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UEBERSEE FINANZ-KORPORATION, A. G., v. McGRATH, ATTORNEY GENERAL, SUCCESSOR TO THE ALIEN PROPERTY CUSTODIAN.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT.
No. 178. Argued January 2, 1952.-Decided April 7, 1952.
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 Powers 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. 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 FinanzKorp., 332 U. S. 480. Pp. 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. 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. 156, the cause is remanded to the District Court for consideration, in
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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. 212213.
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. 847. Affirmed in part and vacated and remanded in part, p. 213.
Thurman Arnold argued the cause for petitioner. With him on the brief were Edward J. Ennis and Harry M. Plotkin.
James L. Morrisson argued the cause for respondent. With him on the brief were Solicitor General Perlman, Assistant Attorney General Baynton, Myron C. Baum and Joseph Laufer.
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, 88 U. S. App. D. C. 182, 191 F. 2d 327. 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
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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:
"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:
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"(a) to the enjoyment of the property or, in the case of money or securities, to the income from the securities;
"(b) to co-possession 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-possession;
"(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
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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