United States v. Curtiss Aeroplane Co.

• Decision Date: 27 May 1943
• Citation: 50 F. Supp. 477
• Parties: UNITED STATES v. CURTISS AEROPLANE CO. et al.
• Court: U.S. District Court — Southern District of New York

50 F. Supp. 477

UNITED STATES v. CURTISS AEROPLANE CO. et al.

District Court, S. D. New York.

May 27, 1943.

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Mathias F. Correa, of New York City (by Daniel M. Sandomire, of New York City), for plaintiff.

Spence, Windels, Walser, Hotchkiss & Angell, of New York City (by Kenneth M. Spence and Soia Mentschikoff, both of New York City), for defendants.

RIFKIND, District Judge.

The complaint alleges seven causes of action. Each is based upon the alleged breach of a separate contract of sale of Curtiss aeroplanes by defendant to the Imperial Russian Government. The United States sues as assignee under the Litvinoff Assignment of November 16, 1933. The contracts were all made in 1914 and 1915. The latest delivery date specified in any of the contracts was July 20, 1915. Action was commenced on April 9, 1941.

Defendant has moved for summary judgment pursuant to Rule 56, Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, on the ground that all causes of action alleged are barred by the New York Statute of Limitations, § 48, New York Civil Practice Act.

Assuming that the contracts in litigation are New York contracts (and I shall hereinafter indicate why the assumption must be taken as fact^*), it is not disputed that more than six years had elapsed between the time when the causes of action accrued and November 16, 1933, when the United States became the assignee of the claims. Consequently, it cannot be doubted that if at that time the claims were barred by the lapse of time, the United States took the claims subject to that infirmity, and that the immunity of the sovereign to the plea of the statute of limitations would not forfeit that defense. So it has been expressly held with respect to the Litvinoff Assignment in Guaranty Trust Co. v. United States, 1938, 304 U.S. 126, 141, 58 S.Ct. 785, 82 L.Ed. 1224. It may also be taken as established that the exemption of the United States and the states from the operation of statutes of limitation does not extend to foreign sovereigns, Id., 304 U.S. at page 133, 58 S.Ct. at page 789, 82 L.Ed. 1224, so that plaintiff's predecessor does not enjoy in this respect a status different from that of a private litigant. It is equally clear that in selecting the appropriate rule of limitations which governs this controversy we must have recourse to the law of New York. Guaranty Trust Co. v. United States, supra; Balkam v. Woodstock Iron Co., 1894, 154 U.S. 177, 14 S.Ct. 1010, 38 L.Ed. 953; Leffingwell v. Warren, 1862, 2 Black 599, 603, 17 L.Ed. 261; Tioga R. R. v. Blossburg & C. R. Co., 1873, 20 Wall. 137, 143, 22 L.Ed. 331; Bauserman v. Blunt, 1893, 147 U.S. 647, 654, 13 S.Ct. 466, 37 L.Ed. 316.

Clearly then, had nothing intervened, the claims alleged in the complaint could not withstand the plea of the statute of limitations. Something, however, has intervened.

I. The 1922 Agreement.

On March 15, 1922, defendant and Russia, acting through Boris A. Bahkmeteff, its ambassador to the United States, entered into an "agreement", which, in its preamble, recited that Russia claimed that Curtiss was indebted to it in certain sums aggregating $1,050,000 and interest as a result of alleged breaches of the aforementioned contracts and that Curtiss claimed that Russia was indebted to it in certain sums by reason of said contracts and which provided further:

"1. Russia shall not commence an action against the company and the company shall not present a claim against Russia until after the expiration of two (2) years after the Government of Russia recognizes and accords full honor in Russia to passports issued by the Government of the United States to American citizens desiring to travel in Russia in connection with ordinary commercial enterprises * * *.

"2. In the event that after the expiration of such two year period Russia shall commence an action against the company or the company shall present a claim against Russia, the defendant party to such action or claim shall not plead or set up as a defense as a part of any statute of limitations the period of time intervening between March 15, 1922 and the end of a period of five years following the expiration of such two year period."

Provision was also made for mode of appearance, examination of witnesses before commencement of actions and for other details.

It is conceded that full honor has been accorded by the Government of Russia to American passports since November 16, 1933. The question squarely presented for decision is the validity of paragraph 2 of the agreement.

