Second Russian Ins Co v. Miller

• Decision Date: 01 June 1925
• Docket Number: No. 362,362
• Citation: Second Russian Ins Co v. Miller, 268 U.S. 552, 45 S.Ct. 593, 69 L.Ed. 1088 (1925)
• Parties: SECOND RUSSIAN INS. CO. v. MILLER, Alien Property Custodian, et al
• Court: U.S. Supreme Court

268 U.S. 552

45 S.Ct. 593

69 L.Ed. 1088

SECOND RUSSIAN INS. CO.

v MILLER, Alien Property Custodian, et al.

No. 362.

Argued April 30, May 1, 1925.

Decided June 1, 1925.

Mr. Albert Massey, of New York City, for appellant.

Mr. Hartwell Cabell, of New York City, for appellees.

Mr. Justice STONE delivered the opinion of the Court.

Appeal from a judgment of the United States Circuit Court of Appeal for the Second Circuit affirming a judgment of the United States District Court for the Southern District of New York, dismissing a bill in equity brought by the appellant, complainant below, under section 9 of the Trading with the Enemy Act (Act of October 6, 1917, 40 Stat. 419 [Comp. St. 1918, Comp. St. Ann. Supp. 1919, § 3115 1/2 e]), to recover money seized and held by the Alien Property Custodian. 297 F. 404.

The appellant, a Russian corporation, in 1913 established an office in the state of New York for the conduct of an American reinsurance business in that state. In order to comply with the law of the state and to qualify it to do business there, appellant deposited with the New York Life Insurance & Trust Company, as trustee under a trust deed, money and securities subject to the provisions of the New York Insurance Law and appointed Meinel & Wemple, Inc., a New York corporation (referred to as Meinel in this opinion), its statutory agent and attorney in fact in New York. In January, 1919, the Alien Property Custodian served upon the New York Life Insurance & Trust Company and Meinel a demand that they pay over to him money in a specified amount held by them for the account and benefit of H. Mutzenbecher, Jr., a copartnership of Hamburg, Germany, alien enemies not holding a license granted by the President under the Trading with the Enemy Act. The money was paid to the Alien Property Custodian pursuant to the demand and now constitutes the subject-matter of this suit. The Mutzenbecher firm filed an answer making claim to the money seized as commissions earned by them under an agency contract with appellant and praying that it be decreed to be their property and be retained by the Alien Property Custodian in accordance with the provisions of the Trading with the Enemy Act.

The firm of Mutzenbecher was engaged in business as managers of a reinsurance 'pool' in Hamburg, Germany, and as such managers represented a number of fire insurance companies, including the appellant, as members of the pool which was formed for the purpose of sharing and redistributing reinsurance business contributed to the pool by its various members. They were in complete control of the pool and received as compensation for their services a fixed commission based on the annual net premium upon reinsurance or retrocession contracts (that is, contracts reinsuring reinsurers) plus a stipulated percentage of the annual net profit of the total business conducted by the pool.

For a considerable period before the outbreak of the World War, Meinel acted as subagent for the Mutzenbechers in the negotiation of the reinsurance business of the appellant and of several other insurance companies for whom they acted in effecting the distribution and allotment of reinsurance risks. In the ordinary course of business, Meinel, acting for the appellant, entered into treaties with companies writing direct insurance in the United States, whereby appellant undertook the reinsurance of risks insured by those companies. Premiums for this reinsurance were collected by Meinel from the companies which had thus ceded insurance to appellant, and after depositing the required reserve for unearned premiums with the trustee of appellant, pursuant to the New York statute, the balance, together with documents giving particulars of all reinsurance to be effected by the Mutzenbechers for account of appellant, was transmitted to them in Hamburg. From the premiums thus received, the Mutzenbechers paid the expenses of their business, including their own commissions amounting to 3 1/2 per cent., and remitted to Meinel in New York out of their own commission certain expenses and 3/4 of 1 per cent. of the premiums thus transmitted, as commissions to Meinel for doing the business in New York. This continued to be the method of doing business after the outbreak of the World War until January 1, 1915, when the remittances from Meinel to the Mutzenbecher firm ceased because of war conditions. During the calendar year 1916, until November, Meinel paid to the Mutzenbechers from premiums received 2 1/2 per cent. commission payable to them and retained its own commissions and expenses.

