Source: https://law.justia.com/cases/federal/appellate-courts/F2/307/845/234192/
Timestamp: 2020-07-14 17:40:14
Document Index: 610240811

Matched Legal Cases: ['§ 977', '§ 260', '§ 41', '§ 44', 'art. 2', 'art. 38', '§ 190', '§ 190', '§ 1100', '§ 1158', '§ 1114', '§ 1158', '§ 205', '§ 170', '§ 170', 'Art. 6', '§ 977', '§ 977', '§ 190', 'art. 10', '§ 169', '§ 190']

Banco Nacional De Cuba, Appellant, v. Peter L. F. Sabbatino, As Receiver, and F. Shelton Parr, William F. Prescott, Emet Whitlock, Lawrence H. Dixon, H. Bartow Farr, Elizabeth C. Prescott, Fabio Freyre and Helen G. Downs, Co-partners Doing Business As Farr, Whitlock & Co., Appellees, 307 F.2d 845 (2d Cir. 1962) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Second Circuit › 1962 › Banco Nacional De Cuba, Appellant, v. Peter L. F. Sabbatino, As Receiver, and F. Shelton Parr, Willi...
Banco Nacional De Cuba, Appellant, v. Peter L. F. Sabbatino, As Receiver, and F. Shelton Parr, William F. Prescott, Emet Whitlock, Lawrence H. Dixon, H. Bartow Farr, Elizabeth C. Prescott, Fabio Freyre and Helen G. Downs, Co-partners Doing Business As Farr, Whitlock & Co., Appellees, 307 F.2d 845 (2d Cir. 1962)
U.S. Court of Appeals for the Second Circuit - 307 F.2d 845 (2d Cir. 1962) Argued January 3, 1962
Decided July 6, 1962
COPYRIGHT MATERIAL OMITTED COPYRIGHT MATERIAL OMITTED Rabinowitz & Boudin, New York City (Victor Rabinowitz, Leonard B. Boudin, Michael B. Standard, Mary Kaufman, New York City, of counsel), for appellant.
Harold L. Fisher and Ross J. DiLorenzo, Brooklyn, N. Y. (Harold L. Fisher, Brooklyn, N. Y., Joseph Slavin, New York City, of counsel), for appellee Sabbatino.
John G. Laylin, Washington, D. C., (Covington & Burling, Ky P. Ewing, Jr., R. Markham Ball, Washington, D. C., of counsel), for Cuban-American Sugar Co. and Cuban American Sugar Mills Co., amici curiae.
In February and July 1960, Farr, Whitlock entered into contracts with General Sugar Estates, Inc., a wholly-owned Cuban subsidiary of Compania Azucarera Vertientes-Camaguey de Cuba (C.A.V.) for the purchase of Cuban sugar. C. A. V. is organized under the laws of Cuba, but over ninety per cent of its shareholders are residents of the United States. Pursuant to these contracts, between 6:00 A.M. on August 6, 1960, and 1:00 P.M. on August 9, 1960, 22,000 bags of sugar were loaded aboard the German vessel S.S. Hornfels standing offshore at the Cuban port of Jucaro. The exact distance offshore is not known.
Followed a list of the twenty-six companies to be seized, number 22 on the list being C. A. V. The purpose of Law No. 851 and the resolution of expropriation was set forth in the resolution as follows:
After August 6 the consent of the Cuban government was required before sugar-carrying ships could leave Cuban waters. To obtain this consent, on August 11 Farr, Whitlock entered into contracts with Banco Para el Commercio Exterior de Cuba, as the representative of the Castro government. The terms of these contracts were identical with those in the earlier contracts between Farr, Whitlock and the subsidiary of C. A. V. With the permission of the Cuban regime the sugar-laden S.S. Hornfels sailed for its destination, Casablanca, Morocco.
Meanwhile, on August 16, a shareholder of C. A. V. brought an action in the New York Supreme Court, Kings County, pursuant to N.Y.Civ.Prac.Act, § 977-b for the appointment of a receiver for the assets of C. A. V. in New York.1 That same day the New York court ex parte appointed the present defendant Sabbatino as Temporary Receiver. A certified copy of the order appointing the Temporary Receiver was served on Farr, Whitlock on August 23.
On Friday, August 26, the same day on which Societe Generale first tried to make delivery of the shipping documents and receive payment for the plaintiff, officers of C. A. V. advised Farr, Whitlock orally and in writing that C. A. V., not the Cuban government or its agencies, was the true owner of the sugar covered by the bills of lading in the hands of Societe Generale.2 C. A. V. enclosed in its letter to Farr, Whitlock a notice of the appointment of the Temporary Receiver. Later that day Farr, Whitlock and C. A. V. entered into an agreement by which Farr, Whitlock promised to retain any proceeds it might receive from the sugar shipment here involved until it was compelled by a court order to turn them over to the Receiver or anyone else. C. A. V. promised to indemnify Farr, Whitlock against any claims with respect to the sugar, except a claim by the Receiver; to defend any suit against Farr, Whitlock involving the sugar or the proceeds therefrom, except a proceeding by the Receiver; and to pay Farr, Whitlock ten per cent of the sum of $175,000 if C. A. V. ever obtained that sum.
A representative of Societe Generale returned to Farr, Whitlock's office at 3:00 P.M. that day to receive payment of the draft. He was informed, the plaintiff maintains, that the bills of lading had been negotiated and that Farr, Whitlock had received the proceeds but that it would not turn over the proceeds to Societe Generale because C. A. V. claimed them.
About two hours later Farr, Whitlock was served with an order of the Supreme Court of New York, Kings County, enjoining it from taking any action which might result in removing assets claimed by C. A. V. out of the State of New York. That same day Farr, Whitlock notified the French bank by letter that the sugar broker had notice of the appointment of the receiver for C. A. V.'s New York assets, that C. A. V. claimed the sugar proceeds here involved, that the broker had received formal notification of a motion in the New York court to vacate the receivership,3 and that Farr, Whitlock had been served with the order mentioned in the preceding sentence. Therefore, the letter stated, Farr, Whitlock was obliged to retain the proceeds until directed by a competent court to give them up. Societe Generale formally protested the non-payment of the draft.
