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

• Citation: 77 F.2d 866
• Decision Date: 20 May 1935
• Docket Number: No. 304.,304.
• Parties: UNITED STATES v. BANK OF NEW YORK & TRUST CO.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

77 F.2d 866 (1935)

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

No. 304.

Circuit Court of Appeals, Second Circuit.

May 20, 1935.

Martin Conboy, U. S. Atty., and Francis H. Horan and Edward J. Ennis, Asst. U. S. Attys., all of New York City.

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-appellee Bank of New York & Trust Co.

Cabell, Ignatius, Lown & Blinken, of New York City (Hartwell Cabell, of New York City, of counsel), for intervener.

Samson Selig, of New York City (Samson Selig and George D. Bradford, both of New York City, of counsel), amicus curiæ.

Engelhard, Pollak, Pitcher, Stern & Clarke, of New York City (Walter H. Pollak and Murray I. Gurfein, both of New York City, of counsel), for judgment creditors of Moscow Fire Ins. Co.

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

CHASE, Circuit Judge.

This is an action in equity for an accounting. The suit was commenced August 22, 1934. It is alleged in the bill that the Moscow Fire Insurance Company of Moscow, Russia, was a corporation organized under the laws of the state of Russia to engage in the business of fire insurance, and that, until dissolved, it was duly authorized in accordance with the laws of the state of New York to do business in that state; that in compliance with the New York law it had deposited with the New York Superintendent of Insurance certain cash, securities, and "other items of value" as a fund out of which the claims of the domestic creditors of the corporation should be paid and that it had done business in New York; that in 1917 and 1918 it was dissolved by decrees of the Russian State "and all of its right, title and interest and all the right, title and interest of all of its stockholders in its property, including the deposits hereinbefore mentioned with the Superintendent of Insurance of the State of New York, were confiscated and appropriated by the said Russian State"; that by April 18, 1933, all the claims of domestic creditors to the fund so deposited had been satisfied, and the New York Superintendent of Insurance had, pursuant to an order of the Supreme Court of New York, New York County, deposited with the defendant, as the agent or depository of the said Moscow Fire Insurance Company, the remainder of said fund consisting of cash and securities of the value of $1,080,399.54 upon the condition that it was not to be withdrawn except upon the order of a court of competent jurisdiction; that the defendant had possession of the fund so deposited or of the avails thereof. It was further alleged that on or about November 16, 1933, the Russian State assigned all of its right, title, and interest in the deposit to the plaintiff, who is the sole owner entitled to immediate possession and who had demanded the fund of the defendant; that the demand had been refused and that the fund was being wrongfully withheld from the plaintiff by the defendant. It was further alleged that the defendant held the fund as trustee for the plaintiff who had no adequate remedy at law. An injunction to keep the fund in the possession of the defendant pendente lite was a part of the relief sought.

The defendant did not answer, but moved to dismiss on the ground that the bill stated no cause of action. The plaintiff's motion for an injunction was denied and the defendant's motion to dismiss granted.

Although the appellee has argued at length that the assignment did not convey to the plaintiff any title to or interest in the fund for the reason that (1) the assignor had no title or interest not based upon confiscation which is a concept so repugnant to our public policy that we will not recognize and enforce it, and (2) that the assignment in terms did not cover the fund, we think the order must be affirmed regardless of whether there is any merit in the argument on these two points. For present purposes we will assume the assignment to be sufficient to transfer to the plaintiff whatever right to an accounting by the defendant the Russian State, the assignor had. See State of Russia v. Nat. City Bank (C. C. A.) 69 F.(2d) 44.

