UNITED
STATES v. BELMONT
301 U.S.
324, 57 S.Ct. 758, 81 L.Ed. 1134
(1937)
Argued: March 4,
1937; Decided: May 3, 1937
[301
U.S. 324, 325] Mr. Justice SUTHERLAND delivered the opinion of
the Court.
This is
an action at law brought by petitioner against respondents in a federal
District Court to recover a sum of money deposited by a Russian corporation
(Petrograd [301
U.S. 324, 326] Metal
Works) with August Belmont, a private banker doing business in New York City
under the name of August Belmont & Co. August Belmont died in 1924; and
respondents are the duly appointed executors of his will. A motion to dismiss
the complaint for failure to state facts sufficient to constitute a cause of
action was sustained by the District Court, and its judgment was affirmed by
the court below. (C.C.A.) 85 F.(2d) 542. The facts
alleged, so far as necessary to be stated, follow.
The
corporation had deposited with Belmont, prior to 1918, the sum of money which
petitioner seeks to recover. In 1918, the Soviet government duly enacted a
decree by which it dissolved, terminated, and liquidated the corporation
(together with others), and nationalized and appropriated all of its property
and assets of every kind and wherever situated, including the deposit account
with Belmont. As a result, the deposit became the property of the Soviet
government, and so remained until November 16, 1933, at which time the Soviet
government released and assigned to petitioner all amounts due to that government
from American nationals, including the deposit account of the corporation with
Belmont. Respondents failed and refused to pay the amount upon demand duly made
by petitioner.
The
assignment was effected by an exchange of diplomatic correspondence between the
Soviet government and the United States. The purpose was to bring about a final
settlement of the claims and counterclaims between the Soviet government and
the United States; and it was agreed that the Soviet government would take no
steps to enforce claims against American nationals; but all such claims were
released and assigned to the United States, with the understanding that the
Soviet government was to be duly notified of all amounts realized by the United
States from such release and assignment. The assignment and requirement for
notice [301 U.S. 324, 327] are parts of the larger plan to bring about a
settlement of the rival claims of the high contracting parties. The continuing
and definite interest of the Soviet government in the collection of assigned
claims is evident; and the case, therefore, presents a question of public
concern, the determination of which well might involve the good faith of the
United States in the eyes of a foreign government. The court below held that
the assignment thus effected embraced the claim here in question; and with that
we agree.
That
court, however, took the view that the situs of the bank deposit was within the
state of New York; that in no sense could it be regarded as an intangible
property right within Soviet territory; and that the nationalization decree, if
enforced, would put into effect an act of confiscation. And it held that a
judgment for the United States could not be had, because, in view of that
result, it would be contrary to the controlling public policy of the state of
New York. The further contention is made by respondents that the public policy
of the United States would likewise be infringed by such a judgment. The two
questions thus presented are the only ones necessary to be considered.
First. We do
not pause to inquire whether in fact there was any policy of the state of New
York to be infringed, since we are of opinion that no state policy can prevail
against the international compact here involved.
This
court has held, Underhill v. Hernandez, 168 U.S.
250 , 18 S.Ct. 83, that every sovereign state must recognize
the independence of every other sovereign state; and that the courts of one
will not sit in judgment upon the acts of the government of another, done
within its own territory.
That
general principle was applied in Oetjen v. Central
Leather Co., 246 U.S.
297 , 38 S.Ct. 309, to a case where an action in replevin had
been brought in a New Jersey state court to recover a consignment of hides
purchased in Mexico from [301
U.S. 324, 328] General
Villa. The title of the purchaser was assailed on the ground that Villa had
confiscated the hides. Villa, it appeared, had seized the hides while
conducting independent operations under the Carranza government, which at the
time of the seizure had made much progress in its revolution in Mexico. The
government of the United States, after the trial of the case in the state
court, had recognized the government of Carranza, first as the de facto government of the Republic of
Mexico, and later as the government de
jure. This court held that the conduct of foreign relations was committed
by the Constitution to the political departments of the government, and the
propriety of what may be done in the exercise of this political power was not
subject to judicial inquiry or decision; that who is the sovereign of a
territory is not a judicial question, but one the determination of which by the
political departments conclusively binds the courts; and that recognition by
these departments is retroactive and validates all actions and conduct of the
government so recognized from the commencement of its existence. 'The
principle,' we said, 246 U.S.
