passing into
hands that might use it to the detriment of the welfare of this
nation, so long as payment could not be made without a license.
Nothing in the Trading with the Enemy Act or regulations
specifically forbids
eo nomine litigation in state courts.
The plan for prohibition of unlicensed transactions by foreign
nationals comprehends blocking of transfers of credits and vesting
of local assets of such nationals under the Trading with the Enemy
Act and regulations thereunder. If transactions are blocked,
vesting may or may not follow. When the Custodian vests blocked
property, title passes to the Custodian and his authority to
vest
Page 337 U. S. 484
and hold cannot be questioned except as provided in the Trading
with the Enemy Act. [
Footnote
17] The freezing order of June 14, 1941, immobilized the assets
covered, by its terms, so that title to them might not shift from
person to person except by license until the Government could
determine whether those assets were needed for prosecution of the
threatened war or to compensate our citizens or ourselves for the
damages done by the governments of the nationals affected.
United States v. Chemical Foundation, 272 U. S.
1,
272 U. S. 11;
Silesian-American Corp. v. Clark, 332 U.
S. 469,
332 U. S.
476.
We assume that the Court of Appeals of New York held, in
Singer v. Yokohama Specie Bank, that title to blocked
assets could pass without license from a statutory receiver to a
creditor. [
Footnote 18] As
the Trading with the Enemy Act is federal legislation founded on
federal constitutional provisions, however, the United States has
authority to make all laws necessary and proper for carrying the
power into execution. The power to enact carries with it final
authority to declare the meaning of the legislation.
Prudence
Realization Corp. v. Geist, 316 U. S. 89,
316 U. S. 95.
Federal
Page 337 U. S. 485
courts have so held as to this issue in this case, 169 F.2d 324,
327, and in
Bernstein v. N. v. Nederlandsche Amerikaansche
etc., 173 F.2d 71, 73. The Trading with the Enemy Act is
national in range. The effect of a federal freezing order should be
the same on subsequent transfers of title in all states. State law
determines the effect of the appointment of a receiver on title to
the property administered, but federal law determines whether the
event of appointment can free the property from the prior control.
Cf. Lyeth v. Hoey, 305 U. S. 188,
305 U. S. 191,
et seq.
Petitioner contends also that the administrative interpretation
of the Executive Order of June 14, 1941, has been to permit
litigation as to rights in the frozen assets. That is borne out by
General Ruling No. 12 of April 21, 1942, 7 F.R. 2991, promulgated
after petitioner had begun his suit against ASCAP and referring to
Executive Order No. 8389, as amended June 14, 1941. The applicable
section is set out in the margin. [
Footnote 19] It is to be observed, however, that the
proviso of § (d) limits the rights a litigant may obtain to such
right as the owner of blocked property could confer by voluntary
act. General Ruling No. 12, as it came after the suit by the
receiver against ASCAP was started and after the order appointing
petitioner as permanent receiver, is not treated by us as
Page 337 U. S. 486
decisive in this case. It is useful only as a statement of the
administrative determination as to the effect of litigation without
a license.
It is our conclusion that the Joint Resolution of May 7, 1940,
and the Executive Order of April 10, 1940, put into effect a valid
plan for control of the property covered by the regulation that
prohibited any change of title to that property by reason of the
subsequent appointment of petitioner as permanent receiver. We do
not now undertake to say whether every determination of rights
concerning blocked property in unlicensed litigation is voidable.
We base our determination on the purpose of Congress to prevent
shifts in title to blocked assets and the prohibition of the
Executive Order against transfers of such a credit as this. This
language of the order prohibits more than payment. It prohibits
transfers of credit. We do not think the administrative rulings are
to the contrary.
Second. The petitioner advances the contention,
however, that title to AKM's claim against ASCAP had passed to him
by his appointment as temporary receiver on June 12, 1941, prior to
the freezing or blocking order of June 14, 1941. Therefore,
petitioner argues, AKM had nothing that could be frozen by the
immobilization order or taken by the vesting order.
The precise issue of state law involved,
i.e., whether
the temporary receiver under § 977-b of the New York Civil Practice
Act is vested with title by virtue of his appointment, is one which
has not been decided by the New York courts. Both the District
Court and the Court of Appeals faced this question and answered it
in the negative. In dealing with issues of state law that enter
into judgments of federal courts, we are hesitant to overrule
decisions by federal courts skilled in the law of particular states
unless their conclusions are shown
Page 337 U. S. 487
to be unreasonable.
