The opinion of the court was delivered by: YOUNGDAHL
This is a suit under section 9(a) of the Trading with the Enemy Act, 50 App.U.S.C.A. § 1 et seq., as amended, seeking the recovery of over.$ 19,000 vested since 1951 in the Alien Property Custodian pursuant to Vesting Order No. 18001. In 1953, the plaintiffs filed claims with the Alien Property Custodian for the return of this property, but these claims were disallowed. The present action was begun in 1962, naming as defendants Robert F. Kennedy, Attorney General of the United States acting as successor to the Alien Property Custodian, and William T. Howell, acting Treasurer of the United States. These defendants have now moved for summary judgment upon the grounds that there is no genuine issue as to any material fact and that they are entitled to judgment as a matter of law.
For the purposes of this motion, the following must be accepted as facts:
In 1935, Ossip Pernikoff, a Russian citizen by birth who had acquired French citizenship by naturalization on September 7, 1935, organized a German corporation called Palestine & Orient Lloyd G.m.b.H. (hereinafter referred to as 'the corporation'). The corporation was solely owned by Ossip Pernikoff, who subscribed to capital stock of the face value of 19,000 reichmarks (although, to comply with the requirements of German law, one Felix Jay subscribed to capital stock of the face value of 1,000 reichmarks). The entire capital of 20,000 reichmarks was paid into the corporation by Ossip Pernikoff, and Felix Jay was a mere 'dummy.' The corporation was used by Ossip Pernikoff mainly to assist Germans being persecuted by the Nazis in escaping from Germany. The defendants stipulated at the oral argument that Ossip Pernikoff was a Russian Jew who was himself persecuted by the Nazis. He resided in the United States from June, 1940, until January, 1946, and was an officer of the Free French Army under de Gaulle, working with U.S. Naval Intelligence during the war.
In 1938 or 1939, the corporation opened a dollar account at the Incasso Bank N.V. in Amsterdam, Netherlands. This Netherlands bank in turn paid the money into an account maintained by it at the National City Bank of New York.
In 1942, Nazi Germany, as part of its persecution of Jews and Jewish-owned corporations, adjudicated the corporation a bankrupt, liquidated its German assets, and dissolved the corporation. By order of the Nazi German Occupation Authorities in the Netherlands, the balance of the corporation's account at the Incasso Bank was transferred to the account of Finanzamt Charlottenburg Berlin. This order, of course, amounted to a paper transfer only, since the actual funds, in dollars, remained on deposit in New York City. The Nazis could not reach these funds because they were 'blocked' by order of the U.S. Government. In 1950, the National City Bank filed a report showing that it held over.$ 19,000 in an account in the name of the Incasso Bank, and on June 5, 1951, the Office of Alien Property issued Vesting Order No. 18001, vesting in the Attorney General the entire interest in that account.
Ossip Pernikoff died on August 27, 1952, leaving a will under which he left all his property, including his entire interest in the account deposited (in the name of the Incasso Bank) with the National City Bank of New York, to his children, the plaintiffs herein, who were his sole heirs and next of kin. These plaintiffs were both born in Germany, one in 1926, the other in 1935; both became French citizens, through their father, in 1935; both fled from France on June 8, 1940, when it fell to the Nazis; and both arrived in the United States shortly thereafter, residing in this country until after the war. Both plaintiffs are now citizens and residents of France.
The plaintiffs have alleged, as they must do to recover under section 9(a),
that neither has at any time material to this action been an enemy or ally of an enemy of the United States, nor a national of a designated enemy country This allegation is not disputed for the purposes of the present motion. It is also conceded for purposes of this motion that if Ossip Pernikoff would be entitled to the return of these funds were he living, then his children, plaintiffs herein, are presently entitled to such return. It is also conceded for purposes of this motion that Ossip Pernikoff himself was not an 'enemy or ally of enemy' within the meaning of the Trading with the Enemy Act. The sole dispute concerns whether Ossip Pernikoff had an 'interest, right, or title' in the funds which is sufficient for purposes of an action under section 9(a).
There is no doubt that the now defunct Palestine & Orient Lloyd G.m.b.H., Ossip Pernikoff's German corporation which was liquidated and dissolved by the Nazis, was technically an 'enemy' within section 2 of the Trading with the Enemy Act, 50 App.U.S.C.A. § 2, which defines an enemy as including 'any corporation incorporated within (the territory * * * of any nation with which the United States is at war.)' This conclusion is not disputed by either side.
