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ed. 135, 144; Tyler v. Defrees, 11 Wall. 331, 20 L. ed. 161; United States v. Ju Toy, 198 U. S. 253, 49 L. ed. 1040, 25 Sup. Ct. Rep. 644; Brown v. United States, 8 Cranch, 110, 3 L. ed. 504.

The contention in appellant's brief that, because the President personally did not make the adjudication of the enemy ownership of the shares, the act of the Alien Property Custodian in seizing the shares was without jurisdiction and void, is unsound.

Confiscation Cases (United States v. Clarke) 20 Wall. 92, 109, 22 L. ed. 320, 323; Selective Draft Law Cases (Arver v. United States) 245 U. S. 366, 389, 62 L. ed. 349, 357, L.R.A.1918C, 361, 38 Sup. Ct. Rep. 159, Ann. Cas. 1918B, 856. The contention of the appellant that the Alien Property Custodian precluded himself from seizing the 14,900 shares because he had seized the rights of the Leipzig company under the contract is unfounded in fact and unsound in law.

Election of Remedies, Eng. Law Dict.; Cyc. Law Diet.; 15 Cyc. 252, 257; Re Garver, 176 N. Y. 386, 68 N. E. 667; Taussig v. Hart, 49 N. Y. 301.

Mr. Justice Van Devanter delivered the opinion of the court:

This is a suit to establish a claim to and prevent a sale of 14,900 shares of the capital stock of the Botany Worsted Mills, a New Jersey corporation, which were seized by the Alien Property Custodian under the Trading with the Enemy Act as the property of a German corporation called Kammgarnspinnerei Stoehr & Co., Aktiengesellschaft. The plaintiff is a citizen of the United States, residing in New York, and sues in the right of Stoehr & Sons, Incorporated, a New York corporation, of which he is a stockholder, his asserted justification for so suing being that the directors of the corporation are agents of the Alien Property Custodian, and so far under his control that it would be useless to request them to bring the

suit.

The grounds for relief urged in the bill are that the shares, although seized and proposed to be sold as the [241] property of the German corporation, are in truth the property of the New York corporation; that, even if it does not own them, it has a substantial interest in them under a pre-war contract between it and the German corporation; that the shares cannot be taken from it consistently with due process of law, as guaranteed by the 5th Amendment, save through a

judicial proceeding wherein it has a right and an opportunity to be heard; that the shares were seized and are about to be sold without any such proceeding or hearing, and in violation of subsisting treaty provisions; and that the seizure, as made, did not conform to designated provisions of the Trading with the Enemy Act, and the sale, as proposed, will not be in accord with other provisions of the act.

After a full hearing the district court overruled the objections urged against the initial seizure; found from the proofs that the German corporation was the beneficial owner, that the New York corporation had no actual interest in the shares, and that the contract between those corporations, stressed by the plaintiff, "was not intended to represent the real purpose of the parties at all, but to serve as a cover for another purpose;" and as a result of the findings the court held that neither the plaintiff nor his corporation was entitled to any relief, and accordingly dismissed the bill. The plaintiff then asked and was allowed a direct appeal to this court. His assignments of error cover all the grounds on which the seizure and proposed sale were attacked in the bill.

We shall assume, as did the district suit such as this in the right of his corcourt, that a stockholder may bring a poration, where there are circumstances and that the plaintiff has shown suffijustifying such respresentative action, cient reason for suing in that capacity. See Equity Rule 27, 226 U. S. p. 8, Appx., 57 L. ed. 1640, 33 Sup. Ct. Rep. xxv.

whether taken as originally enacted, The Trading with the Enemy Act, October 6, 1917, chap. 106, 40 Stat. at L. 411, Comp. Stat. § 3115 a, Fed. Stat. Anno. Supp. 1918, p. 847, [242] or as since amended, March 28, 1918, chap. 28, 40 Stat. at L. 459, 460; November 4, 1918, chap. 201, 40 Stat. at L. 1020; July 11, 1919, chap. 6, 41 Stat. at L. 35; June 5, 1920, chap. 241, 41 Stat. at L. 977, is strictly a war measure and finds its sanction in the constitutional provision, art. 1, § 8, cl. 11, empowering Congress "to declare war, grant letters of marque and reprisal, and make rules concerning cap

tures on land and water." Brown v. United States, 8 Cranch, 110, 126, 3 L. ed. 504, 510; Miller v. United States (Page v. United States) 11 Wall. 268, 305, 20 L. ed. 135, 144.

