United States v. Bank of New York & Trust Co.

• Decision Date: 28 November 1934
• Citation: 10 F. Supp. 269
• Parties: UNITED STATES v. BANK OF NEW YORK & TRUST CO. SAME v. PRESIDENT AND DIRECTORS OF MANHATTAN CO.
• Court: U.S. District Court — Southern District of New York

10 F. Supp. 269

UNITED STATES v. BANK OF NEW YORK & TRUST CO.^*

SAME v. PRESIDENT AND DIRECTORS OF MANHATTAN CO.

District Court, S. D. New York.

November 28, 1934.

Martin Conboy, U. S. Atty., of New York City (Martin Conboy, Francis H. Horan, and Edward J. Ennis, all of New York City, and Paul A. Sweeney, of Washington, D. C., of counsel), for the United States.

Emmet, Marvin & Martin, of New York City (Frederick B. Campbell, Paul C. Whipp, and Lounsbury D. Bates, all of New York City, of counsel), for defendant Bank of New York & Trust Co.

Rumsey & Barker, of New York City (Wendell P. Barker, Robert J. Sykes, and W. C. Morris, all of New York City, of counsel), for defendant President and Directors of Manhattan Co.

Charles B. Alling, Hartwell Cabell, Coudert Bros., John M. Downes, Engelhard, Pollak, Pitcher, Stern & Clarke, Borris M. Komar, Rosenberg, Goldmark & Colin, and Samson Selig, all of New York City, representing various interests, filed briefs amici curie in opposition to the motions of the government and in support of the motions of the defendants to dismiss.

COXE, District Judge.

In these suits the United States seeks to establish title to the remaining New York assets of Moscow Fire Insurance Company and Northern Insurance Company, two Russian insurance corporations which were dissolved in 1918 by decrees of the Soviet government. These companies formerly maintained branches in this country, and upwards of eight years ago the New York assets of both companies were taken over by the New York superintendent of insurance in liquidation proceedings under the New York statute.

The superintendent's liquidation was completed prior to 1933, and in that year the remaining assets of the Moscow Company were turned over, under a state court order, to the defendant Bank of New York & Trust Company "as agent or depositary" of the Moscow Company, subject to withdrawal only on the "order of a court of competent jurisdiction." The same disposition was made of the remaining assets of the Northern Company, except that the depositary in that case was the Bank of Manhattan Trust Company, predecessor of the defendant President and Directors of the Manhattan Company.

The Northern Company had previously made an assignment for the benefit of creditors to the defendant President and Directors of the Manhattan Company, under the New York statute, and, by a later order of the state court, the transfer of the assets of the Northern Company to that company, as assignee, was authorized and approved.

The funds of the two companies are now held by the defendant banks, awaiting distribution among the persons entitled to share in the funds, respectively.

Recently, proceedings were started in the state courts, on notice to all parties interested, to secure distribution of the two funds, and these proceedings have proceeded in the case of the Moscow Company to judgment, and, in the case of the Northern Company, to a consideration of the claims presented.

The complaints in the two suits are substantially alike, and allege that the funds of the two companies, now held by the defendant banks, were "confiscated and appropriated" by the "Russian State" in 1918, and that title to both funds was assigned to the United States by the "Russian State" on November 16, 1933. The prayer for relief in each case is for an accounting and a direction to turn over the fund to the United States.

The present motions are by the government in each case for an injunction pendente lite, restraining distribution of the fund; and by the defendant in each case for a dismissal of the complaint for insufficiency.

The principal contentions urged by the defendants in support of the motions to dismiss are (1) that our courts will not enforce the Soviet decrees of confiscation over property located here, and which has always been located here; and (2) that no title or interest in or to the funds of the two companies now held by the defendant banks has been or could be assigned or transferred to the United States by the Soviet government.

The legislation of any nation has no extra-territorial force as a matter of right. Rose v. Himely, 4 Cranch, 241, 2 L. Ed. 608; The Apollon, 9 Wheat. 362, 6 L. Ed. 111; Hilton v. Guyot, 159 U. S. 113, 16 S. Ct. 139, 40 L. Ed. 95; Second Russian Ins. Co. v. Miller (C. C. A.) 297 F. 404, affirmed 268 U. S. 552, 45 S. Ct. 593, 69 L. Ed. 1088. The extent to which such legislation will be recognized by other nations depends on comity. Bank of Augusta v. Earle, 13 Pet. 519, 589, 10 L. Ed. 274; Second Russian Ins. Co. v. Miller, supra. Comity is "the recognition which one nation allows within its territory to the legislative, executive, or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens, or of other persons who are under the protection of its laws." Hilton v. Guyot, 159 U. S. 113, 164, 16 S. Ct. 139, 143, 40 L. Ed. 95.

The courts of this country will not, however, enforce the laws of foreign nations which are contrary to our own public policy Bank of Augusta v. Earle, supra; Russian Reinsurance Co. v. Stoddard, 240 N. Y. 149, 147 N. E. 703; Vladikavkazsky R. Co. v. New York Trust Co., 263 N. Y. 369, 189 N. E. 456, 91 A. L. R. 1426; and the public policy of the United States is to be determined "from the Constitution and the laws, and the course of administration and decision" License Tax Cases, 5 Wall. 462, 469, 18 L. Ed. 497; "not by the varying opinions of laymen, lawyers, or judges as to the demands of the interests of the public" Hartford Fire Ins. Co. v. Chicago, M. & St. P. R. Co. (C. C. A.) 70 F. 201, 202, 30 L. R. A. 193.

The confiscatory decrees of the Soviet government were clearly opposed to the public policy of the United States. Russian Volunteer Fleet v. U. S., 282 U. S. 481, 491, 492, 51 S. Ct. 229, 75 L. Ed. 473; Petrogradsky M. K. Bank v. National City Bank, 253 N. Y. 23, 170 N. E. 479; Vladikavkazsky R. Co. v. New York Trust Co., 263 N. Y. 369, 189 N. E. 456, 91 A. L. R. 1426; Baglin v. Cusenier Co., 221 U. S. 580, 31 S. Ct. 669, 55 L. Ed. 863. They were utterly ineffective to reach the properties of the Moscow and Northern Companies in this country Vladikavkazsky R. Co. v. New York Trust Co., supra; Baglin v. Cusenier Co., supra; The Jupiter, 96 L. I. P. 62 (1927); Employees Liability v. Sedgwick, 1927, A. C. 95; and the subsequent recognition of the Soviet government in no way changed the confiscatory nature of the decrees in so far as these particular funds were concerned Lehigh Valley R. Co. v. State of Russia (C. C. A.) 21 F.(2d) 396, 401; Vladikavkazsky R. Co. v. New York Trust Co., supra.

It is insisted on behalf of the United States that the Soviet government became the "liquidator" of the assets of the two dissolved Russian insurance companies, and that a liquidator's title will be accorded recognition in our courts. The difficulty with this contention is that the complaints allege specifically that the properties of the two companies were "confiscated and appropriated" by the Soviet government. However, it is perfectly clear that the liquidation of a corporation implies winding up and distribution of the assets among the creditors and stockholders Lafayette Trust Co. v. Beggs, 213 N. Y. 280, 283, 107 N. E. 644; Matter of Silkman, 121 App. Div. 202, ...