Brief for the Respondent — United States v. Pink

~ or ce ¥ Pe 1

«a * bw - 4 Offics - Supremes ut us

i - Peat om

: FILED

ad 5 .

| ers ee

No. 42 Pet cetera

SE ey

‘ ¥. OL ERK

IN THE — ;

~ Supreme Court of the United States

OCTOBER TERM, 1941

+o

U NITED ST ATES OF AMERIC A -

io . Petitioner

Vv. ‘

LOUIS H. PINK, Saperintendent of Insurance of the

Siat& of New York, and as Liquidator of the Do-

mesticated United States Branch of the First Russian

Insurance Company, Established in’ 1827; VICTOR

YERMALOFF, and others ; He

On Writ of Certiorari*to the Supreme Court of the

State ‘of New York, New York County *

‘BRIEF ON BEHALF OF VICTOR, YE" MALOFF

AND OTHERS, CREDITORS —

J CARL. S. STERN

Counsel ;for Victor Yermalof?

avd others, Amicus Curiae

(arL 8S. Stern

I'vepertc C, Pircuer ; ; ; . ?

’ Of Counsel | : °.

‘a

‘

.

"A... Litvinov. assignment conyeyed only such

‘Tights as the Soviet Goverpment could have

Ne tS SOF ted ~-H- 434 F- eottrts cine iE ee Sr eee OM,

B. Litvinov. assigniment and: its acceptance

23-30

/ did not set up Xn ‘over r riding poliey SPR et 18-22

Conelusion ....2 Siok tats ‘euosa x

Appendix Pn SRE a eet ‘“

” ri

/y * 7

rs

SUBJECT INDEX

a0) a bs 2s PAGES:

Statement of the Case wu. osnnetneinsncinninen ‘2-4

; : ea r

AP ZUINEME pe neinnnetinnntneninnsmsni dithionite cecrae FB

Points—Finst. The New York courts have acted in ac-

cordatice With established New Y ork and Amer “8

ican doctrine in applying property within their ‘

"i custody to the payment of forei ‘ign creditors .W... 5-15

A. The questions, arising - have all been, set- .

tled lund nited States v. Moscow, 309 U.S. 624. 4 | ea

BR. The rules worked out by the’ New York

Court of Appeals, culminating | in the Moscow ~

case, represent a consistent body of *doctrine

‘recognized as. appropriate by this Court ........2 6-13

2 -Rgcognition of Soviet Russia did not af-

Dy. Steet nae sitnation ‘ 13- M ;

A seneeee . Le stew ,

D2 Pri ineiples apply with greater foreg to the - 7

payment of interest » Ra ‘ ened ao a |

Srconp. | Litviney agian) cre: sted 1 naover-

riding: Federal rights: did got purport to im-

pair hd not, infact, iapair the rights of these

: . ‘

bigs creditors f plestanenscaiak tadoebeapiipeedoiihstegileibeabasisaaiaaeniaasioa 1 6-2 2

% |

li.

Citations eG

‘ Case a

* es eee ered in . PAGES |

American Tron Co, v. Seaboard Air Line, 25: gtgte S.261. 14.

Arkansas Conmission vy. Thompson, 313 3 U. Fe 32 . has oe oe

Barth v. Backus, 140 N. Y. 250. mack alt; 12-13 ..3

Cherokee Tobacco (The), 11> Wall. 616 Dp

gy tak v. Willard, 4 U.S. 21}. billy Sa ke:. 2

Companje Espanola-v. Navemar, 303 U.S. 68 ccccndmnenn Tp

Consolidated Rock Products Co. v. DuBois, 312 0. S: i

WNP Gesercisa ace i ne

Diseonto ei Ilse shaft v. Umbreit, 308 T. S. 570 chiapas 6 f

‘Ettor v. Tacoma, 228.U. s. 148 Senseo ely _

- Funkhouser v. Preston O6., 2000: S167 ee a

Geofroy v. Riggs, 133. a 258 .... pao eae 1

Guaranty Trust Co. v. United States. 304 U. S.