Sabbatino moved to dismiss the plaintiff's complaint as to him and the broker's cross-claim for failure to obtain permission to sue him from the court which appointed the Receiver. Farr, Whitlock moved to dismiss the Cuban bank's action against it because of alleged lack of jurisdiction over the subject matter. The plaintiff moved for summary judgment against both defendants. Farr, Whitlock moved for summary judgment against the Receiver in the event that the plaintiff obtained summary judgment against Farr, Whitlock. The district court below treated all these motions in a single, scholarly opinion, reported at D.C., 193 F. Supp. 375 (1961). It denied the broker's motion to dismiss, holding that it had jurisdiction over the subject matter and, on the plaintiff's motion for summary judgment, granted judgment for the defendants, thereby rendering the other motions moot. The plaintiff then appealed to this court.
But Farr, Whitlock contends that the jurisdiction of the federal court was defective in another respect. Because a court without jurisdiction has no power to adjudicate upon the merits of a controversy, the first question to be resolved in an orderly consideration of the numerous questions raised in this litigation is whether the court below was correct in denying Farr, Whitlock's motion to dismiss the complaint against it on the ground that the federal court lacked jurisdiction over the subject matter. Farr, Whitlock's motion was based on the proposition that, as the proceeds of the sale had been turned over to a New York state court and as that court had perfected its jurisdiction either in rem or quasi in rem over those proceeds before the U. S. District Court had perfected its jurisdiction over the parties, the U. S. District Court lacked jurisdiction over the subject matter. See Penn Gen. Cas. Co. v. Pennsylvania, 294 U.S. 189, 196, 55 S. Ct. 386, 79 L. Ed. 850 (1935); Harkin v. Brundage, 276 U.S. 36, 43-45, 48 S. Ct. 268, 72 L. Ed. 457 (1928). It has long been established that the court which first obtains jurisdiction over a particular res is entitled to retain that jurisdiction to the exclusion of other courts. See Hagan v. Lucas, 35 U.S. (10 Pet.) 400 (1836); Taylor v. Carryl, 61 U.S. (20 How.) 583, 597 (1858); Freeman v. Howe, 65 U.S. (24 How.) 450 (1861); Hart & Wechsler, The Federal Courts and The Federal System 1073 (1953).
Abstention has been approved when it permits the federal court to avoid reaching a decision of constitutional magnitude, or when state court determination of relevant issues of state law would present the federal constitutional issue in a different posture. City of Meridian v. Southern Bell Tel. & Tel. Co., 358 U.S. 639, 79 S. Ct. 455, 3 L. Ed. 2d 562 (1959); Leiter Minerals, Inc. v. United States, 352 U.S. 220, 77 S. Ct. 287, 1 L. Ed. 2d 267 (1957); Spector Motor Service, Inc. v. McLaughlin, 323 U.S. 101, 65 S. Ct. 152, 89 L. Ed. 101 (1944); Railroad Comm'n of Texas v. Pullman Co., 312 U.S. 496, 61 S. Ct. 643, 85 L. Ed. 971 (1941). It has also been approved when decision by the federal court would unduly strain the relationship between the state and federal jurisdictions. See, e. g., Burford v. Sun Oil Co., 319 U.S. 315, 63 S. Ct. 1098, 87 L. Ed. 1424 (1943); Alabama Pub. Serv. Comm'n v. Southern Ry., 341 U.S. 341, 71 S. Ct. 762, 95 L. Ed. 1002 (1951). But the mere adjudication by a federal court of a particular issue identical with an issue involved in pending litigation in a state court has never been considered so irritable to state prerogatives as to constitute a ground for federal abstention, even though the proceeding in the state court became truncated through an application of the rules of res judicata or collateral estoppel. Moreover, as this controversy involves our national foreign affairs, it is certainly appropriate for its determination to be made on the merits by a court of the United States. The court below properly exercised its discretion in declining to abstain from its duty of adjudication.4
As federal court jurisdiction over the present case rests upon the diversity of citizenship of the parties, we look, initially at least, to the law of the State of New York to determine the litigants' rights. To recover judgment on a theory of conversion, the plaintiff must establish title, possession or right to possession, or some property interest in the subject matter which plaintiff claims the defendants converted to their own use and which provides the basis for the lawsuit. Kaufman v. Simons Motor Sales Co., 261 N.Y. 146, 184 N.E. 739 (1933); Johnson v. Blaney, 198 N.Y. 312, 91 N.E. 721 (1910). Since the plaintiff's alleged rights in the bills of lading and in the proceeds received from the sugar depend upon plaintiff's prior ownership of the sugar the determination of whether Farr, Whitlock is a converter depends upon whether C. A. V. or the Government of Cuba owned the sugar when it left Cuba. Under the ordinary rules of conflict of laws, title to this sugar would be determined by the law of Cuba, namely, the decree of expropriation of August 6, 1960.5 See Restatement, Conflict of Laws § 260 (1934); cf. M. Salimoff & Co. v. Standard Oil Co., 262 N.Y. 220, 186 N.E. 679, 89 A.L.R. 345 (1933). The appellees, however, attack this decree as invalid under (1) the municipal law of Cuba, (2) the public policy of the forum, and (3) the rules and principles of international law.
The appellant, on the other hand, asserts that irrespective of the appellees' contentions as to the status of the expropriation decree we must decide in appellant's favor because under the Act of State Doctrine this court may not inquire into the validity of the Cuban decree. The Act of State Doctrine, briefly stated, holds that American courts will not pass on the validity of the acts of foreign governments performed in their capacities as sovereigns within their own territories. The actions of foreign nations accorded this respect may be executive, legislative, or judicial in nature, although court judgments, because they ordinarily involve the resolution of private disputes and do not ordinarily reflect high state policy, do not usually come within this category. Restatement, Foreign Relations Law of the United States § 41, comment c (Proposed Official Draft, 1962). This doctrine is one of the conflict of laws rules applied by American courts; it is not itself a rule of international law. Id., comments b, g; Zander, The Act of State Doctrine, 53 Am.J.Int'l L. 826, 837, 844 (1959). But see Falk, Toward a Theory of the Participation of Domestic Courts in the International Legal Order: a Critique of Banco Nacional de Cuba v. Sabbatino, 16 Rutgers L. Rev. 1, 34-35 (1961).6 The act of state doctrine stems from the concept of the immunity of the sovereign because "the sovereign can do no wrong." See Note, The Castro Government in American Courts: Sovereign Immunity and the Act of State Doctrine, 75 Harv. L. Rev. 1607, 1608 (1962).
