CHAPTER XIV.

REPORT OF BUREAU OF LAW FOR THE YEAR 1918.

LEE C. BRADLEY, general counsel.

MANSFIELD FERRY, general counsel (Jan. 1. 1919).

GENERAL.

In general the functions of the Bureau of Law are to act as legal adviser to the Custodian and to the various bureaus in the organization; to supervise the work of the State counsel, and to assist the Attorney General in the conduct of litigation in which the Custodian or the estates within his control or custody may be interested.

The Bureau of Law in its capacity as legal adviser to the Custodian has construed and interpreted the Trading with the Enemy act, the numerous proclamations of the President and Executive orders issued thereunder, and the power and authority vested in the Custodian by the act and the action of the President. The questions' presented, however, have not been confined to matters of construction, but because of the enormous amount of property which has come into the hands of the Custodian and of its diverse character, questions of law have been presented relating to every kind of property recognized in jurisprudence. And because the property has come into the hands of the Custodian not as on the creation of a voluntary trust, after mature and careful deliberation on the part of the creator of the trust, but suddenly, and frequently involuntarily, this property in the possession of the Custodian has often been involved in the deepest complications.

Interpretation of the powers of the Custodian under the act.—It was early contended that the power given to the President by section 7 (c) and delegated by him to the Custodian, of requiring property which the President after investigation determined to be owing or belonging, or held for, by, on account of, or on behalf of, or for the benefit of, an enemy, applied only to property which was in fact so owned or so belonged or so held. If this were a proper construction of section 7 (c) the result would be that the Custodian could not have taken into his possession one dollar's worth of prop

erty without the consent of the persons who then held the property as the agents of the Germans. It was further argued that the Custodian was not a judicial officer and that any other construction compelled the delivery of property to the Custodian on his mere ipse dixit and on what might be an ex parte investigation and that this would be a violation of the due process clause of the Constitution of the United States. The result of such contentions would have been that the Custodian would have been put to the trial of thousands of suits to determine the possession of property, which would have dragged on in the courts until after the declaration of peace, and that the property determined by the Custodian to be enemy owned would in the meantime have remained in the hands of the agents of the Germans.

After a careful consideration of the law the Bureau of Law reached the conclusion that the determination of the Custodian was final and must determine the possession of the property; that his act, being an exercise not of the municipal power but of the sovereign power to declare war and to seize and capture enemy property wherever found, was not subject to the due-process clause of the Federal Constitution, but even if it were subject to this clause of the Constitution, that the Trading with the Enemy act by section 9 provided a full, complete, and adequate remedy for the enforcement of any rights which might be infringed; and that the Constitution does not guarantee that a particular remedy, but only that some remedy, will be afforded. Familiar decisions, somewhat analogous though relating to statutes enacted under the municipal power of Congress, are those which hold that statutes requiring payment of taxes in spite of a controversey and giving as a remedy merely a suit to recover back any taxes paid in error are due process of law and are not in violation of the Federal Constitution.

This interpretation of the power of the Custodian and finality of the Custodian's determination of enemy property was confirmed by a decision rendered by Judge Knox on December 16, 1918, in the District Court of the United States for the Southern District of New York, in the case of the Salamandra Insurance Co. against New York Life Insurance & Trust Co.

In accordance with this interpretation of section 7 (c) of the act, a demand by the Custodian under the provisions of section 7 (c) for the delivery to him of enemy property, following his determination that it is such, must be complied with unconditionally.

But a considerable number of cases arose where the impossibility of determining the facts, because of the interrupted communications between this and enemy countries, made it equally impossible to determine with any degree of certainty whether or not property was in fact enemy owned, or how large a sum was in fact owed to an enemy.

This uncertainty of commuications arose while this country was still neutral.

The largest class of such cases were banks and bankers operating in foreign exchange. In the majority of these cases the enemy banks on which the drafts were drawn maintained an account with an American bank which credited this account of the enemy bank as a draft was drawn, and without regard to whether or not the draft actually reached the enemy bank and was paid by it. These transactions involved in the aggregate many millions of dollars. To require the American bank to turn over to the Custodian as a debt owed to an enemy the balance entered upon the books of the American bank or banker as owing to the enemy may well not be in accord with the facts as they would be ultimately disclosed on a resumption of communication between the two banks. On the other hand, it is fair to assume that some drafts have been paid and that some balance is due the enemy bank, and for the Custodian to neglect to require payment of those debts owed on foreign exchange transactions would be a violation of the spirit of the Trading with the Enemy act and the purposes with which Congress enacted it into law. However, for the Custodian to require banks to pay over the balances to him under the provisions of section 7 (c), and therefore unconditionally, would lay the balances so paid over subject to claims of persons other than the paying bank, and quite conceivably have resulted in these other persons being paid from funds ultimately found to belong, not to the enemy bank, but to an American bank.