140 = Sear "13, 16, 17, 18,° 20), 21622

~~ Harrison v. Sterry,.5 Cranch. 289 -....: a ll

Hibernia Bank v“Lacombe, 84 N.Y. 367 isa ae

Hines v. Davidowitz, 312 U.S. 52 =x —

PRN 5

James &C 0. V. Second Russian Ins. C 0. 4, 239 N. Y. 248 male

Klaxon Co. v. Stentor Mfe. Co., 313 U. S. 487: 4

steweneeerOnseerenreeers

Lehigh Valley R.- Co. ve State of Russia, ne Fed. (2d)--

396,.¢. & 275 US. 571 of ee |

Louisville Bank v: Radford, 295 v. 8.555 Se

~Lyneh Ra! nited States, 292 U.S S..571 od 20

Matter of Barnett’s Trusts, 1902, f Ch. 847 concn > H

~M: atter of People. (City Equitable Fire Insurance Ca),

238° N. Y. 147. hid vot ' ) 2

“Matter of People (First Russian Tnsuranee Co.),

SK .

-teeee

J y

Rey «S.A er | |. ip Auman 3, 7,9, 10,22 °°

17, 18, 20, 21, 2

3 an i - ;

Hl 3 ye Sees. eee ea --PAGES .%).

; Matter of Peophe (First Russian Fusurance Co.),0. #2

4 200 A. ID. Til: 2i4 N. ¥. 54 7 : 3. 29. .

£ Mutter of Peaple (Norske Lloyd Insurance Co.), rey

Da ie a 8,9

Hy M: itter.of People {Russi un Reinsurance Co. j,2 955'N. Y. .

415 | zsh Sree cans S|

| Matter of Waite, 99 N.Y. 483 oc. con 12

; Meéade v. United States, 2 Ct. Cl. 224 \- | ae iad

x Miller v: Robinson,. 266 U.S, 243 . : sce ae /

ik Moscow: Fire Insurance *€o. v. Bank of New York

3 “Trust Co. 280 N.Y. 96 (affirme d 309 UL 8. oe .

3 rehearing denied 309 U. S..697) 2. 4,5,10,13,15,16 ©?

‘Murphy v. Second Russian Co., 240 N. Y¥.554 1... OEP 7

Myers v. United States, 272 ES. 62. a see

New ‘Orleans v. United St: ates, 10 Pet, See LN 16, 2] se

: Oetien v. Central Leather Co., 246 U.S 297 Bis “ bok se 14 ;

. shorn v. Nicholson, 13 Wall. 4 ae wie, a

| -Pr reyton v. F unkhouser, 261 N. y. 140; affirmed 200 IU. S.

163 2 PC UnO as *

/ Prevost. v | Greneanx, | 60° i" . med - ae

>> Russian Berebie v. Cibrario, 235 N. Zz, Rs

Russian Volunteer ‘Fleet v. United States, 282 U.S.

ie) SERRE SRA ORE TCA RON Simonet a a0

enats Trust Co. v. --Dodd, wend Coy 173-0.

G24" | ae 13°

Shosherg ov. New York Life Iisur: ance Co., ats N. ae

GUE Scepbiedhceck core ntnacigiecccecbinedh pcccniice cate = im

State of Russia v: ‘National ity B: nk: 69 Fea. (2d) 44. 16 ~

United Sfates v. Ansoni a Strase Co., 218 U..S. 452 7hh 17

- United States Bank of New. York & bhi Co.,

: 296 UL S. "16 affirming 77. iy! s, 2d) 866 .....8, 9, 12, 21,22

a “ed States 4 v. rast jess eae 301 U. y. 324 aod 3 BZ; 14, ye Tee 4

a

; alee PAGES

"I nitet: States v. Buford, : 3 Pet. 12 eee ie

* United States. v. fe w Fire Ins urance Jo. 309 T.

