Russian Reinsurance Co. v. Stoddard

• Decision Date: 07 April 1925
• Citation: 240 N.Y. 149,147 N.E. 703
• Parties: RUSSIAN REINSURANCE CO. et al. v. STODDARD, State Superintendent of Insurance, et al.
• Court: New York Court of Appeals Court of Appeals

240 N.Y. 149

147 N.E. 703

RUSSIAN REINSURANCE CO. et al.

v.STODDARD, State Superintendent of Insurance, et al.

Court of Appeals of New York.

April 7, 1925.

Action by the Russian Reinsurance Company and another against Francis R. Stoddard, Jr., as Superintendent of Insurance of the State of New York, and another. Judgment of dismissal was reversed by Appellate Division (211 App. Div. 132, 207 N. Y. S. 574), and defendants appeal.

Judgment of Appellate Division reversed, and judgment of Special Term affirmed.

Crane, J., dissenting.

Appeal from Supreme Court, Appellate Division, Third Department.

Alber Ottinger, Atty. Gen. (Edward G. Griffin, of Albany, and Joseph C. H. Flynn, of Brooklyn, of counsel), for appellant Superintendent of Insurance.

J. Du Pratt White, Ernest G. Fifield and James A. Murphy, all of New York City, for appellant Bankers' Trust Co.

William C. Cannon, of New York City, amicus curiae.

Frederick B. Campbell and Paul C. Whipp, both of New York City, for respondents.

LEHMAN, J.

The Russian Reinsurance Company was incorporated in December, 1899, by the government of Russia under a special statute which constitutes its charter and by-laws. In or about 1906 the corporation received authority to transact business in the state of New York. In accordance with the provisions of section 27 of the Insurance Law (Cons. Laws, c. 28), it appointed the Mercantile Trust Company of New York (subsequently merged into the defendant Bankers' Trust Company) as trustee, and deposited with it under a trust agreement securities and money to be held as its capital in this state for the protection of policy-holders and creditors in the United States. As such trustee the defendant Bankers' Trust Company now holds these securities and moneys. This action has been brought to compel their return to the plaintiffs. The Bankers' Trust Company claims no interest in this property except as trustee or depositary. It resists the plaintiff's claim solely on the ground that the plaintiffs to establish ownership or right of possession to the exclusion of others who might demand the property hereafter. That at the present time the plaintiff corporation is no longer in existence or, if in existence, has no capacity to sue; or, in the alternative, that the men who claim to be its directors and as such have attempted to take corporate action to demand the return of the property and to authorize the bringing of this suit no longer represent the corporation. It urges that, in any event, the courts of this state should not assume jurisdiction of the action because they cannot grant a judgment which would be binding upon other parties who are not before the court, and who might hereafter be able to establish a valid claim to the cause of action or property formerly belonging to this plaintiff.

[1][2][3] A corporation organized and existing under the laws of a foreign state which we have recognized and with which we live in comity may ordinarily seek the aid of our courts in the assertion of its rights, even against our own citizens. If the existence of the corporation, its capacity to sue, or the authority of its directors to represent it or to bring the action is challenged, we look to the charter and the law of its corporate domicile for the data upon which we may rest our determination of such questions. If it is claimed that the plaintiffs' rights or property have passed to another, we examine the laws of the particular jurisdiction which may regulate their transfer or devolution. In such cases the judgments of our courts not only are binding upon the parties before them but, since other jurisdictions would determine the same questions upon the same considerations and presumably reach the same conclusion as our courts, the danger that a defendant might be subjected to a double recovery at the suit of another claimant may not be regarded as serious. At least in actions at law when other possible claimants could not be brought into court, the court has ordinarily not regarded such danger as a sufficient ground to refuse to take jurisdiction of an action to enforce rights against a resident of this state which a plaintiff can establish by competent evidence.

The situation may present a different aspect when, as in this case, the domicile of the corporate plaintiff is in a country which for years has been without any government recognized by the United States, and all proceedings by the stockholders and directors of the corporation, within the country of its domicile, are forbidden and prevented by the civil authorities which control that country, and these authorities have also passed a decree which purports to liquidate and nationalize the corporation, and perhaps to confiscate its shares of stock and property.