This difficulty is solved by an application of the provisions of section 7 (d), which provides that if not required to pay or deliver money or property under the provisions of subsection (c) of section 7, any person not an enemy, with the consent of the Custodian, may deliver enemy property or pay to the Custodian a debt due to an enemy under such rules and regulations as the Custodian may prescribe. Under this subsection of the act the Custodian has formulated and pursued the policy of suggesting to an American bank which reports a balance appearing on its books to be due to an enemy that it should make application for leave to turn over to the Custodian the amount so appearing to be due, reserving to itself, however, whatever interest the true facts existing but unknown may show to belong to it. The Custodian, by consenting to the conditions, recognizes them as rules and regulations under which the property is accepted, the effect is to give what is substantially an equitable lien.

Abrogation of contract.-Section 8 (b) provides that any contract entered into prior to the war between a citizen of the United States and an enemy which provides for the delivery during or after the

war of anything produced, mined, or manufactured in the United States may be abrogated by such citizen by serving 30 days' notice. in writing on the Custodian of his election to abrogate such contract. This section has been construed by the Bureau of Law to vest no discretion in the Custodian; he must file such notices as are offered and does not pass upon the effectiveness of the attempted abrogation, which is a matter for the subsequent determination of a court or other competent tribunal, which in some cases, however, may be the Custodian himself.

Claims under section 9.-Section 9 authorizes the filing by any person not an enemy, or ally of enemy, of any claim with the Alien Property Custodian which asserts an interest, right, or title in any money or other property conveyed, transferred, assigned, or paid to the Custodian and held by him or by the Treasurer of the United States.

The claimant has his choice of remedies:

1. He may in the first instance file a bill seeking the relief which he desires in the District Court of the United States in which he resides; or

2. He may make application for Executive relief.

The President, who has delegated this power to the Attorney General, where he deems it proper may grant the relief applied for "with the assent of the owner." If the Attorney General fails to act, or if his action is unfavorable, the claimant may then still pursue his remedy in the United States District Court.

The remedy afforded by this section is adequate and complete. But let it be noted that the remedy is not available except in respect of property actually conveyed, transferred, assigned, delivered, or paid over. Property or money required to be conveyed, transferred, assigned, delivered, or paid over is not subject to any relief until there has been a compliance with the Executive demand. The courts are shut to suitors who would obstruct the Executive in the prosecution of the war, but are at once open to those who comply with the Executive demands.

The cases in which application has been made for executive relief have resulted in numerous interpretations of its provisions by the Attorney General, whom the President by an Executive order, dated October 12, 1917, vested with the powers and authority conferred upon the President by that section. The Bureau of Law has placed at the disposition of the Attorney General the results of the study which it has made of the act, and particularly of this section. The more important constructions which have been placed upon the different provisions of section 9 by the Attorney General are:

1. That a claim may be filed in cases where the enemy character of a claimant has been altered by change of residence; as, for instance,

in the case of Americans resident in Germany or citizens of France or Belgium in enemy-occupied portions of such countries at the time their property was taken, but who subsequently returned to the United States, or again became residents of allied territory, as the case may be.

2. An American citizen still resident in enemy territory can not file a claim under section 9 by his agent or attorney resident in neutral or allied territory or in the United States.

3. The word "debt" as used in this section does not include an unliquidated claim, either in contract or tort. Therefore, it does not include claims for damages for injuries of persons or property by German submarines.

4. The words "may be owing" are construed to mean debts owing at the time the Trading with the Enemy act was passed (Oct. 6, 1917), and do not include debts or claims which have been incurred or arisen subsequent to that date.

5. A nonresident who is not an enemy may file his claim under section 9 and make application for the payment thereof.

6. The word "assent” in the clause requiring the assent of the owner is construed to mean assent to the payment under the provisions of section 9 and in contemplation of the property having been taken over by the Custodian.

7. The word "owner" in the clause requiring the assent of the owner has been construed to mean the person determined by the Custodian to be the owner when the property was required to be transferred, and does not include the adverse claimants who may come forward claiming to be the true owners of the property.

8. The words "all persons claiming any right, title, or interest” in the money or property means persons who have filed a notice of their claim with the Custodian under the provisions of this section.

The executive administration under this section is conducted by the Bureau of Law of the Custodian. A summary of the claims filed under this section appears in the appendix.

It will be noted that over 500 claims under this section have been filed up to and including December 31, 1918. A vast majority of the claimants are either (a) persons who though enemies at the time when their property was taken over by the Custodian have returned to the United States, and are therefore no longer enemies, or have lost their enemy status through the rolling back of the German Armies which have been in occupation of allied territory; or (b) persons who are creditors of enemies, whose property has been taken into the possession of the Custodian and are now taking advantage of the procedure afforded by section 9 to secure a payment of the debt owing to them.

It is inevitable that in the administration of tens of thousands of cases errors of determination of enemy status should occasionally be