297 , at page 303, 38 S.Ct. 309, 311, 'that the conduct of one
independent government cannot be successfully questioned in the courts of
another is as applicable to a case involving the title to property brought
within the custody of a court, such as we have here, as it was held to be to
the cases cited, in which claims for damages were based upon acts done in a
foreign country, for it rests at last upon the highest considerations of
international comity and expediency. To permit the validity of the acts of one
sovereign state to be reexamined and perhaps condemned by the courts of another
would very certainly 'imperil the amicable relations between governments and
vex the peace of nations." Ricaud v. American
Metal Co., 246 U.S. 304, 308 , 309 S., 310, 38 S.Ct. 312, is to the
same effect.
In A. M. Luther v. James Sagor
& Co., L.R.(1921) 3 K.B. 532, the English
Court of Appeal expressly ap-[301 U.S. 324, 329]proved and followed our decision in the Oetjen Case. The English case involved that part of the
same decree of the Soviet government here under consideration which declared
certain private woodworking establishments to be the property of the Republic.
Under that decree the government seized plaintiff's factory in Russia together
with a stock of wood therein. Agents of the Republic sold a quantity of the
stock so seized to the defendants, who imported it into England. Thereafter,
the British government recognized the Soviet government as the de facto government of Russia. Upon
these facts, the court held that, the British government having thus recognized
the Soviet government, existing at a date before the decree in question, the
validity of that decree and the sale of the wood to the defendants could not be
impugned, and gave judgment for defendants accordingly. The court regarded the
decree as one of confiscation, but was unable to see (Bankes,
L.J., p. 546) how the courts could treat the decree 'otherwise than as the
expression by the de facto government
of a civilized country of a policy which it considered to be in the best
interest of that country. It must be quite immaterial for present purposes that
the same views are not entertained by the Government of this country, are
repudiated by the vast majority of its citizens, and are not recognized by our
laws.' Lord Justice Scrutton, in his opinion,
discusses ( pp. 557-559) the contention that the
courts should refuse to recognize the decree and the titles derived under it as
confiscatory and unjust, and concludes that the question is one not for the
judges but for the action of the sovereign through his ministers. 'I do not
feel able,' he said, 'to come to the conclusion that the legislation of a state
recognized by my Sovereign as an independent sovereign state is so contrary to
moral principle that the judges ought not to recognize it. The responsibility
for recognition or non-recognition with the consequences of each rests on
the [301 U.S. 324, 330] political advisers of the Sovereign and not on
the judges.' Further citation of authority seems unnecessary.
We take
judicial notice of the fact that coincident with the assignment set forth in
the complaint, the President recognized the Soviet government, and normal
diplomatic relations were established between that government and the
government of the United States, followed by an exchange of ambassadors. The
effect of this was to validate, so far as this country is concerned, all acts
of the Soviet government here involved from the commencement of its existence.
The recognition, establishment of diplomatic relations, the assignment, and
agreements with respect thereto, were all parts of one transaction, resulting
in an international compact between the two governments. That the negotiations,
acceptance of the assignment and agreements and understandings in respect
thereof were within the competence of the President may not be doubted.
Governmental power over internal affairs is distributed between the national
government and the several states. Governmental power over external affairs is
not distributed, but is vested exclusively in the national government. And in
respect of what was done here, the Executive had authority to speak as the sole
organ of that government. The assignment and the agreements in connection
therewith did not, as in the case of treaties, as that term is used in the
treaty making clause of the Constitution (article 2, 2), require the advice and
consent of the Senate.
