FARMERS' LOAN & TRUST CO. v. MILLER reved 9 F (20) 848493 FARMERS' LOAN & TRUST CO. v. MILLER, Alien Property Custodian, et al. (two cases). March, the issue in the state court is the general fund, and can cast no cloud upon the title of plaintiffs' bonds drawn on the special fund. Thompson v. Emmett Irr. (District Court, S. D. New York. March 17, Dist., 227 F. 560, 142 C. C. A. 192, does not apply. Nor are we here concerned with relief equity will afford in the specific performance action; hence the cases cited have no application.1 Goshen Mfg. Co. v. Myers, 242 U. S. 202, 37 S. Ct. 105, 61 L. Ed. 248, was a patent case. The patent being retained, the menace was open, even though manufacturing had ceased. Sears, Roebuck & Co. v. F. T. Com'n, 258 F. 307, 169 C. C. A. 323, 6 A. L. R. 358, was an unfair "method of competition" case and a federal trade commission order to desist from unfair practices in connection with sale of sugar, etc., was not improvidently issued because the methods had been discontinued. These cases are not authority on this issue. The defendants have not sued plaintiff, have not threatened to do so, and in open court state that it is not their purpose so to do. From what was said in the opinion of March 12th, and herein, the motion for temporary injunction is denied, and the motion to dismiss granted. 1 Cases cited by plaintiff: Sears, Roebuck & Co. v. F. T. Com'n, 258 F. 307, 169 C. C. A. 323, 6 A. L. R. 358; Goshen Mfg. Co. v. Myers Mfg. Co., 242 U. S. 202, 37 S. Ct. 105, 61 L. Ed. 248; Union Pac. R. v. Chi. Ry., 163 U. S. 564, 600, 16 S. Ct. 1173, 41 L. Ed. 265; Franklin Tel. Co. v. Harrison, 145 U. S. 459, 12 S. Ct. 900, 36 L. Ed. 776; Joy v. St. Louis, 138 U. S. 1, 11 S. Ct. 243, 34 L. Ed. 843; Southern Ry. Co. v. Franklin R. R. Co., 96 Va. 693, 32 S. E. 485, 44 L. R. A. 297; Peale v. Marian Coal Co. (C. C.) 190 F. 376, 388, 389; Texas Co. v. Central Fuel Co., 194 F. 1, 11, 13, 15, 17, 22, 114 C. C. A. 21; Great Lakes Co. v. Scranton Co., 239 F. 603, 152 C. C. A. 437; Montgomery Co. v. Montgomery Co. (D. C.) 219 F. 963; Camp v. Boyd, '229 U. S. 530, 551, 33 S. Ct. 785, 57 L. Ed. 1317; McGowan v. Parish, 237 U. S. 285, 296, 35 S. Ct. 543, 59 L. Ed. 955; Oelrichs v. Spain, 15 Wall. 211, 228, 21 L Ed. 43; Simpkins, Suit in Equity, pages 2226. Walla Walla v. Walla Walla Water Wks., 172 U. S. 1, 19, 19 S. Ct. 77, 43 L. Ed. 341; Tyler v. Savage, 143 U. S. 79, 12 S. Ct. 340, 36 L. Ed. 82; Kilbourn v. Sunderland, 130 U. S. 505, 9 S. Ct. 594, 32 L. Ed. 1005 Fredenberg v. Whitney (D. C.) 240 F._819; Sec. 720, Rev. Stat. Jud. Code, 265; Texas & P. R. Co. v. Kuteman, 54 F. 547, 4 C. C. A. 503; Traction Co. v. Mining Co., 196 U. S. 245, 25 S. Ct. 251, 49 L. Ed. 462; Glucose Co. v. City of Chicago (C. C.) 138 F. 209; St. Louis, etc., R. R. v. McElvain (D. C.) 253 F. 123, 128, 9, 10. 35, 36; Thompson v. Emmett Irr. Dist., 227 F. 560, 142 C. C. A. 192; Vickrey v. Sioux City (C. C.) 104 F. 164; Tolman v. Board of Com'rs of Onslow County, 145 F. 753, 772, 76 C. C. A. 317. 1924.) 1. War 12-Alien Property Custodian's right to property measured by enemy alien's right thereto at time of seizure. Alien Property Custodian has no greater right to permanent possession of property seized than alien enemy would have had at time of seizure. 2. War 12-Normal business should not be disturbed, unless good reason and law specifically require. Normal business should not be disturbed, unless good reason and law require, and where citizens contract with reliance on certain trustee to hold, manage, invest, and reinvest funds, neither they nor trustee should be compelled to turn over their affairs to department of government, or be deprived of their rights to do business, if it can be avoided. 3. War 12-Trustee of securities deposited by German insurance company to secure American policy holders and creditors_held entitled to recover securities from Alien Property Custodian. Where securities were deposited by German insurance company with American trustee to secure American policy holders and creditors, as required by Insurance Law N. Y. § 27, to so much thereof as might remain after all policy holders and creditors were paid German company had mere contingent possibility of reverter, held that, under Trading with the Enemy Act, § 9, as amended (Comp. St. Ann. Supp. 1923, § 31151⁄2e), trustee was entitled to recover securities from Alien Property Custodian. 