Another case in the history of the act of state doctrine was the well-known opinion of Mr. Justice Holmes in American Banana Co. v. United Fruit Co., 213 U.S. 347, 29 S. Ct. 511, 53 L. Ed. 826 (1909). The plaintiff alleged that the defendant conspired with the Government of Costa Rica to deprive the plaintiff of its plantation and railroad in that country. As in Underhill, the Court refused to entertain the plaintiff's substantive contentions. Mr. Justice Holmes, for the Court, explained that a sovereign within its territorial jurisdiction could not itself commit an unlawful act because the sovereign's act within its own boundaries was the law there.7
"It is not necessary to consider, as the New Jersey court did, the validity of the levy of the contribution made by the Mexican commanding general, under rules of international law applicable to the situation, since the subject is not open to reëxamination by this or any other American court" (246 U.S. at 304, 38 S. Ct. 309, 311).
The other case of that year was Ricaud v. American Metal Co., 246 U.S. 304, 38 S. Ct. 312, 62 L. Ed. 733 (1918). Another one of Carranza's generals had seized a large consignment of lead bullion from a Mexican mining company and had sold it to the defendants. Claiming that he had purchased the bullion from the mining company prior to the seizure, the plaintiff, an American citizen, sought to recover it from the defendant. For virtually the same reasons as it had stated in Oetjen v. Central Leather Co., supra, the Supreme Court denied the relief which the plaintiff sought.8
The act of state doctrine has been recognized and applied by this and other courts. See e. g., Republic of Cuba v. Pons, 294 F.2d 925 (D.C. Cir. 1961), cert. denied, 368 U.S. 960 (1962); Bernstein v. Van Heyghen Freres Societe Anonyme, 163 F.2d 246 (2 Cir.), cert. denied, 332 U.S. 772, 68 S. Ct. 88, 92 L. Ed. 357 (1947); United States ex rel. Von Heyman v. Watkins, 159 F.2d 650 (2 Cir. 1947); Banco de Espana v. Federal Reserve Bank, 114 F.2d 438 (2 Cir. 1940); The Claveresk, 246 F. 276 (2 Cir. 1920); Hewitt v. Speyer, 250 F. 367 (2 Cir. 1919); Eastern States Petroleum Co. v. Asiatic Petroleum Corporation, 28 F. Supp. 279 (S.D.N.Y. 1939); M. Salimoff & Co. v. Standard Oil Co., 262 N.Y. 220, 186 N.E. 679, 89 A.L.R. 345 (1933); Holzer v. Deutsche Reichbahn-Gesellschaft, 277 N.Y. 474, 14 N.E.2d 798 (1938); Dougherty v. Equitable Life Assur. Co., 266 N.Y. 71, 193 N.E. 897 (1934).
The policies and theories underlying this doctrine of judicial abnegation seem to be these: The desire by the judiciary to avoid possible conflict with or embarrassment to the executive and legislative branches of our Government in our dealings with foreign nations, see e. g., Wulfsohn v. Russian Socialist Federated Soviet Republic, 234 N.Y. 372, 138 N.E. 24 (1923); a positivistic concept of territorial sovereignty, see e. g., American Banana Co. v. United Fruit Co., supra; and a fear of hampering international trade by rendering titles insecure, see e. g., Banco de Espana v. Federal Reserve Bank, supra. It has also been suggested that the remoteness of American courts from the circumstances surrounding the making of the foreign decree and the provincial attitude taken by most municipal courts make American courts unsuitable tribunals for judging the validity of acts committed by foreign sovereigns within their territorial limits. See Reeves, Act of State Doctrine and the Rule of Law — A Reply, 54 Am.J.Int'l L. 141, 144-48 (1960); Falk, supra at 10. See, generally, Zander, The Act of State Doctrine, 53 Am.J.Int'l L. 826, 834 (1939); Falk, supra at 31-32.
However, when the executive branch of our Government announces that it does not oppose inquiry by American courts into the legality of foreign acts, an exception to the judicial abnegation required by the act of state doctrine has arisen and has been recognized both in this circuit and elsewhere. In Bernstein v. N.V. Nederlandsche-Amerikaansche Stoomvaart-Maatschappij, 210 F.2d 375 (2 Cir. 1954) (per curiam), when we received word from the State Department that it was State Department policy to permit American courts to pass on the validity of acts done by Nazi officials, our court rescinded its earlier mandate by which, based upon the act of state doctrine, we had prevented the district court from questioning the validity of the acts of the German Nazi government. See 173 F.2d 71 (2 Cir. 1949). See also Bernstein v. Van Heyghen Freres, S. A., 163 F.2d 246, 252 (2 Cir.), cert denied, 332 U.S. 772, 68 S. Ct. 88, 92 L. Ed. 357 (1947); Restatement, Foreign Relations Law of the United States § 44 (Proposed Official Draft, 1962); Kane v. National Institute of Agrarian Reform, (Fla.Cir.Ct.) 18 Fla. Supp. 116; Association of the Bar of the City of New York, Committee on International Law, Report, A Reconsideration of the Act of State Doctrine in United States Courts 13 (May 1959); Zander, The Act of State Doctrine, 53 Am.J.Int'l L. 826 (1959).
