United States v. Bank of New York Trust Co Same v. President and Directors of Manhattan Co Same v. Pink 8212 197

Decision Date06 January 1936
Docket NumberNos. 195,s. 195
CourtU.S. Supreme Court

[Syllabus from pages 463-465 intentionally omitted] Messrs. Homer S. Cummings, Atty. Gen., and David E. Hudson, of Washington, D.C., for the United States.

[Argument of Counsel from pages 466-469 intentionally omitted] Messrs. Frederick B. Campbell and Samson Selig, both of New York City, for respondent Bank of New York and Trust Co.

Mr. Hartwell Cabell, of New York City, for intervener respondent Assecuranz Union von 1865.

Mr. Robert J. Sykes, of New York City, for respondent President and Directors of the Manhattan Co.

Mr. John M. Downes, of New York City, for respondent Pink.

Mr. Chief Justice HUGHES delivered the opinion of the Court.

The United States, claiming to be the owner of certain funds which originally had belonged to Russian insurance companies, brought these suits for accounting and delivery. The companies had made deposits with the superintendent of insurance of the state of New York in order to obtain authority to transact business within the state. The complaints alleged that in 1917, or 1918, the companies had been dissolved, and their properties had been 'confiscated and appropriated,' by decrees of the Russian State. The claim of the United States is based upon an assignment made by the Russian government, on November 16, 1933, in connection with the recognition of that government. Defendants hold the funds in question under orders and judgments of the state court in New York, providing for liquidation and distribution.

In each case, defendants moved to dismiss the complaint for insufficiency, and, in opposition to complainant's motion for an interlocutory injunction restraining distribution, set up the proceedings of the state court. The District Court denied t e motions for injunction and dismissed the complaints upon the grounds (1) that the Russian decrees, by reason of their confiscatory character, were ineffective to vest in the Russian government the title to these funds situated in New York, and (2) that these funds were not covered by the assignment to the United States. 10 F.Supp. 269. The Circuit Court of Appeals held that the jurisdiction of the state court should be respected, and in that view affirmed the decrees of the Dis- trict Court. 77 F.(2) 866; United States v. Van Schaick, 77 F.(2d) 880; United States v. President, etc., of Manhattan Co., 77 F.(2d) 881. Because of the nature and importance of the questions presented, we granted writs of certiorari, October 14, 1935. 296 U.S. 558, 56 S.Ct. 111, 80 L.Ed. 393.

The special facts of the three cases are these:

(1) The case against the Bank of New York & Trust Company (No. 195) relates to the deposit made by the Moscow Fire Insurance Company. By order of the Supreme Court of the state of New York, in 1925, the superintendent of insurance was appointed liquidator of the United States branch of the company pursuant to section 63 of the state Insurance Law (Consol. Laws, c. 28) and creditors were enjoined from pursuing their legal remedies against the assets so sequestered. The superintendent of insurance took possession of the assets and proceeded in the course of liquidation to satisfy the claims of domestic creditors and policyholders. There remained a substantial surplus.

Similar results followed the superintendent's liquidation of the branches of other Russian companies, and the disposition of the surplus assets was brought before the Court of Appeals of New York. Creditors and policyholders with claims arising out of foreign business insisted that the time had come when their claims should be enforceable. The insurance companies insisted that they were still 'jurisdic persons,' that they were represented by boards of directors competent to act, and were entitled to possession subject to the remedies of creditors. The court declined to sustain the position of the superintendent that the surplus should be left in his hands indefinitely—until the recognition of a Russian government. As the superintendent had fulfilled the statutory trust, the court considered it to be no part of his duty to ascertain the validity of the claims that would be paid out of the surplus 'unless inequity would be done if the claimants were remitted to a remedy at law.' Exceptions were recognized where attachments or executions had been levied before the date of liquidation and also where proofs of claim had been filed and diligently pressed while the superintendent was still in charge and the injunction was still in force. As the creditors so proving were acting in response to an invitation—published in accordance with the order of liquidation to submit claims of every kind without reference to the place of origin, and were meanwhile stayed, the court thought that there would be manifest inequity if at that late day they were remitted to their legal remedies and compelled to prove anew. A court of equity having assumed control over a fund might continue to grant relief if justice so required. But the court took the view that after the liquidator had made provision for the payment of claims already filed, the surplus then remaining 'should be paid to the corporations, represented by directors, a quorum of the board.' People, by Beha, v. Russian Reinsurance Co., 255 N.Y. 415, 420 424, 175 N.E. 114, 117.