4. Attachment 49-Execution 31-Contingent interests not subject to attachment or execution. Mere contingent interests are not subject to attachment in actions against person having such contingent right, and cannot be levied on under execution to enforce judgment. In Equity. Suits by the Farmers' Loan & Trust Company, individually and as trustee under a certain indenture of trust between it and the Nord Deutsche Insurance Company, a German corporation, against Thomas W. Miller, as Alien Property Custodian, and another. On defendants' motions to dismiss complaints under Rules of Motions dePractice in Equity, rule 29. nied, with leave to defendants to answer in 10 days. See, also, 298 F. 758. Geller, Rolston & Blanc, of New York City (George S. Mittendorf, of New York City, of counsel), for plaintiff. William Hayward, U. S. Atty., of New York City, and Dean Hill Stanley and A. R. Johnson, Jr., Sp. Asst. Attys. Gen., for defendants. GODDARD, District Judge. These suits are brought under section 9 of the Trading with the Enemy Act as amended (Comp. than five hundred thousand dollars, if a fire St. Ann. Supp. 1923, § 31151⁄2e). The insurance corporation, and not less than suits seek to secure the return to the plain- two hundred thousand dollars, if a life or tiff of certain securities delivered to the casualty insurance corporation, invested in Alien Property Custodian. The first of the like manner as the capital of a similar doabove-entitled actions is brought by the mestic insurance corporation is required to Farmers' Loan & Trust Company as trus- be invested. tee under a deed of trust made by the Nord Deutsche Insurance Company, dated May 5, 1911, for the protection of its insurance policy holders and creditors in the United States, and the second suit as trustee under a deed of trust, dated December 17, 1913, for the protection of the holders of policies of insurance against marine risks and risks of transportation and navigation of the said company in the United States, or such pro rata share of such claims and demands as may be possibly paid with the funds so held in trust. The Farmers' Loan & Trust Company is a corporation organized and existing under the laws of the state of New York, and is authorized to act as trustee under the deeds of trust. The matters specifically before the court at the present time are the motions of the defendant to dismiss the complaints under rule 29 of the United States Rules of Practice in Equity. Facts. The general allegations of the bills of complaint are that the plaintiff, some time prior to the outbreak of the war between the United States and Germany, became trustee of the securities listed in the bills of complaint under deeds of trusts which are attached to the bills. These deeds of trusts are substantially alike. The trusts referred to were created by the Nord Deutsche Insurance Company, a corporation incorporated and resident within the German empire. The trusts were created in accordance with the provisions of section 27 of the Insurance Law of the state of New York (Consol. Laws, c. 28). The material portion of section 27 of the Insurance Law is as follows: "Sec. 27. Funds and Capital of Insurance Corporations Incorporated Outside of the United States. A foreign insurance corporation incorporated by or existing under the government or laws of any country outside of the United States, and admitted to do business in this state, shall not transact any business of insurance in this state, unless it shall have within the United States, deposited with insurance departments or held in trust as hereinafter provided, not less "The capital of such foreign fire insurance corporation, doing fire insurance business in this state, or of any such company hereafter admitted to such business in this state, shall, for the purposes of this chapter, be the aggregate value of such sums or securities as such corporation shall have on deposit in the insurance department of this state, and of the other states of the United States, for the benefit of the policyholders in any of such states or in the United States. After the outbreak of the war between the United States and Germany, the Alien Property Custodian, acting under provisions of section 7 of the Trading with the Enemy Act (Comp. St. 1918, Comp. St. Ann. Supp. 1919, § 31152d), determined that the Nord Deutsche Insurance Company was an enemy within the meaning of that act, and that the securities held as aforesaid by the plaintiff were