Opinion ID: 393941
Heading Depth: 1
Heading Rank: 2

Heading: bbi's claim

Text: 22 On this appeal Banco Nacional argues principally that the judgment against it should be reversed because the act of state doctrine bars BBI's recovery and because Banco Nacional is not subject to the jurisdiction of the court under the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1602-11 (1976). BBI, for its part, contends that the district court's ruling that Banco Nacional is liable for unjust enrichment is correct, and that in any event the judgment may be upheld on the ground that Banco Nacional is expressly obligated to Boston under the terms of Resolution No. 2. 23 We find no error in Judge Brieant's ruling that Boston and Branches were not separate entities and we therefore concur in his rejection of the proposition that Banco Nacional assumed liabilities of Branches to Boston. We must reject, however, his conclusion that Banco Nacional is liable on a quasi contract, or unjust enrichment, theory since we find recovery on such a basis barred by the act of state doctrine. 6
24 An indispensable premise of BBI's contention that Banco Nacional assumed Branches' obligations to Boston is that Branches and Boston were separate entities. The district court properly rejected this proposition in light of the legal framework within which Branches was created and the facts surrounding the Boston-Branches operation. 25 Boston's Branches were organized under the Federal Foreign Banking Law, 12 U.S.C. §§ 601-04, 611-32 (1976). Under this statute the Branches were not, and could not lawfully have been organized as separate corporations. 12 U.S.C. §§ 601, 603. Although foreign branches maintain separate books of account pursuant to 12 U.S.C. § 604, that section is nothing more than a 'bookkeeping' statute, designed to make examination into the financial condition of national banks, particularly the foreign operations of such banks, as simple as possible. First National City Bank v. Internal Revenue Service, 271 F.2d 616, 619 (2d Cir. 1959), cert. denied, 361 U.S. 948, 80 S.Ct. 402, 4 L.Ed.2d 381 (1960). Given the federal statutory scheme, federal agencies and officials have long viewed a national bank and its branches as a single entity. For example, in 1917, counsel to the Federal Reserve Bank gave an opinion to the Governors of the Federal Reserve Board as follows: 26 There is nothing in this language (12 U.S.C. § 601-604) to indicate that branches established in foreign countries are to have a separate existence and constitute separate corporations. On the contrary, it is clear that the parent bank is merely to engage in certain foreign transactions through its foreign branch. This view is substantiated by the fact that the profit and loss accruing to each bank is to be entered on the general ledger of the parent bank at the end of each fiscal year. 27 3 Federal Reserve Bulletin 198, 199 (1917). And a current interpretation by the Federal Reserve Board reads as follows: 28 Identity of foreign branches with parent bank. A foreign branch established by a national bank is not an independent corporation and the creditors of the branch are general creditors of the parent bank.... 29 Published Interpretations of the Board of Governors of the Federal Reserve System § 5600 (1980). Cf. also United States v. First National City Bank, 379 U.S. 378, 85 S.Ct. 528, 13 L.Ed.2d 365 (1965), holding that a suit against a national bank gave the court jurisdiction to require that actions be taken by its foreign branch, and stating that a national bank has actual, practical control over its (foreign) branches; it is organized under a federal statute, 12 U.S.C. § 24, which authorizes it 'To sue and be sued, complain and defend, in any court of law and equity, as fully as natural persons' as one entity, not branch by branch. Id. at 384, 85 S.Ct. at 531. Thus, federal law regards a national bank and its branches as a single entity. 7 30 Within this legal framework, the district court found that while Branches had some operating autonomy, they were never considered to be nor held out to be an entity separate from Boston. There is evidence to support these findings, including the facts that Branches were capitalized with $3,000,000 in bonds that remained in Boston's name, that Branches' Management Group were recommended by Boston, that Boston paid U.S. taxes on Branches' profits, and that Branches operated under the style, First National Bank of Boston, founded in 1789. We cannot say that the finding that Boston and its Branches were a single entity is clearly erroneous. 31 Since Boston and its Branches were not distinct entities, any obligations of one to the other were not matters of substance but, as the district court concluded, merely matters of internal bookkeeping. There were, therefore, no liabilities of Branches to Boston for Banco Nacional to assume.