On April 13, 1961, the State Department told the litigants in Kane v. National Institute of Agrarian Reform, (Fla.Cir. Ct.) (1961) 18 Fla.Supp. 116, a case that involved another confiscation by the Castro Cuban government of American-owned property in Cuba: "Effect in U. S. of Decrees, etc. of Castro regime is question for court in which case heard." These statements are somewhat ambiguous, perhaps intentionally so. But at the least they express a belief on the part of those responsible for the conduct of our foreign affairs that the courts here should decide the status here of Cuban decrees. Of course, if there is no good reason for abstention, a court should recognize and accept its fundamental responsibility to decide a case before it in accordance with whatever substantive norms may be relevant; and when, as here, the State Department is willing for the court to adjudicate the rights of the parties, one of the basic reasons for the act of state doctrine — the danger that independent judicial decisions might interfere with this country's foreign relations — is inapplicable to support abstention. The broad statements in cases such as Oetjen v. Central Leather Co., 246 U.S. 297, 38 S. Ct. 309, 62 L. Ed. 726 (1918) and Shapleigh v. Mier, 299 U.S. 468, 57 S. Ct. 261, (1937) could not have been intended by the Supreme Court to require a judicial avoidance of judicial responsibility in a case where the State Department has expressed a lack of concern as to the outcome of the litigation.
Thus we turn to a consideration of the appellees' third contention, that the appellant's title is invalid under international law. Although the law of nations is a hazy concept, its rules are more limited in scope than are the public policy concepts of a particular nation within the family of nations. Moreover, if we apply international law to the present case, we find that the reasons put forward in support of the act of state doctrine are either inapplicable or insufficient to preclude us from inquiring into the validity of the Cuban decree on the limited basis of an inquiry as to the decree's consistency with international rules of law. First, as pointed out earlier in the opinion, the State Department has no desire to interfere here with independent decision by the judiciary. Second, the very proposition that something known as international law exists carries with it the implication that national sovereignty is not absolute but is limited, where the international law impinges, by the dictates of this international law. Eagleton, Responsibility of States in International Law 65 (1928). See Sohn & Baxter, Convention on State Responsibility art. 2 (Draft No. 12, 1961). Third, when an agency of the expropriating country instead of some third party is the litigant relying upon the expropriation for its title, the problem of preserving the security of the titles to property that is the subject of international trade is not presented. See Falk, supra at 15. Fourth, this court is not so unfamiliar with the legal, political, and social circumstances surrounding the Castro government's seizure of C. A. V. as to be incompetent to pass on its validity under international law. Finally, although it can be argued that nationalistic prejudice could affect decision in cases of this sort, it is also often claimed that other biases in various obnoxious forms are present in the minds of judges in other types of cases. Judges are properly admonished when reminded that judicial duty requires that controversies be decided fairly and without passion, but we also have a duty not to excuse ourselves from exercising the duty of decision when parties and subject matter are properly before us. Thus neither reason nor precedent precludes this court from considering the appellees' contentions, based upon international law concepts, that the court below should be affirmed.
See The Nereide, 9 Cranch 388, 13 U.S. 388, 3 L. Ed. 769 (1815); United States v. Smith, 5 Wheat 153, 18 U.S. 153, 5 L. Ed. 57 (1820); The Scotia, 14 Wall., 170, 20 L. Ed. 822, 81 U.S. 170 (1871); 1 Oppenheim, International Law 41-42 (8th ed. 1955). In the absence of any relevant treaty, enactment of the legislature, act of the executive, or controlling judicial decision, we have been told to draw the guiding concepts of international law from the customs and usages of civilized nations. The Paquete Habana, supra. It would seem that this statement requires at least one qualification. International law is derived indeed from the customs and usages of civilized nations, but its concepts are subject to generally accepted principles of morality whether most men live by these principles or not. See Statute of the International Court of Justice art. 38, 1946-47 U. N. Yearbook 843. But see The Antelope, 10 Wheat 66, 23 U.S. 66, 6 L. Ed. 268 (1825). Judges of municipal courts, the bulk of whose decisions involve questions under a domestic law derived from a long-established and increasingly elaborate national legal system, will often find themselves unfamiliar with the ratiocination necessary for decision in this area, where recognized precedent and accepted authority are scant. Anyone who undertakes a search for the principles of international law cannot help but be aware of the nebulous nature of the substance we call international law. See Rado, Czechoslovak Nationalization Decrees: Some International Aspects, 41 Am.J.Int'l L. 795, 797 (1947). The lack of effective international remedies doubtless contributes to this state of affairs. See Falk, Toward a Theory of the Participation of Domestic Courts in the International Legal Order: a Critique of Banco Nacional de Cuba v. Sabbatino, 16 Rutgers L. Rev. 1, 2 & n. 3(1961). But until the day of capable international adjudication among countries, the municipal courts must be the custodians of the concepts of international law, and they must expound, apply and develop that law whenever they are called upon to do so. See Lauterpacht, Re Helbert Wagg: A Further Comment, 5 Int'l & Comp.L.Q. 301 (4th Ser.1956); Falk, supra at 2.
The appellant argues that the Cuban decree against C. A. V. did not violate international law because C. A. V. was organized under the laws of Cuba. It is generally accepted, as appellant says, that acts of a state directed against its own nationals do not give rise to questions of international law. Zander, The Act of State Doctrine, 53 Am.J. Int'l Law 826, 836 (1959); 1 Oppenheim, International Law, 268 n. 2 (8th ed. 1955); Friedman, Expropriation in International Law 163 (1953); see M. Salimoff & Co. v. Standard Oil Co., 262 N.Y. 220, 186 N.E. 679 (1933). But over ninety per cent of C. A. V.'s shareholders were United States nationals; and the Cuban decree which expropriated C. A. V.'s property clearly indicated that the property was seized because C. A. V. was owned and controlled by Americans. When a foreign state treats a corporation in a particular way because of the nationality of its shareholders, it would be inconsistent for us in passing on the validity of that treatment to look only to the "nationality" of the corporate fiction. The more frequent practice in international litigation and negotiation seems to be that the nationality of the corporation is disregarded when it is different from the nationality of most of the corporation's shareholders. See El Triunfo, 2 Moore, International Law 649-51, [1902] Foreign Rel. U. S. 859-73; Tlahualilo, 5 Hackworth, International Law 842, [1913] Foreign Rel. U. S. 993; Alsop [1910] Foreign Rel. U. S. 138-89, [1911] id. 38; Charbonnage Frederic Henri S. A. v. Germany, [1919-22] Ann.Dig. 227; Baron de Neuflize v. Germany, [1927-28] Ann.Dig. 323-24; Romano-Americana, 5 Hackworth, International Law, 702-05, [1926] 2 Foreign Rel. U. S. 313, [1928] 2 Foreign Rel. U. S. 957, [1929] 3 Foreign Rel. U. S. 757; Friedman, op. cit. supra at 171; Delagoa Bay, 2 Moore, International Arbitration 1865, 1874, [1902] Foreign Rel. U. S. 848, 849. Thus we shall place no significance for present purposes on the fact that C. A. V. was chartered in Cuba.
