| United States v. Pink
(No. 42)
284 N.Y. 555, 32 N.E.2d 552, reversed. |
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| Syllabus
| Opinion
[ Douglas ] | Separate
[ Frankfurter ] | Dissent
[ Stone ] |
| HTML version
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United States v. Pink
CERTIORARI TO THE SUPREME COURT OF NEW YORK
MR. JUSTICE FRANKFURTER:
The nature of the controversy makes it appropriate to add a few observations to my Brother DOUGLAS' opinion.
Legal ideas, like other organisms, cannot survive severance from their congenial environment. Concepts like "situs" and "jurisdiction" and "comity" summarize views evolved by the judicial process, in the absence of controlling legislation, for the settlement of domestic issues. To utilize such concepts for the solution of controversies international in nature, even though they are presented to the courts in the form of a private litigation, is to invoke a narrow and inadmissible frame of reference.
The expropriation decrees of the U.S.S.R. gave rise to extensive litigation among various classes of claimants to [p235] funds belonging to Russian companies doing business or keeping accounts abroad. England and New York were the most active centers of this litigation. The opinions in the many cases before their courts constitute a sizeable library. They all derive from a single theme -- the effect of the Russian expropriation decrees upon particular claims, in some cases before and in some cases after recognition of the U.S.S.R., either de jure or de facto. One cannot read this body of judicial opinions, in the Divisional Court, the Court of Appeal and the House of Lords, in the New York Supreme Court, the Appellate Division, and the Court of Appeals, and not be left with the conviction that they are the product largely of casuistry, confusion, and indecision. See Jaffee, Judicial Aspects of Foreign Relations, passim. The difficulties were inherent in the problems that confronted the courts. They were due to what Chief Judge Cardozo called "the hazards and embarrassments growing out of the confiscatory decrees of the Russian Soviet Republic," Matter of People (Russian Reinsurance Co.), 55 N.Y. 415, 420, 175 N.E. 114, 115, and to the endeavor to adjust these "hazards and embarrassments" to "the largest considerations of public policy and justice," James & Co. v. Second Russian Insurance Co., 239 N.Y. 248, 256, 146 N.E. 369, 370, when private claims to funds covered by the expropriation decrees were before the courts, particularly at a time when nonrecognition was our national policy.
The opinions show both the English and the New York courts struggling to deal with these business consequences of major international complications through the application of traditional judicial concepts. "Situs," "jurisdiction," "comity," "domestication" and "dissolution" of corporations, and other legal ideas that often enough in litigation of a purely domestic nature prove their limitations as instruments for solution or even as means for analysis, were pressed into service for adjudicating claims [p236] whose international implications could not be sterilized. This accounts for the divergence of views among the judges and for such contradictory and confusing rulings as the series of New York cases, from Wulfsohn v. Russian Republic, 234 N.Y. 372, 138 N.E. 24, to the ruling now under review, Moscow Fire Ins. Co. v. Bank of New York & Trust Co., 280 N.Y. 286, 20 N.E.2d 758, accounts for Russian Commercial & Industrial Bank v. Comptoir d'Escompte de Mulhouse, [1925] A.C. 112, compared with Lazard Brothers & Co. v. Midland Bank, [1933] A.C. 289, and for the fantastic result of the decision in Lehigh Valley R. Co. v. State of Russia, 21 F.2d 396, in which the Kerensky regime was, in accordance with diplomatic determination, treated as the existing Russian government a decade after its extinction.
Courts could hardly escape perplexities when citizens asserted claims to Russian funds within the control of the forum. But a totally different situation was presented when all claims of local creditors were satisfied, and only the conflicting claims of Russia and of former Russian creditors were involved. In the particular circumstances of Russian insurance companies doing business in New York, the State Superintendent of Insurance took possession of the assets of the Russian branches in New York to conserve them for the benefit of those entitled to them. Liquidation followed, domestic creditors and policy holders were paid, and the Superintendent found a large surplus on his hands. As statutory liquidator, the Superintendent of Insurance took the ground that,
in view of the hazards and uncertainties of the Russian situation, the surplus should not be paid to anyone, but should be left in his hands indefinitely, until a government recognized by the United States shall function in the territory of what was once the Russian Empire.
