United States v. Belmont

• Citation: 81 L.Ed. 1134,57 S.Ct. 758,301 U.S. 324
• Decision Date: 03 May 1937
• Docket Number: No. 532,532
• Parties: UNITED STATES v. BELMONT et al
• Court: United States Supreme Court

301 U.S. 324

57 S.Ct. 758

81 L.Ed. 1134

UNITED STATES

v BELMONT et al.

No. 532.

Argued March 4, 1937.

Decided May 3, 1937.

Messrs. Stanley Reed, Sol. Gen., of Washington, D.C., Homer S. Cummings, Atty. Gen., and David E. Hudson, of Washington, D.C., for the United States.

Mr. C. W. Wickersham, of New York City, for respondent.

Mr. Justice SUTHERLAND delivered the opinion of the Court.

This is an action at law brought by petitioner against respondents in a federal District Court to recover a sum of money deposited by a Russian corporation (Petrograd Metal Works) with August Belmont, a private banker doing business in New York City under the name of August Belmont & Co. August Belmont died in 1924; and respondents are the duly appointed executors of his will. A motion to dismiss the complaint for failure to state facts sufficient to constitute a cause of action was sustained by the District Court, and its judgment was affirmed by the court below. (C.C.A.) 85 F.(2d) 542. The facts alleged, so far as necessary to be stated, follow.

The corporation had deposited with Belmont, prior to 1918, the sum of money which petitioner seeks to recover. In 1918, the Soviet government duly enacted a decree by which it dissolved, terminated, and liquidated the corporation (together with others), and nationalized and appropriated all of its property and assets of every kind and wherever situated, including the deposit account with Belmont. As a result, the deposit became the property of the Soviet government, and so remained until November 16, 1933, at which time the Soviet government released and assigned to petitioner all amounts due to that government from American nationals, including the deposit account of the corporation with Belmont. Respondents failed and refused to pay the amount upon demand duly made by petitioner.

The assignment was effected by an exchange of diplomatic correspondence between the Soviet government and the United States. The purpose was to bring about a final settlement of the claims and counterclaims between the Soviet government and the United States; and it was agreed that the Soviet government would take no steps to enforce claims against American nationals; but all such claims were released and assigned to the United States, with the understanding that the Soviet government was to be duly notified of all amounts realized by the United States from such release and assignment. The assignment and requirement for notice are parts of the larger plan to bring about a settlement of the rival claims of the high contracting parties. The continuing and definite interest of the Soviet government in the collection of assigned claims is evident; and the case, therefore, presents a question of public concern, the determination of which well might involve the good faith of the United States in the eyes of a foreign government. The court below held that the assignment thus effected embraced the claim here in question; and with that we agree.

That court, however, took the view that the situs of the bank deposit was within the state of New York; that in no sense could it be regarded as an intangible property right within Soviet territory; and that the nationalization decree, if enforced, would put into effect an act of confiscation. And it held that a judgment for the United States could not be had, because, in view of that result, it would be contrary to the controlling public policy of the state of New York. The further contention is made by respondents that the public policy of the United States would likewise be infringed by such a judgment. The two questions thus presented are the only ones necessary to be considered.

First. We do not pause to inquire whether in fact there was any policy of the state of New York to be infringed, since we are of opinion that no state policy can prevail against the international compact here involved.

This court has held, Underhill v. Hernandez, 168 U.S. 250, 18 S.Ct. 83, 42 L.Ed. 456, that every sovereign state must recognize the independence of every other sovereign state; and that the courts of one will not sit in judgment upon the acts of the government of another, done within its own territory.