A treaty
signifies 'a compact made between two or more independent nations, with a view
to the public welfare.' B. Altman &
Co. v. United States, 224 U.S. 583, 600 , 32 S.Ct. 593, 596. But an
international compact, as this was, is not always a treaty which requires the
participation of the Senate. There are many such compacts, of which a protocol,
a modus vivendi, a postal convention, and agree- [301 U.S. 324, 331] ments like that now under consideration are illustrations. See 5 Moore,
Int.Law Digest, 210-221. The distinction was pointed
out by this court in the Altman Case, supra, which arose under section 3 of the
Tariff Act of 1897 (30 Stat. 151, 203), authorizing the President to conclude
commercial agreements with foreign countries in certain specified matters. We
held that although this might not be a treaty requiring ratification by the
Senate, it was a compact negotiated and proclaimed under the authority of the
President, and as such was a 'treaty' within the meaning of the Circuit Court
of Appeals Act (26 Stat. 826), the construction of which might be reviewed upon
direct appeal to this court.
Plainly,
the external powers of the United States are to be exercised without regard to
state laws or policies. The supremacy of a treaty in this respect has been
recognized from the beginning. Mr. Madison, in the Virginia Convention, said
that if a treaty does not supersede existing state laws, as far as they
contravene its operation, the treaty would be ineffective. 'To counteract it by
the supremacy of the state laws, would bring on the Union the just charge of national
perfidy, and involve us in war.' 3 Elliot's Debates 515.
And see Ware v. Hylton, 3 Dall. 199, 236, 237. And while this rule in respect of treaties is
established by the express language of clause 2, article 6, of the
Constitution, the same rule would result in the case of all international
compacts and agreements from the very fact that complete power over
international affairs is in the national government and is not and cannot be
subject to any curtailment or interference on the part of the several states.
Compare United States v. Curtiss-Wright
Export Corporation, 299 U.S. 304 , 316 et seq., 57 S.Ct. 216, 219. In
respect of all international negotiations and compacts,
and in respect of our foreign relations generally, state lines disappear. As to
such purposes the state of New York does not exist. Within the field of its
powers, what [301
U.S. 324, 332] ever the
United States right-fully undertakes, it necessarily has warrant to consummate.
And when judicial authority is invoked in aid of such consummation, State
Constitutions, state laws, and state policies are irrelevant to the inquiry and
decision. It is inconceivable that any of them can be interposed as an obstacle
to the effective operation of a federal constitutional power. Cf. Missouri v. Holland, 252 U.S. 416 , 40 S. Ct. 382, 11 A.L.R. 984; Asakura v. Seattle, 265 U.S. 332,
341 , 44 S.Ct. 515, 516
Second.
The public policy of the United States relied upon as a bar to the action is
that declared by the Constitution, namely, that private property shall not be taken
without just compensation. But the answer is that our Constitution, laws, and
policies have no extraterritorial operation, unless in respect of our own
citizens. Compare United States v.
Curtiss-Wright Export Corporation, supra, 299 U.S. 304 , at page 318, 57 S. Ct. 216, 220. What
another country has done in the way of taking over property of its nationals,
and especially of its corporations, is not a matter for judicial consideration
here. Such nationals must look to their own government for any redress to which
they may be entitled. So far as the record shows, only the rights of the
Russian corporation have been affected by what has been done; and it will be
time enough to consider the rights of our nationals when, if ever, by proper
judicial proceeding, it shall be made to appear that they are so affected as to
entitle them to judicial relief. The substantive right to the moneys, as now
disclosed, became vested in the Soviet government as the successor to the
corporation; and this right that government has passed to the United States. It
does not appear that respondents have any interest in the matter beyond that of
a custodian. Thus far no question under the Fifth Amendment is involved.
It
results that the complaint states a cause of action and that the judgment of
the court below to the contrary is erroneous. In so holding, we deal only with
the case [301
U.S. 324, 333] as now
presented and with the parties now before us. We do not consider the status of
adverse claims, if there be any, of others not parties to this action. And
nothing we have said is to be construed as foreclosing the assertion of any
such claim to the fund involved, by intervention or other appropriate proceeding.
We decide only that the complaint alleges facts sufficient to constitute a
cause of action against the respondents.