255 N.Y. 415, 421, 175 N.E. 114, 115. So the Appellate Division decreed. 229 App.Div. 637, 243 N.Y.S. 35. But the Court of Appeals [p237] reversed and the scramble among the foreign claimants was allowed to proceed. 255 N.Y. 415, 17 N.E. 114. The Court of Appeals held that the retention of the surplus funds in the custody of the Superintendent of Insurance until the international relations between the United States and Russia had been formalized "did not solve the problem. It adjourned it sine die." But adjournment, it may be suggested, is sometimes a constructive interim solution to avoid a temporizing and premature measure giving rise to new difficulties. Such I believe to have been the mischief that was bound to follow the rejection of the Superintendent's policy of conservation of the surplus Russian funds until recognition. Their disposition was inescapably entangled in recognition.
In the immediate case, the United States sues, in effect, as the assignee of the Russian government for claims by that government against the Russian Insurance Company for monies in deposit in New York to which no American citizen makes claim. No manner of speech can change the central fact that here are monies which belonged to a Russian company and for which the Russian government has decreed payment to itself.
And so the question is whether New York can bar Russia from realizing on its decrees against these funds in New York after formal recognition by the United States of Russia and in light of the circumstances that led up to recognition and the exchange of notes that attended it. For New York to deny the effectiveness of these Russian decrees under such circumstances would be to oppose, at least in some respects, its notions as to the effect which should be accorded recognition as against that entertained by the national authority for conducting our foreign affairs. And the result is the same whether New York accomplishes it because its courts invoke judicial views regarding the enforcement of foreign expropriation decrees, or regarding the survival in New York of a Russian [p238] business which according to Russian law had ceased to exist, or regarding the power of New York courts over funds of Russian companies owing from New York creditors. If this Court is not bound by the construction which the New York Court of Appeals places upon complicated transactions in New York in determining whether they come within the protection of the Constitution against impairing the obligations of contract, we certainly should not be bound by that court's construction of transactions so entangled in international significance as the status of New York branches of Russian companies and the disposition of their assets. Compare Appleby v. City of New York, 271 U.S. 364, and Irving Trust Co. v. Day, 314 U.S. 556. When the decision of a question of fact or of local law is so interwoven with the decision of a question of national authority that the one necessarily involves the other, we are not foreclosed by the state court's determination of the facts or of the local law. Otherwise, national authority could be frustrated by local rulings. See Creswill v. Knights of Pythias, 225 U.S. 246; Davis v. Wechsler, 263 U.S. 22.
It is not consonant with the sturdy conduct of our foreign relations that the effect of Russian decrees upon Russian funds in this country should depend on such gossamer distinctions as those by which courts have determined that Russian branches survive the death of their Russian origin. When courts deal with such essentially political phenomena as the taking over of Russian businesses by the Russian government by resorting to the forms and phrases of conventional corporation law, they inevitably fall into a dialectic quagmire. With commendable candor, the House of Lords frankly confessed as much when it practically overruled Russian Commercial & Industrial Bank v. Comptoir d'Escompte de Mulhouse, supra, saying through Lord Wright, "the whole matter has now to be reconsidered in the light of new evidence and of the historical evolution [p239] of ten years." Lazard Brothers & Co. v. Midland Bank, [1933] A.C. 289, 300.
For we are not dealing here with physical property -- whether chattels or realty. We are dealing with intangible rights, with choses in action. The fact that these claims were reduced to money does not change the character of the claims, and certainly is too tenuous a thread on which to determine issues affecting the relation between nations. Corporeal property may give rise to rules of law which, we have held, even in purely domestic controversies, ought not to be transferred to the adjudication of impalpable claims such as are here in controversy. Curry v. McCanless, 307 U.S. 357, 363 et seq.
As between the states, due regard for their respective governmental acts is written into the Constitution by the Full Faith and Credit Clause (Art. IV, § 1). But the scope of its operation -- when may the policy of one state deny the consequences of a transaction authorized by the laws of another -- has given rise to a long history of judicial subtleties which hardly commend themselves for transfer to the solution of analogous problems between friendly nations. See Huntington v. Attrill, 146 U.S. 657; Finney v. Guy, 189 U.S. 335; Milwaukee County v. White Co., 296 U.S. 268; Pacific Ins. Co. v. Industrial Comm'n, 306 U.S. 493, 502; Pink v. A.A.A. Highway Express, 314 U.S. 201.
