Simon v. Miller

298 F. 520 | S.D.N.Y. | 1923

UEARNED HAND, District Judge

(after stating the .facts as above). [1] The first three captures were invalid, and cannot serve 'the defendant. They must stand upon the theory that the fund was created for Albert’s benefit, which is not true. The deposit arose because the officials of the Department of Justice wished to impound the plaintiff’s assets up to the supposed balance due on the account, and to prevent its payment to Albert. Even if it be true that the deposit in fact created a security for some such official as the Custodian, to be later appointed, still it was consensual in its origin, and the United States had no right to secure its possession by capture. To acquire such property it must resort to the ordinary processes of law, exactly as in the case of any other civil rights with which it might be vested. The seizure, being unauthorized, was wrongful, and the defendant cannot assert it to maintain custody of the fund.

[2] However, it is argued that, although the supposed security was not created for Albert, still after the passage of the Trading with the Enemy Act it became property held for his benefit. The theory is this: That as it was created to secure any claim which the Custodian might assert upon the account, it became a security for that account. That after seizure of the account Congress might determine to direct the Custodian to repay all sums collected to Albert. Hence, if the Custodian realized upon the security and Albert might get the proceeds, the security was already held for Albert.

Clearly this is not what was meant by the words “for the benefit of” an alien enemy. The enemy must have some .present interest in the property to subject it to capture. Here there was no more than a mere possibility that Congress might recognize such an interest, which it has not even yet done, except to a limited extent. The argument is especially fanciful, in view of the fact that the deposit was made especially to prevent payment to Albert, and was to terminate with the war, when for the first time Albert could regain any capacity to sue in an American court. Thus at no time before April 3, 1919, the date of the last seizure, had Albert any existing interest in the deposit to be captured. The defendant cannot prevail on this theory.

[3] Hence the defendant must rely on the seizure and statement of the account on June 1, 1920, and the question is whether the Custodian’s power extended beyond the right to garnish or attach Albert’s claim, and included the right to state the account ex parte and to compel the payment* of the balance found. Taken literally, the words of section 7 (c) seem to go so far:

“Any money * * * owing * * * to * * * an enemy * * * which the President after investigation shall determine is so owing * * * shall he * * * paid over to the Alien Property Custodian or * * * may be seized by the Alien Property Custodian.”

It is argued, further, that if the Custodian might, as in fact he might, demand the delivery of chattels without regard to whether they were enemy owned, it is not severer to compel the payment of the balance at which he states an account between the parties. A chattel on bailment was once only a chose in action. To the objection that in the-case of a chattel the thing itself is the res, while in the case of a. chose in action the existence of any res depends upon its liquidation, the defendant answers that the only capturable res in the case of a chattel is the enemy’s jus in re, and that the Custodian’s power therefore concededly extends beyond what may turn out to be his eventual rights.

The consequences of such a power are excessively drastic, and would indeed be extravagant in operation. The Custodian might, in the case of the breach of a contract for the sale of goods or for their manufacture, undertake a liquidation of damages which, however honest, would have no relation to what should eventually be recovered. How could such a finding be enforced? The debtor must collect money to pay it, and, if he had none, must sell his goods till he got in hand the necessary cash. That is in fact execution in limine, a loss scarcely remediable by suit under section 9. It contradicts all our notions of the rights of putative debtors who dispute the-debt; it has no analogy in those possessory suits on which reliance was put, in part anyway, in Central Union Trust Co. v. Garvan, 254 U. S. 554, 41 Sup. Ct. 214, 65 L. Ed. 403. Rather one would look to the common procedure in garnishment, by which a discharge of the debt is paralyzed, and the asset effectively sequestered, until any controversy as to its existence or amount can be determined.

Nor does it seem to me that any such interpretation is called for by the general purposes of the legislation in question. Captures had a double purpose. They changed the title in any actual rights which the enemy might have in the captured property, and they sequestered the property itself in which those rights might inhere. The plaintiff concedes that the'demand of June 1, 1920, gave title to the Custodian to all Albert’s rights to the account; he disputes, however, that after the Custodian’s statement of the account his individual assets might be sequestered to pay the balance found.