Judgment
reversed.
Mr. Justice STONE.
I agree
with the result, but I am unable to follow the path by which it is reached.
Upon the record before us there is, I think, no question of re-examining the
validity of acts of a foreign state, and no question of the United States'
declaring and enforcing a policy inconsistent with one that the state of New
York might otherwise adopt in conformity to its own laws and the Constitution.
The
United States, by agreement with the Soviet government, has acquired an
assignment of all the rights of the latter in a chose in action, against an
American citizen, formerly belonging to a Russian national, and confiscated by
decree of the Soviet government. If the subject of the transfer were a chattel
belonging to an American, but located in Russia, we may assume that the
validity of the seizure would be recognized here. Oetjen v. Central Leather Co., 246 U.S.
297 , 38 S.Ct. 309; Ricaud v. American
Metal Co., 246 U.S., 304, 308-310, 38 S. Ct. 312; Salimoff & Co. v. Standard Oil Co., 262 N.Y. 220, 186 N.E. 679, 89 A.L.R.
345. Similarly, the confiscation of the present claim, being lawful where made,
is upon familiar principles to be regarded as effective in New York, except in
so far as that state, by reason of the presence of the debtor there, may adopt
and enforce a policy based upon nonrecognition of the
transfer. [301
U.S. 324, 334] But this
Court has often recognized that a state may refuse to give effect to a
transfer, made elsewhere, of property which is within its own territorial
limits, if the transfer is in conflict with its public policy. Green v. Van Buskirk,
5 Wall. 307, 311, 312; Hervey v. Rhode Island Locomotive Works, 93 U.S.
664 ; Security Trust Co.
v. Dodd, 173 U.S.
624 , 19 S.Ct. 545; Clark
v. Williard, 292 U.S. 112,
122 , 54 S.Ct. 615, 619; Clark
v. Williard, 294 U.S.
211 , 55 S.Ct. 356, 98 A.L.R. 347. It is likewise free to
disregard the transfer where the subject of it is a chose in action due from a
debtor within the state to a foreign creditor, especially where, as in the
present case, the debtor's only obligation is to pay within the state, on
demand. Harrison v. Sterry,
5 Cranch, 289; The Disconto
Gesellschaft v. Umbreit,208 U.S.
570 , 28 S.Ct. 337; Barth
v. Backus, 140 N.Y. 230, 35 N.E. 425, 23 L.R.A. 47, 37 Am.St.Rep.
545; Vladikav-kazsky Ry. Co. v. New York Trust Co., 263 N.Y. 369, 378, 379, 189 N.E. 456, 91 A.L.R. 1426. The chose in action is so far within the
control of the state as to be regarded as located there for many purposes. Wyman v. Halstead, 109 U.S. 654, 656 , 3 S.Ct. 417; Chicago, R.I. & P. Ry. Co. v. Sturm, 174 U.S.
710 , 19 S.Ct. 797; Harris
v. Balk, 198 U.S.
215 , 25 S.Ct. 625, 3 Ann.Cas. 1084; Pennington v. Fourth National Bank, 243 U.S. 269,
270 , 37 S.Ct. 282, L.R.A. 1917F, 1159; Security Savings Bank v. California, 263 U.S. 282,
285 , 44 S.Ct. 108, 109, 31 A.L.R. 391; Corn Exchange Bank v. Coler, 280 U.S.
218 , 50 S.Ct. 94; In re
Russian Bank for Foreign Trade, L.R.(1933) Ch.Div.
745, 767; American Law Institute, Restatement, Conflict of
Laws, 108, 213.
It does
not appear that the state of New York, at least since our diplomatic
recognition of the Soviet government, has any policy which would permit a New
York debtor to question the title of that government to a claim of the creditor
acquired by its confiscatory decree, and no reason is apparent for assuming
that such is its policy. Payment of the debt to the United States as transferee
will discharge the debtor and impose on him no burden which he did not
undertake when he assumed the position of debtor. Beyond this he has no
interest for the state[301 U.S. 324, 335] to protect. But it is a recognized rule that a state may rightly
refuse to give effect to external transfers of property within its borders so
far as they would operate to exclude creditors suing in its courts. Harrison v. Sterry, supra; Security Trust Co. v. Dodd, supra; The Disconto Gesellschaft v. Umbreit, supra; Clark v. Williard,
supra; Barth v. Backus, supra.