The Moscow Fire Insurance Company, however, had been left with but one director; and although he might be treated as a 'conservator' of the property of his company when there were assets within the state 'that might otherwise be lost,' the Court of Appeals was of the opinion that a measure of discretion should be exercised by a court of equity 'before surrendering possession.' Exercising that discretion, the court directed that the delivery of the assets in the case of that company should be conditioned upon the execution of a bond to the people of the state in a sum equal to the value of the assets delivered, with a condition that the director should faithfully apply the assets to the use of the corporation, its creditors and shareholders. In the event of inability or failure to give the bond, the court directed that delivery should be made to a trust company 'as agent or depositary' upon the stipulation of the insurance company and its 'conservator' that the fund would 'not be withdrawn except upon the order of a court of competent jurisdiction.' In re People (Moscow Fire Insurance Co.), 255 N.Y. 433, 435, 175 N.E. 120, 121. On the remittitur of the Court of Appeals, judgment was entered in the Supreme Court of the state on August 11, 1931, and provided, in the stated alternative, that the superintendent should deliver the surplus assets to the Bank of New York & Trust Company. The Moscow Company and Paul Lucke, 'its sole surviving director and conservator,' took advantage of this alternative and gave the required stipulation, whereupon the Trust Company received the surplus assets, of about $1,000,000, on April 18, 1933.

Immediately—on April 19, 1933—the Moscow Company and Lucke brought suit in the Supreme Court of the state to determine the disposition of these assets, including the determination of the claims of creditors. A second suit was brought in June, 1933, by a shareholder of the Moscow Company. In October, 1933, the first of these suits was referred to a referee to hear and determine, and later the two suits were consolidated. Trial was had before the referee and proofs of claims of various creditors and shareholders of the Moscow Company were submitted. On August 13, 1934, when the referee was about to file his report, the United States' attorney presented to the referee a proof of claim of the United States to the entire fund, based upon the assignment of November 16, 1933, by the Russian government. Apparently the claim was not pressed and an understanding was reached that the referee would withhold his report until August 21, 1934, and that the United States would meanwhile determine in what manner it would assert its claim, whether by intervention in a proceeding in the state court or by suit in the federal court. The referee made no mention of the claim in his report, which was filed on August 22, 1934. Judgment was at once entered upon the report directing payment of the claims of creditors as allowed by the referee and, after making reservation for future claims and expenses, ordering the distribution of the residue in liquidating dividends to the shareholders of the Moscow Company. There was also provision that any shareholder, or any party to the action, or successor in interest, might apply at the foot of the judgment for further directions. On the same day the United States brought the present suit.

(2) The case against the president and directors of the Manhattan Company (No. 196) relates to the Northern Insurance Company of Moscow. Under an order of the state court, in 1926, the superintendent of insurance took possession of the assets of the United States branch of the company. The statutory liquidation was completed. But as the company was left with but two directors, provision was made in April, 1931—under the decision of the Court of Appeals of New York—for the delivery of the surplus assets to a trust company, in case the required bond was not given. In re People (Northern Insurance Co.), 255 N.Y. 433, 435, 175 N.E. 120. In the following year an assignment for the benefit of creditors was made on behalf of the Northern Insurance Company to the Bank of Manhattan Trust Company, the predecessor in interest of the defendant in the present suit. Pursuant to a decision of the Court of Appeals on reargument (Matter of People (Northern Insurance Co.), 262 N.Y. 453, 188 N.E. 17), judgment was entered, on June 6, 1933, in the Supreme Court of the state directing the superintendent of insurance to deliver...

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