held for the benefit of the insurance company, and required them to be delivered to him. In the present suit, the plaintiff claims the right to recover the securities from the Alien Property Custodian under the provisions of section 9 of the act, in order that it may administer the trusts for the benefit of the American policy holders and secure its own fees. Section 9 (a) of the Trading with the Enemy Act permits any person claiming any right, title, or interest in any property seized by the Alien Property Custodian to institute a suit to have that right, title, and interest determined by the court. Taking first the deed of trust of December 17, 1913, which is involved in cause No. 22-129, its provisions may be summarized as follows: "(1) The plaintiff and its successors are to hold the property and its proceeds as a fund in trust to pay or cause to be paid all lawful and valid claims or demands of policy holders or creditors (paragraph II). "(2) The plaintiff might sell and reinvest property in its hands with the previous consent in each case of the board of directors of the German company, or one of its managers in the United States (paragraph III). "(3) To certify a statement of the description and amount of the trust funds 2 F.(2d) 493 and furnish such certificate and description and the number of copies, which may be required to German company, when required to do so either by the German company or its United States managers (paragraph IV). "(4) The plaintiff was to furnish means or securities for making deposits in other states under the insurance regulations of those states, acting under the instructions of the board of directors or the manager of the company in Hamburg (paragraph V). "(5) Furnish the United States managers of its marine branch with means for the payment of money due to policy holders of said company in the United States (paragraph V). "(6) The plaintiff was to pay all income and interest accruing from said trust funds and collected by it to the nominee of the German company or to one of its managers in the United States (paragraph VI). "(7) The German company is granted power under the deed by giving notice in a specified manner to terminate the trust upon presentation of a certificate from the insurance authorities that the trust is no longer required for the protection of policy holders (paragraph VII). "(8) The German company appoints the successor in the event the plaintiff resigns (paragraph VIII). "(9) The German company may amend the deed with respect to any of the conditions and powers declared therein in such manner as it may see fit, provided such amendments are not in violation of law (paragraph IX)." The trust deed in suit E22-128 is substantially the same, and no detailed analysis is necessary. The motions to dismiss set forth several grounds, which may be summarized as follows: That the plaintiff has no interest in the said property which entitles it to a recovery; that the contract between the insurance company and plaintiff involved "trading with the enemy"; that the property is that of an alien enemy. [1] The question now is not so much as to whether ultimately the Custodian of the German company will be entitled to anything that may be left, but whether the plaintiff now has a right to possession. It seems obvious that the Custodian had no greater rights than the German company would have had at the time of the seizure, referring not to the temporary right of possession which the Supreme Court held the Custodian had, but the right of permanent possession. These actions must be determined upon the basis of the rights of the German company at the time of the seizure by the Custodian. If at that time the German company would have been entitled to have the property delivered to it, the Custodian is now entitled to retain the property. If, on the other hand, they were not at that time entitled to it, the Custodian must return it to the plaintiff in these actions. The plaintiff has been performing its duties as trustee for nearly 10 years in one of these instances, and in the other for about 7 years. During that time it has made payments and investments, and generally actively performed its duties as trustee. has a right to do business, administer this estate, and collect its fees for the past and future. It has responsibilities to the policy holders. It [2] It is, of course, desirable that normal business should not be disturbed, unless