It is with parts of the act which relate to captures on land that we now are concerned. They invest the President with extensive powers respecting the

sequestration, custody, and disposal of enemy property. By § 5 he is in terms authorized to exercise "any" of these powers "through such officer or officers as he shall direct." By § 6 he is authorized to appoint and "prescribe the duties of" an officer to be known as the Alien Property Custodian. By § 7c, as amended November 4, 1918, direct provision for sequestering enemy property is made as follows:

"If the President shall so require any money or other property including choses in action, and rights and claims of every character and description owing or belonging to or held for, by, on account of, or on behalf of, or for the benefit of, an enemy or ally of enemy not holding a license granted by the President hereunder, which the President after investigation shall determine is so owing or so belongs or is so held, shall be conveyed, transferred, assigned, delivered, or paid over to the Alien Property Custodian, or the same may be seized by the Alien Property Custodian; and all property thus acquired shall be held, administered and disposed of as elsewhere provided in this act.

"Whenever any such property shall consist of shares of stock or other beneficial interest in any corporation, [243] association, or company or trust, it shall be the duty of the corporation, association, or company or trustee or trustees issuing such shares or any certificates or other instruments representing the same or any other beneficial interest to cancel upon its, his, or their books all shares of stock or other beneficial interest standing upon its, his, or their books in the name of any person or persons, or held for, on account of, or on behalf of, or for the benefit of any person or persons who shall have been determined by the President, after investigation, to be an enemy or ally of enemy, and which shall have been required to be conveyed, transferred, assigned, or delivered to the Alien Property Custodian or seized by him, and in lieu thereof to issue certificates or other instruments for such shares or other beneficial interest to the Alien Property Custodian or otherwise, as the Alien Property Custodian shall require.

"The sole relief and remedy of any person having any claim to any money or other property heretofore or hereafter conveyed, transferred, assigned, delivered, or paid over to the Alien Property Custodian, or required so to be, or seized by him shall be that pro

vided by the terms of this act, and in the event of sale or other disposition of such property by the Alien Property Custodian, shall be limited to and enforced against the net proceeds received therefrom and held by the Alien Property Custodian or by the Treasurer of the United States."

By § 9, as twice amended, anyone, "not an enemy or ally of enemy," claiming any interest, right, or title in any money or other property so sequestered and held, may give notice of his claim and institute a suit in equity against the Custodian or the Treasurer, as the case may be, to establish and enforce his claim; and where suit is brought, the money or property is to be retained by the Custodian or in the Treasury, to abide the final decree. By § 12, as amended March 28, 1918, the Custodian is [244] clothed with "all the powers of a common-law trustee" in respect of all enemy property coming into his hands, and is given authority, subject to the President's supervision, to manage and dispose of the same, by sale or otherwise, as if he were the absolute owner, save as the power of disposal may be suspended by a suit under § 9. As respects the ultimate disposition of the property or its proceeds, § 12 says: "After the end of the war any claim of any enemy or of an ally of enemy to . any money or other property received and held by the Alien Property Custodian or deposited in the United States Treasury, shall be settled as Congress shall direct."

The President, by orders of October 12, 1917, and February 26, 1918, committed to the Alien Property Custodian the executive administration of § 7c, including the power to determine after investigation whether property was enemyowned, etc., and to require the surrender or seizure of such as he should determine was so owned. In exercising this power the Custodian, after investigation, determined, in substance, that the shares now in question, which then stood in the name of the New York corporation on the books of the Botany Worsted Mills, belonged to the German corporation, that it was an enemy not holding a presidential license, and that the New York corporation held the shares for its benefit; and in further exercising this power the Custodian seized the shares and required the Botany Worsted Mills to transfer them to his name on its books, in accordance with the provision in § 7c, before quoted.

One objection urged by the plaintiff

is that the seizure permitted by the act is confined to money or property "which the President, after investigation, shall determine" is enemy-owned, etc., and that here there was no such determination by the President, but only by the Custodian. Whether the objection would be good if it turned entirely on the words of 7c, on which the plaintiff relies, we need [245] not consider; for they obviously are qualified and explained by § 5, which very plainly enables the President to exercise his power under § 7e "through such officer or officers as he may direct." By the orders already noticed, the President directed that this power be exercised through the Alien Property Custodian. It therefore is as if the words relied on had been "which the President, acting through the Alien Property Custodian, shall determine after investigation" is enemy-owned, etc. 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. Central U. Trust Co. v. Garvan, 254 U. S. 554, ante, 403, 41 Sup. Ct. Rep. 214; Confiscation Cases (United States v. Clarke) 20 Wall. 92, 109, 22 L. ed. 320, 323.

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contrary, it distinctly reserves to any
claimant who is neither an enemy nor an
ally of an enemy a right to assert and
establish his claim by a suit in equity
unembarrassed by the precedent exec-
utive determination. Not only so, but,
pending the suit, which the claimant
may bring as promptly after the seizure
as he chooses, the property is to be re-
tained by the Custodian to abide the
result, and, if the claimant prevails, is
to be forthwith returned to him. Thus
there is provision for the return of prop-
erty mistakenly sequestered; and we
have no hesitation in pronouncing it
adequate, for it enables the claimant, as
of right, to obtain a full hearing on his
claim in a court having power to enforce
it if found meritorious.