In October, 1916, the Russian government promulgated a ukase by the terms of which all Russian subjects were forbidden to enter into any agreement or commercial relations whatever with citizens of enemy countries, and which proclaimed that all existing relations, by virtue of contracts, with enemy firms must be considered as at an end from the date of promulgation. Violation of the decree was punishable by imprisonment and fine. The appellant which up to that time had continued its ordinary business relations with the Mutzenbechers, then found it necessary to terminate its relations with them, which it did, in form at least, by the appointment of Meinel, as its general agent, to effect reinsurance and to carry on the business which had previously been carried on by the Mutzenbechers at Hamburg. By the terms of this appointment Meinel was appointed general agent for the appellant, authorized to effect reinsurance for appellant's account, and to retain for itself, as compensation for handling the business, commissions at the rate of 3 1/2 per cent. of the net premiums received.

The principal question of fact presented for consideration by the courts below was whether this transfer of the general reinsurance agency from the Mutzenbechers to Meinel was made in good faith, or whether it was formal only, and a mere cover under which the business was intended to be conducted by the Mutzenbechers as it had been previously conducted. On that question of fact, both the District Court and the Circuit Court of Appeals found for the Alien Property Custodian and against the appellant. That finding we adopt. The evidence was sufficient to support it and will not be discussed here, except in so far as it may be necessary to indicate what the legal relationship of Meinel to the Mutzenbechers was, so that the question of law presented here may be adequately dealt with.

No further remittances were made by Meinel to the Mutzenbechers after November 22, 1916, but it deducted from all net premiums received 3 1/2 per cent. commission as stipulated by its agency appointment. Of the commission thus deducted it retained for itself a commission of 3/4 of 1 per cent. plus its expenses and the balance was deposited in a special bank account in its name and carried on its books as a 'suspense reserve account.' The account remained undisturbed until July 26, 1918, when, the Alien Property Custodian having begun an investigation of the books and records of Meinel, the fund which is the subject of this suit was then turned over by it to the New York Life Insurance & Trust Company, the trustee for appellant, and was by it later paid over to the Alien Property Custodian.

The inference drawn by the courts below from these facts, and from voluminous testimony which need not be here reviewed, was that the transfer of the agency from the Mutzenbechers to Meinel was merely colorable; that the commissions segregated in the suspense reserve account which were commissions from old business, that is, premiums earned under reinsurance treaties effected before the transfer of the agency, notwithstanding the formal terms of the written appointment of Meinel, were commissioners to which Mutzenbecher was entitled under the contract or arrangement existing between Mutzenbecher, Meinel, and appellant before the transfer of the agency, and that Meinel had in fact received and set them apart as the property of the Mutzenbechers. These findings, so far as they relate to what the parties did in these somewhat complicated transactions, and the purpose and intent with which they acted, deal, with questions of fact, and as they are supported by the evidence, they are controlling here.

The proposition of law which is presented, and on the basis of which we are asked to reverse the judgment below, rests upon the asserted illegality of appellant's own conduct. It is argued that the effect of the Russian ukase of October 29, 1916, was to make unlawful the agency of the Mutzenbecher firm for appellant and all further relations between them; that the Mutzenbechers were accordingly not entitled to earn or receive further commissions even from 'old business'; that the fund segregated in the suspense reserve account by Meinel was therefore at all times property of appellant and not subject to seizure by the Alien Property Custodian, since the illegal conduct of appellant had prevented the acquisition of any rights in the fund or against the appellant by the German firm.

To sustain ...