O24; 309. U. . 69 eat | 4,9, ae

United States v. : ashville ete. Ry; C O., Hae U.S. 120 ... iG

t nited St: a ae 296-0; S.459 . paciaanenaees 3,9

United States v. Pi . 284. N.Y. 553 +} 5, 9

V andenbark v, Owens-Illinois Co. es 5 p. S: 538 Ana “oa

‘ Madikavkazsky Rv. Co. v. New York Trust Co.,

ree: ke A nae ie 11, 12,13

Wichita Royalty Co:' v. City National Bank, 06 Us. S.

rs 103 ak i seisundde 6

Rais ean oe wer ease

tt ttres as 4 =

New York Insurance Lay of be § 63, as shereaunige gy

“63, subd. 4° (1. 1912, et ND mecca Ay

§ 68, subd. 5 (L. 1912, ch., D7, 3 as ag eee [. aoe]

hie (1918; ch. 119) ~:~ Re de = ‘

Ne AW ¥ ork Instranee Law of 1939 (L199, aie 882) — a

Bh S| itwanerieaataw Sct 8, 10

‘ 516, amended L. 1940, ch. 631, § 2 2 .

New York Civil Practice Act) - ye

; § 476 ... SS aR SROs Sane tala Te

: ~ § 480 ER Sia cee actasel ° a

= eed ee Soe \ hk SE

eae New York Rules of Civil Practice, tile 113 aD A tee ’ |

Misc elaneous: ‘

_Borchard, Confiseations, Extrate .rritor u-and Domes.

7 tie,’ 31 Am. Journal, of. ‘nt. Law 67 ¥ 81937) sificnre AE i

¢ : : Sto ak

t

. —

BRIEF ON BEHALF OF VICTOR: YERMALOFF ine? ere

ee ee ee a He,

—-~+Fhis-group of creditors is desclibed in the econ int ds cpeesenel by ae ie

~ Messrs. Enge lhard, Pollak, Pitcher & ‘Stern, (R: 20). Seer

No. “42 ea a

IN. THR Se

“Supreme Court of the Hnited States

. tg OCTOBER-TERM, i931 Mera ened

<r

* Unitep States of AMibnica

Deep nt Gf

’ Petitioner

"sey a ; ; . et

ste, ~ Vv. ;

a “oe : ‘ k 2 | e:

Lovis Hy Pix, ‘Superintendent of Insurince of the State

caf New York, and as. Liquidator, of the Domesticated

oe nited States Branch of. the First Russian Insurance

( ‘ompany, Established i in 1827; Vieror Yermacorr, and

ae J is

On W rit of @. ‘rfiorari to the Secon me Court of the ,. sl

State-of New York, NeweYork County i - ii

~

others: - Cane i ;

tae we

-

a. Sy + veneer

_@ OTHERS, CREDITORS ae es

With the consent of the Solic itor Gener: al and the. Attor-

ney ‘for the Supe ‘rintendent of Jnsurance of the State of 3

New York, this brief is filed on’ be fialf of Vic tor Yermaloff, i.

- and ot! Hers, defendants in this ac tion, or reditors of the First

Russian Tnsuratice Company" se whese lain have been — oe

——

ibe? L

we.

re } . /-

‘ . v a ” :

* bd ‘ .

— . . ° 2 Se?

ae es, - ‘

/ * ° - : ~ “pat

con mee | . 3°

allowed-—many of thetn paid in part—in the proteeding ,

bronght for. the liquidation of the domesticated. United |

* States branch of that company. .

The creditors of the’ Tnsuragee Company, though defend.