That the shares were transferred to
the Custodian's name does not affect the
question, for, considering the nature of
the property, that was but an incident of
an effective seizure, and, if a return of
the shares were ordered, a retransfer
would follow as of course.

Treating this as a suit under § 9,the plaintiff having filed a notice of claim under that section, the next question is, Has the New York corporation such an interest in the shares as entitles it, or the plaintiff in its right, to demand that they be freed from the seizure? Whether it has any interest turns on the effect to be given to the contract between it and the German corporation, under which the plaintiff insists it became the owner or acquired a substantial interest. The district court, as we have indicated, found that the contract was not intended to affect the ownership as between the two corporations, but to serve as a cover for something else, and that, after the contract, the German corporation remained, as it had been before, the sole beneficial owner. The facts bearing on the question are as follows:

The plaintiff further objects that the shares, although claimed by and standing in the name of the New York corporation, which concededly was neither an enemy nor an ally of an enemy, were seized and transferred to the name of the Alien Property Custodian in virtue of a determination by an executive officer in an ex parte administrative proceeding that they belonged to an alien enemy, the gist of the objection being that the shares could not be taken from the New York corporation consistently with due process of law without first according it a hearing on its claim in a court of justice. The objection rests on neous assumptions and is not tenable. That Congress, in time of war, may At the beginning of the World War, authorize and provide for the seizure and during its early stages, the Stoehr and sequestration, through executive family, consisting of a father and three channels, of property believed to be [247] sons, were engaged in business in enemy-owned, if adequate provision be New York as copartners under the name made for a return in case of mistake, is of Stoehr & Sons. The father and one son not debatable. Central U. Trust Co. v. were German subjects, residing in GerGarvan, supra. There is no warrant for many; one son, Hans E. Stoehr, was a saying that the enemy ownership must German subject residing in the United be determined judicially before the prop- States, and the remaining son, Max W. erty can be seized; and the practice has Stoehr, was a naturalized citizen of the been the other way. The present act United States, residing therein. commits the determination of that queswere shareholders in the German cortion to the President, or the represent- poration, and the father and son in ative through whom [246] he acts, but it Germany were among its chief officers. does not make his action final. On the | All were directors of the Botany Worst

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ed Mills, and Hans E. Stoehr and Max | $5,000 was to be retained by the German W. Stoehr were directing and control- corporation, and neither corporation ling its affairs, one being its treasurer was to have "any further claim against and the other its secretary. It was a the other" by reason of the contract. manufacturing concern with large hold- Possibly the stipulated price was less ings, had a well-established and exten- than the actual value; but, however this sive business, had been paying large may have been, the assets and situation dividends and gave promise of contin- of the New York corporation were such uing to do so. The German corporation that it reasonably could not have been acquired the 14,900 shares in that com- expected to make the required payments. pany long prior to the war, and in 1915, after the war became flagrant in Europe, transferred them to Hans E. Stoehr and Max W. Stoehr, to be held in trust for it as the beneficial owner. Stoehr & Sons, the copartnership, also had 5,690 shares in that company, and these, with the 14,900, constituted a majority of its stock.

Diplomatic

relations between the United States and Germany were severed February 3, 1917, and, as was commonly understood, war between them was then imminent. The Stoehrs took that view and began to adjust their affairs accordingly. They caused the New York corporation to be organized, and on February 19, 1917, transferred to it the entire assets and business of their copartnership, taking in exchange all of its capital stock, and putting the same in a five-year voting trust as a means of protecting and preventing a severance of their interests. On the following day, February 20, 1917, the contract relating to the 14,900 shares in the Botany Worsted Mills was made, and the shares were immediately transferred on its books to the name of the New York corporation. [248] In that transaction Hans E. Stoehr acted for the German corpora- | tion and the directors of the New York corporation for it, the directors being Hans E. Stoehr, Max W. Stoehr, George G. Roehlig, and Alfred de Liagre, the last two being relatives of the Stoehrs. The attorney who had advised and assisted them in transferring the copartnership assets and business also advised and assisted them in this. The shares were worth approximately $5,000,000; and yet the initial payment was only $5,000, and even that was paid by mere book entries. The full stipulated price was the book value of the shares, with good will and other intangible assets eliminated, and was payable in five future annual instalments. The stock certificates, transferred as just stated, were left in the custody of the German corporation as collateral security. If payment was not made when due, nor within sixty days after demand, the shares were to be retransferred, the

After the contract the dividends accruing on the shares were not paid to the New York corporation, but were credited to it in a "special" account on the books of the Botany Worsted Mills, this being directed by Hans E. Stoehr, president of the former and treasurer of the latter.