Estate of Spiegel v. Commissioner,
335 U. S. 701,
335 U. S.
707-708;
Helvering v. Stuart, 317 U.
S. 154;
MacGregor v. State Mutual Co.,
315 U. S. 280. We
shall examine the problem from that point of view.
Having no state case on the precise statute before it, the Court
of Appeals turned to cases dealing with temporary receiverships in
equity proceedings and under analogous statutes. These cases seem
to hold that neither temporary receivers of the equity [
Footnote 20] nor statutory [
Footnote 21] class obtain title,
but, on the contrary, merely a right to possession. The courts
below found nothing in § 977-b which evidenced an intent that the
result under that section should be otherwise. Admittedly there is
no express declaration of such an intent.
The statutory language is easily susceptible to varying
interpretations.
See subsections 4, 10, 11, 12 and 19.
These sections are not clear as to the title taken by the temporary
receiver or the authority granted to him for the holding or
handling of claims against debtors. The Court of Appeals concluded,
however, that where, in subsection 12, the statute said that
"any receiver appointed . . . shall have all the powers and
duties . . .
Page 337 U. S. 488
possessed by and conferred upon receivers and trustees by the
laws of the state of New York,"
the meaning was "that a temporary receiver under this provision
takes the usual powers of other temporary receivers in New York."
169 F.2d 324, 326, 327. It was pointed out that otherwise the
specific and restricted grant of powers to a temporary receiver by
subsection 4 would be purposeless.
Petitioner contends here for the first time that a vesting of
title in the temporary receiver is an essential prerequisite to the
exercise of jurisdiction
in rem over the assets within the
state of a nonresident association which is served by publication.
The contention is that an affirmance of the court below on the
issue of state law will render proceedings under § 977-b subject to
an attack on constitutional grounds under the doctrine of
Pennoyer v. Neff, 95 U. S. 714. In
our opinion, the argument is without merit.
Pennoyer v.
Neff merely holds that a personal judgment cannot be obtained
against a nonresident on service by publication. It recognizes at
p.
95 U. S. 733
that, for an
in rem action, it is sufficient that the
property be within the state, subject to the control of the Court,
and that there be some form of service which is reasonably
calculated to give notice to parties whose interests may be
affected by the judgment.
Cf. Milliken v. Meyer,
311 U. S. 457,
311 U. S. 463.
The first requirement can be met in other ways than seizure of
title,
e.g., by an injunction against transfer of the
property,
Pennington v. Fourth National Bank, 243 U.
S. 269; by an attachment,
Herbert v. Bicknell,
233 U. S. 70; or by
personal service on the party holding the property within the
state,
Security Savings Bank v. California, 263 U.
S. 282. We have no doubt that, where property is in a
state and comes under the control of a court, as here by
appointment of the temporary receiver, it is fair to permit
substituted service.
Anderson Nat. Bank v.
Luckett, 321
Page 337 U. S. 489
U.S. 233,
321 U. S. 240,
et seq.; see McDonald v. Mabee, 243 U. S.
90.
Since the determination of the state law issue concerning the
title of the temporary receiver by the court below is not
unreasonable, we accept it as correct for the purposes of this
case.
A suggestion appears in petitioner's briefs, but not in the
questions presented by the petition for certiorari, that the
judgments below should be vacated and the case remanded to the
District Court to be held until the parties can secure from the
courts of New York a decision as to whether the temporary receiver
took title to the claim against ASCAP. Waiving the failure to raise
the issue by the petition for certiorari, [
Footnote 22] we consider the contention in
deference to the earnestness with which the point is pressed in the
dissent. [
Footnote 23] If
the state law is that title passed to the temporary receiver on his
appointment prior to the freezing order, the Custodian, by the
assumption of the opinion, would obtain nothing by his order
vesting AKM property. Such a ruling would make unnecessary
consideration of any other issue.
This suggested procedure has been followed in order to avoid a
decision on a federal constitutional issue --
Spector Motor Co.
v. McLaughlin, 323 U. S. 101;
Chicago v. Fielderest Dairies, 316 U.
S. 168;
Railroad Comm'n v. Pullman Co.,
312 U. S. 496;
but cf. Public Utilities Comm'n v. United Fuel Gas Co.,
317 U. S. 456,
317 U. S.
462-463 -- and where the only issue in the case was one
of state law, although federal jurisdiction was based on the
Bankruptcy Act.
