Propper v. Clark

Background

A federal official known as the Alien Property Custodian sued to collect music royalties that ASCAP owed to an Austrian music association. A New York court earlier had appointed a state receiver to collect those same local royalties. Two presidential actions were key: a June 14, 1941 “freezing” order that blocked certain transfers of foreign-owned assets, and a 1943 vesting order by which the Custodian later claimed title to the Austrian association’s property.

Reasoning

The Court focused on whether the state receiver obtained title before the freezing order or whether the freezing order barred a later unlicensed state-court transfer. It held that the President’s freezing order prevented an unlicensed transfer of the Austrian association’s royalty claim. The Court accepted the federal government’s broad definition of “banking institution,” concluded that a transfer of the royalty credit would have violated the freeze, and treated federal law as controlling whether a judicial appointment could free blocked property from federal control. The lower courts’ view that a temporary receiver did not receive full title under New York law was accepted for this case.

Real world impact

The ruling means federal controls and licensing govern transfers of blocked foreign credits. State receivers cannot obtain title to such frozen assets by state-court orders without federal authorization. As a practical result, U.S. payors like ASCAP must follow federal direction and pay the federal Custodian when the Custodian’s claim is established.

Dissents or concurrances

One Justice objected that ASCAP did not fit the government’s “banking institution” label. Another Justice argued the New York courts should first decide whether the temporary receiver took title, urging a remand.