Great Northern Railway Co. v. Sutherland

Background

The case was brought by the Alien Property Custodian (a federal official) against the Great Northern Railway Company (a railroad) and the Central Union Trust Company (the transfer agent). During World War I the railway filed reports saying certain shares were held by or for enemies. The Custodian issued written demands during the war asserting those enemy interests and later sought court orders requiring the company and the registrar to cancel old stock certificates and issue new ones to him without requiring surrender of the old certificates.

Reasoning

The Court examined the wartime demands together with the Executive Order extracts and concluded the demands operated as symbolic seizures that vested possession in the Custodian. The Court relied on the statute amended November 4, 1918, which required corporations to issue new certificates when shares had been seized, and held that the amendment merely provided a new method to show possession, not a new substantive right. The Court also noted statutory protections and immunity for corporations and registrars who complied with the Custodian’s demands. The district court decree ordering issuance and delivery of the new certificates was affirmed, and the Custodian prevailed.

Real world impact

Moving forward, corporations and transfer agents can be required to cancel outstanding certificates and issue new ones to the government when wartime demands have lawfully seized enemy-held shares. Transfer agents are protected from liability when they comply. The ruling rests on wartime demands and statutory provisions in force at the time.

Dissents or concurrances

Three Justices—Sutherland, Sanford, and Stone—dissented, although their separate reasoning is not stated in the opinion text provided.