That general principle was applied in Oetjen v. Central Leather Co., 246 U.S. 297, 38 S.Ct. 309, 62 L.Ed. 726, to a case where an action in replevin had been brought in a New Jersey state court to recover a consignment of hides purchased in Mexico from General Villa. The title of the purchaser was assailed on the ground that Villa had confiscated the hides. Villa, it appeared, had seized the hides while conducting independent operations under the Carranza government, which at the time of the seizure had made much progress in its revolution in Mexico. The government of the United States, after the trial of the case in the state court, had recognized the government of Carranza, first as the de facto government of the Republic of Mexico, and later as the government de jure. This court held that the conduct of foreign relations was committed by the Constitution to the political departments of the government, and the propriety of what may be done in the exercise of this political power was not subject to judicial inquiry or decision; that who is the sovereign of a territory is not a judicial question, but one the determination of which by the political departments conclusively binds the courts; and that recognition by these departments is retroactive and validates all actions and conduct of the government so recognized from the commencement of its existence. 'The principle,' we said, 246 U.S. 297, at page 303, 38 S.Ct. 309, 311, 62 L.Ed. 726, 'that the conduct of one independent government cannot be successfully questioned in the courts of another is as applicable to a case involving the title to property brought within the custody of a court, such as we have here, as it was held to be to the cases cited, in which claims for damages were based upon acts done in a foreign country, for it rests at last upon the highest considerations of international comity and expediency. To permit the validity of the acts of one sovereign state to be reexamined and perhaps condemned by the courts of another would very certainly 'imperil the amicable relations between governments and vex the peace of nations." Ricaud v. American Metal Co., 246 U.S. 304, 308, 309, 310, 38 S.Ct. 312, 62 L.Ed. 733, is to the same effect.

In A. M. Luther v. James Sagor & Co., L.R.(1921) 3 K.B. 532, the English Court of Appeal expressly ap- proved and followed our decision in the Oetjen Case. The English case involved that part of the same decree of the Soviet government here under consideration which declared certain private woodworking establishments to be the property of the Republic. Under that decree the government seized plaintiff's factory in Russia together with a stock of wood therein. Agents of the Republic sold a quantity of the stock so seized to the defendants, who imported it into England. Thereafter, the British government recognized the Soviet government as the de facto government of Russia. Upon these facts, the court held that, the British government having thus recognized the Soviet government, existing at a date before the decree in question, the validity of that decree and the sale of the wood to the defendants could not be impugned, and gave judgment for defendants accordingly. The court regarded the decree as one of confiscation, but was unable to see (Bankes, L.J., p. 546) how the courts could treat the decree 'otherwise than as the expression by the de facto government of a civilized country of a policy which it considered to be in the best interest of that country. It must be quite immaterial for present purposes that the same views are not entertained by the Government of this country, are repudiated by the vast majority of its citizens, and are not recognized by our laws.' Lord Justice Scrutton, in his opinion, discusses (pp. 557—559) the contention that the courts should refuse to recognize the decree and the titles derived under it as confiscatory and unjust, and concludes that the question is one not for the judges but for the action of the sovereign through his ministers. 'I do not feel able,' he said, 'to come to the conclusion that the legislation of a state recognized by my Sovereign as an independent sovereign state is so contrary to moral principle that the judges ought not to recognize it. The responsibility for recognition or non-recognition with the consequences of each rests on the political advisers of the Sovereign and not on the judges.' Further citation of authority seems unnecessary.

We take judicial notice of the fact that coincident with the assignment set forth in the complaint, the President recognized the Soviet government, and normal diplomatic relations were established between that government and the government of the United States, followed by an exchange of ambassadors. The effect of this was to validate, so far as this country is concerned, all acts of the Soviet government here involved from the commencement of its existence. The recognition, establishment of diplomatic relations, the assignment, and agreements with respect thereto, were all parts of one transaction, resulting in an international compact between the two governments. That the negotiations, acceptance of the assignment and agreements and understandings in respect thereof were within the competence of the President may not be doubted. Governmental power over internal affairs is distributed between the national government and the several states. Governmental power over external affairs is not distributed, but is vested exclusively in the national government. And in respect of what was done here, the Executive had authority to speak as the sole organ of that government. The assignment and the agreements in connection therewith did not, as in the case of treaties, as that term is used in the...