The United States Department of State has asserted this proposition to foreign countries on numerous occasions.10 The Restatement, Foreign Relations Law of the United States § 190(b) (Proposed Official Draft 1962) is to the same effect:
"§ 190. When Taking is Wrongful Under International Law "The taking by a state of property of an alien is wrongful under international law if * * *
But some writers have asserted that the payment of adequate compensation is not required by international law. Friedman, Expropriation in International Law 206 (1953); Baade, Indonesian Nationalization Measures before Foreign Courts — A Reply, 54 Am.J.Int'l L. 801, 803-04 (1960); Williams, International Law and the Property of Aliens, Brit.Yb.Int'l L. 1 (1928); see Brierly, Law of Nations 178 (2d ed. 1936); Isaacson, International Law and Public Policy 1961 (unpublished paper in Yale Law School Library). Cf. Baade, supra at 834. Tremendous social and cultural changes are occurring in many parts of the world today. Many countries have acted upon the principle that, in order to carry out desired economic and social reforms of vast magnitude, they must have the right to seize private property without providing compensation for the taking. They argue that because of the paucity of funds in their governmental coffers it would be impossible to carry out large-scale measures in the name of social welfare if they had to provide immediate, or even delayed, compensation. The Reporter of the Restatement, Foreign Relations Law of the United States frankly admits that some states including ones in Latin America other than Cuba, do not recognize any requirement to pay compensation.13 It is commonplace in many parts of the world for a country not to pay for what it takes. See Falk, supra at 32. Since it is unnessary for this court in the present case to decide whether a government's failure, in and of itself, to pay adequate compensation for the property it takes is a breach of international responsibility, we decline at this time to attempt a resolution of that difficult question.
The history of the relations between the United States and the Castro government in the period immediately preceding the decree of expropriation, as well as the words of the decree itself, demonstrate that one of the fundamental purposes of the confiscation was retaliation against this country. On July 6, 1960, Congress amended the Sugar Act of 1948, 61 Stat. 922 (1947), as amended, 7 U.S. C.A. §§ 1100-61, so as to permit the President to reduce the sugar quota allotted to Cuba for the period extending through March 31, 1961. 74 Stat. 330 (1960); as amended 7 U.S.C.A. § 1158. Under the law as it stood before this amendment, Cuba would have had the option to supply sugar to this country in excess of the basic quota allotted to her, since sugar growers in this country were finding it impossible to fill the quota allotted to them. 70 Stat. 219 (1956), 7 U.S.C.A. § 1114(a). See 106 Cong. Record 14680 (1960) (remarks of Senator Long). The Secretary of State testified before the House Committee on Agriculture that the purpose of the amendment was to secure an adequate supply of sugar. He said that Cuba, which had in the past provided about one-third of the sugar consumed in the United States, might not remain a reliable source of sugar because of the increasing diversification of her economy, and because of her commitments to supply sugar to certain Communist countries. He added that "other circumstances" also made it appropriate for Congress to pass the legislation. Hearings Before House Committee on Agriculture on H.R. 12311, H.R. 12534, and H.R. 12624, 86th Cong., 2d Sess. 3-5 (1960). Other legislative history made it abundantly clear that the main purpose of the amendment was to impose a sanction against an unfriendly nation. E. g., 106 Cong.Record 15228-48, 15711-29 (1960). On the day following the passage of this legislation, July 7, 1960, the President greatly reduced the sugar quota allotted to Cuba. Proclamation No. 3355, 25 Fed.Reg. 6414 (1960), 7 U. S.C.A. § 1158 note.
Several authorities have announced that confiscation of the property of the nationals of a particular country without the payment of compensation when done as an act of retaliation is contrary to international law. The American Branch of the International Law Association's Committee on Nationalization of Property has stated: " [U]nder International law, a State may not take foreign interests as a measure of political reprisal." American Branch of the International Law Association, Proceedings and Committee Reports 68 (1957-58). Restatement, Foreign Relations Law of the United States § 205 & Ill. 1 (Proposed Official Draft 1962) supports this proposition. Lord McNair declared in regard to Indonesian seizures of Dutch property during the dispute between the Netherlands and Indonesia over control of Dutch New Guinea:
And in Anglo-Iranian Oil Co. v. S. U. P. O. R. Co., Italian Civil Court of Rome, 1954, [1955] Int'l L.Rep. 23, 42, the court stated:
But there was a difference between the treatment of American-owned sugar enterprises and Cuban-owned sugar enterprises. American-owned sugar enterprises were expropriated on August 6, 1960; Cuban-owned sugar enterprises were not seized until October 13, 1960. A short lapse of time between similar provisions in the same program, standing alone, would not create discrimination. But the difference in time here is quite significant, because the shipment of sugar involved in this case left Cuba and was sold abroad between August 6 and October 13. And this difference of ten weeks' time stems directly from the efforts of the Cuban government to retaliate against the United States and its sugarbuying policy. Since we have held above that seizure of the assets of nationals of an unfriendly sovereign as part of a scheme of reprisal against that country is illegal under international law, it follows that a difference in the treatment accorded those nationals based upon reprisal is discriminatory. Therefore, at least with respect to the shipment of sugar here in question, the Cuban government discriminated against United States nationals.
