UNITED STATES v. CHEMICAL FOUNDA- full power to dispose of property seized, but

(Argued Dec. 9, 10, 11, 1925. Decided Oct. 11, auction, "unless the President, stating the rea

Of two possible constructions of executive order, one of which will render it useless, and the other give it validity, the latter will be adopted.

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes
47 S.CT.-1

10. War 12.

That executive order vesting in counselor for Department of State powers of President, under section 12 of Trading with the Enemy Act, as amended (Comp. St. § 3115%ff), did not designate him as such officer, or as an officer through whom President was authorized to act, held not to invalidate the order.

11. War 12.

Orders of President's agent, authorizing private sales without advertisement of seized alien property, held not invalid as an attempt to give the Alien Property Custodian the very power granted to the President.

12. Appeal and error 1094 (2).

Findings of fact, concurred in by two lower courts, will not be disturbed by the Supreme Court, unless clearly erroneous.

13. Evidence 83(1).

Official acts of public officers are presumed regular, in the absence of clear evidence to the

contrary.

14. Warm 12.

ment of the District Court, dismissing the complaint (294 F. 300), was affirmed by the Circuit Court of Appeals (5 F. [2d] 191), and the United States appeals and applies for certiorari. Application for certiorari denied. Decree modified, and, as modified, affirmed.

*The Attorney General and Messrs. Henry W. Anderson, of Richmond, Va., and Herman J. Galloway, Asst. Atty. Gen., for the United

States.

Messrs. John W. Davis, of New York City, William G. Mahaffy, of Wilmington, Del., and Moorfield Storey, of Boston, Mass., for appellee.

Mr. Justice BUTLER delivered the opinion of the Court.

Suit was brought by the United States in the District Court for Delaware to set aside sales made by it to the Chemical Foundation of a number of patents, copyrights, trademarks, and other similar properties-which Presidential order of February 13, 1920, for brevity will be referred to as "patents"held a ratification and confirmation of sales by seized pursuant to the Trading with the EnAlien Property Custodian of enemy-owned pat-emy Act of October 6, 1917, c. 106, 40 Stat. ents to corporation created under President's direction in the public interest.

The rule with respect to the sales of trust properties by fiduciaries held inapplicable to sales of enemy-owned patents by Alien Property Custodian, having full power of disposition under Trading with the Enemy Act, § 12, as amended (Comp. St. § 31151⁄2ff).

18. United States 147.

411, as amended by the act of March 28, 1918, c. 28, 40 Stat. 460, and the Act of November 4, 1918, c. 201, 40 Stat. 1020, and other acts (Comp. St. § 31151⁄2a et seq.). The complaint alleges that a number of domestic manufacturers as a result of war conditions had been able to combine and monopolize certain chemical industries in this country, and, fearing that at the end of the war German competition would destroy the monopoly, they conspired to bring about transfers and sales of the patents at nominal prices to themselves or to a corporation controlled by them; that the patents so obtained would control the industries in question and perpetuate the monopoly; and that the sales were procured through the fraudulent deception of the President, the Alien Property Custodian, and oth

er offi*cials.

*5

The answer denies conspiracy and fraud, and asserts that the transfers were made in good faith and pursuant to law, and that they are valid. There was a trial at which much evidence was taken. The Dis

trict Court dismissed the complaint (294 F.

The United States, suing to set aside sales of enemy-owned patents by Alien Property Custodian, held not taxable with costs, not-300), and. its decree was affirmed by the Cirwithstanding equity rule 50, and consent of counsel that certain expenditures to be taxed

as costs.

19. United States 147.

Generally, in absence of statute directly authorizing it, courts will not give judgment against the United States for costs or

ex

cuit Court of Appeals (5 F. [2d] 191). Both courts found that no unlawful scheme, combination, or conspiracy was shown, and that there was no deception or fraud.

[1] The United States took an appeal under section 241, Judicial Code (Comp. St. § 1218), and has applied for a writ of certiorari under section 240 (Comp. St. § 1217). The decree of the Circuit Court of Appeals was enAppeal from the Circuit Court of Appeals tered March 26, 1925, prior to the taking effor the Third Circuit.

penses.

fect of the Act of February 13, 1925, amendAction by the United States against the ing the Judicial Code. Chapter 229, 43 Stat. Chemical Foundation, Incorporated. Judg-936 (Comp. St. § 1120). Since this is not a

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(47 S.Ct.)

case in which the decree of that court is made final by section 128, the United States had the right of appeal. The application for certiorari is therefore denied.