Thompson v. Magnolia Petroleum Co.,
309 U. S. 478. We
have refused in a diversity of citizenship case to allow the
difficulty of an issue of state law to deter us
Page 337 U. S. 490
from exercising our jurisdiction when federal determination was
subject to equitable discretion and the state issue was the only
one in the case.
Meredith v. Winter Haven, 320 U.
S. 228. [
Footnote
24] To refrain from deciding it, we there said, would be to
enervate diversity jurisdiction.
Where a case involves a nonconstitutional federal issue,
however, the necessity for deciding which depends upon the decision
on an underlying issue of state law, the practice in federal courts
has been, when necessary, to decide both issues. This was the
course we followed in
Markham v. Allen, 326 U.
S. 490,
326 U. S.
495-496, a case arising under the Trading with the Enemy
Act, where an issue was the construction of a state statute. The
state law question in
Estate of Spiegel v. Commissioner,
supra, was concededly difficult and unsettled; its decision
admittedly controlled the existence of a federal question, since a
finding that there was no possibility of reverter under Illinois
law would have finally determined the issue on which the case was
decided. And yet, although a method may have existed for obtaining
an adjudication on the issue from the Illinois courts,
335 U. S. 335 U.S.
632,
335 U. S.
673-674, this Court followed the procedure which we
adopt here of depending upon the determination of state law by the
Court of Appeals.
335 U. S. 335 U.S.
701,
335 U. S.
707-708. In so doing, it followed the decision in
Helvering v. Stewart, 317 U. S. 154,
317 U. S. 161,
et seq. Erie R. Co. v. Tompkins, 304 U. S.
64, a common law case, is itself a precedent against any
general ruling that cases properly in the federal courts that
depend upon
Page 337 U. S. 491
state law should have that issue submitted to state courts for
decision.
See the later decision in the same case,
Tompkins v. Erie R. Co., 98 F.2d 49.
The cases mentioned above where this Court required submission
of single issues, excised from the controversy, to state courts
were cases in equity. The discretion of equity as to the terms upon
which it would grant its remedies in the light of our rule to avoid
an interpretation of the Federal Constitution unless necessary was
relied upon to justify a departure from normal procedure. In the
Magnolia case, we directed that the trustee file plenary
proceedings to determine title in a state court litigation
necessarily complete in itself. The complaint here in a single
count seeks recovery of the debt from ASCAP and determination of
the Custodian's title to the claim
vis-a-vis the receiver.
Assuming that quieting title to a chattel is an equitable
proceeding and that the District Court can, by cutting out the
title issue and by refusing to proceed in the controversy unless
obeyed, compel the Custodian, by whatever proceedings New York may
provide, to litigate only the narrow issue of title in the
temporary receiver, there would remain the problem of control of
the receiver, by threats of contempt action, to keep him from
raising in such proceedings federal issues such as the right to
secure title as permanent receiver through state judicial action
after the freezing or immobilization order. This federal issue we
decided above. Furthermore, as the state court could reasonably
require complete adjudication of the controversy, the District
Court would perhaps be compelled to stay proceedings in the state
court to protect its own jurisdiction. 28 U.S.C. § 2283. Otherwise,
in sending a fragment of the litigation to a state court, the
federal court might find itself blocked by
res judicata,
with the result that the entire federal controversy would be ousted
from the
Page 337 U. S. 492
federal courts, where it was placed by Congress.
See
note 17 supra.
The submission of special issues is a useful device in judicial
administration in such circumstances as existed in the
Magnolia, Spector, Fielderest, and
Pullman cases,
supra, but, in the absence of special circumstances, 320
U.S. at
320 U. S.
236-237, it is not to be used to impede the normal
course of action where federal courts have been granted
jurisdiction of the controversy.
We reject the suggestion that a decision in this case in the
federal courts should be delayed until the courts of New York have
settled the issue of state law.
Third. The petitioner makes the further point that the
judgment below determining that he had no right, title or interest
to the claim of AKM against ASCAP is beyond the competence of the
federal district court because that property was in the hands of
the state court by virtue of the receivership. Even if title did
not pass, he argues, he, and through him the state court, had
possession of the claim by virtue of his appointment as temporary
receiver before the promulgation of the freezing order. Reliance is
placed on the rulings of cases like
Kline v. Burke Construction
Co., 260 U. S. 226,
260 U. S. 229,
260 U. S. 231;
Princess Lida v. Thompson, 305 U.
