LEARNED HAND, District judge
(after stating the facts as above). [1,2] This suit, in spite of its claim under sections 24 and 57 of the Judicial Code (Comp. St. §§ 991, 1039), must be regarded as dependent for jurisdiction upon section 9 of the Trading with the Enemy Act. The plaintiff filed a claim, avowedly made under that act, a few days before bill filed, which he made a part of the bill itself, and there is, therefore, no procedural condition lacking to his rights. The fact [834]*834that he has claimed jurisdiction erroneously need make no difference, if the evidence falls within that section, and especially if he has no other possible remedy. That he had none appears from a consideration of the purpose and structure of the act itself. Under section 7c the President may seize all property which he decides to have enemy character, and under section 7e all who comply with his demands get immunity in all courts. But nothing is settled by the capture itself except bare sequestration of the property in the hands of the Alien Property Custodian.
[3] It is quite true that under section) 12 as amended his powers are extended to include the general power to sell, but under section 9 any claimant friend may file a bill such as this, and either the bill automatically stays the sale, or at least the court may stay it in a proper case, and such a suit section 9 makes the sole remedy of claimants. Thus it is apparent what the scheme of the act was. The reduction to possession of enemy property should be absolute, final and incontestable; it was to proceed by ex parte investigation and without right of review; it should include all property that the Alien Property Custodian decided to have enemy character. But it adjudicated nothing and its effect upon any right but that of possession was nil. In a suit under section 9 the investigation and decision are irrelevant. Instead of an original libel of information to condemn the property upon capture, which places the initiative upon the captor, the initiative in restoration is given to claimant friends, who, as soon as they choose within a fixed period, may reclaim under section 9; until they do the Alien Property Custodian is free to manage and even to sell under section 12 as amended. In the reclamation suit the validity of the capture is for the first time to be tested, and the question of title to be adjudicated. If the fixed period passes without any suit, the title by capture becomes good by a kind of prescription or limitation.
[4] Such being the plainly disclosed plan of the act, it is apparent that the plaintiff here has no standing, unless as it be under section 9, or unless the act be unconstitutional. The plaintiff does attack it as unconstitutional and this objection must first be considered. Cases like McVeigh v. U. S., 11 Wall. 259, 20 L. Ed. 80, and Windsor v. McVeigh, 93 U. S. 274, 23 L. Ed. 914, are not pertinent. They arose under the Civil War Confiscation Acts, which did not forfeit the property of all Confederates by-virtue of their status, but- of only six specified classes. There was no way for a claimant, even though an avowed Confederate, to prove that he was not within those classes except by appearance in the suit. To strike out his appearance in limine, on the ground that he was an enemy, as was done, was therefore to deny him the legal procedure accorded him by the statute. Section 9 is the precise equivalent of this right, at least so far as concerns claimant friends, who are alone concerned here'.
The sole basis for the plaintiff’s claim of unconstitutionality comes down, therefore, to the Custodian’s power of initial sequestration ex parte. But how does this differ in substance from the customary right upon libels of information in rem to arrest whatever property officials may decide to be forfeit? Such property may not be reclaimed pen[835]*835dente lite by filing a bond; the claimant must endure the temporary loss of possession until the innocence of the res is adjudicated. The public purpose of the statute so far overrides this incident of his rights of property. How much more is this the case in time of war where the interests are vital? The difference is one merely of procedure; the substantial rights are the same, for capture effects no more than an arrest in rem. The right to sell is the only addition, and I have shown that this is at least subject to judicial control in the event of a bill filed under section 9. The act, therefore, affords a complete remedy to all claimant friends, and is constitutional. As to claimant enemies. I hare already considered its validity in Kahn v. Garvan (D. C.) 263 Fed. 909, but the point does not arise here.
