The controversy involves the liability of the appellee to account for 670 shares of the capital stock of the Kekaha Sugar Company, reported by the appellee to have been sold under the act known as the Trading with the Enemy Act, by the Alien Property Custodian, as property of beneficiaries of the estate of Otto Isenberg, deceased. The eireuit court found that the stock was part of the trust estate, and that at the time of the accounting it should have been in the appellee’s possession as trustee, and that it had been lost to the estate, through its negligence in failing to reduce it to possession. The Supreme Court of the territory held that the demand addressed by the Custodian in May, 1918, to the Kekaha Sugar Company, for 840 shares of common stock therein standing on its books in the name of the estate of Otto Isenberg, did not operate to transfer to the Custodian any title either of the trustee of of the beneficiaries under the will, because that company did -not hold any property belonging either to the trustees or to the beneficiaries; there being no deposit of any of the certificates of stock with the Kekaha Sugar Company for safe-keeping or for any purpose, that the company was not the agent either of the trustees or of the beneficiaries, and that for those reasons the demand was not sufficient to accomplish the seizure of the property of others which the company did not hold or control in any way. -
*612While we are constrained to differ with the learned court in that view of the law, Stoehr v. Wallace, 255 U. S. 239, 41 S. Ct. 293, 65 L. Ed. 604; Great Northern R. Co. v. Sutherland, 273 U. S. 182, 47 S. Ct. 315, 71 L. Ed. 596, we think the court’s conclusion is sustainable on other grounds. The demand made on the Kekaha Sugar Company gave notice that the Custodian had determined that “Estate of Otto Isenberg, whose address is Berlin, Germany, is an enemy and has a certain right, title, and interest in and to 840 shares of common stock standing on your books in the name of Estate Otto Isenberg.” There was no estate of Otto Isenberg whose a,ddress was Berlin or elsewhere, and there were no shares standing on the books of the Kekaha Sugar Company in the name of the Estate Otto Isenberg. Otto Isenberg had died many years before. His estate had been administered and settled and closed, and his executors had been discharged in 1905, and in that year the property of the estate had been delivered to trustees, who held it for the benefit of Otto Isenberg’s widow and children, and from and after that date the shares of the stock of the Kekaha Sugar Company stood in the names of the trustees. We are unable to see why the reasoning of the territorial Supreme Court and the conclusion which it reached as to the demand upon the Kekaha Company should not apply to the demands made upon the trustees Schultze and Rodiek. At the time when those demands were made, the trustees held no property belonging either to themselves or to the beneficiaries of the trusts. The demands were made in June, 1918. At that time the appellee held, and since January 31, 1918, had held, possession of all the shares of stock belonging to the trustees or to the beneficiaries, and there was nothing in the hands of the trustees subject to their control or subject to seizure. On January 31, 1918, Schultze, trustee, had voluntarily surrendered all the trust estate to the appellee as depositary, and on March 11, 1918, the shares of stock constituting the trust estate had been transferred to the appellee as depositary for the Alien Property Custodian. Demand upon Schultze, after he had surrendered the corpus of the trust estate and had been divested -of title thereto, cannot be said to be a seizure. No demands were addressed to the appellee. It has been uniformly held that no seizure can be had without a valid demand upon the party in possession of the property. Said the court in Miller v. Rouse (D. C.) 276 F. 715:
“Normally a ‘demand’ should include the •communication of the claim to the person against whom it is directed. Probably in section 2 of the executive order this is not its meaning; it is to be treated as a completed ‘demand’ when once drawn up. Yet under section 2 (e) it is only after notice that the property vests in the Alien Property Custodian. Therefore it is apparent that under the executive orders the capture is made to depend upon the service of the demand, and this conforms with the-meaning of ‘require’ in the act itself. * * * The property does not become the ‘subject’ of a demand till those acts are done which would vest the property in the United States, and that, as I have said, even under the executive orders themselves, is only when the demand is served. * * * In the case of choses in action, where the property cannot be forcibly taken, notice is all that can be given, unless the enemy’s debtor is himself to be seized. The analogy of garnishment is directly in point.”