there is good reason to do so, and the law specifically requires it; and where citizens enter into contracts, relying upon a certain trustee to hold, manage, invest, and reinvest funds, safeguarding their contracts, and handling matters, neither they nor the trustee should be compelled to turn over their affairs to a department of the government, or be deprived of their rights to do business, and do it in their own way, if it can be avoided, assuming that the business and methods are proper. [3] The government's contention, broadly speaking, is that, because a German insurance company has or may have a reversionary interest in the trust funds, the trustee should be displaced by the Alien Property Custodian, who should take over the entire fund and handle it, notwithstanding that the trustee is an American trust company of good standing, and the beneficiaries are American citizens. It seems to me that the plain and natural method, and one which would be less likely to interfere with the affairs and rights of American citizens, would be for the trustee to administer it, and when the claims of Americans have been satisfied and the trustee's fees paid, turn over the balance, if there be any, to the Alien Property Custodian, after obtaining the certificate of the insurance department of the state of New York, and settling their accounts in an orderly way. Such a plan as this would do less violence to the rights of our citizens, and so far as I can see would involve no great risk of funds reaching any one not contemplated under the Act. In Central Trust Co. v. Garvan, 254 U. S. 554, 41 S. Ct. 214, 65 L. Ed. 403, Mr. Justice Holmes, in his opinion, makes it clear that under Trading with the Enemy Act, § 7 (a), securities held by such a trustee should be immediately turned over to the Custodian, but states that "the present proceeding gives nothing but the preliminary custody such as would have been gained by seizure. It attaches the property to make sure that it is forthcoming, if finally condemned, and does no more." Judge Ward, in the opinion of the Circuit Court of Appeals, in the same case (Garvan v. $20,000 Bonds, 265 F. 477), states: "Policy holders or creditors may proceed to protect their rights under section 9, or the trustees may do so for them." No case has been brought to my attention, or have I found any, holding that the Custodian was entitled to permanently hold and administer such a trust fund. An examination of the trust instruments themselves show that the enemy company had merely a contingent possibility of reverter after an accounting, as to so much thereof, if any, as might remain after all American policy holders and creditors, whenever such claims may mature, shall have been paid and all the other conditions specified in the deeds of trust should have been fulfilled. F. 520, but decided in November, 1923, Judge Learned Hand, referring to a similar question, says: "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. [4] Mere contingent interests or remote possibilities are not the subject of attachments in actions against the person having such contingent right, and cannot be levied upon under an execution to enforce a judgment obtained against them. Cavalliotis v. La Fonciers, etc. (C. C. A.) 272 F. 803; Babcock Printing Press Co. v. Ranous, 164 N. Y. 440, 58 N. E. 529; Rogers Locomotive Works v. Kelly, 88 N. Y. 234; Herrmann & Grace v. City of New York, 130 App. Div. 531, 114 N. Y. S. 1107, affirmed 199 N. Y. 600, 93 N. E. 376. The German insurance company's rights, which were all that the Custodian could seize, were subject to three conditions: (1) That all the creditors shall have been paid; (2) that the superintendents of insurance had given the necessary certificates; and (3) that the charges of the trust company had been satisfied. Accordingly, defendants' motions to dismiss the bills are denied, with leave to deIn the case of Simon v. Miller (D. C.) 298 fendants to answer within 10 days. 2 F.(2d) 497 LATHROP et al. v. UNITED STATES.* (Circuit Court of Appeals, Ninth Circuit. December 15, 1924.) No. 4240. 