S. 456,
305 U. S. 466,
and
Farmers' Loan, Co. v. Lake St. R. Co., 177 U. S.
51,
177 U. S. 61.
The rule declared by these cases is that, when one court has taken
possession and control of a
res, a second court is
disabled from exercising a power over that
res. The
circumstances of this controversy do not present such an
interference with state control of a
res. We are dealing
with a situation more closely resembling determinations of rights
to participate in
res in the hands of state courts.
[
Footnote 25] What
Page 337 U. S. 493
the state court had, at most, was a claim against a debtor,
ASCAP. The judgment enabled the Custodian to collect the debt that
ASCAP owed AKM. Although this judgment determined title to AKM's
claim against ASCAP when the adverse claimant was a state receiver,
those facts did not prevent the federal court from giving a
judicial declaration of the right to the claim. The scheme of the
Trading with the Enemy Act contemplates that federal courts may
provide such determinations. § 17;
cf. Markham v. Allen,
326 U. S. 490,
326 U. S. 495.
The congressional purpose to put control of foreign assets in the
hands of the President through the Custodian, so that there might
be a unified national policy in the administration of the Act,
argues strongly for federal determination of issues of rights in
the blocked assets. Comity does not require abnegation to the
extent that a federal court cannot adjudicate rights to the claim
involved.
Affirmed.
MR. CHIEF JUSTICE VINSON took no part in the consideration or
decision of this case.
MR. JUSTICE JACKSON dissents on the ground that ASCAP is not a
banking institution under the definition in Executive Order No.
8785.
[
Footnote 1]
Tom C. Clark, Attorney General, as Successor to the Alien
Property Custodian, was duly substituted for the latter.
[
Footnote 2]
ASCAP, having stipulated to the entry of a judgment against it,
did not appeal. It filed a motion here to be made a party. It was
permitted to argue, and there is now no occasion to grant the
motion. It is denied.
[
Footnote 3]
By the Joint Resolution of May 7, 1940, 54 Stat. 179.
[
Footnote 4]
6 F.R. 2897.
[
Footnote 5]
For opinions of the New York courts relating to the petitioner's
action against ASCAP,
see Propper v. Buck, N.Y.Law
Journal, October 29, 1941, p. 1268, col. 5;
Propper v.
Buck, 263 App.Div. 807, 32 N.Y.S.2d 103;
Propper v.
Buck, 178 Misc. 76, 33 N.Y.S.2d 11,
aff'd, 263
App.Div. 948, 34 N.Y.S.2d 134;
Propper v. Taylor, 186
Misc. 70, 58 N.Y.S.2d 829,
aff'd, 270 App.Div. 890, 62
N.Y.S.2d 602;
Propper v. Taylor, 186 Misc. 72, 58 N.Y.S.2d
831, 270 App.Div. 890, 63 N.Y.S.2d 601.
[
Footnote 6]
This latter issue was brought forward by the petition for
certiorari, Question Presented No. 3, and, before argument, its
discussion by brief and at the bar was formally requested by this
Court, although no order to that effect was entered.
[
Footnote 7]
See Trading with the Enemy Act, 50 U.S.C. App. §§ 7(c)
and 616:
"§ 616. . . . 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. . . ."
See Clark v. Uebersee Finanz-Korp., 332 U.
S. 480.
[
Footnote 8]
Compare Great Northern R. Co. v. Sutherland,
273 U. S. 182,
where the Custodian vested himself by order on a corporation the
shares of stock appearing on the corporation's books in the name of
an alien enemy.
It may be that all property subject to blocking may not be
subject to vesting. Trading with the Enemy Act, as amended by First
War Powers Act, 55 Stat. 838, 839, Title III(1)(B).
Compare Bishop, Judicial Construction of the Trading with
the Enemy Act, 62 Harv.L.Rev. 721, 723.
[
Footnote 9]
55 Stat. 838, 840, 50 U.S.C. App. § 617.
[
Footnote 10]
54 Stat. 179:
"During 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, investigate, regulate,
or prohibit, under such rules and regulations as he may prescribe,
by means of licenses or otherwise, any transactions in foreign
exchange, transfers of credit between or payments by or to banking
institutions as defined by the President. . . ."