32 The basis on which the district court upheld BBI's claims was that when Banco Nacional took over the pesos deposited with Branches by the Cuban purchasers of the letters of credit, leaving Boston to pay the beneficiaries of those letters, Banco Nacional was unjustly enriched: 33 Banco Nacional ... took over the going business being conducted in Cuba by (Branches), and receiving the avails, became liable in quasi contract for the countervailing burdens of the transactions. 34 Opinion at 14. This view cannot be sustained. 35 As a general matter the act of state doctrine bars courts from examining the validity of an expropriation of property by a foreign sovereign in its own territory. Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 84 S.Ct. 923, 11 L.Ed.2d 804 (1964); see Chase, supra. There is no question here that Banco Nacional, acting as an alter ego of the Cuban government, see Chase, supra; Banco Nacional de Cuba v. First National City Bank, 478 F.2d 191, 193-94 (2d Cir. 1973), succeeded to the Branches' assets through an act of nationalization through forced expropriation pursuant to a Law and a Resolution of the Cuban government. Given these facts, we see no basis for refusing to apply the act of state doctrine to bar BBI's present claims. As we stated in Menendez v. Saks & Company, 485 F.2d 1355 (2d Cir. 1973) (Menendez), rev'd on other grounds sub nom. Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 96 S.Ct. 1854, 48 L.Ed.2d 301 (1976) (Alfred Dunhill). 36 (n)o authority has been cited for the proposition that the act of state doctrine does not apply to a quasi-contractual claim based on unjust enrichment .... Nor has any sound reason been advanced in support of such an exception. 37 485 F.2d at 1370. Indeed, were there an unjust enrichment exception to the act of state doctrine, we would expect the exception to swallow the rule, for virtually every taking will enrich the sovereign, 8 and to the extent that compensation is not paid that enrichment will have been unjust. We may not avoid application of the act of state doctrine by simply compartmentalizing the expropriation and narrowing our sights to the precise injustice associated with the taking of a particular asset. 38 Nor do we find any exception to the doctrine availing to BBI. If there were a commercial activity doctrine, see Alfred Dunhill, supra, 425 U.S. at 695-706, 96 S.Ct. at 1861-1866 (plurality opinion of Justice White), 9 we would not view it as applicable here since the liability sought to be imposed on Banco Nacional does not arise out of its own commercial activity, but rather results from the pre-expropriation activities of Boston and Branches. All 324 letters of credit were issued by Branches and confirmed by Boston prior to the expropriation. Those that were paid prior to the expropriation obviously were not commercial obligations of Banco Nacional. As to the letters that were paid after the expropriation, the payments were made by Boston with no participation, encouragement, or reassurance although Boston solicited reassurance as to reimbursement by Banco Nacional. We do not view Banco Nacional's intercession aiding Cuban buyers to gain possession of the shipped goods without proper documentation as a commercial activity. Nor can we construe as a commercial activity Banco Nacional's collection of pesos from those few Cuban buyers who had not already paid for their letters of credit. Banco Nacional obtained the right to collect those pesos, along with all debts owed Branches, by means of the expropriation. In all, we are at a loss to see what commercial activity of Banco Nacional could have given rise to BBI's claims. 39 Finally, the decision of the Supreme Court in First National City Bank v. Banco Nacional de Cuba, 406 U.S. 759, 92 S.Ct. 1808, 32 L.Ed.2d 466 (1972), does not advance BBI's cause. That case held that the act of state doctrine did not bar adjudication of a counterclaim for expropriation where the Executive Branch of the United States government has advised the courts that it believes the act of state doctrine need not be applied, 10 where there was no showing that adjudication would interfere with delicate foreign relations, and where the amount of the counterclaim did not exceed the value of the sovereign's claim. See Chase supra. This exception is obviously not applicable to the present case since the action was initiated not by Banco Nacional but by BBI, and since BBI seeks not merely a setoff against Banco Nacional's claims, but an affirmative award of damages. 40 We conclude that BBI's claims should have been dismissed on the basis of the act of state doctrine.