We are of the opinion that the voluntary surrender by Schultze as trustee of the entire corpus and income of the Otto Isenberg estate was without authority of law. On January 31, 1918, there were two trustees, Schultze and Rodiek. Schultze alone made the surrender to the appellee of the shares which stood in the name of himself and his cotrustee, and on March 11,1918, the appellee surrendered to the Kekaha Company the stock certificates and received in place thereof one certificate for 170 shares and one for 500 shares as requested by it, in its capacity as depositary for the Alien Property Custodian. This was done without authority from the Custodian. Up to that time there had been no determination that any of the beneficiaries of the Otto Isenberg trust estate were enemies, and no demand had been made for the surrender of their property. Section 7-D of the Trading with the Enemy Act (50 USCA Appendix § 7[d]; Comp. St. § 3115%d[d]) provides for voluntary surrender to the Alien Property Custodian and declares that any person not an enemy or ally of an enemy, who holds property for the benefit of an enemy, “may, at his option, with the consent of the President, pay, convey, transfer, assign, or deliver to the Alien Property Custodian said money or other property under such rules and regulations as the President shall prescribe.” Rule 30 provides that the person making the surrender shall file an application with the Alien Property Custo'dian for consent and permit, and it authorizes the Custodian to consent and issue a permit or to withhold or refuse the same. There *613was no compliance with, this rule. Schultze filed no application for permission, and no permission was granted by the Alien Property Custodian. The stock certificates at that time stood in the name of the trustees, and the estate was subject to the control of the probate court.
On October 31, 1918, the appellee upon its own petition and without notice to the widow or to any of the beneficiaries of the trust estate was appointed trustee of the trust formerly administered by Schultze and Rodiek, and shortly thereafter gave a bond for the faithful performance of the duties of the trust in the sum of $120,000. In thus assuming, as it did, the duties of trustee of an active trust, while at the same time discharging the duties of representative of the custodian of alien enemy funds, the appellee acted in inconsistent and conflicting capacities. As trustee, it was its duty to protect the trust and carry out its provisions. The legal title of the trust property was vested in it. Two of the beneficiaries of the trust were not enemies, but were loyal American citizens residing in the United States, and they held an interest in the shares of stock which had been set apart for the benefit of the widow during her life. The appellee had been instructed by the Custodian to be very cautious and not to recommend any bank or trust company as depositary “which may have any interest which would conflict with those of the properties deposited with it, or the good faith of the officers of which might be questioned in any manner in discharging their duties for the government.” As early as September 16, 1918, the president of the appellee had been advised of the condition of the Isenberg trust and knew that to seven of the children had been distributed their distributive shares of their two-thirds of the estate, leaving two-ninths of the two-thirds in the names of Paul Otto and Dorothea, and yet in his letter to the Custodian of September 25, 1918, although he knew that no alien enemy held’the legal title to any of the securities constituting the estate in trust, he represented that the widow was the owner of 500 shares of Kekaha stock, and that Paul Otto and Dorothea were each the owner of 170 shares of the Kekaha stock, and on September 26, 1918, he wrote to the Custodian, “This estate is in probate and subject to the orders of our probate court.”
But if it be assumed that by the demand upon the Kekaha Sugar Company of March 11, 1918, there was a valid seizure, the appellee was chargeable with notice of the nature and extent of that which was seized. The demand was for “the right, title, and interest” of the estate of Otto Isenberg in and to certain shares of stock. In Kahn v. Garvan (D. C.) 263 F. 909, Judge Learned Hand said of the seizure there under consideration: “It did not profess to be greater than the right of the enemies as eestuis que trustent, and it did hot in law change the substance, or the incidents, of the right itself, any more than if, for example, it had been an unliquidated claim for breach of contract. * * *
If it be a chose in action, subject to an accounting as a condition of its assertion, he must submit to some judicial determination between himself, as captor, and the trustee as obligor.”