[
Footnote 11]
54 Stat. 179:
"SEC. 2. Executive Order Numbered 8389 of April 10, 1940, and
the regulations and general rulings issued thereunder by the
Secretary of the Treasury, are hereby approved and confirmed."
[
Footnote 12]
6 F.R. 2898, § 5:
"F. The term 'banking institution,' as used in this Order, shall
include any person engaged primarily or incidentally in the
business of banking, of granting or transferring credits, or of
purchasing or selling foreign exchange or procuring purchasers and
sellers thereof, as principal or agent, or any person holding
credits for others as a direct or incidental part of his business,
or brokers, and each principal, agent, home office, branch, or
correspondent of any person so engaged shall be regarded as a
separate 'banking institution.'"
[
Footnote 13]
Executive Order No. 8785,
supra.
[
Footnote 14]
See United States Treasury Department, Administration
of the Wartime Financial & Property Controls of the United
States Government (1942), pp. 1-4.
[
Footnote 15]
Central Trust Co. v. Garvan, 254 U.
S. 554;
United States v. Chemical Foundation,
272 U. S. 1;
Great Northern R. Co. v. Sutherland, 273 U.
S. 182;
Markham v. Allen, 326 U.
S. 490;
Clark v. Uebersee Finanz-Korp.,
332 U. S. 480.
[
Footnote 16]
There is a suggestion that Congress could not, because of the
Tenth Amendment, constitutionally abrogate the power of New York
through its courts, in peacetime, to deal with the local assets of
defunct foreign corporations. The chief reliance is placed upon
Clark v. Williard, 294 U. S. 211, a
case that held that, as between states, the State of the location
of corporation assets had control of their distribution in
liquidation. It cannot be seriously doubted that the danger of war
was sufficiently grave at the time of the freezing order, June 14,
1941, to justify the President's action respecting Austrian
property.
Cf. Silesian-American Corp. v. Clark,
332 U. S. 469,
332 U. S.
474-477.
[
Footnote 17]
50 U.S.C. App. §§ 7(c), 9(a).
Cf. Clark v. Uebersee
Finanz-Korp., 332 U. S. 480,
332 U. S. 487;
Central Trust Co. v. Garvan, 254 U.
S. 554,
254 U. S.
567-568;
Great Northern R. Co. v. Sutherland,
273 U. S. 182,
273 U. S. 194;
Becker Steel Co. v. Cummings, 296 U. S.
74,
296 U. S. 79;
Josephberg v. Markham, 152 F.2d 644, 649.
[
Footnote 18]
293 N.Y. 542, 550, 58 N.E.2d 726, 728:
"The fact that Federal regulations governing transactions in
foreign exchange prevent the payment to Standard until a license
under Executive Order No. 8389, as amended, . . . is procured does
not make conditional the obligation of the New York Agency to pay.
(
See United States Treasury Department, General Ruling No.
12(4) under Executive Order No. 8389 as amended;
also
Feuchtwanger v. Central Hanover Bank, 288 N.Y. 342, 43 N.E.2d
434.)"
Cf. id., 299 N.Y. 113, 85 N.E.2d 894.
Compare
Commission for Polish Relief v. Banca N.A. Rumaniei, 288 N.Y.
332, 43 N.E.2d 345.
[
Footnote 19]
"(d) Any transfer affected by the Order and/or this general
ruling and involved in, or arising out of, any action or proceeding
in any Court within the United States shall, so far as affected by
the Order and/or this general ruling, be valid and enforceable for
the purpose of determining for the parties to the action or
proceeding the rights and liabilities therein litigated;
Provided, however, That no attachment, judgment, decree,
lien, execution, garnishment, or other judicial process shall
confer or create a greater right, power, or privilege with respect
to, or interest in, any property in a blocked account than the
owner of such property could create or confer by voluntary act
prior to the issuance of an appropriate license."
See also Public Circular No. 31, August 2, 1946, 11
F.R. 8351.
[
Footnote 20]
E.g., Decker v. Gardner, 124 N.Y. 334, 26 N.E. 814;
see Keeney v. Home Insurance Co., 71 N.Y. 396, 401.
[
Footnote 21]
E.g., Mutual Brewing Co. v. New York & C.P.F. Co.,
16 App.Div. 149, 45 N.Y.S. 101;
Metropolitan Life Ins. Co. v.