-’ ants, are not parties to the present appeal. For it was

upon the motion of ¢he Superintendent of Insurange atone ,

‘that the judgment of dismissal here under rey iew Was.

obtained. The creditors, however, ‘though not parties pro

forma, are the persons whose rights and interests are really

at stake here, for this appeal igpolding up the payment

of their allowed claims. > -

°

; Statement. of the Case ° «

In 1925, in proceedings. then begun for the liquidation

5 of the Uniged States branch of the Insurance Company, the

=~ Superintendent of Insurance of the State of New York

fook over its properties as liquidator. The cash aml securi-

ties here involved were among the properties of that .

hraneh. In 1931, after the payment of the branch creditors

‘and of the attachment: lie gre ditors (R. 28-29) the New,

_ York -Court of Appeals:directed’ that all claims filed,

se whether by foreign or domestic creditors and which .were-.

-» filen or thereafter found: to be valid, should be paid. . .

— _ The order and interlocutory judgment entered’ on. the’

remittitur from‘the Court of Appeals (June 16, 1931, re-

oe 9 July 13, 1931} required that a ‘*Reserve Fund tor

fed Claims’? shoujd be set up: suffici jent te cover pay-

tna of the filed claims? This resérve’ was expressly ex-

‘empted from attachment or. execution. After thé setting

up of this reserve and:a further reserve for expehses of *

liquidation 4 taxes, the balance rémaining was (1) fora

period of four months to be subject. to attachment by those

éreditors who had not theretofore filed their claims, and

*

45

“These creditors whom’ we represent | were “among those ‘wie had already

_ hited their claims.

*

a.

. ~

.—@ 5

-» (2) any surplns thereafter was to go for a quorum of direc. .

tors as representing the, Contpaiyy for the benefit. of the

_ stockholders.*

(There will be no surplns for shareholders. As explained |

in thé Superintendent’ s brief, the surplus on hand will be

exhausted by the allowed claims of creditors. See also ¢ com-

plaint, par. 17 [R. 86-7}.).

After the entry of the 1931 detree, the Superintendent

=

‘of. Insurance proceeded to take proof of claims, make eval-

uations and compute ‘interest. ‘His fourth and latest re-

port, dated November 9, 1933 (R. 32), was confirmed by

thé New York Supreme Court on December 13, 1933 and

the claims thus allowed were then pala as to priteipal (R.

On November 16, 1933—over two years after the entry

of the orde? and interfweutory judgment on remittitury and

a week after the Superintendent’ s November 9, 1933 feport

working out the details was’ filed (R. 30-33)—the Soviet

government -was recognized and the Litvinov assignment

made anil accepted (R..31). 2 |

_ A referee’s: report ‘Fecommending allowance of some

additional claims, and interest on all claims allowed, was

confirmed-by order.of March 30, 1936; the Appellate Divi-

~e of the. New York Supreme Court affirmed on February

6, 19387 and the Court of Appeals om May 25, 1937. (R.

24, 39; Matter of People [First Russian Insurance’-¢ ‘o.|,

250 App. Div. 711, po opinion; 274 N. Y. 545, no opinion \,

*The principles are laid down in the opinion of ee Cc. J. writing

for the unanimous court. Matter of People (First Russian Insurance Co.),

255 N. Y..415, 422-426. The order and judgment on remittitur is not printed

in the recerd here. It appears at pages 37-42 ofthe record in United States .

of America, petitioner, v. Lowis H. Pink, one of the three casés decisled ©

towether, 296 U. S: 463. For the convenience of the Court it. is reprinted

if? the Appendix, infra, pp. 23-30, sce especially pp. 26-30.

. ‘

—.

Sixteén years ago the liquidation was started... Ten years

ago the principles were laid down (255-N. Y. 415) applying

the surplus funds heid by the Supérintendent to the pay-

ment of these creditors, all of whom had filed their claims

prior to the entry of the order and judgment én rémittitur

in 1931. Only this appeal prevents the payment of the sums

awarded and the completion of ‘the liquidation, so far as -

these creditors are concerned (R. 42).

Argument cee

The orinciples applying here have all pais setiled in

United States v. Moscow Fire Insurance Co., 309 U. S. 624

(affirming 280 N. Y. 286), rehearing denied 309 U. S. 697.

