Upright v Mercury Business Machines Company

• Date: 11 April 1961
• Court: New York Supreme Court

United States, Supreme Court of New York, New York County, Special Term, Part I.

Supreme Court of New York, Appellate Division, First Department.

Upright

and

Mercury Business Machines Co.

Recognition — Of Governments — Effect of non-recognition upon capacity to sue of assignee of corporate agency of unrecognized Government — Suit by assignee on underlying transaction where such transaction not shown to violate public policy — Status of East Germany — The law of the United States of America.

On appeal,

Held (by the Appellate Division): that the order of the Special Term denying the plaintiff's motion must be reversed. The assignee of a corporation which was the creature of a Government not recognized by the United States had capacity to sue on the underlying transaction, unless it could be shown that the transaction or the assignment violated the national or public policy of the United States.

The Court said: [213 N.Y.S. 2d 419] “A foreign Government, although not recognized by the political arm of the United States Government, may nevertheless have de facto existence which is juridically cognizable. The acts of such a de facto Government may affect private rights and obligations arising either as a result of activity in, or with persons or corporations within, the territory controlled by such de facto Government. This is traditional law (Russian Reinsurance Co. v. StoddardUNKUNK, 240 N.Y. 149, 147 N.E. 703;[l]M. Salimoff & Co. v. Standard Oil Co.UNKUNKUNKECAS, 262 N.Y. 220, 186 N.E. 679, 89 A.L.R. 345;[2]State of Texas v. WhiteUNKUNK, 7 Wall. 700, 733, 74 U.S. 700, 733, 19 L.Ed. 227, overruled in part, Morgan v. United StatesUNKUNK, 113 U.S. 476, 496, 5 S.Ct. 588, 28 L.Ed. 1044; cf.United States v. RiceUNK, 4 Wheat 246, 17 U.S. 246, 4 L.Ed. 562, involving the effect of enemy occupation of United States territory; 1 Hyde, International Law [2d rev. ed., 1945], pp. 195–197; 48 C.J.S. International Law, § 5, pp. 8–10).

“In the Russian Reinsurance Co. case, Lehman J., later Chief Judge, summarized the principles:

“So, too, only limited effect is given to the fact that the political arm has not recognized a foreign Government. Realistically, the courts apprehend that political non-recognition may serve only narrow purposes. While the judicial arm obligates itself to follow the suggestions of the political arm in effecting such narrow purposes, nevertheless, it will not exaggerate or compound the consequences

required by such narrow purposes in construing rights and obligations affected by the acts of unrecognized Governments (Sokoloff v. National City BankUNKUNKUNK, 239 N.Y. 158, 145 N.E. 917, 37 A.L.R. 712;[1]M. Salimoff & Co. v. Standard Oil Co., supra). Thus, in Sokoloff v. National City Bank, Cardozo J., later Chief Judge, said

“The principles last discussed are the same as those presented by so authoritative a compiler as Hackworth as governing the effect of non-recognition (1 Hackworth, Digest of International Law, pp. 364 et seq.).

“Applying these principles, it is insufficient for defendant merely to allege the non-recognition of the East German Government and that plaintiff's assignor was organized by and is an arm and instrumentality of such unrecognized East German Government. The lack of jural status for such Government or its creature corporation is not determinative of whether transactions with it will be denied enforcement in American courts, so long as the Government is not the suitor.2 (Actually, on the present pleadings no issue is raised that...