We
recently held, in Clark v. Williard, supra, that the full faith and credit clause
does not preclude the attachment of property within the state, by a local
creditor of a foreign corporation, all of whose property has been previously
transferred, in the state of its incorporation, to a statutory successor for
the benefit of creditors. Due process under the Fifth Amendment, the benefits
of which extend to alien friends, as well as to citizens, Russian Volunteer Fleet v. United States, 282 U.S.
481 , 51 S. Ct. 229, does not require any different result. The Disconto
Gesell-Schaft v. Umbreit,
supra, 208 U.S. 570, 579 , 580 S., 28 S.Ct. 337. The Constitution
has no different application where the property transferred is a chose in
action, later seized by a creditor in the state of the debtor. The Disconto
Gesellschaft v. Umbreit,
supra. See Harrison v. Sterry, supra. In conformity to this doctrine, New York
would have been free to enforce a local policy, subordinating the .soviet
government, as the successor of its national, to local suitors. Its judicial
decisions indicate that such may be its policy for the protection of creditors
or others claiming an interest in the sum due. James & Co. v. Second Russian Insurance
Co., 239 N.Y. 248, 257, 146 N.E. 369, 37 A.L.R.
720; Matter of People (City Equity Fire Insurance Co.), 238 N.Y. 147, 152, 144 N.E. 484; Matter of
Waite, 99 N.Y. 433, 448, 2 N.E. 440.
See Vladikavkazsky Ry. Co. v. New York Trust Co., supra.
It seems
plain that, so far as now appears, the United States does not stand in any
better position with respect to the assigned claim than did its assignor, or
any other [301 U.S.
324, 336] transferee of the Soviet government. We may, for
present purposes, assume that the United States, by treaty with a foreign
government with respect to a subject in which the foreign government has some
interest or concern, could alter the policy which a state might otherwise
adopt. It is unnecessary to consider whether the present agreement between the
two governments can rightly be given the same effect as a treaty within this
rule, for neither the allegations of the bill of complaint, nor the diplomatic
exchanges, suggest that the United States has either recognized or declared
that any state policy is to be overridden.
So far as
now relevant, the document signed by the Soviet government, as preparatory to a
more general settlement of claims and counterclaims between the two
governments, assigns and releases to the United States all amounts 'due or that
may be found to be due it' from American nationals, and provides that the
Soviet government is 'to be duly notified in each case of any amount realized
by the Government of the United States from such release and assignment.' The
relevant portion of the document signed by the President is expressed in the
following paragraph:
'I am glad to have these undertakings by your
Government and I shall be pleased to notify your Government in each case of any
amount realized by the Government of the United States from the release and
assignment to it of the amounts admitted to be due or that may be found to be
due.'
There is
nothing in either document to suggest that the United States was to acquire or
exert any greater rights than its transferor, or that the President, by mere
executive action, purported or intended to alter the laws and policy of any
state in which the debtor of an assigned claim might reside, or that the United
States, as assignee,[301
U.S. 324, 337] is to do
more than the Soviet government could have done after diplomatic
recognition-that is, collect the claims in conformity with those laws. Cf. Todok v. Union State Bank, 281 U.S. 449 , 50 S.Ct. 363.
As
respondent debtor may not challenge the effect of the assignment to the United
States, the judgment is rightly reversed. But as the reversal is without
prejudice to the rights of any other parties to intervene, they should be left
free to assert, by intervention or other appropriate procedure, such claims
with respect to the amount due as are in accordance with the laws and policy of
New York. There is no occasion to say anything now which can be taken to
foreclose the assertion by such claimants of their rights under New York law.
Mr. Justice BRANDEIS and Mr. Justice CARDOZO concur
in this opinion.