The communications from the Custodian to the appellee gave to the latter notice that no seizure had been made of the corpus of the trust. In his letter of "October 16, 1918, the Custodian wrote: “As the Otto Isenberg estate is still in the hands of the probate court, this office is only entitled to the enemy’s interest when liquidated.” Again, in a letter of November 8, 1920, the Custodian wrote: “No property was taken over in this trust; all of the shares being included in the reports filed by Schultze, either as guardian or trustee.” Until the respective rights of the trustee and the beneficiaries were judicially determined, no rights in any particular portion of the corpus of the trust were confiscable by the Custodian, for he was not vested with title to the corpus, or to any particular portion thereof, but, if vested at all, was vested only with the right, title, and interest of the beneficiaries, and in fact the right, title, and interest of the beneficiaries was not sold. The sale was a specific sale of 500 shares of stock “owned” by the widow and 170 shares of stock formerly “owned” by Paul Otto Isenberg, and it was not a sale of shares belonging to a trust estate, for neither was the widow nor Paul Otto owner of any Kekaha shares.
We think it was the plain duty of the appellee, as soon as it was appointed trustee of the Isenberg trusts, to initiate a proceeding under section 9 of, the Trading with the Enemy Act (50 USCA Appendix § 9; Comp. St. § 3115%e) to recover the corpus of the estate. Section 9 of the act (50 USCA Appendix § 9; Comp. St. §' 3115%e), as it then stood, provided that any one not an enemy or ally of an enemy, claiming any interest, right, or title in any money or other property so sequestered and held, might give notice of his claim and institute a suit in equity against the Custodian to abide the final decree. The commencement of such a suit *614would require the Alien Property Custodian to retain the property until determination of the rights thereto. In such a final decision undoubtedly the corpus of the trusts would have been protected and the interests of the American citizens involved would have been safeguarded, and opportunity would have been afforded to segregate such property as was subject to confiscation. Central Trust Co. v. Garvan, 254 U. S. 554, 41 S. Ct. 214, 65 L. Ed. 403; Stoehr v. Wallace, 255 U. S. 239, 41 S. Ct. 293, 65 L. Ed. 604.
The Trading with the Enemy Act, § 12 (50 USCA Appendix § 12; Comp. St. §' 3115%-ff), required that all moneys paid to or received by the Custodian should be deposited forthwith with the Treasurer of the United States. None of the money realized upon the sale of the shares of stock was thus deposited. On December 14,1918, the appellee wrote to the Custodian suggesting that the proceeds of the sale should be turned over to. the appellee as trustee, and by it invested in Liberty bonds; the income therefrom to be accounted for to the Custodian. The Custodian made no objection, and made no demand for the proceeds of the shares of stock belonging to the trust estate. He thus recognized that he was not concerned with the corpus of the trust estate, and was entitled only to the income thereof after liquidation. The proceeds of the sale of the 500 shares of Kekaha stock were retained by the appellee, and were never transferred to the Custodian. They were reinvested by the appellee, and they constituted a part of the trust estate when the appellee as trustee filed his principal account, the objections to which brought about the present controversy. The proceeds of the 170 shares, known as the Paul Otto shares, were also received by the appellee as trustee, and had been retained by it more than two years after the date of the sale, when, on February 4, 1921, they were forwarded to the Custodian in consequence of the latter’s demand, which was made on the theory that Paul Otto had, at the time of his death, a vested interest in the principal as well as in the income, of those shares of stock. The appellee complied with the Custodian’s demand without protest, and without consulting counsel or endeavoring in any way to ascertain whether or not it was its duty to retain possession of the money as part of the trust estate. On January 4, 1921, the Custodian notified the appellee that the Attorney General had decided, under the provisions of section 9 of the Trading with the Enemy Act, that the widow was entitled to the return of the property held in trust for her benefit, and instructed the appellee to deliver the same to her. The widow had made demand for the restoration of 500 Kekaha shares, and in a letter of September 20, 1921, the Custodian wrote to her attorneys the following:
“The proceeds from the sale of the shares of Mrs. Isenberg belonged to the Trent Trust Company as trustee, and were delivered to the trustee and by the trustee reinvested without instruction or limitation by this office. * * * Tiie effect of our demand was to acquire the income payable to her as provided in the will of the decedent and in accordance with the trust established thereby. By error of the former trustee, H. Sehultze, and the Trent Trust Company, acting as our depositary, the corpus was delivered to the Trent Trust Company. * * * In connection with the sale of certain shares of stock held by the Trent Trust Company as trustee of such estate and the subsequent sale thereof and the reinvestment of the proceeds, we submit that the sale and reinvestment was the act of the Trent Trust Company as trustee and not that of the Alien Property Custodian.”
