UEBERSEE FINANZ-KORP. v. McGRATH(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.
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 [343 U.S. 205, 207] certain shares of stock in the Adam Opel Works, a German corporation largely owned by General Motors Corporation. Wilhelm had an agreement with General Motors to sell his shares at a price. In 1931, he became alarmed at business conditions in Germany and desired to get his stock out of the country to save his investment for himself and his family from the economic and governmental influences there prevailing. In that year, he and his wife entered into what was known under German law as a usufruct agreement with their only son, Fritz, who had not lived in Germany since 1929 and for that reason was not subject to the German restrictions upon the handling of this property. By this agreement, Wilhelm's title to the shares in the Adam Opel Works was transferred to Fritz. The instrument provided as follows:
After much expert testimony, the District Court found the law of Germany pertaining to such usufruct agreement to be as follows:
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 [343 U.S. 205, 210] was at war with Hungary from December 13, 1941. During October, November, and December 1941, the Hungarian corporation shipped bauxite to Germany and had a contract to do so until the end of 1942.
In 1942, the Alien Property Custodian vested the stocks held by petitioner in several American corporations and all the right, title, and interest of petitioner in and to a certain contract with another American corporation. All of the stocks had been acquired from the proceeds of the original usufruct property.
From October 5, 1931, the date of the usufruct agreement, the usufruct property was controlled, used, and in all ways handled and directed by Wilhelm and his managing agents. The interest of Fritz in petitioner was wholly subordinated to that of Wilhelm. Fritz had the bare legal title and the right to 20% of the income from the property. Wilhelm is now dead. His wife, a daughter, and the son, Fritz, still survive.
Petitioner was in this Court on the pleadings in this case in Clark v. Uebersee Finanz-Korp., A. G., 332 U.S. 480 . There, it was alleged in the complaint that petitioner was not an enemy or ally of an enemy, and that at no time specified in the complaint had the property in question been owned or controlled, directly or indirectly, in whole or in part, by an enemy, an ally of an enemy, or a national of a designated enemy country; that none of the property had been owing or belonging to or held on account of or for the benefit of any such person or interest. This Court construed these allegations "to mean that the property is free of all enemy taint and particularly that the corporations whose shares have been seized, the corporations which have a contract in which respondent has an interest, and respondent itself, are companies in which no enemy, ally of an enemy, nor any national of either has any interest of any kind whatsoever, and that respondent has not done business in the territory of the [343 U.S. 205, 211] enemy or any ally of an enemy." P. 482. The complaint alleging such facts was held to be sufficient as against a motion to dismiss, and the case was sent back for trial. Upon the trial, the facts were found as above stated.
However, from the facts found, it is clear that petitioner for all practical purposes was, to the extent of 97%, largely owned, managed, used, and controlled by Wilhelm von Opel, a national of Germany. The findings demonstrate that petitioner was a corporate holding company acquired for the purpose of enabling Wilhelm to control and use his property as he saw fit. His interest was paramount and controlling. The interest of Fritz was wholly and in reality subordinated to Wilhelm's, except as to the right of Fritz to receive 20% of the income from the usufruct property. Petitioner was neutral in name only. Its enemy taint was all but complete because of the predominant influence and control of Wilhelm. Wilhelm had and used the substance, while Fritz had the bare legal title; and such right as this gave Fritz, he exercised or failed to exercise in complete subordination to the will of his father. We agree with the Court of Appeals when it said:
It is suggested that vested property must be returned unless there is proof of actual use of the property for economic warfare against the United States. The crucial fact is not the actual use by an enemy-tainted corporation of its power in economic warfare against the United States. It is the existence of that power that is controlling and against which the Government of the United States may move. The Government does not have to wait for the enemy to do its worst before it acts. Cf. Miller v. United States, 11 Wall. 268 at 306.
As the District Court said, it would be difficult "to find a stronger case of enemy taint in vested property short of full ownership by an enemy than exists in this case. The neutral aspect of ownership in the property is insignificant . . . ." 82 F. Supp. at 606.
In view of the decision today in Kaufman v. Societe Internationale, ante, p. 156, consideration must be given to an effort of petitioner to open the case for the assertion of the rights of Fritz von Opel.
Petitioner attempted at the end of the litigation in the District Court to have the case reopened for the purpose of asserting and establishing the nonenemy status of Fritz von Opel. Because of the failure to diligently and timely [343 U.S. 205, 213] assert the interest of Fritz, the District Court refused to reopen the case for further consideration of such separate interest.
The judgment of the Court of Appeals is affirmed as to petitioner, but in view of the novel holding in Kaufman, the Court is of the opinion that its decision in Hormel v. Helvering, 312 U.S. 552 , is applicable. We accordingly vacate the judgment of the court below and remand the cause to the District Court for consideration, in the light of Kaufman and this opinion, of any application that may be made on behalf of Fritz von Opel within 30 days from the date of remand, and in all other respects the judgment is affirmed.