Source: https://supreme.justia.com/cases/federal/us/301/324/
Timestamp: 2019-04-23 02:09:54+00:00

Document:
1. A decree of the Soviet Government dissolved a Russian corporation and expropriated all of its assets, including a deposit account with a bank in New York. Subsequently, the President of the United States recognized, and established diplomatic relations with, the Soviet Government, and, for the purpose of bringing about a final settlement of claims and counterclaims between that Government and the United States, it was thereupon agreed, among other things, that the Soviet Government would take no steps to enforce claims against American nationals, but all such claims, including the deposit account, were assigned to the United States with the understanding that the Soviet Government would be notified of all amounts so realized by the United States. Held that, as between the United States and the depositary, the deposit, in virtue of the international compact, belonged to the United States, whatever the policy of the State of New York touching the enforcement of acts of confiscation. P. 301 U. S. 327.
2. Judicial notice is taken of the facts that, coincidentally with the assignment, the President recognized the Soviet Government and normal diplomatic relations were established between the two Governments, followed by an exchange of ambassadors. P. 301 U. S. 330.
3. 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. P. 301 U. S. 330.
4. The international compact was within the competency of the President, and participation by the Senate was unnecessary. P. 301 U. S. 330.
5. The external powers of the United States are to be exercised without regard to state laws or policies. P. 301 U. S. 331.
6. What another country has done in the way of taking over property of it nationals, and especially of its corporations, is not questionable in our courts. P. 301 U. S. 332.
85 F. (2d) 542, reversed.
CERTIORARI, 299 U.S. 531, to review the affirmance of a judgment of the District Court dismissing the complaint in an action by the United States to recover from executors a sum of money which had been deposited with their decedent by a Russian corporation and assigned by the Soviet Government, after expropriation, to the United States.
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. 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.
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, 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 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, 246 U. S. 308-309, 246 U. S. 310, is to the same effect.
"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."
political advisers of the Sovereign, and not on the judges."
Further citation of authority seems unnecessary.
like that now under consideration are illustrations. See 5 Moore, Int.Law Digest, 210-221. The distinction was pointed out by this court in the Altman case, supra, which arose under § 3 of the Tariff Act of 1897, authorizing the President to conclude commercial agreements with foreign countries in certain specified matters. We held that, although this might not be a treaty requiring ratification by the Senate, it was a compact negotiated and proclaimed under the authority of the President, and as such was a "treaty" within the meaning of the Circuit Court of Appeals Act, the construction of which might be reviewed upon direct appeal to this court.
the United States rightfully undertakes it necessarily has warrant to consummate. And when judicial authority is invoked in aid of such consummation, state constitutions, state laws, and state policies are irrelevant to the inquiry and decision. It is inconceivable that any of them can be interposed as an obstacle to the effective operation of a federal constitutional power. Cf. Missouri v. Holland, 252 U. S. 416; Asakura v. Seattle, 265 U. S. 332, 25 U. S. 341.
Second. The public policy of the United States relied upon as a bar to the action is that declared by the Constitution, namely, that private property shall not be taken without just compensation. But the answer is that our Constitution, laws and policies have no extraterritorial operation unless in respect of our own citizens. Compare United States v. Curtiss-Wright Export Corp., supra, at p. 299 U. S. 318. What another country has done in the way of taking over property of its nationals, and especially of its corporations, is not a matter for judicial consideration here. Such nationals must look to their own government for any redress to which they may be entitled. So far as the record shows, only the rights of the Russian corporation have been affected by what has been done, and it will be time enough to consider the rights of our nationals when, if ever, by proper judicial proceeding, it shall be made to appear that they are so affected as to entitle them to judicial relief. The substantive right to the moneys, as now disclosed, became vested in the Soviet Government as the successor to the corporation, and this right that government has passed to the United States. It does not appear that respondents have any interest in the matter beyond that of a custodian. Thus far, no question under the Fifth Amendement is involved.
as now presented, and with the parties now before us. We do not consider the status of adverse claims, if there be any, of others not parties to this action. And nothing we have said is to be construed as foreclosing the assertion of any such claim to the fund involved, by intervention or other appropriate proceeding. We decide only that the complaint alleges facts sufficient to constitute a cause of action against the respondents.
I agree with the result, but I am unable to follow the path by which it is reached. Upon the record before us, there is, I think, no question of reexamining the validity of acts of a foreign state, and no question of the United States' declaring and enforcing a policy inconsistent with one that the State of New York might otherwise adopt in conformity to its own laws and the Constitution.
