Silesian-American Corp. v. Clark

Background

The Alien Property Custodian issued Vesting Order No. 370 on November 17, 1942, under the Trading with the Enemy Act and an executive order, declaring certain Silesian American Corporation stock to belong in interest to a German national. The stock had been listed in the name of a Swiss company, Non Ferrum, and the physical certificates were said to be pledged as security with several Swiss banks. Silesian, a Delaware corporation then in Chapter X bankruptcy, feared liability because its bylaws required surrender of certificates before canceling them, so it sought court instructions about whether to issue replacement certificates to the Custodian.

Reasoning

The central question was whether the Custodian could vest the foreign-owned shares and require Silesian to issue new certificates even without having the original physical certificates and despite claimed bank pledges. The Court held that the Trading with the Enemy Act, as amended (notably § 5(b)(1)), and the executive order authorized the Custodian to vest such interests and to require replacement certificates; lack of physical possession was immaterial. The Court also found Silesian lacked a legal interest to press its shareholders’ claims, treated pledged interests under the amended § 5(b)(1) as subject to vesting, and explained that statutory clauses protect a complying corporation from liability. The Court assumed the United States will provide constitutionally required compensation to friendly aliens.

Real world impact

The ruling requires corporations to follow federal vesting orders in wartime or declared emergencies, lets the U.S. take control of foreign-owned corporate shares despite pledges, and leaves questions about compensation to later procedures. The decision protects companies that comply from immediate liability while holders seek compensation through the government or courts.