For more than fifteen years, formal relations between the United States and Russia were broken because of serious differences between the two countries regarding the consequences to us of two major Russian policies. This complicated process of friction, abstention from friendly relations, efforts at accommodation, and negotiations for removing the causes of friction, are summarized by the delusively simple concept of "nonrecognition." The history of Russo-American relations leaves no room for doubt that the two underlying sources of difficulty were [p240] Russian propaganda and expropriation. Had any state court during this period given comfort to the Russian views in this contest between its government and ours, it would, to that extent, have interfered with the conduct of our foreign relations by the Executive, even if it had purported to do so under the guise of enforcing state law in a matter of local policy. On the contrary, during this period of nonrecognition, New York denied Russia access to her courts, and did so on the single and conclusive ground: "We should do nothing to thwart the policy which the United States has adopted." Russian Republic v. Cibrario, 235 N.Y. 255, 263, 139 N.E. 259, 262. Similarly, no invocation of a local rule governing "situs" or the survival of a domesticated corporation, however applicable in an ordinary case, is within the competence of a state court if it would thwart to any extent "the policy which the United States has adopted" when the President reestablished friendly relations in 1933.
And it would be thwarted if the judgment below were allowed to stand.
That the President's control of foreign relations includes the settlement of claims is indisputable. Thus, referring to the adhesion of the United States to the Dawes Plan, Secretary of State Hughes reported that
this agreement was negotiated under the long-recognized authority of the President to arrange for the payment of claims in favor of the United States and its nationals. The exercise of this authority has many illustrations, one of which is the Agreement of 1901 for the so-called Boxer Indemnity.
(Secretary Hughes to President Coolidge, February 3, 1925, MS., Department of State, quoted in 5 Hackworth, Digest of Int.Law, c. 16, § 514.) The President's power to negotiate such a settlement is the same whether it is an isolated transaction between this country and a friendly nation or is part of a complicated negotiation to restore normal relations, as was the case with Russia. [p241]
That the power to establish such normal relations with a foreign country belongs to the President is equally indisputable. Recognition of a foreign country is not a theoretical problem or an exercise in abstract symbolism. It is the assertion of national power directed towards safeguarding and promoting our interests and those of civilization. Recognition of a revolutionary government normally involves the removal of areas of friction. As often as not, areas of friction are removed by the adjustment of claims pressed by this country on behalf of its nationals against a new regime.
Such a settlement was made by the President when this country resumed normal relations with Russia. The two chief barriers to renewed friendship with Russia -- intrusive propaganda and the effects of expropriation decrees upon our nationals -- were at the core of our negotiations in 1933, as they had been for a good many years. The exchanges between the President and M. Litvinov must be read not in isolation, but as the culmination of difficulties and dealings extending over fifteen years. And they must be read not as self-contained technical documents, like a marine insurance contract or a bill of lading, but as characteristically delicate and elusive expressions of diplomacy. The draftsmen of such notes must save sensibilities and avoid the explicitness on which diplomatic negotiations so easily founder.
The controlling history of the Soviet regime and of this country's relations with it must be read between the lines of the Roosevelt-Litvinov Agreement. One needs to be no expert in Russian law to know that the expropriation decrees intended to sweep the assets of Russian companies taken over by that government into Russia's control no matter where those assets were credited. Equally clear is it that the assignment by Russia meant to give the United States, as part of the comprehensive settlement, everything that Russia claimed under its laws against [p242] Russians. It does violence to the course of negotiations between the United States and Russia, and to the scope of the final adjustment, to assume that a settlement thus made on behalf of the United States -- to settle both money claims and to soothe feelings -- was to be qualified by the variant notions of the courts of the forty-eight states regarding "situs" or "jurisdiction" over intangibles or the survival of extinct Russian corporations. In our dealings with the outside world, the United States speaks with one voice and acts as one, unembarrassed by the complications as to domestic issues which are inherent in the distribution of political power between the national government and the individual states.
