Court Opinion

ID: 8886241
Source: CourtListenerOpinion
Date Created: 2022-11-26 21:54:53.84174+00
Date Added: 2024-06-11T17:06:55.846685
License: Public Domain

FEINBERG, Circuit Judge
(dissenting) :
The basic issue in this case is whether the promise of an insurance company to an American citizen to pay death benefits “in lawful currency of the United States of America” should be enforced. The case would have been far different had the insurer’s obligation been to pay benefits in “lawful currency” or in “legal tender” or in “lawful currency of Cuba.” The first two phrases are capable of the construction defendant seeks, which the third embodies. But that is not what the policy said. The obligation instead was to pay benefits in “lawful currency of the United States.” The majority concludes that this unmistakably clear promise of defendant insurance company is unenforceable even though that conclusion is inconsistent with the insurer’s own selling practices and the insured’s justified expectations and is contrary to the most relevant precedents. I emphatically dissent from such an inequitable and unjustified result.
I.
The case involves three insurance policies issued by a Cánadian insurance company through a local branch office in Cuba to two native born American citizens, Thomas Francis Turull Y Belling and Harry T. Johansen, Jr., while they resided in Cuba. Turull was born in Brooklyn, New York, in 1888 and moved to Cuba in 1911 where he founded a commission and merchant business selling United States chemicals and raw materials in that country. While in Cuba, he married a Cuban, who later became a naturalized citizen of the United States, and had three daughters. Due to the nature of his business, Turull was in constant contact with American business men and often traveled to the United States. In the 1930’s, Turull began the practice, continued until 1959, of moving his family to New York for the summer months. For about 20 years, during the 1930’s and 1940’s, he maintained a New York apartment. While World War II was fought, Turull spent more time in New York than in Cuba. In 1959, Turull and his family left Cuba for New York, where he died in 1961.
Johansen’s history is similar. He also was born and raised in Brooklyn, and went to work in New York. It was there that he first met the Turulls during the 1930’s. After his marriage to Turull’s daughter, he remained in New York until he entered the United States Air Force in 1942. He moved to Cuba in 1946, *183having been discharged that year, and began to work for his father-in-law. In addition to various business trips to New York State, he and his wife maintained an apartment on Long Island from 1952 to 1960 and regularly spent the summer months there. In 1960, Johansen left Cuba for the last time and has since lived in New York.
Defendant insurance company has an extensive world-wide organization and does business in some 22 countries, including the United States; its principal foreign business has been in the United Kingdom and in Latin America. The policies issued by defendant in Latin America differed somewhat from those issued in Canada, but there was a conscious effort to conform the clauses in the Latin American policies even when written in Spanish, to those in the Canadian policies. In the various countries where it did business, defendant normally maintained branch offices, which were not autonomous from the head office in Canada. It was at the head office that the decision “to go on the risk” was made and only there could changes in the terms of the policies be approved. As shown by the policies in this case, defendant’s practice was to insert the capital city of the country in which the insured lived as the place of payment. However, defendant also had the general practice, which continued as to Cuban policies until 1959, of changing the place of payment to any new permanent residence of the insured. This practice was of particular interest, and a main selling point, for the European and North American business men in Latin America who may reasonably have expected to ■ return to their home land.1
In 1909, defendant began selling policies in Cuba. From that year until 1939, it wrote there only policies calling for payment in United States currency. By 1939, approximately 30 per cent of its actuarial liabilities for policies delivered in Cuba were covered by investments in Cuba, all of which were in United States dollars. This practice of investing in Cuba exclusively in dollars continued well after the 1939 Cuban law made pesos and dollars interchangeable on a one-to-one basis. In 1945, defendant began to invest in Cuban mortgages. Even so, by 1951, much of defendant’s Cuban investments remained dollar investments. After the 1951 decree, which ended the status of United States currency as legal tender in Cuba, defendant liquidated its dollar investments and converted them to pesos. As noted by the district court, 312 F.Supp. at 1058, however, defendant’s investments in Cuba never equalled its actuarial liabilities there until 1960. At no time did Cuban law require that defendant’s Cuban policies be paid out of assets held in Cuba. In addition, defendant’s policies had no such limitation.
Turning from this background to the specific issues of this case, it will be convenient for analysis to focus on the two policies of $25,000 each that insured the life of Turull. These were issued to Turull in Cuba by defendant in 1937 and 1939. By the time of his death in 1961, Turull had paid in premiums well over the face value of each policy. His beneficiaries in those policies were his widow and his daughter; since the latter is now also deceased, her husband and executor, Johansen, sues in her place.2
*184At the time of Turull’s death in New York, it is undisputed that his family— including the beneficiaries under the policies — were domiciled in New York along with him. The beneficiaries made a demand on defendant for death benefits to be paid in United States dollars in New York. Defendant refused and plaintiffs sued for breach of contract. The insurance company's defense, essentially, is that there has been no breach. It claims that Cuban law applies to the policies, that under the 1951 Cuban decree the insurer’s only obligation is to pay Cuban pesos in Havana and that it is willing and able to do that. Such performance is totally worthless to plaintiffs. It is conceded that they, as United States citizens, can neither travel to Cuba nor handle currency there. Plaintiffs contend that the policies are governed by New York or Canadian law and that defendant is obliged to pay in United States dollars in New York. The district court agreed with defendant, reasoning that Cuban law “manifestly governs these contracts,” that Cuban law converted the policies from dollars to pesos, and that New York would give effect to the Cuban law.