War was declared by Congress April 6, 1917, 40 Stat. at L. 1, chap. 1, and the Trading with the Enemy Act was passed October 6th following. Up to the latter date no preparation was made for making the first payment under the contract, although it was to be about $1,000,000. Under the act it became the duty of every domestic corporation to report fully whether it owed any money to or held any property [249] for an enemy, and also whether any of its shares were owned by or held for an enemy. In the report of the New York corporation, signed by Max W. Stoehr, the 14,900 shares covered by the contract were not reported as held for the German corporation, nor was the stipulated price or any part thereof reported as owing to that corporation. But in the report of the Botany Worsted Mills, signed by Thomas Prehn, it was said that that company had "reason to believe" that the German corporation had an interest in the shares. This led to an insistent call for full information, and resulted in some correspondence and several conferences at the Alien Property Custodian's office, in all of which Herbert Heyn represented the New York corporation and the Botany Worsted Mills, he being the attorney who had advised and assisted the Stoehrs in adjusting their copartnership affairs and in making the contract. February 5, 1918, while Heyn was attending one of the conferences, Hans E. Stoehr, as president of the New York corporation and treasurer of the Botany Worsted Mills, sent to him, for use at the conference, a list of the latter company's stockholders, in which the German corporation was described as having 14,900 shares and the New York corporation as having only 5,685. In an accompanying letter he said: "The majority of the stock of the Botany

The district court, after reviewing the proofs at length, concluded that the contract was not prompted by commercial motives, nor based on an estimate of mutual advantages, and was not intended as a genuine business transaction, but was made to avoid inconveniences which otherwise might ensue from a state of war; and that the parties intended to leave the beneficial ownership in the German corporation, and not to pass it to the New York corporation. We reach the same conclusion. On no other theory can the acts of those who were concerned be explained or their declarations reconciled. The mere recitation of the facts makes this so plain that we refrain from any special discussion of them.

Worsted Mills . . . is held by parties | 1918, an attorney who had been looking who are alien enemies," a statement into the contract made an oral report, which was true if the 14,900 shares be- in the course of which he called in queslonged to the German corporation, and tion the purpose with which the contract not true if they belonged to the New was made, and said it "would not hold York corporation. Four days later water." Max W. Stoehr, although presHeyn, with the approval in writing of ent, said nothing in support of the conHans E. Stoehr as such president and tract. Not until he [251] ceased to be an treasurer, wrote to the Alien Property officer of the corporation did he manifest Custodian, saying of the purpose with any opposition to the seizure. His only which the New York corporation was explanation of his silence while he reformed: "The immediate occasion for mained a director is that he feared he the organization of the corporation in would lose that position if he took any February, 1917, was this: It was as- other course. sumed that if there was a declaration of war between the United States and Germany, the partnership [of Stoehr & Sons] would probably have to cease, [250] being dissolved by reason of the alien-enemy character of Eduard Stoehr, the father, and George Stoehr, the brother, the results of such dissolution being, of course, obviously unfortunate and conceivably disastrous;" and saying of the 14,900 shares: "Regarding the contract for the purchase of said 14,900 shares by Stoehr & Sons, Incorporated, from Stoehr & Company, of Leipzig, Germany, it has been fully explained that the control of Botany might be imperiled by a state of war, because the voting right on stock of alien enemies, or in which alien enemies had the beneficial interests (as was the case with said 14,900 shares), was doubtful under the decisions of the courts, and, if deprived of the voting right, the control of Botany might be lost. This contract was made with reference to the control of Botany as between its stockholders, and had, of course, no reference to the status of such control so far as the Alien Property Custodian is concerned. Such status is not affected whether such shares are in Stoehr & Company, the Leipzig corporation, or in Stoehr & Sons, Incorporated, the New York corporation. . While Botany is managed in this country, considerably more than a majority of its stock is controlled by alien-enemy interests."

Max W. Stoehr, the plaintiff, was a director and the secretary of the New York corporation from the time it was organized until October 14, 1918. He participated in making the contract relating to the 14,900 shares and signed it as secretary. The shares were seized in April, 1918, and he knew of the seizure. The other directors at that time were new. He regularly attended their meetings, but did not suggest to them that the corporation had an interest in the shares. At a meeting in August,

The treaty provisions relied on (articles 23 and 24, July 11,1799, 8 Stat. at L. 174) relate only to the rights of merchants of either country "residing in the other" when war arises, and therefore are without present application.

Of the objections specially directed against the proposed sale, it is enough to observe that as the New York corporation does not own or have any interest in the shares, it is not in a position to criticize or attack the sale; and, of course, a stockholder suing in its right is in no better position. Decree affirmed.

[252] ST. LOUIS, IRON MOUNTAIN, & SOUTHERN RAILWAY COMPANY and United States Fidelity & Guaranty Company, Appts.,

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