M. Salimoff & Co. v. Standard Oil Co. of New York

• Decision Date: 11 July 1933
• Citation: 186 N.E. 679,262 N.Y. 220
• Court: New York Court of Appeals Court of Appeals
• Parties: M. SALIMOFF & CO. et al. v. STANDARD OIL CO. OF NEW YORK. SAME v. VACUUM OIL CO.

262 N.Y. 220

186 N.E. 679

M. SALIMOFF & CO. et al.

v.STANDARD OIL CO. OF NEW YORK.

SAME

v.VACUUM OIL CO.

Court of Appeals of New York.

July 11, 1933.

Separate actions by M. Salimoff & Co. and others against the Standard Oil Company of New York, and against the Vacuum Oil Company. From orders of the Appellate Division, First Department (237 App. Div. 686, 262 N. Y. S. 693) dismissing plaintiffs' complaint, on appeal from the Special Term, the plaintiffs appeal by permission of the Appellate Division.

Order in each case affirmed, and first question certified answered in negative, and the other questions not answered.

See, also 250 N. Y. 219, 181 N. E. 457; 259 N. Y. 608, 182 N. E. 201.

The following questions were certified in each action:

‘1. Is the complaint herein sufficient in law upon the face thereof?

‘2. Is the first separate and distinct defense contained in defendant's answer sufficient in law upon the face thereof to constitute a defense?

‘3. Is the second separate and distinct defense contained in defendant's answer sufficient in law upon the face thereof to constitute a defense?

‘4. Is the third separate and distinct defense contained in defendant's answer sufficient in law upon the face thereof to constitute a defense?

‘5. Is the fourth separate and distinct defense contained in defendant's answer sufficient in law upon the face thereof to constitute a defense?

‘6. Is the fifth separate and distinct defense contained in defendant's answer sufficient in law upon the face thereof to constitute a defense?

‘7. Is the sixth separate and distinct defense contained in defendant's answer sufficient in law upon the face thereof to constitute a defense?

‘8. Is the seventh separate and distinct defense contained in defendant's answer sufficient in law upon the face thereof to constitute a defense?

‘9. Is the eighth separate and distinct defense contained in defendant's answer sufficient in law upon the face thereof to constitute a defense?

‘10. Is the ninth separate and distinct defense contained in defendant's answer sufficient in law upon the face thereof to constitute a defense?

‘11. Is the tenth separate and distinct defense contained in defendant's answer sufficient in law upon the face thereof to constitute a defense?

‘12. Is the eleventh separate and distinct defense contained in defendant's answer sufficient in law upon the face thereof to constitute a defense?’Appeal from Supreme Court, Appellate Division, First department.

Joseph M. Proskauer, J. Alvin Van Bergh, and Eugene Eisenmann, all of New York City, for appellants.

Harrison Tweed, William Dean Embree, A. Donald MacKinnon, and John E. Lockwood, all of New York City, for respondents.

POUND, Chief Judge.

The Soviet government, by a nationalization decree, confiscated all oil lands in Russia and sold oil extracted therefrom to defendants. The former owners of the property, Russian nationals, join in an equitable action for an accounting on the ground that the confiscatory decrees of the unrecognized Soviet government and the seizure of oil lands thereunderhave no other effect in law on the rights of the parties than seizure by bandits. Luther v. Sagor, [1921] 1 K. B. 456; Id. 3 K. B. 532, cited in Sokoloff v. National City Bank of New York, 239 N. Y. 158, 164, 145 N. E. 917, 37 A. L. R. 712. The complaints have been dismissed.

The question is as to the effect on the title of a purchaser from the unrecognized confiscating Soviet Russian government. Does title pass, or is the Soviet government no better than a thief, stealing the property of its nationals and giving only a robber's title to stolen property? Plaintiffs contend that the Soviet decrees of confiscation did not divest them of title.

When a government which originates in revolution is recognized by the political department of our government as the de jure government of the country in which it is established, such recognition is retroactive in effect and validates all the actions of the government so recognized from the commencement of its existence. Oetjen v. Central Leather Co., 246 U. S. 297, 38 S. Ct. 309, 62 L. Ed. 726;Terrazas v. Holmes, 115 Tex. 32, 275 S. W. 392. The courts of one independent government will not sit in judgment upon the validity of the acts of another done within its own territory, even when such government seizes and sells the property of an American citizen within its boundaries. If the Soviet government were a de jure government, it would follow that title to the property in this case must be determined by the result of the confiscatory Soviet decrees.

The status of the Soviet government is defined by the Secretary of State's office as follows:

‘1. The Government of the United States accorded recognition to the Provisional Government of Russia as the successor of the Russian Imperial Government, and has not accorded recognition to any government in Russia since the overthrow of the Provisional Government of Russia.

‘2. The Department of State is cognizant of the fact that the Soviet régime is exercising control and power in territory of the former Russian Empire and the Department of State has no disposition to ignore that fact.

‘3. The refusal of the Government of the United States to accord recognition to the Soviet régime is not based on the ground that that régime does not exercise control and authority in territory of the former Russian Empire, but on other facts.’

It follows that the question as to the validity of acts and decrees of a régime, not the subject of diplomatic recognition, becomes a matter to be decided by the courts in an appropriate case. Thus it was held that out of respect for the political departments of the United States government only a recognized government may be a plaintiff in the courts of this state. Russian Socialist Federated Soviet Republic v. Cibrario, 235 N. Y. 255, 139 N. E. 259.

It has been held by the Appellate Division: ‘Whatever may be said of the propriety or justice of the nationalizingdecrees promulgated by the Soviet government of Russia, those decrees were made by the de facto government of that country and are there in full force and effect and binding upon all Russian nationals. * * *

‘Under well-established principles of international law and in accordance with the decisions of our courts, the Soviet law and decrees must be given internal effect in that country.’ 237 App. Div. 686, 689, 690, 262 N. Y. S. 693, 697.

Writers have been inclined to the view that, where a de facto government reigns supreme within its own territory, the courts should give full effect to its decrees, in so far as they affect private rights. Borchard, ‘The Unrecognized Government in American Courts' (1932) 26 Am. J. Int. Law, 261; Fraenkel, ‘Juristic Status of Foreign States' (1925) 25 Columbia Law Rev. 544; Connick, ‘Effects of Soviet Decrees in American Courts' 1924) 34 Yale Law Journal, 499; Dickinson, ‘The Unrecognized Government or State in English and American Law,’ 22 Mich. Law Rev. 29, 118.

The courts of this state have not gone so far. The question with us is whether, within Russia, the Soviet decrees have actually attained such effect as to alter the rights and obligations of parties in a manner we may not in justice disregard, even though they do not emanate from a lawfully established authority, recognized politically by the government of the United States. Russian Reinsurance Co. v. Stoddard, 240 N. Y. 149, 157, 147 N. E. 703. We have considered the extraterritorial effect of Soviet decrees which liquidated Russian banks (Petrogradsky Mejdunarodny Kommerchesky Bank v. National City Bank, 253 N. Y. 23, 170 N. E. 479) and insurance companies (First Russian Ins. Co. v. Beha, 240 N. Y. 601, 148 N. E. 722). We have reached the conclusion in those and similar cases that such decrees had no extraterritorial effect and that the continued existence of such companies, wherever they were found to function outside of Russia, would be recognized. The consequence has been that corporations nonexistent in Soviet Russia...