The purpose of this suit is to prevent the sale of 14,900 shares of stock in the Botany Worsted Mills formerly owned by Kammgarnspinnerei Stohr -& Co., a German corporation doing business in Leipzig. All right of this corporation was captured under section 7c and sections 2a and 2b of the executive order of February 26, 1918, by the Alien Property Custodian’s demand on April 5, 1918, and all its rights under the contract of February 20, 1917, mentioned below, were laier captured in February, 1919. Nobody questions, as I understand it, that these demands effectively divested, whatever rights the Leipzig Company had against Stohr & Sons, Incorporate^, but the dispute is as to what these were. I shall assume for argument’s sake that a shareholder may bring a representative suit in the right of his corporation under section 9, and that the plaintiff here has shown a situation justifying his recognition in that capacity. I shall further assume, though the fact is no way proved, that Hans E. Stohr had,a general authority which would cover the execution of contracts for the sale of such property as this for a consideration such as this. This assumption is all that the plaintiff has suggested he could prove, if he had the chance to take proo f in Germany.
[5] The precise issue then becomes, what rights the Alien Property Custodian got by his symbolic act of capture, and whether they gave him a right to sell under section 12. This question has nothing directly lo do with the statute; it concerns, first, the rights of the Leipzig company; second, whether the belligerent rights of the United Slates were greater than the rights of the Leipzig company inter partes. If, then Stohr & Sons, Incorporated, has no interest in the shares which forbids the sale, the capture made the Custodian an unconditional cestui que trust by substitution under the transfer of 1915 to Hans and Max Stohr. They, being dry trustees, cannot complain of the transfer of legal title to the Custodian’s name, and section 12 authorizes the sale. The question in the end turns upon the effect of the contract of February 20, 1917, which, viewed merely within its four comers, purported to convey to Stohr & Sons, Incorporated, the shares,_ which were registered as such on the Botany Worsted Mills books in professed compliance with its terms. I shall assume that “title” to the shares thereby vested in Stohr & Sons, Incorporated, in spite of irregularity under the by-laws of Botany Worsted Mills.
The contract, verbally taken, was one of two kinds—either a sale [836]*836with the purchase price payable in five future annual installments, the Leipzig Company meanwhile reserving a vendor’s lien, or an option granted Stohr & Sons, Incorporated, to buy one-fifth of the shares in five successive years, provided they made each payment within sixty days after due date. If the contract is valid at all against the United States, and if it was intended as written, on either interpretation the plaintiff is entitled to some relief, because, under the first, the Leipzig Company must sell under its vendor’s lien, and such a sale would be free from the limitations of sales under section 12 as amended. If, on the other hand, Stohr & Sons, Incorporated, has only an option, then it can be terminated only on 60 days’ notice, and no such notice has been given. Therefore, if the contract is valid against the right of capture, the Alien Property Custodian must prove that it was not the true intent of the parties, and that the equitable right of the Leipzig Company is unclogged by any equity of redemption or option. I shall first assume that it would be valid against the United States.
[6] In order to ascertain the real intent of the parties on February 20, 1917, it is necessary first to consider their situation and the events of the day before. The firm of Stohr & Sons was composed of three Germans and one naturalized American, whose interest amounted to less than 2 per cent. It was for all practical purposes, therefore, a German firm doing business in New York, and it was obvious, after February 3, 1917, the day when Count von Bernstorff received his exequatur, that its existence was imperiled by the almost certain event of war. On February 15, 1917, Max, the American partner, and De Liagre and Rohlig, also naturalized Americans, executed a certificate to form a New York corporation of 2,500 shares. In the certificate of incorporation Hans Stohr was made a director, and he became president at once. All the stock was by several transfers issued to Hans E. and Max W. Stohr and to Rohlig in exchange for the firm property, having a net value of over $1,000,000, and they held it when issued as “voting trustees” under the New York statute for five years. “Trust certificates” were issued, by these trustees to the four Stohrs in proportion to their interests in the old firm, except that Max, the American, held the certificates of Eduard and Georg residing in Germany, in trust for them, a trust upon a trust.
The result was that on February 19, 1917, the share of the German partners had not been put beyond the reach of capture any better than if the firm had remained in existence. All that was accomplished, and in my opinion all that was desired, was to secure the firm against dissolution in the event of war, and to insure the voting right in two Americans on whom Hans could rely, if his own right to vote on the shares became affected by his enemy character. I doubt whether the parties then or láter thought of any possible confiscation at all; but, if they did, it is clear either that they despaired of any successful evasion of it, or that they were constrained by motives of prudence or conscience. In any event they left the substantial interests of the partners susceptible to capture and confiscation.