II.
The underlying issue before us is whether the New York courts would, because of changes in the Cuban law after the policies were issued, excuse or limit the insurer’s explicit promise to pay in American dollars. The parties seem in accord that in this diversity case we must first look to the conflicts law of New York, the forum state; the main opinion agrees, citing Klaxon Co. v. Stentor Electrical Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). I accept that assumption in this case.3 While the main opinion ultimately applies Cuban law and answers the underlying issue in the affirmative, it recognizes that the New York courts would not reach that result because of the Act of State doctrine, French v. Banco Nacional de Cuba, 23 N.Y.2d 46, 295 N.Y.S.2d 433, 242 N.E.2d 704 (1968); Dougherty v. Equitable Life Assurance Society, 266 N.Y. 71, 193 N.E. 897 (1934), because that doctrine has no direct application in this case. The main opinion concludes that if defendant paid United States dollars in New York, it would not violate the Cuban law against either handling United States dollars in Cuba or transferring funds out of Cuba. I also believe that the Act of State doctrine has no application here, but base my conclusion on an additional ground. Act of State is a modification of the ordinary conflict rules.
If under accepted-choice of law principles the foreign law should govern, the court could still refuse to apply that law if it were found to be contrary to the public policy of the forum. The act of state doctrine, however, says that the foreign “law” (i. e., the act of state) must govern certain transactions and that no public policy of the forum may stand in the way. [Footnote omitted.]
Henkin, Act of State Today: Recollections in Tranquility, 6 Colum.J. of Transnat’l L. 175, 178 (1967). Therefore, the act of state — here the Cuban 1951 decree — -has no relevancy unless the New York courts would apply Cuban law. As will be seen below, I do not think that they would.
The main opinion reasons that the New York courts would rule that Cuban law applies and would give that law extra-territorial effect under either the “grouping of contacts” test, see Auten v. Auten, 308 N.Y. 155, 124 N.E.2d 99 (1954), or the “greatest interest” rationale, see Miller v. Miller, 22 N.Y.2d
*18512, 290 N.Y.S.2d 734, 237 N.E.2d 877 (1968) ; Tooker v. Lopez, 24 N.Y.2d 569, 301 N.Y.S.2d 519, 249 N.E.2d 394 (1969) . It is true that ordinarily the rights created by a life insurance contract are determined by the local law of the jurisdiction (here Cuba) where the insured was domiciled at the time of application for the policy. See Restatement (Second) of Conflict of Laws § 192 (P.O.D.1969). But that rule is by no means ironclad, particularly in international eases. See Rossano v. Manufacturers' Life Insurance Co. [1963] 2 QB 352, and other cases cited in Restatement, supra, Reporter’s Note § 192 at 10. When the insured changes his domicile after the policy is issued, as eoncededly occurred here in 1959, the jurisdiction to which he has moved has “the dominant interest in him.”4 Restatement, supra, Explanatory Notes § 192, comment d at 3. Moreover, in view of defendant’s selling practices, described above, such a move was clearly foreseeable to it. Cf. Clay v. Sun Insurance Office, Ltd., 377 U.S. 179, 84 S.Ct. 1197 12 L.Ed.2d 229 (1964). These practices gave rise to a justified expectation by the insured that he could count on payment of benefits in American dollars when he went back to his domicile of origin where American dollars, rather than pesos, were used. Cf. South American Petroleum Corp. v. Colombian Petroleum Co., 177 Misc. 756, 31 N.Y.S.2d 771 (Sup.Ct.1941). When to these considerations is added the fact that the beneficiaries here are New York domiciliarios and that New York’s choice of law would be influenced by its strong policy of construing insurance contracts to protect the insured, National Screen Service Corp. v. United Sattes Fidelity and Guaranty Co., 364 F.2d 275, 277 (2d Cir. 1966); Lumbermens Mutual Casualty Co. v. Pound Ridge, 362 F.2d 430, 432 (2d Cir. 1966), I do not think that New York would apply the Cuban law in this case and render worthless the benefits under the contracts.
Defendant argues that a New York court would look to the law of the place of payment as specified in the contract to decide in which currency payment of the obligation is to be made. That may correctly state a New York conflicts principle, but it only governs “details of performance and not * * * matters which substantially affect the nature and extent of the obligations imposed by the contract.” See Restatement (Second) of Conflict of Laws, Explanatory Notes § 206, comment b at 319 (P.O.D.1968). In any event, application of that rule is doubtful where the contract itself makes provision, as do the policies in this case, for the type of currency to be used. Liebeskind v. Mexican Light & Power Co., 116 F.2d 971, 974 (2d Cir. 1941). Without deciding which law applies as to where performance is to be had, it seems reasonably clear that under New York or Cuban law the duty of defendant to pay benefits should not be narrowly construed as a duty to pay only in Havana. Defendant points to no Cuban law that limits the obligation to pay money under a contract to the place named in a place of payment clause. As the district court found, it would not be illegal under Cuban law for defendant to pay dollars in New York. 312 F.Supp. at 1056. The policies themselves contemplated that payment might be made elsewhere. Each stated that it was “exempted from restrictions in regard to residence, trips and occupation of the insured.” And, to “obtain any of the benefits contained in the policy,” one could “[w]rite directly to THE CONFEDERATION OF CANADA, or communicate *186with the authorized agent of the Association residing nearest to [the insured or beneficiary] whose duty [was] to facilitate any settlement without charge * * Prior to 1959, as recognized in the main opinion, defendant did make payments to beneficiaries who had moved outside of Cuba and allowed insureds to transfer their policies if they moved. This practical construction of the contract has great weight in determining the meaning that the parties gave to the contractual language and shows that the designated place of performance was not of great importance. It seems clear that the correct construction of this contract is that the place of payment clause was inserted into the policies as a matter of convenience and not as an essential part of the bargain. In light of this and the other conflicts considerations discussed in this opinion, I do not believe that under New York law the naming of Havana as the place of payment requires that Cuban law be applied to these policies.
