Lamont v. Travelers Ins. Co.

• Decision Date: 14 November 1939
• Citation: 24 N.E.2d 81,281 N.Y. 362
• Court: New York Court of Appeals Court of Appeals
• Parties: LAMONT et al. v. TRAVELERS INS. CO. et al.

281 N.Y. 362

24 N.E.2d 81

LAMONT et al.

v.TRAVELERS INS. CO. et al.

Court of Appeals of New York.

Nov. 14, 1939.

Appeal from Supreme Court, Appellate Division, First Department.

Action by Thomas W. Lamont and others, individually and as the International Committee of Bankers on Mexico, against the Travelers Insurance Company and others, wherein Louis S. Ottenheimer filed a counterclaim, and wherein the government of the United States of Mexico intervened. The action was brought for a voluntary accounting for moneys received from Mexican government under terms of an agreement between them and the Mexican government, and between them and the depositors of bonds of the Mexican government. From an order of the Appellate Division, First Department, affirming an order of the Special Term, which denied jurisdiction and dismissed the complaint and counterclaim praying for such accounting, 254 App.Div. 511, 5 N.Y.S.2d 295, Louis S. Ottenheimer appeals.

Orders reversed, and motion to dismiss denied. Mark Hyman, Daniel W. Blumenthal, and Frank R. Bruce, all of New York City, for appellant.

Jerome S. Hess, of New York City, for respondent.

LEHMAN, Judge.

The plaintiffs, constituting the ‘International Committee of Bankers on Mexico,’ have brought this action, asking that the court permit them to render an account of their proceedings, as such committee, and that the court instruct them as to the manner in which they should distribute moneys which they have received from the Government of the Mexican Republic and which they now hold. In their complaint the plaintiffs allege that the moneys have been paid to them pursuant to certain agreements, to which the Government of Mexico was a party, and that, by the terms of such agreements, ‘they are constituted trustees of the funds coming into the hands of the Committee pursuant to said agreements and are obligated to distribute such funds' to holders of obligations, issued or guaranteed by the Republic of Mexico, who have deposited their securities with the committee, pursuant to a deposit agreement. Claiming that the committee holds the moneys, received from the Government of the United States of Mexico, only as agents and that the moneys remain the property of the government, that government has appeared specially for the purpose of ‘asserting the sovereign immunity from suit of the United States of Mexico’ and has moved for an order that the court refuse jurisdiction of the action. The motion was granted and an order dismissing the action was entered, and has been affirmed by the Appellate Division.

The pleadings and the affidavits filed upon the motion, show that in June, 1922, the Mexican Government was in default in the payment of interest on over $500,000,000 of bonds, issued at various times and containing varying terms and stipulations. These various issues of bonds may, it is said, be ‘generally classified as falling into three classes: a, the Secured Direct Debt; b, the Unsecured Direct Debt; and, c, the Railways Debt.’ A committee of foreign bankers, composed of representatives of banking firms or corporations which had distributed these issues of bonds to foreign investors, was formed for the purpose of negotiating, in behalf of the foreign bondholders who might deposit their bonds with the committee under a deposit agreement and plan prepared by the committee, an agreement with the Government of Mexico, for the adjustment and liquidation of its public debt. The committee successfully negotiated a satisfactory agreement with the government whereby the government promised to pay to the committee stipulated sums, to be distributed by the committee in accordance with a schedule which was made part of the agreement. In 1925 the committee, purporting to act under authority conferred by the depositing bondholders, agreed to a modification of the earlier agreements. The government has not paid the full amounts stipulated in the original or the modified agreement, but it has paid to the committee large sums of money and the committee now holds a fund of several million dollars which, concededly, it has received from the government for distributionamong holders of government obligations deposited with the committee.

Conflicting claims have been made by holders of the three classes of obligations, and the Mexican Government has claimed that it is entitled to the return of the moneys it has paid. The complaint accordingly states: ‘* * * serious doubts have been raised as to whom and in what manner such funds should be distributed, it being questioned whether (a) all such funds should be distributed pro rata to depositors of bonds of the Secured Direct Debt, or (b) whether all such funds should be applied pro tanto in accordance with the schedule attached to the Deposit Agreement to depositors, or (c) whether the Mexican Government has an interest in all or part of said funds sufficient to require your plaintiffs, as such Committee, to deliver over all or part of such funds to such Government, or (d) whether distribution should be made in some other manner. In view of these circumstances, your plaintiffs, as such Committee, and as Trustees as aforesaid, feel it incumbent on them for their protection to apply to this Court for directions as to the persons to whom and the proportions in which they should pay and turn over such funds before making any distribution or partial distribution thereof whatsoever.’

Because over two hundred and seventy-five thousand individual holders of securities have deposited their securities under the deposit agreements and because, according to the complaint, ‘the questions which are the subject of this action are of common and general interest to all depositors of securities falling within three general classifications of securities under the aforesaid Agreements, namely, the Secured Direct Debt, the Unsecured Direct Debt, and the Railways Debt; that the rights under the aforesaid Agreements of depositors of securities of each of said three general classifications are equal and identical within the respective classification,’ the plaintiff has named Travelers Insurance Company of Hartford as a party defendant, as the representative of all the holders of deposited securities, hereinabove designated as the Secured Direct Debt; has named New York Life Insurance Company as a party defendant, as the representative of all holders of deposited securities of the Unsecured Direct Debt, and has named Equitable Life Assurance Society of the United States as the representative of all holders of securities of the Railways Debt. Thereafter, by stipulation of the parties and by order of the court, Louis S. Ottenheimer was permitted to intervene as a party defendant in his own behalf and in behalf of all other holders of bonds of the ‘Secured Direct Debt.’ He appeared and filed an answer in which, as a counterclaim, he asserted, in behalf of the bondholders he represented, that, under the terms of their bonds and under the terms of the agreement and plan of 1922, holders of obligations of the Secured Direct Debt have a right to payment of defaulted interest out of the moneys held by the committee prior and superior to the rights of holders of other classes of obligations. He alone has appealed from the order dismissing both the complaint and the counterclaim which he has pleaded.

The Government of the United States of Mexico is, of course, immune from suit here. The courts of this State cannot adjudicate any controversy to which a foreign sovereign government is a necessary party unless the foreign government, as a suitor, asks our courts to enforce some right claimed by the foreign government or, voluntarily, submits to our courts for adjudication a claim which another makes against it. In this action neither the plaintiffs nor the defendant Ottenheimer seek any relief against the Government of Mexico or redress for a wrong which they claim the Mexican Government has done. Both ask the court only to pass upon conflicting claims to a fund which is here and in which, it is said, the Mexican Government has no property right or interest. They seek an adjudication of the rights only of those who are subject to the jurisdiction of the courts in a fund which is held by the plaintiffs. The problem is, primarily, whether the Mexican Government is a necessary party, because of its claim that it owns the fund and that none of the parties who urge conflicting claims have any legal or equitable interest in the fund, and, incidentally,...