On the following day Hans E. Stohr, assuming to act for the Leipzig Company, made the contract here in question with Stohr & Sons, [837]*837Incorporated. The plaintiff argues that it effected an immediate change of title to the shares here in suit and that it left in the Leipzig Company no interest save a vendor’s hen. The execution of that contract could have been actuated as little by a desire to escape capture by the United States as were the transactions on February 19, 1917, and for the same reason. From the point of view of the Leipzig Company nothing was gained. The first payment was a year in the future, and the rest succeeded annually. If the United Stales were to confiscate enemy property, the consideration was as easily discovered as the shares; it would equally be lost. From the point of view oí Stdhr & Sons, Incorporated, nothing was gained, because while the shaies became the property of a New York corporation, all but 2 per cent, of its shares, controlling the substantial interest in the assets, was equally lost. Hence the contract was not tabula in naufragio; some other motive must be found.
On the other hand, it is clear, of course, that the contract was not a commercial transaction. The occasion is enough to prove this and the everts leading up to it. Besides, thé contract itself proves that it could not have been due to ordinary commercial motives. The Botany Worsted Mills had been a successful business, already 28 years in existence and one of the largest and best equipped in the United States. No possible reason can be suggested for the sudden sale of nearly a majority of its shares, which was not based upon an emergency. Moreover, the consideration was inadequate. It expressly omitted the good will, which must have had a substantial value, and it fixed no present price at all, so that it insured nothing to the Leipzig Company except a sale of one-fifth each year at the then book value of its “hard assets.” If the shares fell in value the Leipzig Company bore the loss, both in general value and in book value; if they rose, it did not share the gain, except in so far as that was reflected in book values. Possibly it is legitimate to observe, also, that our entrance into the war was likely to have that advantage to woolen mills which the event proved.
Now, Hans K. Stóhr was not acting alone for himself and his family. The record does not show how many outside shareholders there were in the Leipzig Company, but they were many. He was in the position oí selling for an apparently inadequate consideration, to his family, property in which other persons were interested as well as they. The contract, if not, therefore, justified upon the principle of selling to Crassus a burning house, could not be justified at all; it was apparently a fraud. And even if not clearly such, it was voidable at die instance of any single German shareholder who chose to protest. It was not likely that Heyn, a capable adviser, should have seriously expected a contract with such infirmities to stand; indeed, it is not-credible that the parties could have intended it as a commercial bargain at all, _ except it were, what is was not, a desperate catch at salvage.
_ Besides, to give even a colorable plausibility to the bargain, the plaintiff’s position requires the assumption that the contract was mutual in its obligations. The point is not in any sense critical, but perhaps worth notice, because it was pretty clearly not a contract of purchase, but only an option. Of course, I am aware of the doctrine that bilateral [838]*838obligations are generally presumed in like cases, and that the courts will light on such words as “agreed” and the like, when they need them, but all such canons are only guides to the interpretation of general intent. I should perhaps think that the obligations were mutual, were it not for article 5; but, that being there, the omission of any express promise to pay may well have been deliberate. Article 5 in terms provides that the remedy of the Leipzig Company on default shall be one which is in substance strict'foreclosure, and that after strict foreclosure there shall be no further right of action on cither side. It is quite .true that it does not expressly say that this shall be the only remedy; but in view of the conclusion of the article I should be disposed so to construe it, especially when, as I have said, there are elsewhere no express covenants to pay the purchase price. It is unexpected, to say the least, that an experienced lawyer like Heyn should have introduced a clause of strict foreclosure in a genuine contract of sale, knowing it to create a forfeiture. The structure of the contract, therefore, if the case turned on it, would lead me to call it an option.
The surroundings confirm that conclusion. As I have shown, while the contract was- heavily weighed against the Leipzig Company, conceivably it might involve Stohr & Sons, Incorporated, in embarrassing obligations, because the transaction was large. After the annual appraisals, the shares might fall; the company might be on an obvious decline. Some recalcitrant Leipzig; shareholder might insist upon ratification of the bargain and place Stohr & Sons, Incorporated, in an awkward predicament. But, if it were only an option, all this would be avoided. The omission to include any promise to pay at least fits with that purpose not to induce the Leipzig Company to call for performance, which may be inferred from the unequal inducements of the contract to either party. If the contract were never intended to be enforced, and if some of the Leipzig shareholders were not altogether reliable, we should look for a contract in substance and in form not dissimilar.
