Orvis v. Brownell/Dissent Douglas

by William O. Douglas

United States Supreme Court

345 U.S. 183

Orvis  v.  Brownell

 Argued: Feb. 4, 1953. --- Decided: March 16, 1953

Mr. Justice DOUGLAS, with whom Mr. Justice FRANKFURTER concurs, dissenting.

Section 34(a) of the Trading With the Enemy Act, 60 Stat. 925, provides that property vested in the Alien Property Custodian 'shall be equitably applied by the Custodian in accordance with the provisions of this section to the payment of debts owed by the person who owned such property' prior to the vesting in the Custodian. A priority of debt claims is provided by § 34(g). ^[1] But, unlike § 60 of the Bankruptcy Act, 52 Stat. 869, 11 U.S.C.A. § 96, it does not purport to outlaw liens acquired within certain periods or under specified conditions. Section 34(i) indeed recognizes that there may be liens asserted against the Custodian; ^[2] and it in no way qualifies them by reason of the time of their acquisition. The House Report, H.R.Rep. No. 2398, 79th Cong., 2d Sess., p. 15, was quite explicit as respects the protection which § 34(i) was designed to give secured creditors and creditors claiming a lien:

'Protection of a secured creditor or a creditor claiming a lien is afforded by the proviso in subsection (i). Such a claimant may proceed as a general creditor, without thereby waiving his security. In addition or alternatively, he may file a claim or suit as a title claimant for return of his security interest in the property or for just compensation in respect of that interest, in which event his recovery would be reduced, as in the case of any other such plaintiff, to the extent of any debt claim payment made to him (or to any other claimant, if his claim as a title claimant was not filed in time to hold up debt claim payments). It is believed that this arrangement is preferable to provision of a separate special procedure for secured creditors.' Thus, as the Custodian concedes, a secured or lien creditor can proceed under § 9(a) for recovery of a property interest, see Markham v. Cabell, 326 U.S. 404, 66 S.Ct. 193, 90 L.Ed. 165; Clark v. Uebersee Finanz-Korporation, A.G., 332 U.S. 480, 68 S.Ct. 174, 92 L.Ed. 88, or under § 34 for recovery of a debt, or both.

We have been meticulous in protecting the right of the Custodian to possession of assets which have been vested. Propper v. Clark, 337 U.S. 472, 69 S.Ct. 1333, 93 L.Ed. 1480; Lyon v. Singer, 339 U.S. 841, 70 S.Ct. 903, 94 L.Ed. 1323; Zittman v. McGrath, 341 U.S. 471, 71 S.Ct. 846, 95 L.Ed. 1112. But we have also been meticulous to respect liens and preferences obtained in judicial or administrative proceedings so long as the enforcement of those liens did not interfere with the Custodian's administration. Lyon v. Singer, supra; Zittman v. McGrath, 341 U.S. 446, 71 S.Ct. 832, 95 L.Ed. 1096.

Yet why the concern in protecting the lien or the preference if there was no possibility of asserting it? Certainly it was not necessary to establish the lien to prove the claim. Certainly it was not necessary to establish the lien in order to have the right to apply for a license. 'As against the German debtors,' we said in Zittman v. McGrath, 341 U.S. 446, 463-464, 71 S.Ct. 832, 842, 'the attachments and the judgments they secure are valid under New York law, and cannot be cancelled or annulled under a Vesting Order by which the Custodian takes over only the right, title, and interest of those debtors in the accounts.' If we meant what we said, the claimants (in the position of petitioners in the present case) were more than unsecured creditors. They had lawful liens that could be proved in the federal proceedings. A lien implies some priority. We reserved the question as to its nature. But if we meant no more than what is now granted, the dissenting opinion in Zittman v. McGrath, supra, 341 U.S. at page 465, 71 S.Ct. at page 843, should have been made the law then rather than now.

Notes

1. 'Debt claims shall be paid in the following order of priority: (1) Wage and salary claims, not to exceed $600; (2) claims entitled to priority under sections 191 and 193 of title 31 of the United States Code, except as provided in subsection (h) hereof; (3) all other claims for services rendered, for expenses incurred in connection with such services, for rent, for goods and materials delivered to the debtor, and for payments made to the debtor for goods or services not received by the claimant; (4) all other debt claims. No payment shall be made to claimants within a subordinate class unless the money from which, in accordance with subsection (d) hereof, payment may be made permits payment in full of all allowed claims in every prior class.'
2. '* * * no person asserting any interest, right, or title in any property or interest or proceeds acquired by the Alien Property Custodian, shall be barred from proceeding pursuant to this Act for the return thereof, by reason of any proceeding which he may have brought pursuant to this section; nor shall any security interest asserted by the creditor in any such property or interest or proceeds be deemed to have been waived solely by reason of such proceeding.'