[4] Until these civil authorities have been recognized by our State Department, we may not regard them as the lawful sovereign government of the state. Rose v. Himeley, 4 Cranch, 241, 2 L. Ed. 608;Gelston v. Hoyt, 3 Wheat, 246, 4 L. Ed. 381;Kennett v. Chambers, 14 How. 38, 14 L. Ed. 316. In order to avoid possible confusion which may ensue when a term which ordinarily expresses a well-recognized juridical concept is applied to a new and partially undefined state of facts, we shall not even call these authorities a government. Sokoloff v. National City Bank, 239 N. Y. 158, 145 N. E. 917. We assume for the moment that, without recognition, their decrees lack here all the force which the decrees of a recognized sovereign government would have. We may assume that ordinarily such decrees are insufficient to furnish justification for an act which would otherwise be unlawful; that they can be the basis of no right which may be asserted in the courts of this country, and can excuse no wrong. Whether these assumptions correctly represent rules to be applied under particular circumstances is a question which might arise, if a representative of the civil authorities now functioning in Russia or a liquidator appointed by them laid claim to the assets held in trust by the Bankers' Trust Company, or if the Bankers' Trust Company urged as a defense to the present action that it had paid over the property to some other party, relying on a decree of the so-called Soviet government. Until the question how far, if at all, the courts of this country may give effect to the decrees of an unrecognized governmental authority arises necessarily and directly, its further consideration may be postponed. In the present case the primary question presented is not whether the courts of this country will give effect to such decrees, but is rather whether within Russia, or elsewhere outside of the United States, they have actually attained such effect as to alter the rights and obligations of the parties in a manner we may not in justice disregard, regardless of whether or not they emanate from a lawfully-established authority.

[5] Certain findings of the trial court which have been unanimously affirmed by the Appellate Division set forth the general condition of Russia since the fall of the government of the Czar in 1917. We are bound by these findings, and, in any event, they merely embody a concise narration of events which, in most part, are within the common knowledge of the people of this country. Among these findings are the following:

‘(6) In 1917 the government of the Czar in Russia was overthrown and a provisional government, sometimes known as the Kerensky government, was established in Russia, which was recognized in full by the government of the United States of America on March 22, 1917.

‘(7) The provisional or Kerensky government of Russia was overthrown or fell early in November, 1917, and was followed by the Russian Socialist Federal Soviet Republic.

‘(8) The Russian Socialist Federated Soviet Republic is the de facto government in Russia, enforcing in Russia by force its decrees.

‘(9) The state of Russia is now governed by the Russian Socialist Federated Soviet Republic. Such government there exists, clothed with power to enforce its authority within its own territory, obeyed by the people over whom it rules, capable of performing the duties and fulfilling the obligations of an independent power, and able to enforce its claims by military force.

‘(10) The ambassador of the provisional (Kerensky) government to this country continued to be recognized until June 30, 1922, when his duties were terminated.

‘(11) There are no diplomatic, consular, or trade representatives of the United States government in Russia at the present time.

‘(12) The United States government has not accorded recognition to the Russian Socialist Federated Soviet Republic, and there is in the United States no recognized representative of that régime.

‘(13) The following countries have extended full recognition to the Russian Socialist Federated Soviet Republic (Soviet Régime): Austria; Esthonia; Lithuania; Turkey; Afghanistan; Finland; Latvia; Poland; Persia; Germany; Great Britain; Italy; Greece; Norway and Sweden; and Denmark and Czechoslovakia have concluded trade agreements with the Soviet Régime.

‘(14) The United States has concluded no treaties with Russia as represented by the Russian Socialist Federated Soviet Republic.’

The fall of one governmental establishment and the substitution of another governmental establishment which actually governs, which is able to enforce its claims by military force and is obeyed by the people over whom it rules, must profoundly affect all the acts and duties, all the relations of those who live within the territory over which the new establishment exercises rule. Its rule may be without lawful foundation; but, lawful or unlawful, its existence is a fact, and that fact cannot be destroyed by juridical concepts. The State Department determines whether it will recognize its existence as lawful, and, until the State Department has recognized the new establishment, the court may not pass upon its legitimacy or ascribe...