The United States, by agreement with the Soviet government, has acquired an assignment of all the rights of the latter in a chose in action, against an American citizen, formerly belonging to a Russian national, and confiscated by decree of the Soviet government. If the subject of the transfer were a chattel belonging to an American but located in Russia, we may assume that the validity of the seizure would be recognized here, Oetjen v. Central Leather Co., 246 U. S. 297; Ricaud v. American Metal Co., 246 U. S. 304, 246 U. S. 308-310; Salimo & Co. v. Standard Oil Co., 262 N.Y. 220, 186 N.E. 679. Similarly, the confiscation of the present claim, being lawful where made, is, upon familiar principles, to be regarded as effective in New York except insofar as that state, by reason of the presence of the debtor there, may adopt and enforce a policy based upon nonrecognition of the transfer.
But this Court has often recognized that a state may refuse to give effect to a transfer, made elsewhere, of property which is within its own territorial limits, if the transfer is in conflict with its public policy. Green v. Van Buskirk, 5 Wall. 307, 72 U. S. 311-312; Hervey v. Rhode Island Locomotive Works, 93 U. S. 664; Security Trust Co. v. Dodd, Mead & Co., 173 U. S. 624; Clark v. Williard, 292 U. S. 112, 292 U. S. 122; Clark v. Williard, 294 U. S. 211. It is likewise free to disregard the transfer where the subject of it is a chose in action due from a debtor within the state to a foreign creditor, especially where, as in the present case, the debtor's only obligation is to pay within the state, on demand. Harrison v. Sterry, 5 Cranch 289; Disconto Glesellschaft v. Umbreit, 208 U. S. 570; Barth v. Backus, 140 N.Y. 230, 35 N.E. 425; Vladikavkazsky Ry. Co. v. New York Trust Co., 263 N.Y. 369, 378-379, 189 N.E. 456. The chose in action is so far within the control of the state as to be regarded as located there for many purposes. Wyman v. Halstead, 109 U. S. 654, 109 U. S. 656; Chicago, R.I. & P. Ry. Co. v. Sturm, 174 U. S. 710; Harris v. Balk, 198 U. S. 215; Pennington v. Fourth National Bank, 243 U. S. 269; Security Savings Bank v. California, 263 U. S. 282, 263 U. S. 285; Corn Exchange Bank v. Coler, 280 U. S. 218; In re Russian Bank for Foreign Trade, L.R.1933, Ch.Div. 745, 767; American Law Institute, Restatement, Conflict of Laws, §§ 108, 213.
to protect. But it is a recognized rule that a state may rightly refuse to give effect to external transfers of property within its borders so far as they would operate to exclude creditors suing in its courts. Harrison v. Sterry, supra; Security Trust Co. v. Dodd, Mead & Co., supra; Disconto Gesellschaft v. Umbreit, supra; Clark v. Williard, supra; Barth v. Backus, supra.
We recently held, in Clark v. Williard, supra, that the full faith and credit clause does not preclude the attachment of property within the state, by a local creditor of a foreign corporation, all of whose property has been previously transferred, in the state of its incorporation, to a statutory successor for the benefit of creditors. Due process under the Fifth Amendment, the benefits of which extend to alien friends, as well as to citizens, Russian Volunteer Fleet v. United States, 282 U. S. 481, does not require any different result. Disconto Gesellschaft v. Umbreit, supra, 208 U. S. 579, 208 U. S. 580. The Constitution has no different application where the property transferred is a chose in action, later seized by a creditor in the state of the debtor. Disconto Gesellschaft v. Umbreit, supra. See Harrison v. Sterry, supra. In conformity to this doctrine, New York would have been free to enforce a local policy, subordinating the Soviet government, as the successor of its national, to local suitors. Its judicial decisions indicate that such may be its policy for the protection of creditors or others claiming an interest in the sum due. James & Co. v. Second Russian Insurance Co., 239 N.Y. 248, 257, 146 N.E. 369; Matter of People (City Equitable Fire Insurance Co.), 238 N.Y. 147, 152, 144 N.E. 484; Matter of Waite, 99 N.Y. 433, 448, 2 N.E. 440. See Vladikavkazsky Ry. Co. v. New York Trust Co., supra.
transferee of the Soviet government. We may, for present purposes, assume that the United States, by treaty with a foreign government with respect to a subject in which the foreign government has some interest or concern, could alter the policy which a state might otherwise adopt. It is unnecessary to consider whether the present agreement between the two governments can rightly be given the same effect as a treaty within this rule, for neither the allegations of the bill of complaint, nor the diplomatic exchanges, suggest that the United States has either recognized or declared that any state policy is to be overridden.
"I am glad to have these undertakings by your Government, and I shall be pleased to notify your Government in each case of any amount realized by the Government of the United States from the release and assignment to it of the amounts admitted to be due or that may be found to be due."
is to do more than the Soviet government could have done after diplomatic recognition -- that is, collect the claims in conformity with those laws. Cf. Todok v. Union State Bank, 281 U. S. 449.

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