Orvis v. Brownell/Dissent Douglas

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). 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; 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.