it was provided, and Germany agreed, that Germany should herself recompense her own nationals for the loss of their seized property. Thus it was provided that "Germany undertakes to compensate her nationals in respect of the sale or retention of their property." (Pt. X, Sec. IV, Art. 297, i.) All of the foregoing provisions for the benefit of nationals whose property was destroyed by German acts of war were specifically made applicable to American nationals by the treaty of Berlin (August 25, 1921). 4 has * ** This treaty, moreover, made further provisions with respect to the alien property fund. It provided that "All property of German nationals which * come into the possession or under control of, or has been the subject of a demand by the United States of America or of any of its officers, agents, or employees, from any source or by any agency whatsoever * * shall be retained by the United States of America and no disposition thereof made until such time as (Germany) shall have * * made suitable provisions for the satisfaction of all claims who have suffered (through Germany) of all persons * loss, damage, or injury to their persons or property, directly or indirectly * Thus the alien property fund, by the provisions of this treaty, became a fund held as collateral security for the fulfillment of Germany's promise to pay her admitted obligations to American claimants. As stated by Secretary of State Hughes in a letter to the Chairman of the House Committee, when Congress, in 1922, had under consideration the bill under which a part of this fund was returned to former German owners: * * * "The resolution of July 2, 1921, declaring the state of war terminated * provided that the sequestered property should be retained by the United States until such time as the owing government made suitable provi sion for the settlement of claims growing out of the war. Under the last mentioned treaties this Government also has the right to apply the proceeds of sequestered property to the payment of * certain public debts owed to American citizens. It is understood that this bill (to return to Germany part of this sequestered property) has been introduced on the assumption that it would require the return of a relatively small amount of property and that the security for the settlement of American claims would not be substantially impaired. Unless this were the fact, I could not approve the bill." ** * To carry out the provisions for the payment of the claims against Germany it was necessary, of course, that tribunals for the adjudication of those claims should be established. Thus the treaty of Versailles (Pt. X, Sec. VI) provided for the establishment of arbitral tribunals specifically for that purpose. The arbitral tribunal established in Washington is the Mixed Claims Commission. By the treaty of Berlin, therefore, this Government procured from Germany an acknowledgment of liability for damages to American nationals and a promise to pay, the establishment of a tribunal for the adjudication of claims, and an agreement for the use of a fund as collateral security for the payment of such judgments as might be recovered. When Congress ratified this treaty it became the supreme law of the land. Nor is that all, for when Congress ratified this treaty it invited its nationals to present their claims for adjudication, upon those assurances for payment, if judgments were recovered, which were given by the treaty, including the assurance of collateral security. General Considerations.-The points which we wish to make, under the provisions of these treaties, are directed to what we conceive to be the legal rights of American claimants in the alien property fund. We think that these legal rights of the American claimants are inseparably connected with the moral questions with which Congress is confronted. We think that to return this fund to the former German owners would be to deprive the American claimants of a property right--that it would be a taking of private property for a public use and that this should not be done, unless the fifth amendment of the Constitution is to be disregarded, without making a just compensation to the American claimants-for the fifth amendment says: nor shall private property be taken for public use, without just compensation." The argument is not that the alien property fund, or a part of it, should not be returned, but that, if it be returned, just compensation should be made to the American claimants who are thereby deprived of a property right. Furthermore, that the importance of protecting the American claimants in this regard is emphasized by the fact that the return of the alien property fund is not and can not be based upor any theory of legal obligation, but must be admitted to be a mere act of grace in the nature of a gift to the Germans. Furthermore, that no discrimination can properly be made among the American claimants, under these circumstances, either legally or morally, with respect to the payment of their claims. And finally, that since the return of the fund can be based only on the ground that it is for the public good, the loss occasioned by such return, if any loss is thereby necessarily occasioned, must properly be charged to the public expense. It will be unnecessary to argue what would be a just compensation to the American claimants if their collateral security be turned over to the Germans. It is obvious that, if this be done, a substitution of other collateral, equally as good, would be just compensation-but, in making such substitution, Congress is morally and legally bound to make provision that the American claimants will suffer no substantial damage thereby, either through loss of any considerable part of the amounts of their claims, or through any undue or unreasonable deferment in the payment thereof. And in this