Plaintiffs, however, advance two theories to support their argument that despite the corporation's enemy status, the interest in the vested funds was owned by Ossip Pernikoff himself until his death, and that plaintiffs herein are therefore entitled to have the funds returned. One theory was advanced in the claim made to the Alien Property Custodian, which claim was a necessary prerequisite to bringing suit under section 9(a). There plaintiffs declared that the corporation 'was liquidated by the Nazi authorities' in 1942, and that in 1951, at the time of the vesting, Ossip Pernikoff was entitled to the funds then on deposit in New York 'by reason of the liquidation of P.O.L., in 1942 * * *.' (Emphasis added.) The other theory, advanced for the first time in opposition to the motion of defendants for summary judgment, is contained in an affidavit of Paul Simon, an attorney who is a member of the Bar of the State of New York, who was born and educated in Germany, studied law in Germany and Switzerland, was a judge in the courts of Berlin from 1922 until 1933, when he was dismissed from office by the Nazis, and who has kept current in his study of German law, with particular emphasis upon problems of war-time restitution claims. This attorney, whose qualifications as an expert are not disputed, states as follows:
'It is true that under German Law, as well as under Common Law, a corporation is a separate legal entity and that title to the corporation's assets is in the corporation rather than in its shareholders. In fact, until Hitler came to power, this theory was adhered to in Germany probably with more force than in the Common Law countries. A change, however, was brought about by the acts of the Nazi Government in connection with its efforts to deprive the Jews in Germany and the occupied countries of their property. It was in the course of this policy that corporations owned and operated by Jews were arbitrarily dissolved and their assets confiscated as 'Jewish' property.
'After the downfall of the Hitler Regime, the Allied Governments enacted Military Laws in their respective Zones of Occupation, aiming at the restitution of Jewish property, confiscated by the Nazis, to its rightful owners. In this connection, the question arose who was entitled to such property which prior to its confiscation was owned by a corporation which was dissolved by the Nazi Authorities as 'Jewish owned and operated'. If the doctrine of 'separate legal entity' would have been applied by the German and International Courts, entrusted with the enforcement and interpretation of the Allied Restitution Laws, it would have been necessary to 'revive' such dissolved corporations, as far as such 'revival' was possible under German Law, and to appoint a liquidator of such 'revived' corporation for the purpose of collecting the assets of such corporation and to distribute the proceeds of such collection among the shareholders of the corporation. If, however, the shareholders were regarded as the true owners, they would have been entitled to the restitution of the confiscated assets rather than the defunct corporation.
'This problem came before the Supreme Restitution Court in Berlin, an international tribunal created by the Allied Governments for West Berlin, composed of a Swedish Judge as Presiding Judge, and three Allied and three German Judges, as Associated Judges, in the matter of ARNDT vs. NORD-DEUTSCHE SALINEN-VEREINIGUNG Gm.b.H. The decision in this matter, which was rendered on May 17, 1956, and published in Volume V of the Official Collection of the decisions of the said Court, deals with the above stated problem on pages 424 to 427. The Court, relying on a statement by the Court of Restitution Appeals for the American Zone of Occupation (Opinion No. 476, Case No. 1080, dated August 1, 1955) reached the conclusion that, in the case of a one-man corporation, the veil of corporate entity had to be pierced and that the assets which were put into the corporation by the sole shareholder were his property rather than the property of the corporation used by him as a cloak in his business transactions; that title to such assets had never ceased to be in the sole shareholder and that they could be recovered by him; and that there was no need to revive the corporation and to appoint a liquidator in order to return the property to its rightful owner.
'As appears from a recent decision of the Supreme Restitution Court for the former British Zone of Occupation, dated November 29, 1961, published in 'Rechtsprechung zum Wiedergutmachungsrecht' 1962, page 161, Nr. 7, the leading German Law Review dealing with the Law of Restitution and Indemnification, the concept of 'piercing the veil of corporate entity' has been adopted by the German Law as a general proposition, not only confined to questions of the Law of Restitution.
'From the foregoing, I reach the conclusion that under German Law, as it stands now, Ossip Pernikoff as the sole shareholder of Palestine and Orient Lloyd, G.m.b.H. was and always has been the owner of the funds deposited with the Incassobank in the name of his corporation and vested by the Alien Property Custodian, and that * * * he has been the owner of the said funds 'ab initio'.' (Emphasis added.)
The only difference between plaintiffs' two theories is that in one, Ossip Pernikoff's direct interest dates from 1942, when the corporation was liquidated, and in the other, he is considered the owner from the time of the original deposit, in 1938 or 1939. There is no real difference between the two theories, however, since both are clearly designed to achieve the same result by the use of different words: to provide that funds which belonged in name to German corporations but never reached Nazi hands be returned to non-enemy individuals who were continuously the sole shareholders of such corporations. If this result is consistent ...