The New York Supreme Court preperly refused to give

_effect to a foreign transfer of property within its juris-

- diction and-held subject to its disposal, te the extent of

destroying the rights of creditors who had.been invited to

file their claims against this property in — oom —

Point ).

‘

The Litvinov: assignment, under which petitioner claims

created no’ overriding federal rights. It did not purport

‘to impair, and under the Fifth Amendment could not im-

. pair the rights of the creditors before thé New York courts

(Second Point).

. te

5

FIRST

The New York courts have acted in accordance with

established New York and American doctrine in applying

property within their custody | to the payment of foreign

creditors whose claims have been filed and adjudged valid —

in the liquidation proceeding under former 4 63 of the

| New York Insurance Law.

: . 7

A. Every quéstion arising in this case was settled in United

States v. Moscow Fire Insurance Co., 309 U. S. 624 (affirming

- 280 N° Y. 286), rehearing unanimously denied 309 JJ. S. 697.

The New York Court of Appeals, in rendering the judg- _

ment of affirmance that is here under review declared (R.

71-2; 284 N. Y. 555) that this case had already been

- determined in principle by its decision in the Moscow

case (280 N. Y. 286) and the affirmance of that decision by —

_ this Court (309 U. S. 624). — ane

How thoroughly the Moscow case covers the points at

issne here is shown by the arguinents of counsel for the

Government:

_ Thus, in opposing the motion’ for the p Bene of the

complaint here—made pursftant to Rule 113 of the New

‘York Rules of Civil Practice, and § 476 of the New York

Civil Practice Act—the sole ‘ground of opposition urged.

_- by Government counsel was that the Moscow case had not °

yet been decided by this Court ( see affidavit in opposition

to mation, R..51).

And the Government’s brief is merely an aftempt to”

reargue the Moscow case. A significant illustration is the

- plea that all that is songht by the Government now is a

recognition that the rights of- the Soviet Government

(arid of the U4ited States as its assignee).with respect,-

to the surplus funds of the United States Branch of the

First Russian Insurance Company, were those of a statu: 5 =

tory suecessor of the Russian corporation (Government’s /

6 e°°

brief, pp. 9, 19, 58). For in the Moscow case there was ‘

- express , recognition of th. | otatus—an express finding that —

.**upon nationalization, the Government, ‘under Soviet laws,

becomes the statutory successor and domiciliary liquidator

of the nationalized and * dissolved Russian companies”

(Record, 309 U, 8. 624, p. 124, finding. 77)*. “The Moscow |

case was’ decided against the Government’s contentions, ;

despite that finding. 7 cs :

The decisions of the New York courts in the Moscow

case and in the present ease of the First Russian Insurance”

- Company, represent the appl ‘ation of the governing prin-

ciples used by the New York Court of Appeals over a

. period of vears in interpreting the duties of the Superin- -

- tendent of Insurance under § 63 of the Insutance Law of

1909 (L. 1909, ch. 33, as amended L. 1912/ eh. 217; bi

1918, ch. 119). The prinviples so established are consis:

tent with the whole body of New York and American

doctrine® sx |

| ae

B. ” The rules worked out by the New York Court of Appeis

over a period of years and culminating in-the Moscow case,:

represent, a consistent body of doctrine recognized as appropri--

ate by’this Court with respect to creditors’ rights in the New

York courts against property situated in New York. |

(1) The rights of alien friends to have recourse to the

New York courts on their contract claims has been recog-

nized for many years. Russian Republic y. Cibrario, 235

N. Y. 255, 259; Sliosberg v. New York ‘Life Insurance

‘Company, 244 N. Y. 482, 492; Disconto Gesellschaft v.

Umbreit, 208 U.S. 570, 578. "When in our courts aliens”

' ey | ae ;

This. finding was stressed in the brief which. the’ United States submitted

' an that case (Government brief im Moscow case, .p. 150).

‘Being the latest decisions of the highest state court, they ona represent

the state law on “the ‘subject even if they had deen inconsistent with pric

New York decisions. Vandenberk v.. Owens-[inois Co., 311 U. S. 538, 541,

543, Wichita Royalty Company v. City National Bank, 306 U. S. 103, 109.

