Oliver American T. Co. v. Government of the US of Mexico, 96.

• Citation: 5 F.2d 659
• Decision Date: 15 December 1924
• Docket Number: No. 96.,96.
• Parties: OLIVER AMERICAN TRADING CO., Inc., v. GOVERNMENT OF THE UNITED STATES OF MEXICO et al.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

5 F.2d 659 (1924)

OLIVER AMERICAN TRADING CO., Inc., v. GOVERNMENT OF THE UNITED STATES OF MEXICO et al.

No. 96.

Circuit Court of Appeals, Second Circuit.

December 15, 1924.

Robert F. Greacen and Alfred Hayes, both of New York City, for plaintiff in error.

Hardin & Hess, of New York City (Jerome S. Hess, Harold B. Elgar, and Ernest Angell, all of New York City, of counsel), for defendants in error.

Before ROGERS, HOUGH, and MANTON, Circuit Judges.

ROGERS, Circuit Judge.

This is an action at law for damages arising out of an alleged breach of contract in which the amount in controversy is $1,164,348.90. The suit was commenced on October 18, 1922, in the Supreme Court of New York. Service was made by attaching tangible personal property and credits within the state alleged to belong to the defendants and summons. Thereupon the government of Mexico appeared specially in the action and seasonably moved to vacate the attachment and to dismiss the suit. Before the motion was heard the case was removed by the defendants to the United States District Court for the Southern District of New York. Mexico then appeared in that court specially and procured a rule that the plaintiff show cause why the attachment should not be vacated and the suit dismissed, upon the ground that it is "an independent sovereign nation" and as such immune from process of the courts except upon its consent. Before this motion was decided the government of Mexico was duly recognized by the United States of America, and diplomatic relations between the two governments, which had been interrupted, and were interrupted at the time the suit was brought, had been resumed. The District Court, having these facts before it, vacated the attachment previously granted, vacated and set aside any levy made thereunder, and declined to exercise further jurisdiction of the suit and dismissed the action. This ruling was thereupon certified by the District Court to the Supreme Court of the United States. This certificate it granted, as it supposed, in conformity with section 238 of the Judicial Code (Comp. St. § 1215) which is set forth in the margin.¹

The Supreme Court, however, held the case was not one which was properly before it, and that the writ of error from that court had been improvidently allowed, and directed that the case should be transferred to this court. This it did in conformity with section 238 (a) of the Judicial Code, as added by Act Sept. 14, 1922, c. 305, 42 Stat. 837 (Comp. St. Ann. Supp. 1923, § 1215a), which may also be found in the margin.²

The Supreme Court (Oliver American Trading Co. v. United States of Mexico, 264 U. S. 440, 44 S. Ct. 390, 68 L. Ed. 778), holding that the case was improperly before it, said: "The fact that the District Judge issued the certificate does not relieve this court from the duty of determining for itself whether the question which was certified is in truth one of the jurisdiction of the lower court as a federal court. Bogart v. Southern Pacific Co., 228 U. S. 137, 144; Smith v. Apple, 264 U. S. 274. Such a question is presented whenever there is in controversy the power of the court, as defined or limited by the Constitution or statutes of the United States, to hear and determine the cause. The Pesaro, 255 U. S. 216, 218. It is not presented where the question of jurisdiction to be decided turns upon matters of general law, applicable alike to actions brought in other tribunals. De Rees v. Costaguta, 254 U. S. 166, 173. The question of sovereign immunity is such a question of general law, applicable as fully to suits in the state courts as to those prosecuted in the courts of the United States."

The plaintiff is a Delaware corporation — all the stock of which is owned by H. F. Oliver, an American citizen. The action was commenced by attachment and the service of a summons by the sheriff of the county of New York, together with notice that judgment would be taken for $1,164,348.90, upon the defendant, the government of the United States of Mexico. The National Railways of Mexico was also made a party defendant. The summons and notice were served on the government of Mexico by service upon its managing agent transacting business at the office of the financial agency of Mexico in the city of New York, and they were served upon the National Railways of Mexico by service upon its managing agent, another individual, who it is alleged was regularly transacting business at the office of such railways, also in the city of New York.