*7

stock, the holders of which are entitled to a
cumulative dividend of 6 per centum per an-
num, and 1,000 shares constitute the common
stock, the holders of which are entitled to
dividends not exceeding 6 per centum per an-
num after dividends on the preferred stock
have been provided for. The preferred stock
is subject to redemption at par plus *accumu
lated dividends, if any, and after such re-
demption net earnings not needed for work-
ing capital "shall be used and devoted to the
development and advancement of chemistry
and allied sciences, in the useful arts and
manufactures in the United States, in such
manner as the board of directors may deter-
mine." The holders of the common stock
The certificate
have all the voting power.
provides that, without the approval of the
board of directors, stockholders may not sell
any of their stock. The board of directors

consists of three members. The executive of

The chemical industries in question are closely related to the production of explosives, gasses, and other things directly used in waging war, as well as to the production of dyestuffs and medicines essential to the welfare of the people. At the outbreak of the war many necessary medicines and other substances, as well as most of the dyestuffs used in this country, were imported from Germany or were manufactured under patents owned by enemy Germans. The amount of such things here produced was small. Importations were hindered by the blockade and ceased when this country entered the war. To meet the demand numerous plants were developed and by 1919 chemicals, dyestuffs, medicines, and the like were being produced here in large quantities. A number of associations of manufacturers were formed for the advancement of such industries; they in-retary and treasurer. The president and vice cluded in their membership the producers of president are required to serve without pay. nearly all the dyestuffs and like chemicals The shares of the Foundation were subscribed made in this country. Mr. A. Mitchell Palmer by those interested in the chemical and dye industries. But a voting trust agreement was the Alien Property Custodian until he was made, pursuant to which all common was appointed Attorney General, March 4, stock was deposited with, and all voting pow1919. In order to protect the United States er was vested in, five trustees. Directors and against enemy and foreign control of its officers were chosen March 8, 1919. Francis chemical industries and to stimulate produc- P. Garvan, Douglas I. McKay, and George J. tion here, he favored the seizure and sale of Corbett were made directors and constituted the patents in question. To that end a num- the board. Mr. Garvan, then Alien Property ber of conferences were held between his rep- Custodian, was elected president. Mr. Mcresentatives and those of the industries. The Kay was elected vice president, and Mr. Corplan that was carried into effect was formu-nard and four others were made voting trusbett secretary and treasurer. Otto T. Ban

#6

lated under his direction.

ficers are president, vice president, and a sec

The President, by Executive Order December 3, 1918, declared:

tees. All the directors, officers, and voting In February, 1919, the Chemical Founda-trustees were chosen by or in accordance with tion was incorporated under the laws of Del- the direction of Mr. Palmer, given while he aware. The certificate of incorporation diswas Custodian. closes that it was created and empowered to purchase enemy-owned patents seized by the Custodian and to hold the "property and rights so acquired in a fiduciary capacity for the Americanization of such industries as may be affected thereby, for the exclusion or elimination of alien interest hostile or detrimental to the said industries, and for the advancement of chemical and allied science and Industry in the United States"; to grant to the United States nonexclusive licenses to

"I hereby vest in Frank L. Polk all power and authority conferred upon the President by the provisions of section 12" of the Trading with the Enemy Act as amended (Comp. St. § 31151⁄2ff).

Mr. Polk was then counselor for the De

*8

partment of State, but was not so described in the order. He made two orders, dated respectively February 26, 1919, and April 5, make, use, and sell the inventions covered 1919, to authorize the Custodian to sell at by the patents, and also to grant like licenses, private sale to the Foundation without adon equal terms and without advantage as be-vertisement, at such places and upon such tween licensees, to American citizens and corporations under control of American citizens. The board of directors is authorized to prescribe the terms and conditions of such licenses. It may refuse to issue any license or may revoke any license granted by it. The corporation is required to enforce its rights and to protect the rights of its licensees. The authorized capital stock is $500,000, consisting of 5,000 shares of the par value of $100 each: 4,000 shares constitute non voting preferred

terms and conditions as to the *Custodian might seem proper, all patents found to relate to the objects and purposes of the Foundation as expressed in its charter. These orders contained a statement of the reasons therefor in the public interest. Briefly they were that the patents could not be sold to the best advantage at public sale after advertisement; that the Foundation had been incorporated to hold the patents as a trustee for

ence.

terest shall otherwise determine.
40 Stat. 460.

