Court Opinion

ID: 5303830
Source: CourtListenerOpinion
Date Created: 2022-01-08 03:20:25.872159+00
Date Added: 2024-06-11T08:29:06.784598
License: Public Domain

Proskauer, J.
(dissenting). The plaintiff, a New York corporation, alleges that for value it received an assignment from Alfred Scharnberg & Co. of the benefits accruing to the assignors from a contract made between them and the defendant insurance company prior to .November 10, 1913. The partners composing the firm of Alfred Scharnberg & Co. were German nationals, residents of France. By the terms of this contract the defendants agreed to pay to Scharnberg & Co. as compensation for services which had been fully rendered and without obligation on Scharnberg’s part to perform any further services, a stated commission on business procured for the defendant in the United States by a firm of brokers whose services had been secured for the defendant by Scharnberg & Co. The assignment for value to the plaintiff was executed on August 27, 1914, after the declaration of war between France and Germany. The complaint contains no allegation of the place where the assignment was made, and while possibly we may not infer that the uncontradicted statement upon argument that the assignment was in fact executed and delivered in the United States is correct, we have no right to assume that it was executed in France. Neither complaint nor answer contains any allegation upon this subject.
The defendant has set up as a first and separate defense that, subsequent to the time of the making of the assignment to the plaintiff, the French government passed a statute which declared that " any agreement or contract drawn in any and every place between French citizens * *' * and subjects of the Empire of Germany * * * is null and void as contrary to public policy.” The statute purported to make this provision retroactive to August 4, 1914. This defense further alleges that on January 22, 1916, the French government enacted a law that “ any person holding funds belonging to German subjects, or owing, funds to German subjects ” shall upon demand pay such funds to a Sequestrator; that pursuant to said law, defendant paid over “ to the said Sequestrator all of the commissions accruing to the said Scharnberg & Company under the said contract during the year 1914 * * * down to the 5th of April, 1922.” There are no allegations respecting the payment of the “ commissions ” which accrued during the years 1923 to 1926, for which the plaintiff also seeks recovery.
The provisions of this statute constitute no defense against the claim of an American citizen who purchased for value from a Ger*340man national a claim based upon an executed consideration against a French national at a time when there was no French law forbidding the transaction and at a place which we are unable to say was subject to the jurisdiction of the French government. Conceivably, if this transfer was made in France, it might be attacked as invalid upon the general principle that the validity of an assignment is to be determined by the laws of the country in which it was made. But there is no such allegation contained in the defense. The assignment of the contract was, therefore, valid.
The French statute purported to make the contract to pay “ commissions ” void as of August 4, 1914. It is difficult to see how sequestration of commissions under a void contract is a defense to the debtor. Its defense must rest solely on the provision of the statute which makes void any contract between Frenchmen and Germans no matter where or when made. But, by virtue of the assignment, at the time the statute was passed the obligation of the French defendant was to pay not to a German but to an American. Whatever may be the public policy of a belligerent nation under the pressure of war, we do not think that comity requires recognition by a neutral nation of a statute so sweeping in character and so destructive of a property right of our own citizens. We recognize sympathetically the efforts of belligerents to legislate to prevent the increase of the resources of their enemies; but we cannot push comity to the extent of denying to our own citizens as neutrals the right to traffic with belligerents in so far as such traffic does not involve overt acts of hostility. Examination of the "authorities following the World War discloses no case where the principle of comity has so far been extended as to deprive an American citizen of a property right which he acquired for value at a time when there was no legal ban against the transaction and at a place where no law prohibiting the transaction had either present or retroactive force.
We are not here concerned with a nominal transfer of assets, where “ the parties intended to leave the beneficial ownership in the German corporation and not to pass it to the New York corporation.” (Stoehr v. Wallace, 255 U. S. 239, 251.) Nor are we concerned with stock in a corporation where the law of the situs of the stock certificate has a qualified power to affect its title (Direction Der Disconto-Gesellschaftv. U. S. Steel Corp., 267 IT. S. 22), subject to the paramount power of the law which created the corporation. (Miller v. Kaliwerke Aschersleben Aktien-Gesellschaft, 283 Fed. 746; Schrijver v. Sutherland, 19 F. [2d] 688.) We are here confronted with the problem of whether a nation acquires jurisdiction retroactively to extinguish a debt after the obligee has transferred the chose in action for value to a neutral in a neutral country.
*341In James & Co. v. Second Russian Ins. Co. (239 N. Y. 248, 257) the Court of Appeals had occasion to consider the question of jurisdiction to confiscate debts. Cardozo, J., there wrote:
“ Was it [the liability] extinguished by the Soviet decree canceling or releasing the debts of the nationalized companies? * * * As to the Soviet decree, we think its attempted extinguishment of liabilities is brutum fulmen, in England as well as here, and this whether the government attempting it has been recognized or not. Russia might terminate the liability of Russian corporations in Russian courts or under Russian law. Its fiat to that effect could not constrain the courts of other sovereignties, if assets of the debtor were available for seizure in the jurisdiction of the forum * * *. The decree invoked by the defendant is not in any true sense a decree of bankruptcy, though even if it were, there would be limits to its extraterritorial validity. [Phelps v. Borland, 103 N. Y. 406.]
“ A decree of bankruptcy presupposes a distribution of the assets for the benefit of creditors, and this decree is one of confiscation, appropriating the assets for the benefit of the Soviet Republic. One government does not execute the tax laws of another (State of Colorado v. Harbepk, 232 N. Y. 71, 82), nor help another in enforcing a penalty or forfeiture (Loucks v. Standard Oil Co., 224 N. Y. 99, 102). If this is so where the foreign statute or decree is that of a recognized government de jure, it is still more clearly so where the decree is that of a government to which recognition has been denied. Neither comity nor public policy requires us to enforce a mandate of confiscation at the behest of such a government to the prejudice either of our own citizens or of those of any friendly power seeking justice in our courts.” (Compare Second Russian Ins. Co. v. Miller, 268 U. S. 552.)
Under the facts herein alleged, France had no jurisdiction to confiscate the incorporeal right bought and paid for by an American corporation. Neither comity nor public policy requires or permits us to recognize the French mandate of confiscation to the prejudice of our own citizens seeking justice in our courts. France could confiscate German property, but not American property.
On a former appeal in this action reference was made to a defense that Scharnberg & Co.’s interest “ was seized by the Sequester acting for and in behalf of the government of France.” It was stated in the opinion of Mr. Justice McAvoy (222 App. Div. 299) that this defense would be good if the allegation further pleaded the laws of France governing the situation and alleged the facts showing that Scharnberg & Co. and this contract were subject to their provisions. The very purpose of holding the defense bad *342upon the former appeal was to require a statement of the provisions of the French statute and of the circumstances surrounding its enactment in order that the court might for itself determine whether the statute constituted a defense. We there held that we were not bound by the pleader’s conclusion that the' statute was a defense, but that we were required to examine the statute to ascertain whether the date of its enactment, the period during which it was in force, and its terms and provisions would operate to bar the plaintiff’s claim. The contention that we decided in advance that if they were pleaded we would hold the defense good is in my view untenable.
For these reasons the order appealed from should be reversed in so far as it sustains the first affirmative defense.
I concur with the opinion of Mr. Justice Merrell in so far as it approves the holding of the Special Term that the second affirmative defense is insufficient.
O’Malley, J., concurs.
Order so far as appealed from affirmed, without costs.