Sutherland, Alien Property Custodian v. Mayer Mayer v. Sutherland, Alien Property Custodian Reis v. Mayer

Background

The government official in charge of enemy property sued an American businessman who had been a partner with several German partners to sort out ownership of partnership assets after World War I. The partnership began before the war, held assets in the United States and Europe, and was dissolved when the U.S. entered the war on April 6, 1917. U.S. assets in the American partner’s hands had been seized and later partly returned, while the German partners kept and used the European assets during the war. The German mark fell sharply in value during and after the war, from about 18 cents before the war to 7½ cents in July 1919 and far lower later.

Reasoning

The Court addressed how to measure the American partner’s share of the German assets after the partnership ended by war. The Court held that remedies were suspended during non-intercourse and that measuring Mayer’s share at the extreme prewar value would be unfair because the severe depreciation of the mark was an unavoidable war result. The Justices therefore chose the date when commercial intercourse and settlement first became lawful under War Trade Board rules in July 1919 and used the exchange rate then (the record showed about 7½ cents on July 17, 1919). The Court also allowed the German partners a credit for wartime taxes they paid to protect the fund, disallowed payments to the American partner’s relatives without proof of assent, and ordered an allowance in place of unascertainable profits.

Real world impact

The decision tells courts to value foreign-currency partnership shares at the date when lawful settlement first resumed after war, rather than at accounting or prewar dates. It protects partners from bearing the full burden of wartime currency collapse, allows credit for reasonable wartime expenses that preserved the fund, and limits post-war claims for payments made without clear authority.