When a state treats aliens of a particular country discriminatorily to their detriment, that state violates international law. Restatement, Foreign Relations Law of the United States, § 170 & Ill. 2 (Proposed Official Draft, 1962); British Claims in the Spanish Zone of Morocco [1925] 2 U.N.Rep.Int'l Arb. Awards 615, 647 (Britain/Spain); Standard Oil Tankers Case, 22 Am.J. Int'l L. 404, 419-20 (1928); United States note to Romania, 19 Dep't State Bull. 408 (1948); Netherlands note to Indonesia, December 18, 1959, 54 Am.J. Int'l L. 484, 485-87 (1960); Rolin, 6 Netherlands Int'l L.Rev. 260, 269 (1959); Foighel, Nationalization: A Study in the Protection of Alien Property in International Law, 47 (1957); Van Hecke, Confiscation, Expropriation and the Conflict of Laws, 4 Int'l L.Q. 345 (1951); Sohn, in Proceedings and Committee Reports of the American Branch of the International Law Association 1959-1960, at 31; Verdross, Die Nationalisierung Nederlandischer Unternechmungen in Indonesien Im Lichte Des Volkerrects, 6 Netherlands Int'l L.Rev. 278 (1959). See also The Oscar Chinn Case, P.C.I.J. ser. A/B No. 63 [1934], 3 Hudson, World Court Reports 416, 438. Certain circumstances may exist which would permit a state to treat all aliens differently from its own citizens, but those circumstances are not present in this case. See Restatement, Foreign Relations Law of the United States § 170, comment a (Proposed Official Draft, 1962).
But that is not the end of the matter. We must consider whether the one whose property has been thus expropriated has no recourse except against the expropriator to obtain the just compensation not paid to him, or whether he may attack in the courts of the United States the validity of the expropriator's title. Compare Domke, Foreign Nationalizations, 55 Am.J.Int'l L. 585, 610-15 (1961), and Wortley, Indonesian Nationalization Measures — an Intervention, id. at 680, with Baade, Indonesian Nationalization Measures Before Foreign Courts — A Reply, 54 Am.J.Int'l L. 801 (1960). If the appellant's title was not rendered void, Farr, Whitlock was guilty of conversion of the bills of lading and the proceeds of the sale even though C.A.V. has not been compensated for the taking. It has been argued that the wrong under international standards is not in the taking but in the failure to pay compensation for the taking. It has been pointed out, moreover, that international tribunals have never granted restitution of the property taken. Therefore, the argument runs, the expropriator possesses good title to the property seized subject to a duty to pay damages for the injury caused. But international tribunals are not the sole custodians of international law. As we stated earlier in this opinion, municipal courts also play a part in the development of that body of law. See Coerper, The Act of State Doctrine in the Light of the Sabbatino Case, 56 Am.J.Int'l L. 143, 147 (1962); Falk, supra at 2. Furthermore, municipal courts are competent to give a restitutory remedy. In fact, the New York court which holds the proceeds from the sale of sugar involved in the present case is in such a position. We need not at present go into the question whether the granting of this type of remedy is a feature of international law or of domestic law. But we do suggest that the failure of an international tribunal to give a remedy of this type results from the inability of that kind of court to enforce its awards and is not a result of the dictates of substantive international law principles.15
Refusal by municipal courts of one sovereignty to sanction the action of a foreign state done contrary to the law of nations will often be the only deterrent to such violations. More important, the only relief open to persons injured by a confiscation will often be the invalidation of the confiscating country's title to the confiscated goods by decree of a court of another country. See Note, The Castro Government in American Courts: Sovereign Immunity and the Act of State Doctrine, 75 Harv. L. Rev. 1607, 1617-18 (1962). This is particularly true in the present case because Art. 6 of Law No. 851 explicitly precludes review of the confiscation by the Cuban courts. And no aid appears to be available through diplomatic channels to the injured parties. Therefore, we conclude that, since the Cuban decree violated international law, the appellant's title is invalid and the district court was correct in dismissing the complaint.16
N.Y.Civ.Prac.Act, § 977-b provides in pertinent part:
"§ 977-b. Receivers to liquidate local assets of foreign corporations. 1. An action may be instituted in the supreme court for the appointment of a receiver of the assets in this state of a foreign corporation, whenever such foreign corporation has assets or property of any kind whatsoever, tangible or intangible, within the state of New York, and (a) it has heretofore been or is hereafter dissolved, liquidated or nationalized * * *."