1. Post office 49-Evidence held sufficient to warrant conviction of officers of town-site company selling lots by fraudulent representations. Conviction, for using mails to defraud, of town-site company officers, who sold lots greatly in excess of purchase price on false representations that improvements would be made, that certain funds would be set aside therefor, and that purchasers' notes would not be discounted, held warranted by evidence as against contention that no fraudulent scheme or intent. was shown when representations were made. 2. Post office 49-In prosecution for using mails to defraud, letters of defendants' agents as to misrepresentations in other enterprises held admissible. In the prosecution of town-site company officers for using mails to defraud, letters of salesman to president in reference to difficulties encountered in collecting notes from investors in other enterprises of defendants held admissible as imputing to defendants knowledge that misrepresentations had been made in such enterprises and were probably being made by the same agents in sale of town-site lots involved in instant case. In Error to the District Court of the United States for the Eastern Division of the District of Idaho; Frank S. Dietrich, Judge. L. H. Lathrop and others were convicted of using the mails to defraud, and they bring error. Affirmed. The plaintiffs in error were convicted under an indictment charging them with the use of the United States mails in furtherance of a scheme to defraud. Lathrop was the president of the Northwestern Investment Company and was also president of the Pocatello Security Trust Company. Both corporations were doing business at Pocatello, Idaho. Champlain was secretary of both companies. Clarke was the sales manager of the tract of land which was to be sold in furtherance of the scheme. The Northwestern Investment Company contracted for the purchase of a tract of land which was to be converted into the Yellowstone addition to the city of Blackfoot. One hundred lots were sold and notes aggregating $56,800 were taken therefor. The notes were discounted at an average discount of 13.54 per cent., so that the company realized but $40,258.66. It was charged in the indictment, and shown by the evidence, that the land was purchased by the investment company for $15,000, and that it was divided into 157 town lots which were offered for sale at from $450 to $700 per lot, which *Rehearing denied January 26, 1925. was many times the actual and prospective value thereof; that the investment company took from the purchasers promissory notes drawing interest at 10 per cent. per annum and which the plaintiffs in error represented would be held by the investment company, whereas, their purpose was, immediately on receipt of the notes, to discount the same for cash; that the plaintiffs in error falsely and fraudulently represented that they had bought the addition and tract outright and did not owe a dollar for it, and that they had a clear title thereto; that 30 per cent. of the cash and notes received in payment for the lots would be used for the purpose of grading streets, sidewalks, planting shade trees, laying water mains, etc. Lathrop and Champlain were found guilty on six, and Clarke was found guilty on four, counts of the indictment. Jesse R. S. Budge, A. L. Merrill, and R. D. Merrill, all of Pocatello, Idaho, for plaintiff in error L. H. Lathrop. J. H. Peterson and T. C. Coffin, both of Pocatello, Idaho, for plaintiff in error S. S. Champlain. W. G. Bissell and Branch Bird, both of Gooding, Idaho, for plaintiff in error George W. Clarke. E. G. Davis, U. S. Atty., and James F. Ailshie, Asst. U. S. Atty., both of Boise, Idaho. Before GILBERT, ROSS, and RUDKIN, Circuit Judges. GILBERT, Circuit Judge (after stating the facts as above). [1] Each plaintiff in error presents his own assignment of errors. They all rely on the assignment that it was error to deny their individual motions for instructed verdicts of acquittal. The evidence conclusively shows that there was utter failure to carry out the promises to place as a trust fund with the Pocatello Security Trust Company 30 per cent. of the cash received at the time of sale and 30 per cent. of the total amount of notes received in payment for the lots. There was also failure to devote any sum to the improvements which were promised in the contracts under which the lots were sold. The plaintiffs in error concede this, but they argue that it does not follow therefrom that there was a fraudulent scheme or any fraudulent intent at the time when the representations were made, and they contend that conditions which arose after the initiation of the scheme compelled them to divert the moneys received from the sale of the lots and use the same in payment of other and |