The summary power to sequester property depends upon’the protection necessary to secure the United States in the assertion of its eventual right by capture; the property must be held in custody until any disputes shall be determined, just as is done in replevin or attachment. In the case of chattels or tenements this involves possession ad interim of the property itself, since otherwise the chattel might be delivered or the profits collected and disbursed. That would make ineffectual any -final decree óf title.

But these considerations cannot apply to the capture of a debt. A creditor has no rights in his debtor’s assets and is not concerned with their fate. The debt remains a general obligation, regardless of their disposition. Whatever makes invalid any payment by the debtor protects the captor of the debt. No possession is necessary, because none is possible; the captor is secure so long as the debtor cannot discharge the debt. How, then, can it be argued that the scheme of the act involved a payment of the debt in prsesenti? The captor being protected, why must the debtor be exposed to execution in limine?

It is quite true that in this very litigation it has been decided (American Exchange Nat. Bank v. Garvan, 273 Fed. 43 [C. C. A. 2]; Simon v. American Exchange Nat. Bank, 260 U. S. 706, 43 Sup. Ct. 165, 67 L. Ed. 474) that a debtor must pay an acknowledged debt to the Custodian, regardless of any controversy as to who is the creditor. r:But such a rule imposes no hardship upon the debtor, who is protected under section 7 (e) from any pursuit by any other person. It changed no element of the contract, except the promisee, and all the promisor is in any case entitled to is a valid discharge. It is true that such summary remedy was as little necessary to protect the captor as in the case at bar, but, the rights of the debtor being preserved, he has no right to complain.' The rule in that case does not affect this, where sequestration presupposes a change in the substance of the debtor’s obligation as he asserts it. The plaintiff has indeed changed his position upon the balance due; that is no doubt a suspicious circumstance, but alone it cannot subject him to summary execution upon his obligation.

When the language of a statute admits an interpretation which avoids any constitutional question, it should be adopted.. Perhaps under the war power Congress might have gone so far, but'surely there must be clear expression of such a purpose to overset the traditional methods in analogous cases. I ought not lightly to impute to such general words so oppressive a purpose; the language must, be confined to debts whose validity and extent the debtor acknowledges.

[4] The last objection is that, regardless of whether the Custodian had any right to seize the fund, the defendant, now having it, may counterclaim on Albert’s captured right to the extent of a set-off. This may be put most persuasively as resulting from equity rule 30. The accounting, being “the subject of an independent suit in equity,” may be set off against the plaintiff’s right to the fund seized. But a suit under section 9 is not necessarily subject to the general rules in equity; perhaps it is, but the question is not wholly dear. Again, it does not appear that the account between the plaintiff and Albert was the proper “subject of an independent suit in equity.” That point was not developed at the hearing, and I cannot say whether it be so or not. So far as appears, it may depend merely upon cross items of indebtedness. I do not know whether the plaintiff had received moneys of Albert as his fiduciary, or in such other capacity as entitled him to an accounting. The answer says nothing of the charatter of the account.

[5] However, I need not rely upon either of these points. As I have already said, the Custodian’s power to seize property, which may not in the end prove to be of enemy character, depends solely upon the right of the United States to attach and impound what might otherwise be removed or dissipated. It is an interlocutory remedy, designed to make effectual the capture of. true enemy property. Central Union Trust Co. v. Garvan, supra. When the seizure is unlawful, the petition under section 9 does no more than establish the plaintiff’s right and the consequent illegality of the capture. It is analogous to the vacation of an attachment levied upon the goods of a third person. If the suit may be answered by an independent claim against the plaintiff, the seizure itself is legalized; "the defendant is put in exactly the same position as though the seizure had been valid. To pursue the analogy of attachment, it would be as if the creditor might support an attachment of A.’s property for the debt of B. by an independent claim against A. The petition, while indeed not possessory, is similar to a possessory suit in this: That until the original wrong has been righted the 'defendant may not undertake to pursue other claims against his victim. Anything else would be a premium upon lawless seizures by the sovereign, the fountain of justice. The defendant must therefore work out his rights as captor of Albert’s property after he has restored the plaintiff to the position he would have occupied but for the wrongful seizure.

Decree for the plaintiff.