State of Russia v. National City Bank of New York

• Decision Date: 06 February 1934
• Citation: 69 F.2d 44
• Parties: STATE OF RUSSIA v. NATIONAL CITY BANK OF NEW YORK et al.
• Court: U.S. Court of Appeals — Second Circuit

69 F.2d 44 (1934)

STATE OF RUSSIA v. NATIONAL CITY BANK OF NEW YORK et al.

Circuit Court of Appeals, Second Circuit.

February 6, 1934.

Frederic R. Coudert and Mahlon B. Doing, Sp. Assts. to Atty. Gen., and W. S. Ward, of Washington, D. C., for the United States.

Coudert Brothers, of New York City (Frederic R. Coudert and Mahlon B. Doing, both of New York City, of counsel), for the State of Russia.

Shearman & Sterling, of New York City (Philip A. Carroll and Otey McClellan, both of New York City, of counsel), for defendant-appellee.

Before MANTON, AUGUSTUS N. HAND, and CHASE, Circuit Judges.

MANTON, Circuit Judge.

This action, brought in the name of the state of Russia July 9, 1928, sought the recovery of a deposit in the National City Bank of New York. A decree for the defendant was entered October 11, 1933, and this appeal was taken by the state of Russia.

Mr. Serge Ughet, the financial attaché of the Russian Embassy under the Russian Provisional Government, in the name of the state of Russia, appealed from the decree October 14, 1933. On October 21, 1933, Mr. Ughet sent a letter to the Department of State expressing a desire to be relieved of his duties as a representative of the state of Russia, and, on November 15, 1933, he made an assignment of this cause of action to the United States. On November 16, 1933, the President of the United States established diplomatic relations with the Union of Soviet Socialist Republics as the de jure government of Russia. Mr. Maxim Litvinoff, the People's Commissar for Foreign Affairs of the Soviet Republics, assigned to the government of the United States the claim in suit and thus ratified the assignment of the claim in suit which had been made by Mr. Ughet. We judicially recognized Mr. Ughet as the financial attaché of the Russian Embassy in the United States. Lehigh Valley R. Co. v. State of Russia, 21 F.(2d) 396 (C. C. A. 2).

The deposit of money, in December, 1917, was in the Bankers' Trust Company in the name of three individuals, and was drawn from the general account of the Russian government and deposited with the National City Bank. These individuals were empowered to sign checks. They were officials of the Russian Railroad Commission in the United States appointed prior to the Soviet Revolution. It was a government account. In 1918 one of these same three officials had transferred allegiance to the Soviet government. The others arranged to transfer to the National City Bank the existing credit balance in the Bankers' Trust Company. Mr. Ughet obtained their check and deposited the same with the bank to a general account for the credit of the Russian government. The account, $115,788.32, remained there until July, 1928, under a special arrangement unnecessary to consider here. This action was then commenced.

Below it was agreed that the money is the sole and exclusive property of the Russian government, but that the government owes the National City Bank $4,435,000, evidenced by a promissory note dated May 1, 1917. The money was used to finance the purchase of railroad cars in the United States for the Russian government. Below the bank successfully offset its claim against the deposit.

The diplomatic letters exchanged, dated November 16, 1933, were as follows:

"The White House, Washington November 16, 1933.

"My Dear Mr. Litvinov:

"I am very happy to inform you that as a result of our conversations the Government of the United States has decided to establish normal diplomatic relations with the Government of the Union of Soviet Socialist Republics and to exchange ambassadors.

"I trust that the relations now established between our peoples may forever remain normal and friendly, and that our nations henceforth may cooperate for their mutual benefit and for the preservation of the peace of the world.

"I am, my dear Mr. Litvinov,

"Very sincerely yours "Franklin D. Roosevelt

"Mr. Maxim M. Litvinov, People's Commissar for Foreign Affairs, Union of Soviet Socialist Republics."

"Washington, November 16, 1933.

"My dear Mr. President:

"Following our conversations I have the honor to inform you that the Government of the Union of Soviet Socialist Republics agrees that, preparatory to a final settlement of the claims and counter claims between the Governments of the Union of Soviet Socialist Republics and the United States of America and the claims of their nationals, the Government of the Union of Soviet Socialist Republics will not take any steps to enforce any decisions of courts or initiate any new litigations for the amounts admitted to be due or that may be found to be due it, as the successor of prior Governments of Russia, or otherwise, from American nationals, including corporations, companies, partnerships, or associations, and also the claim against the United States of the Russian Volunteer Fleet, now in litigation in the United States Court of Claims, and will not object to such amounts being assigned and does hereby release and assign all such amounts to the Government of the United States, the Government of the Union of Soviet Socialist Republics to be duly notified in each case of any amount realized by the Government of the United States from such release and assignment.

"The Government of the Union of Soviet Socialist Republics further agrees, preparatory to the settlement referred to above not to make any claim with respect to:

"(a) judgments rendered or that may be rendered by American courts in so far as they relate to property, or rights, or interests therein, in which the Union of Soviet Socialist Republics or its nationals may have had or may claim to have an interest; or,

"(b) acts done or settlements made by or with the Government of the United States, or public officials, in the United States, or its nationals, relating to property, credits, or obligations of any Government of Russia or nationals thereof.

"I am, my dear Mr. President,

"Very sincerely yours "Maxim Litvinoff "People's Commissar for Foreign Affairs, Union of Soviet Socialist Republics.

"Mr. Franklin D. Roosevelt, President of the United States of America, The White House."

Since this exchange of notes, the state of Russia is no longer recognized by this government for any purpose. It may not appear as a litigant, neither on behalf of the assignee or otherwise. The assignee of the claim named in a legally sufficient assignment is now the proper party appellant. A motion is made by the United States as an assignee to be permitted to prosecute this appeal.

The appellee argues that the assignments by Ughet and Litvinoff are ineffectual, and that to bring the United States in as a party now requires a petition in the nature of a supplemental bill in the District Court. It also maintains that the substance of the diplomatic notes of Mr. Litvinoff to the President is tantamount to an abandonment of the appeal.

The United States is in the nature of a corporate entity, and has a common-law right to acquire property. Fay v. United States, 204 F. 559 (C. C. A. 1); United States v. Rubin (D. C.) 227 F. 938. Therefore a lawful assignment to it is effective. One government may transfer property rights to another government. Hijo v. United States, 194 U. S. 315, 24 S. Ct. 727, 48 L. Ed. 994; Herrera v. United States, 222 U. S. 558, 32 S. Ct. 179, 56 L. Ed. 316.

While specific powers and duties of a secretary or minister for foreign affairs of a nation are generally prescribed and regulated by the municipal law of that nation at home, international law defines his position regarding intercourse with other nations. 1 Oppenheim International Law (3d Ed.) 1920, p. 538.

In United States v. De la Maza Arredondo, 6 Pet. 691, at page 728, 8 L. Ed. 547, the court said: "The grants of colonial governors, before the revolution, have always been, and yet are, taken as plenary evidence of...