We take judicial notice of the recognition of the Soviet Government by the United States on November 16, 1933, which was the day on which the assignment here relied upon was made. Underhill v. Hernandez, 168 U. S. 250, 18 S. Ct. 83, 42 L. Ed. 456. By that act of recognition the decrees under which this Russian corporation was dissolved and its property confiscated by the Soviet Government became as valid as they would have been had they been passed at a time when we had already recognized the Soviet Government. The effect of recognition was to that extent retroactive. Ricaud v. American Metal Co., 246 U. S. 304, 38 S. Ct. 312, 62 L. Ed. 733; Oetjen v. Central Leather Co., 246 U. S. 297, 38 S. Ct. 309, 62 L. Ed. 726. When our government recognized that government, the public policy of this country to recognize the validity of Soviet decrees within Soviet territory was established. No one will question the power of the government of the domicile of a corporation to destroy what it has created. Bank of Augusta v. Earle, 13 Pet. 519, 587, 10 L. Ed. 274; Head v. Providence Ins. Co., 2 Cranch, 127, 168, 2 L. Ed. 229. When the now recognized Soviet Government issued its decrees to that effect this corporation was dead. Oklahoma Natural Gas Co. v. State of Oklahoma, 273 U. S. 257, 47 S. Ct. 391, 71 L. Ed. 634; The Greyhound, 68 F.(2d) 832 (C. C. A. 2). There can be no serious dispute that its property and all its corporate rights in Russia were subject to such disposition as actually took place in accordance with Russian law. The Russian State obviously could, and this record shows that it did, confiscate everything belonging to this corporation within the confines of Russia. It could, and did, acquire for itself every right the corporation in Russia possessed. It became the corporation there so far as we are now concerned. It had all its property and rights as fully as though the corporation had lawfully assigned them to it before dissolution. To that extent our public policy as to confiscatory decrees, so far as it may be expressed by our courts, is of no moment. When the executive branch recognized the Soviet Government, the judicial branch became bound to recognize the validity of Soviet decrees in Soviet territory from the beginning of the Soviet régime. Oetjen v. Central Leather Co., supra. See, also, Lazard Bros. & Co. v. Midland Bank, Ltd., 1933 A. C. 289, H. of L., for the rule in England. Consequently we must for present purposes take the Soviet Government to have become to all intents and purposes the Russian insurance corporation in Russia which owned the deposit in New York subject to the fulfillment of the conditions upon which the deposit was made with the New York Superintendent of Insurance.

For present purposes, also, we may assume arguendo that the present plaintiff has by assignment acquired all the rights in and to the deposit which the Soviet Government took in Russia from the corporation which made the deposit. That is the best position the plaintiff can claim, and in view of the disposition which in our opinion now must be made of this appeal we think it would be inadvisable, as it is unnecessary, to express our opinion on the merits as to this point. It is enough that we assume without deciding that the plaintiff has all the rights which the depositing corporation would, if now in existence, possess. The transfer of those rights to the plaintiff did not enlarge them because the assignee happened to be the United States. The United States has no greater rights than those of an assignor. United States v. Buford, 3 Pet. 12, 30, 7 L. Ed. 585; Ritter v. United States (C. C. A.) 28 F.(2d) 265. Though sovereign powers have been dealing with each other, they have been dealing in private causes of action and the plaintiff is simply attempting to enforce, as assignee, the claim of a Russian corporation to what remains of a deposit it made in this country.

As has already been stated, this remainder of the original fund has been placed on deposit with the defendant bank pursuant to an order of the New York court. It is now pertinent to state further that the record shows that this order of the New York court was made in the course of liquidation proceedings brought and prosecuted by the New York Superintendent of Insurance in accordance with the New York law in New York courts within whose jurisdiction the fund actually was. On August 11, 1931, the New York Supreme Court, acting in accordance with a decision of the New York Court of Appeals (see In re People, by Beha In re Moscow Fire Insurance Co. of Moscow, Russia, 255 N. Y. 433, 175 N. E. 120), ordered the deposit now in controversy made in the defendant bank. Rather extensive liquidation proceedings have been conducted in the New York courts which it will now serve no good purpose to relate in detail. The important matter is that before this action was commenced the fund in controversy had been taken into the custody of the New York court and has ever since remained in its custody. The sole purpose of the proceeding in the New York court was to liquidate the fund and distribute it according to its laws. To that end, the state suit was in rem. During its prosecution the remainder of the fund, consisting of cash and securities left after domestic creditors had been paid, was actually deposited with this defendant under an order of the court which controlled within its own proper jurisdiction the proceedings and the fund in liquidation. That being so, this suit cannot be maintained to deprive the state court of its previously acquired jurisdiction of the res in its custody. Covell v. Heyman, 111 U. S. 176, 4 S. Ct. 355, 28 L. Ed. 390; Harkin v. Brundage, 276 U. S. 36, 48 S. Ct. 268, 72 L. Ed. 457; Lion Bonding & Surety Co. v. Karatz, ...