Banco de Espana v. Federal Reserve Bank

Decision Date08 July 1940
Docket NumberNo. 370-372.,370-372.
Citation114 F.2d 438
CourtU.S. Court of Appeals — Second Circuit


John Foster Dulles, of New York City (Sullivan & Cromwell, Inzer B. Wyatt, and Henry P. deVries, all of New York City, on the brief), for plaintiff-appellant.

Henry L. Stimson, Sp. Asst. to Atty. Gen., and Francis M. Shea, Asst. Atty. Gen. (John T. Cahill, U. S. Atty., William L. Lynch, Asst. U. S. Atty., and Winthrop, Stimson, Putnam & Roberts, all of New York City, and Melvin H. Siegel, Sp. Asst. to Atty. Gen., on the brief), for defendants-respondents.

Before SWAN, CHASE, and CLARK, Circuit Judges.

CLARK, Circuit Judge.

These three appeals, ably briefed and argued, bring before us important and fascinating questions reaching into the realms of international law and polity. The actions here involved all arise from the purchases of about six and a half million dollars' worth of silver made by the United States Secretary of the Treasury in the summer of 1938 from certain persons purporting to act as the government of Spain. Before any payments were made, notice was served upon all the defendants that the Spanish government's title to the silver was contested by the Banco de Espana, which claimed to be the true owner thereof. Nevertheless the Treasury paid the amount due on the silver and completed the acquisition of possession. Three actions were instituted by the Banco de Espana — one on June 4, 1938, for possession, or, in default thereof, for the value, of a first shipment of silver, together with damages for its detention, against the Federal Reserve Bank of New York, which had acted as fiscal agent of the United States in respect to that transaction; a second on July 2, 1938, for like relief concerning a second shipment of silver, against the United States Lines Company, which had transported that shipment across the ocean; and a third on August 15, 1938, seeking only possession of the three lots of silver, against Sigmund Solomon, individually and as Superintendent of the United States Assay Office at New York, who was alleged to be then actually in possession of all the silver so purchased by the Secretary of the Treasury. The first two actions were begun in the Supreme Court of the State of New York, but were removed to the District Court of the United States for the Southern District of New York by defendants. The last action was commenced in the District Court.

All three defendants asked for summary judgments and also moved to dismiss in each action, claiming the protection of the sovereign immunity of the United States. The United States Attorney appeared specially on behalf of the United States and made a motion to dismiss all three suits for the same reason. The District Court denied the motions to dismiss in the cases against the Federal Reserve Bank of New York and the United States Lines, but awarded summary judgments for defendants on the merits. The motion to dismiss the action against Solomon was granted, but the court added that if sovereign immunity did not require dismissal of that action, summary judgment would be directed in Solomon's favor. The appeals by the Banco de Espana necessitate a review of each determination made by the District Court.

I. The Propriety of Summary Judgment. In awarding summary judgments for the defendants in the first two actions and suggesting a like result on the merits of the third action, the District Court concluded that the plaintiff was not entitled to the silver in question. The court reached this conclusion upon the basis of the affidavits submitted by defendants averring that the silver, conceded to have belonged originally to the plaintiff, had become subject to a power of disposal by the Spanish government, before the sales to the United States took place, by virtue of valid governmental acts committed in Spain. The particular basis for this holding was an affidavit of Fernando de los Rios, Ambassador of Spain to the United States, made for submission in this action on October 17, 1938, which alleged the acquisition of such power by the government he then represented on the basis of a governmental decree and ministerial orders, of which copies were attached to the affidavit as exhibits. Other affidavits were submitted on behalf of defendants, of which one was by Henry Morgenthau, Jr., Secretary of the Treasury of the United States, wherein the Secretary described in some detail his dealings with Ambassador de los Rios and asserted that he had accepted and acted upon the representations of title and full power to sell made by the Ambassador on behalf, and as the duly accredited and accepted representative, of the Spanish government at the time of the sale and delivery of the silver to the United States.