While the action is nominally against both the government of Mexico and the National Railways of Mexico, it is in reality a suit only against the Mexican government. For it appears that the National Railways of Mexico is "merely a name" for a system of railroads in the possession of the Mexican government, and has been controlled and operated by Mexico since 1914 for national purposes, just as it operates the Post Office, the Customs Service, or any other branch of the national government.

This, then, is an action in personam, directed against the United States of Mexico, to recover damages for acts committed by it in Mexico. Process was served upon certain representatives of that government in the United States, and attachment levied upon such of the public property of that nation as the plaintiff has been able to find in this country.

It appears that the plaintiff, an American corporation, since its organization in 1915, has been engaged in the transaction of business in the United States and in Mexico. It claims that in January, 1921, it entered into a written agreement with the defendants by which the latter agreed to pay it a certain amount of money for each 1,000 pounds of tractive effort of each locomotive which the plaintiff then had or which it should thereafter place in service upon the railroad lines upon the National Railways of Mexico. The plaintiff also claims that it had in its possession in Mexico certain railway freight cars, which the defendants took possession of and used for military, freight, postal, express, and other similar purposes, and for which they became liable to pay to the plaintiff a reasonable rental. It also claims that the government of Mexico illegally placed an embargo upon all the plaintiff's locomotives in Mexico, which prevented it from removing any of the locomotives from Mexico, and which the courts of Mexico held to be illegal, but which the government of that country has nevertheless refused to release from the embargo, and continues to hold to the plaintiff's damage.

It further alleges that the defendants have wrongfully repudiated their contract with it, and have forced the plaintiff to discontinue the profitable business which it had theretofore conducted in Mexico, with a resulting loss of its clientele, its credit, and good will; and it is alleged that on account of the defaults of the defendants they are justly indebted to the plaintiff in the sum of $1,164,348.90.

It appears that the government of Mexico never appeared in this action either in the New York Supreme Court or in the United States District Court, but, on the contrary, has continually protested the jurisdiction of the said courts over its person and property. Such appearances as it has made have been special appearances, made to raise the sole question of jurisdiction.

At the time this suit was commenced the government of Mexico was a de facto government, which had not been recognized by the United States of America. But before the final order of the United States District Court, which is the order complained of, was entered, the government of the United States had accorded complete and unconditional recognition to the government of Mexico. It is contended that, as the suit was commenced and the jurisdiction of the court fully attached prior to the recognition of Mexico, its jurisdiction was not divested by the occurrence of that event.

In this country it has always been held as an attribute of sovereignty that the United States cannot be sued without its consent. United States v. McLemore, 4 How. 286, 11 L. Ed. 977; Hill v. United States, 9 How. 386, 13 L. Ed. 185; United States v. Clarke, 8 Pet. 444, 8 L. Ed. 1001; United States v. Eckford, 6 Wall. 484, 18 L. Ed. 920; Case v. Terrell, 11 Wall. 199, 20 L. Ed. 134. It is also true that a state of the United States cannot be sued in its own courts, or in the courts of one of the other states, or in the federal courts, by an individual, without its consent. Beers v. Arkansas, 20 How. 527, 15 L. Ed. 991; McArthur Bros. Co. v. Commonwealth, 197 Mass. 137, 83 N. E. 334; Sanders v. Saxton, 182 N. Y. 477, 75 N. E. 529, 1 L. R. A. (N. S.) 727, 108 Am. St. Rep. 826. And it has been held that the consent of a state to be sued, being voluntary, may be withdrawn by the state whenever it sees fit, even though pending suits are thereby defeated. Beers v. Arkansas, supra; Railroad Company v. Alabama, 101 U. S. 832; Ex parte State, 52 Ala. 231, 23 Am. Rep. 567. Therefore, upon the repeal of a statute authorizing the suit, the court in which the suit is pending can proceed no further.

In Memphis & C. R. Co. v. Tennessee, 101 U. S. 337, 339 (25 L. Ed. 960), Chief Justice Waite declared that "the principle is elementary that a state cannot be sued in its own courts without its consent. This is a privilege of sovereignty." The court in that case held that if, at the time a contract is made, a statute gives the right to sue the state, the subsequent repeal of the statute is not unconstitutional, as impairing the obligation of the contract. This conclusion was reached in view of the fact that a statute which merely confers a right to sue the states does not give a complete judicial remedy. It merely enables the claim to be judicially ascertained, and "there the power of the court ends."

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