The letter made reference to the Custodian’s letter of January 2, 1918, whieh, it said, “clearly shows that the Alien Property Custodian did not exercise any control over the sale or of the stocks referred to or the reinvestment of the proceeds from such sale.” The sale of January 17, 1919, was subject to confirmation by the Custodian. C)n January 2, 1919, the Custodian wrote to the appellee ■reminding it that by letter of October 16, 1918, it had been advised that the Custodian was only entitled to the enemies’ interest in the Otto Ernst Isenberg estate when liquidated. The appellee took no action under this intimation from the Custodian, and took no steps to withdraw the 670 shares of Kekaha stock and cancel the sale thereof as it might have done, but permitted the matter to rest until February 22, 1919, when the sale was confirmed. On January 4,1921, the Custodian sent to the appellee a letter of the Assistant Attorney General, stating that the widow was an American citizen, and directing the appellee as depositary for the Custodian to return to her as an American citizen all money and property in its possession belonging to her, but the order was not complied with, .and no property was returned to her. On August 23, 1921, the appellee cabled to the Custodian, advising it that an attorney was demanding the return of certain shares of stock of the Otto Ernst Isenberg estate, and requesting the Custodian to withhold information “pending our letter.” In *615the letter which followed the Custodian was informed that Kekaha shares had advanced to a price of $235 per share, and that the appellee had retained an attorney of the Honolulu har “to represent us in any litigation which may arise in this matter. * “ *
We will greatly appreciate it if you will assist Judge Robertson in such manner as you may be able, and if you will kindly give out no information concerning this matter pending Judge Robertson’s arrival.”
Whether the interests of the beneficiaries in the trust estate were at the time of the sale, vested, as held by the majority of the Supreme Court, or were contingent, the possession and enjoyment thereof was, as to the shares set apart for the widow, deferred until her death, and, as to the Paul Otto shares, was deferred until he should reach the age of 25 years. The widow was still living, and no news had then been had of the death of Paul Otto, who, it later appeared, died unmarried and without issue before he reached the age of 25. A sale of the interests of the beneficiaries could convey no title to the shares of stock. If it is true, as we hold, that neither Sehultze’s voluntary surrender nor the subsequent demands of the Custodian operated to vest in the Custodian the legal title to the 670 shares in dispute, the sale by the Custodian was wholly void. If, on the other hand, it is true that the surrender and the subsequent demands of the Custodian were sufficient to authorize the Custodian to deal with the property as held by enemies, the Custodian had the right to sell no more than the right, title, and interest of enemy beneficiaries in the estate. No such sale was had. The sale was of stock “owned” by the widow and stock “owned” by Paul Otto. This is shown by the correspondence and the advertisements of the sale, and the order which was sent by the Custodian to the appellee, in which' the widow and Paul Ott-o were listed as enemies and as the owners, respectively, of 500 and 170 shares of Kekaha Sugar Company stock.
The determination of the ease involves the investigation of numerous documents, some of which are conflicting and some are obscure. A number of the communications addressed to the appellee from the Custodian’s office, written as they were by different assistants to the Custodian, show upon their face that the writers were not advised of the fact that the appellee was the trustee of the estate in Hawaii. In the opinion of the Supreme Court of the territory, it was recognized that in such a base the first duty of the trustee after his appointment and qualification to act was to secure the possession of the trust property and protect it from loss and injury. Said the court: “He is bound not to do anything that would place him in a position inconsistent with the interests of the trust, or which may have a tendency to interfere with his duty in discharging it. In the case at bar the first duty devolved upon the Trent Trust Company, limited, was to resign as depositary for the Alien Property Custodian because of conflicting interests.” With that expression of opinion we agree. We differ with the Supreme Court in the degree in which the trustee should be held accountable for loss to the estate. We agree that the appellee’s first breach of duty was its failure to obtain possession of the estate immediately upon its appointment as trustee. It obtained possession of no part thereof until May 16, 1919, more than six months after the appointment. It was also its plain duty, we think, to institute proceedings under section 9 of the Trading with the Enemy Act to determine the rights of the beneficiaries of the trust estate.
We are of the opinion that the decision of the circuit court properly disposes of the questions at issue. The decree of the Supreme Court of the territory is reversed, and the decree of the circuit court is affirmed.