There are only two jurisdictions, other than New York, with any arguable interest in the outcome of this case, Cuba and Canada. I agree that Cuba has numerous contacts with the transaction, but on analysis it is apparent that Cuba has no interest in the outcome of this case. Whether or not defendant has to pay plaintiffs, neither defendant’s nor plaintiffs’ assets in Cuba will be removed from that country. On the other hand, insurance is a highly regulated business and Canada has a strong interest in the practices of an insurance company domiciled there. Therefore, New York courts would be influenced by a recent ruling of the Canadian Supreme Court, Imperial Life Assurance Co. v. Casteleiro y Colemnares [1967] Can.S.Ct. 443, 62 D.L.R.2d 138, which refused to apply Cuban law in a situation not fairly distinguishable from this case.
In Imperial Life, defendant, a Canadian insurance company, had issued life insurance to plaintiff, a Cuban national. The policies were written in Spanish, were delivered in Cuba, and were payable in United States dollars. The Canadian court reasoned that a contract is governed by the law “with which it appears to have the closest and most substantial connection.” 62 D.L.R.2d at 143. Finding that the decision to “go on the risk” was made at defendant’s head office in Toronto, that the policies, although in Spanish, were a standard form that complied with the law of Ontario, that the place of contracting was Ontario, and that the insured would reasonably anticipate that the law of Ontario would govern the contracts, the court held that Ontario law applied to the policies. Accordingly, defendant was required to pay in Canadian currency the equivalent of the United States dollar value of the policies.
The decision below reaches a result, therefore, that defendant could not have obtained in its home jurisdiction of Canada. When the local law of the jurisdictions with the most interest in the insured, the beneficiaries, and the insurer would allow plaintiffs to recover, a New York court would not choose Cuban law. As between the law of Canada and that of the forum, there is no conflict and New York would apply its own local law.5
That defendant can no longer transfer its assets out of Cuba does not require affirmance of the district court order. Defendant’s obligation to plaintiffs is a general one, payable from defendant’s general assets. Defendant’s unannounced policy of investing in Cuban assets enough funds to cover payment of its Cuban policies is irrelevant to its obligation to plaintiffs. On their face, there is no indication that the policies are restricted to assets held in Cuba. While perhaps it was a reasonable business practice to invest in Cuban assets, no Cuban law required defendant to do so. See Blanco v. Pan-American Life *187Insurance Co., 221 F.Supp. 219, 223 (S.D.Fla.1963), aff’d in part, rev’d in part, 362 F.2d 167 (5th Cir. 1966).
Nor can it accurately be said that the insured agreed to transposing the United States dollar policies into peso policies. Because there was no formal amendment of the policies as there might have been, see Blanco, supra, 362 F.2d at 168, 172, defendant relies on the fact that the insured paid his premiums in pesos after 1951. It is admitted that the insured did not object to the notice sent by defendant or ask that the policies be “transferred” out of Cuba. The notice, however, was not unambiguous. It stated:
All premiums payable in accordance with this policy as well as all other liabilities contracted under the same and in which a reference is made to American currency, will from now on be payable in Cuban National currency at par * * *.
The notice did not state that policies were payable only from defendant’s reserves in Cuba or that they would not be payable in United States dollars some place other than Cuba. And defendant itself, by allowing payment in United States dollars in the United States after 1951, obviously did not believe that the 1951 change in Cuban law had such effect. Moreover, until 1959, Turull could not have transferred his policy to New York because defendant would not “transfer” insurance contracts off its Cuban registry if the insureds remained in Cuba. And since 1959, defendant has refused to transfer policies because it could not remove its assets from Cuba. Indeed, transferring policies after 1959 is what this ease is about. Defendant should not be excused from performance because the insured failed to act in a way defendant would not have allowed.
Finally, a word on the equities. The district court regarded as inequitable the allocation to defendant of the loss resulting, in truth, from its decision to invest in Cuban pesos its net premium income from policies issued to American citizens who resided in Cuba. Apparently, this is so because defendant is a mutual insurance company. I fail to see how this makes great sense. It places the loss resulting directly from defendant’s voluntary, if now proved to be unfortunate, decision to invest in Cuba on those who had no part in making, nor notice of, that decision and who can clearly less afford to bear it than defendant.
While my discussion has focussed on the two policies that insured the life of Turull, I believe that similar considerations apply to the policy that insures the life of Johansen. He seeks a declaration that defendant is obliged to accept premium payment dollars in New York and to pay death benefits in that currency. That Johansen cannot perform in Havana, Cuba, does not relieve defendant of its obligation. Accordingly, I would reverse the district court and direct defendant to pay in New York the death benefits on two of the policies in United States dollars and to accept United States dollars in New York as premium payments on the third.