It is not clear whether Societe Generale on August 26 presented documents to Farr, Whitlock before or after C. A. V.'s warning to Farr, Whitlock on that day
Since Farr, Whitlock has an indemnification agreement with C. A. V., it is unlikely that Farr, Whitlock will suffer a double liability
We assume that the district court below was correct in concluding that C. A. V. had an interest in the sugar on the date of the expropriation decree and that the sugar was in Cuban territorial waters on that date
The act of state doctrine appears to be well established among British courts. See Blad v. Bamfield, 3 Swans. 604, 36 Eng.Rep. 992 (Ch. 1674); A. M. Luther v. James Sagor & Co., [1921] 3 K.B. 532 (C.A.); Princess Paley Olga v. Weisz, [1929] 1 K.B. 718 (C.A.); Re, Foreign Confiscations in Anglo-American Law 128-40 (1951).*
Elsewhere, however, courts have been more willing to inquire into the legality of steps taken by foreign sovereigns. Anglo-Iranian Oil Co. v. S. U. P. O. R. Co., Civil Court of Rome, Sept. 13, 1954, [1955] Foro Italiano I. 256, [1955] Int'l L.Rep. 23, 49 Am.J.Int'l L. 259 (1955). Compare Societe Potasas Ibericas v. Black, Supreme Court (France), March 14, 1939, [1939] Dalloz I. 257, [1938-1940] Ann.Dig. 152 (No. 54); Union des Republiques Socialistes Sovietiques v. Intendant General Bourgeois Es-Qualite et Societe La Ropit, Supreme Court (France), March 5, 1928, Sirey I. 217, [1927-1928] Ann.Dig. 67 (No. 43); and Volatron v. Moulin, Court of Appeal of Aix, March 25, 1939, [1939] Dalloz I. 329, [1938-1940] Ann.Dig. 24 (No. 10), with Societe Hardmuth, Court of Appeal of Paris, Dec. 2, 1950, 44 Rev.Cr.Dr.Int. Priv. 501 (1955); De Keller v. Maison de la Pensee Francaise, Tribunal of La Seine, July 12, 1954, 44 Rev.Cr.Dr.Int. Priv. 503 (1955), [1954] Int'l L.Rep. 21, 49 Am.J.Int'l L. 585 (1955); Martin v. Banque d'Espagne, Supreme Court (France), Nov. 3, 1952, 42 Rev.Cr.Dr. Int.Priv. 425 (1953), [1952] Int'l L.Rep. 202 (No. 42); Larrasquitu et l'Etat Espagnol v. Societe Cementos Rezola, Court of Appeal of Poitiers, Dec. 20, 1937, [1938] Sirey III. 68, [1935-1937] Ann.Dig. 196 (No. 70). Compare Prince Dabischa-Kotromaniez v. Societe Lepke, Tribunal of Berlin, Nov. 1, 1928, 56 Clunet 184 (1929), with Domke, Indonesian Nationalization Measures Before Foreign Courts, 54 Am.J.Int'l L. 305, 318-19 (1960). Compare Senembah Mattschappij N.V. v. Republiek Indonesie Bank Indonesia and De Twentsche Bank N.V., District Court of Appeals of Amsterdam, reported in Domke, supra at 307-08, with United States of Mexico v. Batafsche Petroleum Maatschappij, District Court of Middleburg, Aug. 2, 1938 [1938] W. & N.J. No. 790, [1919-1942] Ann. Dig. 16 (No. 7); Petroservice & Credit Minier Franco-Roumain v. El Aguila, Court of Appeals of The Hague, Dec. 4, 1939, [1939] W. & N.J. No. 115, aff'd on other grounds, Feb. 7, 1941 [1941] W. & N.J., [1919-1942] Ann.Dig. 17; and Dairs et Cy. v. El Aguila, District Court of Rotterdam, July 31, 1939, [1939] W. & N.J. No. 747, [1919-1942] Ann.Dig 19. But see Propetrol, Petroservice, et Petrolet v. Compania Mexicano de Petroleo, Civil Tribunal of Antwerp, Feb. 21, 1939, [1939] Belgique Judicaire II. 12, [1938-1940] Ann.Dig. 25 (No. 11); Davis et Cie v. Compania de Petroleo, Court of Appeal of Rotterdam, 41 Bull.Inst.Jur.Int. 256 (1939), [1938-1940] Ann.Dig. 25 (No. 12); Hungarian Soviet Government, Supreme Court of Austria, Oct. 31, 1922 (Ob.I. 1055/22), [1922] 4 E.O.G.Z. 274 (No. 10), [1919-1922] Ann.Dig. 56 (No. 31).
But see Anglo-Iranian Oil Co. v. Joffrate, [1953] Int'l L.Rep. 316, 47 Am.J.Int'l L. 325 (Supreme Court of Aden); Fawcett, supra note 7, at 375
" [I]t is a contradiction in terms to say that within its jurisdiction it is unlawful to persuade a sovereign power to bring about a result that it declares by its conduct to be desirable and proper. It does not, and foreign courts cannot, admit that the influences were improper or the results bad. It makes the persuasion lawful by its own act. The very meaning of sovereignty is that the decree of the sovereign makes law." (213 U.S. at 358, 29 S. Ct. 511).
Another Supreme Court decision should be mentioned in this respect, Shapleigh v. Mier, 299 U.S. 468, 57 S. Ct. 261, 81 L. Ed. 355 (1937). That case involved a dispute over title to a tract of land which had formerly been part of Mexico but which had become part of the United States as a result of a change in the course of the Rio Grande River. While under its sovereignty the Mexican state of Chihuahua had expropriated the land in question. At the outset of its opinion in Shapleigh the Supreme Court stated:
"The question is not here whether the proceeding was so conducted as to be a wrong to our nationals under the doctrines of international law, though valid under the law of the situs of the land. For wrongs of that order the remedy to be followed is along the channels of diplomacy." (299 U.S. at 471, 57 S. Ct. 261).