But as an option for $5,000 to purchase during a period of five years $5,000,000 of shares 'at prices which confessedly omitted an important element, of value, the contract is too open a fraud upon the Leipzig Company to admit even of argument. Hans E. Stohr and Heyn were not engaged in any such enterprise; the plaintiff would be the last to suggest that they were. Therefore I think I may say that it is demonstrated that neither was the contract intended to sell out in an emergency so as to escape putative capture, nor was it a genuine business transaction dependent upon an estimate of the mutual advantages of the parties. There remains only the possibility that it was not intended to represent the real purpose of the parties at all, but to serve as a cover for another purpose.
We are, moreover, not left to surmise as to what that purpose was, because the written statements of Hans E- Stohr and Heyn just before the capture very frankly disclose it. It was merely the continuation of what they had doné in 1915, when they put the legal title in the name of Hans E. and Max W. Stohr for convenience of management, and what'they had done in the case of the partnership just before February [839]*83920, 1917. for the same reason. They wished to put their house in against the disabilities and inaccessibility of their German associates during the period of a war which could certainly not go more than live years. This they did, so far as 1 can see, without the slightest anticipation of any confiscation of enemy property, which had, indeed, been generally supposed for over a century to be obsolete.1
Hans E. Stohr wrote two letters to Heyn on February 5, 1918, tyhile Heyn was in Washington, arranging, so far as he could, the affairs of the Stohrs with the Alien Property Custodian. In one letter he said that the shares in question were owned by the Leipzig Company; in the other that the majority of the Botany Worsted Mills was enemy owned. Each was probably intended for transmission to the authorities, and each flatly contradicted the contract of February 20, 1917, at least unless it was an option, which, as I have shown, is incredible. When Heyn came to make his final statement, cumulative upon the earlier reports under section 7a—a statement which Hans expressly approved—he specifically mentioned the contract of February 20, 1917, and referred it exclusively to the supposed danger Lo the voting control of the Botany Worsted Mills. It “had,” said he, “of course, no reference to the status of such control so far as the Alien Property Custodian is concerned. * * * Considerably more than a majority of its stock is controlled by alien enemy interests within the meaning of the Alien Enemy Act.”
This information wa.s given in compliance with section 7a, the second paragraph of which requires a statement as of February 3, 1917, of all enemy shareholders who the corporate officer had cause to suppose then or later owned any shares. Heyn would have had to disclose that Hans E. and Max W. Stohr were trustees on February 3, 1917, for so the books would show. The section in addition required him to say what shares were enemy, owned though standing in the name of another when the report was filed. He was therefore positively required to state the character of the relations arising under the contract of February 20, 1917, and his account of it was authoritative. There can he no question that, had the Leipzig Company had only a vendor’s lien, it would have been a wrong upon Stohr & Sons, Incorporated, to fail to state its full rights. In saying that the “control” for purposes of the act was in the Leipzig Company, I may fairly suppose that he had in mind those provisions, of section 7a under which he was acting; he used “control” as “owned.”
Heyn and Flams S. Stohr are now dead, but the aspect which the plaintiff seeks to put upon the contract is an apocryphal afterthought, which there is no reason whatever to suppose that they, were they alive, would now have the disposition, or the hardihood, to adopt. Their [840]*840declarations ante litem motam fit that interpretation, which alone acquits them at once of any purpose to defraud either their associates or the United States in its right as captor. I have no question that the beneficial ownership of the Leipzig shares was always intended to remain in the Leipzig Company.