. The district court allowed testimony by defendant’s former actuary on this issue, but it granted defendant’s motion, apparently on the grounds of irrelevancy, 312 F.Supp. at 1065, to strike testimony as to defendant’s selling practices in Cuba. The witness, a native-born New Yorker doing business in Cuba, had in 1933 taken out a policy with defendant while living in Cuba. He testified that defendant’s agent had promised that if he returned to New York, a move he was contemplating at the time, the policy would be performed in New York. This testimony was relevant on the issue of defendant’s selling practices and should not have been stricken.

. Johansen is the plaintiff on the third policy, issued by defendant in 1945, which insures his life. He seeks a declaration that defendant is obligated to accept *184premium payments from Mm in United States dollars and to pay the proceeds of the policy on his death in the same currency.

. But see Henkin, The Foreign Affairs Power of the Federal Courts: Sabbatino, 64 Colum.L.Rev. 805, 820-21 n. 51 (1964) (raising question of applicable conflicts rule when conflict is international rather than interstate).

. The main opinion affirms the district court’s finding that Turull and Johansen were domiciled in Cuba when the policies were issued. Under my analysis, resolution of the issue is not necessary. I note only that the district court may have equated domicile with residence, and, in any event, did not make the necessary specific finding regarding the insured’s intention to change domicile of origin (New York) to domicile in a foreign country. See Perkins v. Guaranty Trust Co., 274 N.Y. 250, 8 N.E.2d 849 (1937); Dupuy v. Wurtz, 53 N.Y. 556 (1873). See also Restatement (Second) of Conflict of Laws §§. 15, 18 (P.O.D. 1967).

. Application of New York law in this case is not prevented by the decision in Home Insurance Co. v. Dick, 281 U.S. 397 (1930). See Clay v. Sun Insurance Office, Ltd., 377 U.S. 179 (1964).