Sanborn, 34 Misc. 531, 69 N.Y.S. 1009;
see N.Y.
General Corporation Law, §§ 162, 163, 168, and annotations thereto.
Petitioner calls our attention to
Nealis v. American Tube &
Iron Co., 150 N.Y. 42, 45, 44 N.E. 944, a case not cited to
the Court of Appeals. This case says that a temporary receiver
under a different statute
"is vested with title, and represents the corporation and its
creditors as fully as a permanent receiver after final judgment of
dissolution."
P. 45. This case, however, involved the right of a temporary
receiver to sue, and the opinion deals with that problem, rather
than the distinction between a right to obtain possession and
title.
See In re Warren E. Smith Co., 31 App.Div. 39, 52
N.Y.S. 877, 884.
[
Footnote 22]
Connecticut R. & L. Co. v. Palmer, 305 U.
S. 493.
[
Footnote 23]
Cf. West v. Edward Rutledge Timber Co., 244 U. S.
90,
244 U. S. 100.
[
Footnote 24]
Where there is no suggestion to hold and send to a state court
for the resolution of a state issue, we decide issues of state law.
See cases in federal courts under diversity jurisdiction.
Wichita Royalty Co. v. City National Bank, 306 U.
S. 103;
West v. A.T. & T. Co., 311 U.
S. 223;
Fidelity Trust Co. v. Field,
311 U. S. 169;
Six Companies v. Highway Dist., 311 U.
S. 180;
Stoner v. New York Life Ins. Co.,
311 U. S. 464;
Palmer v. Hoffman, 318 U. S. 109,
318 U. S.
117.
[
Footnote 25]
See Markham v. Allen, 326 U. S. 490;
Commonwealth Trust Co. v. Bradford, 297 U.
S. 613;
Clark v. Tibbetts, 167 F.2d 397,
401.
MR. JUSTICE FRANKFURTER, dissenting in part.
The Court recognizes that central to determining the effect of
the Alien Property Custodian's freezing and vesting orders is the
effect under New York law of petitioner's appointment as temporary
receiver on June 13, 1941. It observes that
"The precise issue of state law involved,
i.e., whether
the temporary receiver under § 977-b of the New York Civil Practice
Act is vested with title by virtue of his appointment, is one which
has not been
Page 337 U. S. 494
decided by the New York courts."
And it concedes that the language of the relevant New York
statutes "is easily susceptible to varying interpretations." Yet it
puts its own interpretation on those statutes, though that
interpretation may be displaced tomorrow by the only courts which
have power to render an authoritative interpretation of New York
law -- the courts of the New York.
In other cases that have come before us in which decision of a
federal issue of the necessity for its decision depended on a
seriously doubtful question of State law, we have directed that
application should first be made to the courts of the State for
final disposition of the State question.
Thompson v. Magnolia
Petroleum Co., 309 U. S. 478;
Railroad Comm'n of Texas v. Pullman Co., 312 U.
S. 496;
Chicago v. Fielderest Dairies, Inc.,
316 U. S. 168;
Spector Motor Service, Inc. v. McLaughlin, 323 U.
S. 101;
A.F. of L. v. Watson, 327 U.
S. 582. In each of these cases, the discretion of a
federal court of equity could practicably be exercised in a way
which retained ultimate jurisdiction of the case while permitting
adjudication of the State question in the State courts. In each,
there were available State procedures capable of providing a prompt
decision, and the litigation had not already consumed such an
unconscionable amount of time as to make recourse to them
inexpedient.
Cf. Public Utilities Comm'n v. United Fuel Gas
Co., 317 U. S. 456. The
present case meets all those conditions,
see N.Y.Civ.Prac.
Act § 473, and should receive the same disposition.
It is true that, in all but one of these cases, recourse to the
State courts also served the purpose of avoiding what might have
proved to be unnecessary decision of a constitutional issue.
But see Thompson v. Magnolia Petroleum Co., 309 U.
S. 478. Even more fundamental, however, was recognition
of the importance of maintaining
Page 337 U. S. 495
harmonious relations between parallel systems of State and
federal courts in a situation where, because State law controlled,
the State courts had the last word, and so a federal court, at
best, could make only an informed guess. That this was a dominant
consideration in the mind of the Court appears plainly in the
language of its opinions. The following passages are
illustrative:
1.