[7] The question whether the contract was invalid as a fraud on the belligerent rights of the United States is not, therefore, of critical consequence, in view of the completeness of the proof that there never was any transfer at all. The nearest authorities I have been able to find are those relating to prize,. It was well settled before the Great War that under French law no transfers of cargo or bottoms, flagrante bello, were valid; this being recognized as in diminution of the belligerent’s right of capture, though under American and British law the same doctrine did not obtain.2 In those countries such transfers are valid, but only if made while the goods or vessel are not in transitu. The Benito Estenger, 176 U. S. 568, 20 Sup. Ct. 489, 44 L. Ed. 592; The Bawean [1917] Prob. Div. 58; The United States [1916] Prob. Div. 30.
[3] The claimant must, moreover, even when the goods were not in transitu, establish an unconditional transfer, and the scrutiny as to this point is especially severe; any retention of enemy interest being sufficient to prevent its being regarded as absolute. The Benito Estenger, supra; The Sechs Geschwistern, 4 Ch. Rob. 100; The Jemmy, 4 Ch. Rob. 31. If the sale were absolute of a vessel or cargo not in transitu, being good flagrante bello, it was a fortiori good, imminente bello. But if the sale be imminente bello, and in contemplation of war and to avoid capture, the same limitations applied. The Daksa [1917] App. Cas. 386; The Southfield [1917] App. Cas. 390, note (Sir S. E. Evans); The Tommi [1914] Prob. Div. 251; The Jan Frederick, 5 Ch. Rob. 115; The Vrow Margaretha, 1 Ch. Rob. 337; The Baltica, 11 Moore, P. C. 141. Thus, an ¿bsolute sale, of goods in transitu, or a sale with reservation, is void, if made to avoid capture. In general, it is the rule that the enemy character of the goods depends upon their character at the outset of the voyage. The Packet de Bilboa, 2 Ch. Rob. 133; The Ann Green, Fed. Cas. No. 414.
It is quite true that the right of capture on land depends upon the action of Congress (Brown v. U. S., 8 Cranch, 110, 3 L. Ed. 504), and _ is not a part of our customary law arising from a state of war. Yet the incidents of sea capture might, in the absence of contrary legislative expression, be perhaps looked to as a fair analogy. The reason of the rule which makes the transitu a test of the validity of a transfer, imminente bello, was considered by the Privy Council in The Baltica, supra, and it was held to be the difficulty involved in detecting reserved enemy interests. Therefore a ship was restored when delivery was made to the transferee at an intermediate port. The theory was [841]*841repudiated that while at sea the belligerent’s rights are already inchoate, and that the ship has come, as it were, already into the jurisdiction of the captor.
[9] In spite of The Baltica, supra, it might still be that sales of goods within enemy territory, immiriente bello, and to avoid capture, ought to be regarded as in fraud of belligerent rights, if the statute said nothing. A serious argument might be made in favor of such a result, once a policy of land capture be inaugurated; but under this act it appears to me that section 7b effectively closes any such discussion. A part of the first paragraph of that section reads as follows:
“No person sliall by virtue of any assignment * * * to Mm of any ♦ s' * chose in action by - * * an enemy * * * Rave any right or remedy against the ® "■* " obligor * * * unless said assignment * * 15 was made prior to the beginning oí the war.”
It might indeed be open to a good deal of question whether this included an assignment of equitable interests in shares of stock (Brown v. Fletcher, 235 U. S. 589, 35 Sup. Ct. 154, 59 L. Ed. 374), though shares are analogous to choses in action (Jellenik v. Huron Copper Co., 177 U. S. 1, 20 Sup. Ct. 559, 44 L. Ed. 647), and a fortiori equitable interests in shares. But I think that the purpose of the statute is preity clearly indicated, even if its letter do not cover this precise case. It can scarcely be supposed that°an exception would be made in favor of ante bellum transfers of choses in action which did not apply to property so nearly akin as this, or indeed to all property, and it is clear that absolute transfers of choses in action before April 6, 1917, would be valid. Apparently the United States meant not to inquire into such transfers as in fraud of its rights. There is no reason to extend the application of so penal a statute beyond its fair import; therefore the capture must stand upon the ground that the contract conveyed nothing to Stohr & Sons, Incorporated. Upon that ground it finds sufficient support.
It becomes unnecessary to consider the prayer of the plaintiff for letters rogatory.
Upon the understanding that this suit now concerns only the 14,900 shares of the Eeipzig Company, the bill will be dismissed, with costs.