connection the following considerations are pertinent: (1) That if the alien property fund be returned, this will be in the nature of a gift to the Germans of property which is held as collateral security for the payment of American claimants. (2) That to deprive the American claimants of their collateral security is to deprive them of property rights. (3) That this may not be done, either legally or morally, without substituting some other security, for otherwise the judgments of the American claimants against Germany would be rendered practically unenforceable and worthless. (4) That the last consideration applies equally to all the claimants alike, without discrimination, for none may be deprived of a property right without just compensation. If Congress, moved by moral or politic considerations, determines to give back the alien property fund to the Germans, it should be careful to act in such a manner as will not deprive a single one of its citizens of a property right. (5) That if the return of the fund is for the public good-as, indeed, it needs must be then it must be at the public expense, if any expense be involved. POINT I.-The return of the alien property fund will be a return of property held as collateral security for the payment of all American claimants, and therefore will deprive them of their property right to have this fund retained until suitable provision is made for the payment of their claims; and this should not be done without making just compensation to all claimants thus deprived of a property right The fund held as collateral security.-The right of the American claimants was created by the Treaty of Berlin, which provided that this fund “shall be retained by the United States of America and no disposition thereof made * * until such time as [Germany] * * * shall have * * made suitable provisions for the satisfaction of all claims.” By undertaking not to dispose of this fund until after suitable provisions have been made for the satisfaction of all claims, and by stipulating, under the adopted provisions of the treaty of Versailles (see above, p. 2), that this fund might be applied to the payment of the claims, the United States created a collateral security for the payment of all American claimants (see above, p. 4, the letter of Mr. Hughes). Thus the United States is in a position analogous to that of a trustee who holds property as collateral security for the payment of creditors, who have an equitable lien thereon. The cestuis que trust under this agreement are not, of course, the former German ownersthey have no right, title, or interest whatsoever in this fund (see above, footnote on p. 2). The cestuis que trust are the American claimants. Moreover, when the United States invited the claimants to go to the labor and expense of presenting their claims to the Mixed Claims Commission for adjudication, its offer includ d an assurance for payment of such judgments as might be recovered, to wit: That assurance for payment which was afforded by the treaties--the assurance of collateral security. And when the claimants accepted this offer, it would seem that there was created a direct contract obligation by the Government to the claimants with respect to the collateral security. It is conceded that Congress is not restrained by the Constitution from an exercise of its powers which may, incidentally or indirectly, impair the obligations of contracts between individuals (Legal Tender Cases, 79 U. S. 457, 20404-2618 547-551), but it is urged that Congress may not legislate in direct breach of a Government obligation, thereby depriving its nationals of collateral security. without making them just compensation. And even if the contract obligation by the Government were not a direct obligation to the claimants, it would stil be a contract obligation by which the Government would be bound under the familiar doctrine of Lawrence v. Fox. That is, this Government contracted with Germany, the debtor of the claimants, for the benefit of the claimants to hold the alien property fund as security for the payment of Germany's debt to the claimants; and thus the Government assumed a contract obligation as binding, and in legal theory as enforceable by the claimants, as if it had contracted with the claimants themselves. Claimants' property rights.-From the fact that the alien property fund is held as collateral security for the payment of the claims, it necessarily follows that the claimants have a property right therein. That a creditor has a prop erty right in the collateral held as security for his debt is a proposition of law so elementary that it is difficult to find a specific statement thereof in recent cases. It goes without saying. The very "term collateral security' nees sarily implies the transfer to the creditor of an interest in (Jones on Collateral Securities, 3d ed., p. 3). property A lien is a "hold or charge which one person has upon the property of another as a security for some debt" (Bouvier), and an equitable lien is one which, though not cognizable in law, will be created in equity "for the purpose of justice (id.). An equitable lien is a right, in justice, to enforce compensation. It "constitutes a charge upon the thing. In regard to these [equitable] liens, it may generally be stated that they arise from constructive trusts. They are, therefore, wholly independent of the possession of the thing to which they are attached as an incumbrance" (Story, Eq. Jur. sec. 1215). Thus the American claimants have, at the very least. an equitable lien on this fund. And that an equitable lien is a property right is an axiematic proposition of law. * means The property right here asserted is not, of course, the legal title of the property held as collateral security; it is the right to satisfy the debt out of that property. This right is