"After the end of the war any claim of any enemy or of an ally of enemy to any money or Property Custodian or deposited in the United other property received and held by the Alien States Treasury, shall be settled as Congress shall direct.

40 Stat. 424.

[3] It is conceded that when seized the pat

10

American industries affected by the patents, to eliminate hostile alien interests and to advance chemical and allied industry in the United States, and that it was obligated to grant nonexclusive licenses upon equal terms to qualified American manufacturers and was empowered to grant free licenses to the United States; that the public interest would be best served by a wide use of the inventions, which most readily could be promoted by li-ents belonged to enemy Germans and that censes which the Foundation was obligated they were lawfully taken over by the Custoto grant; that a private sale would prevent dian. The purpose of the Trading with the the patents from falling into the hands of Enemy Act was not only to weaken enemy purchasers unwilling or unable to use the in-countries *by depriving their supporters of ventions or who would use them for specula- their properties (Miller v. Robertson, 266 U. S. tive purposes; that it would be impossible to 243, 248, 45 S. Ct. 73, 69 L. Ed. 265), but also make a public sale that would secure these to promote production in the United States of benefits, and that a private sale would avoid things useful for the effective prosecution of unnecessary expense, delay and inconveni- the war. Section 10 (c) authorized the President, if he deemed it for the public welfare, Prior to and contemporaneously with the to grant licenses to American citizens or cororganization of the Foundation, the repre- porations to use any inventions covered by sentatives of the chemical industries co-oper-enemy-owned patents. Subsection (c) of secated with those of the Custodian in making tion 7 of the Act as amended November 4, lists of the patents to be seized and sold by 1918 (Comp. St. § 3115%d), authorized the the Custodian to the Foundation. Mr. Garv-seizure of enemy-owned patents, and providan, the Custodian, from time to time com- ed that all property so acquired should be mencing April 10, 1919, executed and deliv- held and disposed of as provided by the act. ered to the Foundation various assignments And there is no ground for contending that of the patents. The considerations paid by the seizure and transfers did not tend to lesthe Foundation to the Custodian amounted in sen enemy strength and to encourage and all to $271,850.00. The President, February safeguard domestic production of things es13, 1920, made an executive order which was sential to or useful in the prosecution of the held by both courts below to constitute a ratwar. There is nothing to support a strict ification of the transactions. And pursuant construction of the act in respect of the seito that order, the Custodian confirmed the zure and disposition of enemy property. On assignments theretofore made. the other hand, contemporaneous conditions and war legislation indicate a purpose to employ all legitimate means effectively to prosecute the war. The law should be liberally construed to give effect to the purposes it was enacted to subserve.

*9

[2] *We come to the question whether, as held below, the Act as amended March 28, 1918, empowered the President to authorize, and the Custodian under his supervision to consummate, these sales.

As originally enacted, section 12 gave the The pertinent provisions of the act are in Custodian in respect of properties in his possection 12 as amended:

"The Alien Property Custodian shall be vested with all of the powers of a common-law trustee in respect of all property other than money, which has been or shall be, or which has been or shall be required to be, conveyed, transferred, assigned, delivered, or paid over to him in pursuance of the provisions of this act, and, in addition thereto acting under the supervision and direction of the President, and under such rules and regulations as the President shall prescribe, shall have power to manage such property and do any act or things in respect thereof or make any disposition thereof or of any part thereof, by sale or otherwise, and exercise any rights or powers which may be or become appurtenant thereto or to the ownership thereof in like manner as though he were the absolute owner thereof: Provided, that any property sold under this act, except when sold to the United States, shall be sold only to American citizens, at public sale to the highest bidder, after public advertisement of time and place of sale which shall be where the property or a major portion thereof is situated, unless the President stating the reasons therefor, in the public in

session "all of the powers of a common-law trustee." He was authorized, acting under the supervision and direction of the President and under rules and regulations prescribed by the President, to manage the property and do any act or things in respect thereof or make any disposition of it by sale or otherwise and to exercise any rights appurtenant to its ownership "if and when necessary to prevent waste and protect such property and to the end that the interests of the United States in such property and rights, or of such person as may ultimately become entitled thereto, or to the proceeds thereof, may be preserved and safeguarded." The

*11

Custodian was a mere conservator and *was authorized to sell only to prevent waste. But brief experience made it clear that this restriction on the power to dispose of enemy property sometimes operated to defeat the purpose of the act and brought profit and advantage to the enemy. The amendment of March 28, 1918, eliminated the restriction