In response to these affidavits plaintiff presented affidavits challenging the legal effectiveness and the adequacy of proof of the governmental acts in Spain, relied on by its opponents as having given the Spanish government title to make the sale. It also presented the suggestion of the chargé d'affaires of the present Spanish government to the United States, which superseded the earlier government and was recognized by the United States in the spring of 1939, to the effect that his government now desired that the matters here involved should be determined after trial on the merits, rather than that, as an act of international comity, conclusive effect should be given to the statements of Senor de los Rios.

We are therefore brought to the question whether the court below was correct in ruling that on all the moving papers there was presented no genuine issue as to any material fact and that judgment should go for the defendants. Rule 56(c), Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c.

To the following extent the facts are undisputed: In January, 1938, the Secretary of the Treasury arranged with Fernando de los Rios, the Spanish Ambassador in Washington, to purchase silver from the Spanish government. A memorandum of the procedure to be followed was drafted by Treasury officials, and it mentioned the Federal Reserve Bank and the Banco de Espana as the fiscal agents of the two governments. On March 29, 1938, Senor de los Rios notified Secretary Morgenthau that Spain was ready to sell 5,000,000 troy ounces of silver. The Federal Reserve Bank of New York handed to de los Rios a cable addressed to the Banco de Espana, offering to purchase the 5,000,000 ounces. On April 1, de los Rios delivered to the Treasury a copy of a cable accepting the offer. The cable was signed Negrin, Premier and Minister of Finance. The silver arrived in due season on the Normandie, consigned by "Establishments Edouard Aget" to the "Reserve Federal Bank New York or to its order (for the account of the Consul General of Spain, 515 Madison Avenue, New York)." At this point the Banco de Espana notified the Federal Reserve Bank that the title of the Spanish government was disputed. But the shipping documents were obtained by the Federal Reserve Bank of New York from the Spanish Consul in New York, and the silver was transported to the United States Assay Office. Payment was effected by a check drawn by the Federal Reserve Bank on the Treasurer of the United States, payable to the order of "The Ambassador Extraordinary and Plenipotentiary of Spain to the United States." All other shipments were made in the same manner, except that the two banks dropped out of the transactions, subsequent bills of lading named the Spanish government as consignor, and the United States Assay Office as consignee, and later checks in payment were signed on behalf of the Superintendent of the Assay Office.1

The defendants' contentions on the merits of the issues here presented are in substance three: (1) Determination by the Secretary of the Treasury, on behalf of the Executive branch of our government, that the title of the Spanish government to the silver was good, and the transaction valid, was binding upon, and not subject to review by, the courts; (2) the statement made here by the representative of the Spanish government of its claim of title and his acceptance of payment were actions behind which, for reasons of international comity, the courts could not go; (3) in any event there was appropriate proof of governmental acts in Spain whereby the Spanish government acquired a title to the silver which cannot be disputed here. As we have seen, plaintiff's challenge to these contentions goes to the very existence of any such acts, as well as their adequate proof and their legality if proven. We shall take up defendants' contentions in order and state plaintiff's countercontentions as they are apposite.

(1) We do not believe the acts of Secretary Morgenthau in accepting the representations of the Spanish Ambassador are binding upon the courts on a controversy as to the validity of a purchase of property by the United States which does not affect the international or diplomatic relations of our government, but turns rather on the effect of local law on the vendor's title. The courts will leave for the Executive the determination of all "political" issues; in the international field this means such matters as the recognition of new governments or the making of treaties, not the direct determination of questions of property. Cf. Doe ex dem Clark v. Braden, 16 How. 635, 57 U.S. 635, 14 L.Ed. 1090; Z. & F. Assets Realization Corp. v. Hull et al., ___ App.D.C. ___, 114 F.2d 464, June 3, 1940; Field, The Doctrine of Political Questions in the Federal Courts, 8 Minn.L.Rev. 485; Jaffe, Judicial Aspects of Foreign Relations (1933) 8-78. The decisions investigating the title to the Spanish vessel The Navemar are perhaps not controlling, since there the Executive Department refused to take a position. Compania Espanola v. The Navemar, 303 U.S. 68, 58 S.Ct....

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