none the less a property right notwithstanding that the ownership of the fund is not in the claimants. Thus it was said as long ago as by Lord Coke that a pledgee has a property in the thing pledged (Co. Litt., 89a)-that he has a property in it, and not a custody only (Southcote's case, 4 Rep. 83b)-notwithstanding that a pledgor retains title in the thing pledged. Property is not, of course, only corporeal; it may be incor poreal. Corporeal property consists of lands, goods, and the like. Incor poreal property consists of legal rights, as choses in action, easements, and the like. The word property * * *. As ordinarily used the thing possessed, but it may include the right to use and enjoy it. The more comprehensive meaning is presumed to have been intended by the use of such a word [as property] in a constitution." (Wells, Fargo & Co. v. Jersey City, 207 Fed. 871, 876.) That is, the word property in the fifth amendment of the Constitution means, and has many times been held to mean, incorporeal property, like legal rights, as well as corporeal property, like lands. Thus in Territory v. Daniels (6 Utah 288) it was held that, in the fifth amendment. which declares that private property shall not be taken for public use without just compensation, the term private property means "all kinds of property." And in Truax v. Corrigan (257 U. S. 312, 327) the Supreme Court held that the right of a man to conduct a lawful business "is a property right (Duplex Printing Press Co. v. Deering, 254 U. S. 443, 465)." Instances might be multiplied, but it is thought that the case most squarely on the point is Ettor v. City of Tacoma (228 U. S. 148), for the right to enforce a debt against collateral security is certainly a right to enforce compensation. and in that case the Supreme Court held that deprivation of a remedy to enforce compensation is a deprivation of property within the meaning of the Constitution. That case concerned a statute which provided for compensation to be paid by the State to property owners damaged by changing the grades of streets. It was held that this statute did not merely provide a remedy, but created a property right; and that the repeal of this statute, after rights to compensa tion had accrued thereunder, was a deprivation of property. The court said: "Matters which belong to the remedy are subject to change and alteration. and even repeal, provided the legislation does not operate to * * * deprive one of a vested property right. If the changing or repealing statute leaves the parties a substantial remedy, the legislature does not exceed its authority. * * * * # ** Rights and remedies shade one into the other so that it is sometimes difficult to say that a particular act creates a right or merely gives a remedy. So also a statute, under the form of taking away or changing a particular remedy, may take away an existing property right (p. 155). "The necessary effect of the repealing act was to deprive the plaintiffs of any remedy to enforce compensation. This was to deprive the plaintiffs of a right which had vested before the repealing act, a right which was in every sense a property right" (p. 156). The rights of the American claimants in the collateral security held for payment of their claims became vested when the right to have the alien property fund so held was procured for them by treaty, and when they accepted the government's invitation to present their claims for adjudication upon the assurance of that security. And it would seem to be beyond question of doubt that at least those of the claimants who have procured judgments secured by the collateral have a vested right to have the same held pend.ng "suitable provisions for the satisfaction of all claims." POINT II-If or when the alien property fund is returned, such return will be an act of grace, in the nature of a gift to the Germans The former German owners have no right, title, or interest in the fund.-The title to the alien property fund is in the United States, and the United States may, in law, deal with the fund as it sees fit, after there shall have been made suitable provisions for the satisfaction of all claims." The former German owners have, in law, no right, title or interest whatsoever in the fund (see above, footnote on p. 2). Moreover th s legal principle was established by the treaty of Berlin. The American seizures of the alien property divested the former German owners thereof of all title thereto as fully as though they themselves had made voluntary conveyances. But even if this were not so, Germany would still, in the exercise of her war powers, and under the exigencies of her situation, have had the right to requisition th's property of her nationals, even without the just compensation which she promised to make them. But these questions are academic, for it is now beyond question that neither Germany nor her nationals has or have any right, title, or interest whatsoever in the alien property fund. The return of the fund a gift.-From the fact that the Germans have no legal right to this fund, it necessarily follows that a return of it to them, if or when made, will be an act of grace, in the nature of a gift. It will be made. without consideration, and not under any treaty. Even under international law, which does not recognize the right of seizure but only the necessity and power under which seizures are made, this would still be a gift, for it is made on abandonment of a treaty right. ! POINT III-It would be neither legal nor moral to make a gift to Germans of property held as security for American claimants without substituting other security equally as good, and in this regard no discrimination should be made among the American claimants, for the security is held for the satisfaction of all claims. Substitution of security should be made.