E.g., Chorzow Factory Case (Indemnity), P.C.I.J. Judgment No. 13, September 13, 1928, ser. A. No. 17, 1 Hudson, World Court Reports 646, 677; German Interest in Polish Upper Silesia (Merits), P.C.I.J. Judgment No. 7, May 25, 1926, ser. A., No. 7, 1 Hudson, World Court Reports 510, 523-24; Norwegian Shipowners' Claims (Norway/United States), 1 U.N.Rep.Int'l Arb.Awards, 307 334 (Perm.Ct.Arb.1921); Arabian-American Oil Company v. Saudi Arabia, Award of Arbitral Tribunal, Geneva, 1956, at 61, 101-02, 109, 127, portions of award quoted in 6 Netherlands Int'l L.Rev. 233-34 (1959); Marguerite de Joly de Sabla (United States/Panama), 6 U.N.Rep.Int'l Arb.Awards 358, 366 (1933); Arbitral Award Between Portugal and Germany, June 30, 1930, 2 U.N.Rep. Int'l Arb. Awards 1035, 1039 (1930); Shufeldt Claim (United States/Guatemala), 2 U.N. Rep. Int'l Arb.Awards 1079, 1095 (1930); Affaire Goldenberg (Germany/Rumania), 2 U.N.Rep. Int'l Arb. Awards 901, 909 (1928); Spanish Zone of Morocco Case (Great Britain/Spain), 2 U.N.Rep.Int'l Arb.Awards 615, 647 (1925); Landreau Claim (United States/Peru), 1 U.N.Rep.Int'l Arb. Awards 347, 365 (1921); Selwyn's Case (United States/Venezuela), Ralston, Venezuelan Arbitrations of 1903, at 322 (1904)
See Restatement, Foreign Relations Law of the United States, § 190, comment a (Proposed Official Draft, 1962); Anderson, Title to Confiscated Foreign Property, 20 Am.J.Int'l L. 528-29 (1926); ___ Basis of the Law Against Confiscating Foreign-Owned Property, 21 Am.J.Int'l L. 525 (1927); Baxter & Sohn, Convention on State Responsibility, art. 10 (Draft No. 12, 1961); Bindschedler, Verstaatlichungmassnahmen und Entschadigungspflicht nach Volkerrecht 111 (1950); Doman, Postwar Nationalization of Foreign Property in Europe, 48 Colum. L. Rev. 1125, 1130-31 (1948); ___ Compensation for Nationalized Property in Post-war Europe, 3 Int'l L.Q. 323 (1950); Domke, Indonesian Nationalization Measures Before Foreign Courts, 54 Am.J.Int'l L. 305 (1960); Fachiri, Expropriation and International Law, 6 Brit.Yb.Int'l L. 159 (1925); ___ International Law and the Property of Aliens, 10 Brit.Yb.Int'l L. 32 (1929); Fauchille & Sibert, 32 Revue Generale de Droit Int'l Public 5, 22 (1925); LaLai Agraire Lithuanienne; Fawcett, Some Foreign Effects of Nationalization of Property, 27 Brit.Yb.Int'l L. 355 (1950); Friedmann, Some Impacts of Social Organization on International Law, 50 Am. J.Int'l L. 475, 505 (1956); 1 Hyde, International Law Chiefly as Interpreted and Applied by the United States 710-25 (2d rev. ed. 1947); Kaufman, Regles Generales du Droit de la Paix, 54 Hague Recueil 313, 429 (1935); Kunz, The Mexican Expropriations, 17 N.Y.U. L. Rev. 327, 344 (1940); Peselj, International Aspects of the Recent Yugoslav Nationalization Law, 53 Am.J.Int'l L. 428 (1959); Rado, Czechoslovak Nationalization Decrees; Some International Aspects, 41 Am.J.Int'l L. 795 (1947); Re, The Nationalization of Foreign-Owned Property, 36 Minn. L. Rev. 323, 328 (1952); Scelle, 2 Precis de droit des gens 113 (1934); Scheuner in Report of 48th Conference of the Int'l Law Association, 164 (1958); Schindler, Besitzen konfiskatorische Gesetze ausserterritoriale Wirkung?, 3 Schweizerisches Jahrbuch fur Internationales Recht 65, 94 (1946); 1 Schwarzenberger, International Law 205 (3d ed. 1957); Schwebel in Report of 48th Conference of the Int'l Law Association 150 (1958); Verdross, Die Nationalisierung Niederlandischer Unternehmungen in Indonesian im Lichte des Volkerrects, 6 Netherlands Int'l L.Rev. 278 (1959); Weiss-Tessbach in Report of 48th Conference of the Int'l Law Association 179-80 (1958); 2 Whiteman, Damages in International Law 1386 (1937); Wortley, Observations on the Public and Private International Law Relating to Expropriation, 5 Am.J.Comp.L. 577, 591 (1956). See generally Wortley, Expropriation in Public International Law 33-36 (1959)
Position of Latin American states. The rule stated in this Section is questioned by some states, especially in Latin America. Not only do they maintain the general position, explained in Comment a to § 169, that aliens are entitled to no better treatment than nationals, but they have insisted specifically that international law imposes no duty to pay compensation when property is taken pursuant to a general program of social or economic reform. See, e. g., Mexican Minister of Foreign Affairs to Secretary of State of the United States, August 3, 1938, 3 Hackworth, Digest of International Law, 657 (1942).
§ 190 Reporters' Notes.
The first paragraph of the preamble to Law No. 851 states as follows:
"WHEREAS, the attitude assumed by the government and the Legislative Power of the United States of North America, which constitutes an aggression, for political purposes, against the basic interests of the Cuban economy, as recently evidenced by the Amendment to the Sugar Act just enacted by the United States Congress at the request of the Chief Executive of that country, whereby exceptional powers are conferred upon the President of the United States to reduce the participation of Cuban sugars in the American sugar market as a threat of political action against Cuba, forces the Revolutionary Government to adopt, without hesitation, all and whatever measures it may deem appropriate or desirable for the due defense of the national sovereignty and protection of our economic development process."
We mention one further problem related to this case which we find unnecessary to settle but which may arise to torment some future court with a case similar to the present one. That problem is whether the law governing this case involves elements of federal law or whether the case is governed solely by New York law. Cf. Bergman v. De Sieyes, 170 F.2d 360 (2 Cir. 1948). It has been said that the act of state doctrine is part of the law of conflict of laws. If that is so, it would seem that under the rule in Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S. Ct. 1020, 85 L. Ed. 1477 (1941), it is New York law which we are applying. On the other hand, certain cases have indicated that international law is part of the body of federal law. See, e. g., The Lusitania, 251 F. 715, 732 (S.D.N.Y. 1918). Perhaps Eric R. R. v. Tompkins has changed the rule in these latterly mentioned cases. But see 1 Oppenheim, International Law 41 n. 4 (8th ed. 1955). For our purposes here we do not have to resolve these questions because it appears to us that a New York court would reach the same result we reach. Cf. Frenkel & Co. v. L'Urbaine Fire Ins. Co., 251 N.Y. 243, 167 N.E. 430, 65 A.L.R. 1490 (1929) (alternative holding); Fred S. James & Co. v. Second Russian Ins. Co., 239 N.Y. 248, 146 N.E. 369, 37 A.L.R. 720 (1925); Sulyok v. Penzintezeti Kozpont Budapest, 279 App.Div. 528, 111 N.Y.S.2d 75, modified on other grounds, 304 N.Y. 704, 107 N.E.2d 604 (1952) (per curiam); Schwartz v. Compania Azucarera Vertientes-Camaguey De Cuba, 208 N.Y.S.2d 833 (Sup.Ct.1960). See also Falk, supra at 11