The basis of the attack upon its validity is found in Section 10 of the New York Civil Practice Act, the relevant portion of which reads:

"§ 10. Application of article. The provisions of this article apply and constitute the only rules of limitation applicable to a civil action or special proceeding, except in one of the following cases:

"1. A case where a different limitation is specially prescribed by law or a shorter limitation is prescribed by the written contract of the parties".

The Civil Practice Act enacted in 1920 derived this provision from Section 414 of the Code of Civil Procedure, enacted in 1876, as Chapter 448 of the Laws of 1876.

On its face, this statute forbids the enforcement of the challenged agreement. That parties may abbreviate but may not extend the period of limitations, is its explicit direction. If they would abbreviate the period they must do so by contract and in writing.

It is difficult to imagine more explicit language for the expression of the state's policy. By means of this statute the New York legislature clearly expressed its intention that the benefit of the statute of limitations was not merely a private privilege but a public concern; that private consent was insufficient to postpone the bar imposed by statute; that a consensual arrangement to accelerate the bar was permitted but in such event the arrangement must rise to the dignity of a contract and that it be in writing. A mere written memorandum was insufficient for this purpose although such a writing might suffice to satisfy the requirements of Section 59 of the Civil Practice Act, formerly Section 395 of the Code of Civil Procedure, derived from Section 110 of the Code of Procedure as an acknowledgment. The statute, Section 10, Civil Practice Act, makes no distinction between contracts for the modification of the period of limitation made at or before the inception of liability and those made thereafter; but by necessary implication it forbids such contracts if made after the statutory period has fully run, since any further extension would amount to a lengthening of the statutory period.

However, no matter how clear and unequivocal the legislative mandate may appear and no matter how persuasive the argument derived from the statute might be in a state court, it is of little significance in a Federal court if there be judicial construction of the statute by the courts of the state. In the Federal court the construction given to the statute by the state courts must prevail. Balkam v. Woodstock Iron Co., 1894, 154 U.S. 177, 14 S.Ct. 1010, 38 L.Ed. 953.

In the absence of a decision by the highest court of the state, the Federal courts must observe the decisions of the lower courts and they are not at liberty to reject such decisions merely because they do not agree with their reasoning. Fidelity Union Trust Co. v. Field, 1940, 311 U.S. 169, 179, 61 S.Ct. 176, 85 L.Ed. 109.

Only where the evidence is convincing that the highest court of the state would depart from the rule announced by the inferior court may a Federal court disregard the decision of such inferior court.

This rule of decision compels a detour from the simple direction of the statute into a maze of decisions and dicta which sometimes appear to defy the statute, but most commonly seem to act in complete oblivion of the statute.

Before Section 414 was enacted as part of the Code of Civil Procedure in 1876, the law was not entirely settled. Four cases illustrate its position at that time. In Utica Ins. Co. v. Bloodgood, 1830, 4 Wend., N.Y., 652, an action was brought on a promissory note and the defense of the statute of limitations was interposed. It appeared that shortly before the statute had run the defendant had signed a stipulation: "I hereby agree not to plead the statute of limitations in a prosecution for any balance that may be due on said note". It was held that the defendant was "estopped" by his stipulation from availing himself of the statute of limitations.

Thirty-three years later the theory of estoppel satisfied only one of the three judges who heard Rowe v. Thompson, 1863, 15 Abb.Prac., N.Y., 377. In answer to the plea of the statute of limitations, the plaintiff proved that he had signed and delivered a paper to the defendant at the request of the latter which read: "We, the creditors or Elmor Thompson, agree not to sue or molest him for his indebtedness, or the debts owing to us by him, for two years from the 1st of February". Brady, J., rejected the defense of the statute of limitations on two distinct grounds.

First, he said, "The agreement which he made with the plaintiff is an estoppel in pais as to the two years. The plaintiff acted upon it, and he would be injured by allowing it to be disregarded."

Second, he construed the writing as an acknowledgment of the debt within the provision of § 110 of the Code of Procedure and held that the mention therein of defendant's name satisfied the statutory requirement that the writing be signed by the party to be charged.

Hilton, J., joined in the result but only on the second ground. Daly, J., dissented: "The effect of the judgment is to declare that if the creditor agrees for a specified time not to sue the debtor, that time shall not be taken as any part of the six years. * * * It is declaring that a disability — not among those which the statute enumerates — shall, during its...