-This point might be made without reference to legal considerations. It seems clear, as a matter of abstract justice, that property which is held as security for the reimbursement of American nationals who suffered losses through German aggressions, especially in those instances where the aggress ons were at at me when we were still at peace with Germany, should not be made the subject of a gift to Germans, unless some other security, equally as good, be subst tuted in place of that given away. And this would still remain true, irrespective of the legal considerations establishing a property right in the American cla mants, n the alien property fund. It would still be true even though no such property right existed. No discrimination among claimants.-The point that, with regard to the substitution of securtiy, no discrimination should be made among the claimants, seems equally clear, for the security to be given away is now held for all claimants alike. The treaty specially provides that the security is to be held until there shall have been made "suitable provisions for the satisfaction of all claims." Moreover, whatever the prior nature of the rights asserted by the various claimants before the Mixed Claims Commission, such rights, whenever adju dicated by the Mixed Claims Commission, become merged in the judgments, and thereafter stand on the same basis, and are of the same nature, as all other judgments of the commission.' The test of the constitutionality of discriminatory or partial legislation was stated in Barrier v. Connolly (113 U. S. 27, 32) as follows: "Class legislation, discriminating against some and favoring others, is prohibited, but legislation which, in carrying out a public purpose, is limited in its application, if within the sphere of its operation it affects alike all persons similarly situated, is not within the amendment." And in Hayes v. Missouri (interpreting the fourteenth amendment, which contains, with respect to State legislation, the same prohibition against class legislation which is prohibited to Congress by the fifth amendment) it was said (120 U. S. 68): It "does not prohibit legislation which is limited either in the objects to which it is directed, or by the territory within which it is to operate. It merely requires that all persons subjected to such legislation shall be treated alike, under like circumstances and conditions. both in the privileges conferred and in the liabilities imposed." And in Truax v. Corrigan (257 U. S. 312, 333-334): “The guaranty [of the equal protection of laws] was intended to secure equality of protection for all * * * # * similarly situated. Indeed, protection is not protection unless it does SO. Immunity granted to a class, however limited, having the effect to deprive another class, however limited, of a personal or property right, is just as clearly a denial of equal protection of the laws to the latter class as if the immunity were in favor of, or the deprivation of right permitted worked against, a larger class the equality clause * forbids the granting of equitable relief to one man and the denying it to another man under like circumstances and in the same territorial jurisdiction." And in Yick Wo v. Hopkins (118 U. S. 356, 369): "These provisions are universal in their application, to all persons within the territorial jurisdiction, without regard to any differences of race, color, or of nationality; and the equal pro-1 tection of the laws is a pledge of the protection of equal laws." Thus Congress may not discriminate against insurance companies as such There is no difference in law between them and other judgment creditors under the awards of the commission. Congress may not arbitrarily select this class! for discriminatory legislation. The "power of selection for classification is not an arbitrary one, but must have a reasonable foundation. It must rest upon some difference which bears a reasonable and just relation to the act in respect to which the classification is proposed, and can never be made arbitrarily and without any such basis.'" (Lapping v. Dist. of Col., 22 App. Cases, 68, 70, citing Gulf, etc., Co. v. Ellis, 165 U. S. 150, 155.) It is hardly necessary to argue, with respect to the 2 per cent payment sent to the United States under the Dawes plan, for payment of the claims of American nationals, that no part of this may be diverted from certain of the claimants to the others. It does not matter that these moneys are sent to the Government instead to the claimants direct, for they are sent to the Government only for the claimants. They are sent to the Government because of Germany's express ac knowledgment of indebtedness to the claimants, and in fulfillment of Germany's promise to pay the claimants. The equitable ownership of this small percent age of the Dawes payments is therefore not in the Government, but in the claimants. It would seem to be a proposition of law which, if not self-evident, is at least clear under the decisions above cited, that the Government may not take the property of some of these claimants and give it to the others. Thus in the Legal Tender cases (79 U. S. 457, 580-581) it was said that it is a"fundamental principle of all just legislation that the legislature shall not take the property of A and give it to B. 1 44 Every judgment is for most purposes to be regarded as a new debt. This new dest is not. in general, affected by the character of the old one. Though the cause of action may have arisen from a tort, the judgment is not therefore any the less a contract or a the nature of a contract. The tort merges in the judgment." (Freeman on Judgments, 5th ed., sec. 548.) All judgments of the commission are debts. The causes of action which resulted these judgments all arose from torts, but the judgments are none the less all in the natur of contract obligations. |