"The last word on the meaning of Article 6445 of the Texas Civil
Statutes, and therefore the last word on the statutory authority of
the Railroad Commission in this case, belongs neither to us nor to
the district court, but to the supreme Court of Texas. In this
situation, a federal court of equity is asked to decide an issue by
making a tentative answer which may be displaced tomorrow by a
state adjudication. . . . The reign of law is hardly promoted if an
unnecessary ruling of a federal court is thus supplanted by a
controlling decision of a state court. . . ."
"Few public interests have a higher claim upon the discretion of
a federal chancellor than the avoidance of needless friction with
state policies, whether the policy relates to the enforcement of
the criminal law,
Fenner v. Boykin, 271 U. S.
240;
Spielman Motor Co. v. Dodge, 295 U. S.
89; or the administration of a specialized scheme for
liquidating embarrassed business enterprises,
Pennsylvania v.
Williams, 294 U. S. 176; or the final
authority of a state court to interpret doubtful regulatory laws of
the state,
Gilchrist v. Interborough Co., 279 U. S.
159;
cf. Hawks v. Hamill, 288 U. S.
52,
288 U. S. 61. These cases
reflect a doctrine of abstention appropriate to our federal system
whereby the federal courts, 'exercising a wise discretion,'
restrain their authority because of 'scrupulous regard for the
rightful independence of the state governments' and for the smooth
working of the federal judiciary.
See Cavanaugh v. Looney,
248 U. S.
453,
248 U. S. 457;
Di
Giovanni
Page 337 U. S. 496
v. Camden Ins. Assn., 296 U. S. 64,
296 U. S.
73."
Railroad Comm'n of Texas v. Pullman Co., 312 U.
S. 496,
312 U. S.
499-501.
2.
"We are of the opinion that the procedure which we followed in
the
Pullman case should be followed here. Illinois has the
final say as to the meaning of the ordinance in question. It also
has the final word on the alleged conflict between the ordinance
and the state Act. The determination which the District Court, the
Circuit Court of Appeals or we might make could not be anything
more than a forecast -- a prediction as to the ultimate decision of
the Supreme Court of Illinois. . . . As we said in the
Pullman case, 'The resources of equity are equal to an
adjustment that will avoid the waste of a tentative decision' and
any 'needless fiction with state policies.' . . . It is an exercise
of a 'sound discretion, which guides the determination of courts of
equity.'
Beal v. Missouri Pacific R.
Co., [
312 U.S.
45,
312 U. S. 50]. In this case,
that discretion calls for a remission of the parties to the state
courts, which alone can give a definitive answer to the major
questions posed. Plainly they constitute the more appropriate forum
for the trial of those issues.
See 54 Harv.L.Rev. 1379.
Considerations of delay, inconvenience, and cost to the parties
which have been urged upon us do not call for a different result.
For we are here concerned with the much larger issue as to the
appropriate relationship between federal and state authorities
functioning as a harmonious whole."
Chicago v. Fielderest Dairies, 316 U.
S. 168,
316 U. S.
171-173.
3.
". . . if, as the District Court thought, this Florida law is
not self-executing, suits seeking to raise the due process question
or any constitutional question would be premature until Florida
supplied sanctions for its enforcement. A decision today on the
merits might therefore amount to no more than an advisory opinion.
. . . The resources of equity are not inadequate
Page 337 U. S. 497
to deal with the problem so as to avoid unnecessary friction
with state policies while selective cases go forward in the state
courts for an orderly and expeditious adjudication of the state law
questions."
A.F. of L. v. Watson, 327 U. S. 582,
327 U. S.
598-599.
So here, though no constitutional issue is present, regard for
the respective orbits of State and federal tribunals is the best of
reasons, as a matter of judicial administration, for requiring a
definitive adjudication by the New York courts, rather than
proceeding on the basis of our own tentative guess as to the
meaning of the New York statutes. That federal issues may remain is
no justification for refusing to submit to the New York courts a
separable issue of New York law. We have no occasion to assume that
they will go on to decide these federal questions when a federal
court has expressly retained jurisdiction to decide them.
Cf.
Federal Power Comm'n v. Pacific Power & L. Co.,
307 U. S. 156,
307 U. S.
160.
We should remand the case to the District Court with
instructions to retain jurisdiction pending submission proceedings
of New York by appropriate proceedings of the question whether
title to AKM's claim against ASCAP passed to petitioner upon his
appointment as temporary receiver.