< 7 es ; a

- are: entitled to the same protection as other creditors

~. (Russian Volunteer Fleet v. United States, 282 U. S. 481,

491-2; Hibernia Bank vy: Lacombe, 84 N. Y. 367, 385).

But for the liquidation proceeding, which provided a dif-

‘ferent mechanism, Yermaloff and other similarly: situated

creditors. of the First Russian Insurance Company might »

have brought suit, attached, and been paid as was the cred-

‘itor in Murphy v. Second Russian Co., 240 N. Y..554 (1925).

Instead of attaching, these redlare, pursuant to invita-

tion of the New York courts, filed their claims.’ As already

stated, all those on whose behalf this brief is -submitted

had filed their elaims prior’ to the entry of the order on

remittitur.

(2) The property—out of which by the order of the

Court a reserve fund was directed to be set up for the

paymént of those claims—consisted of cash deposited by

the Superintendent in New York: banks and securities in

the Superintendent’s possession, and-was held by him sub-

jeet to the direction of the New York Supreme Court. In

1931 the Court specifically directed the appropriation and

setting aside of part of this property in a reserve for indi- -

viduals who, pursuant .to ‘the invitation of the State, filed

their claims. This proceeding was, as this Court has held,

“In the Matter of People (First Russian’ Insurance Co.), 255 N. Y. 415,

Cardozo, C. J., at 423 referred. to those claimants: (including the creditors

whom we represent) whose proofs of .claim had been “filed and diligently

pressed.” He said: “Creditors so, proving were acting in response to a-published

invitation, published in accordafice with the order of liquidation, to submit

claims of every kind without reference to the place of origin, and were stayed

in the meantime from a remedy in the courts.” Declaring that “there would

be manifest inequity if at this late date ai ancillary receiver were to remit

the to their legal remedies and thus compel them to prove anew”,‘he re-

- Quired that a réserve be set aside to take care of their claims, and it was

only after the setting aside of that réserve that the remaining surplus was

_to go (2) to creditors who had not then filed, and, after all qremiters. ” ta

the representatives of the stockholders.

a

‘, the liquidation of the remaining assets for the benefit of

statutory liquidator of.a domesticated branch of a foreign

. tors ‘‘but for the interest of all its policyholders, creditors

~-reasentially in rem’* (United States v. Bank of — York

and Trust Co., 296 U. S. 463, @54). ’

(3) As to the res rm its custody for administration, the

New York Supreme’ Court was within its powers and juris-

diction in refusing to allow a transfer of title under Rus-

sian decrees to defeat creditors Whose right to payment -

out of this fund—provided their claims were found valid—

__had already been adjudged. The propriety of. thus apply:

ing the funds has, as we show tafre, been expressly recog-

nized by this Court,

( a) After the payment of the branch and attachment

creditors, the New York conrts properly proceeded with -

‘all creditors regardless of the origin of their claims. - |

Tke principle.established by the Court of Appeals prior

to the Moscow case is that under former. § 63° of the New

York Insurance Law the Superintendent of Insurance, as

insurance company, took possession of the local. assets °

not solely. for the security of local policyholders ard credi-

and stockholders wherever they may be’’. Matter of People

(City Equitable Fire Insurance Ca.), 238 N. Y. 147, 156;-

Matter of People (Norske ne Insurance Co.), 242 N. Sn

148, 165.

™The important matter”, wrote Chase, C. J., forthe Second Circuit Court

of Appeals, in the pinion below (77 Fed. [2d] 856, 869), “is that before

this action was commenced the fund in controversy had been ‘teken .tnto the

custody of the New York court and has ever since remained in its custody

~The sole. purpose of the proceeding in the New York Court was to liquidate.

the fund and distribute it according to its laws. To an end, tie state suit

was ® rem.” *

“Subdivisions 4 and_ 5. of former 3 63, dealing with the liquidation of

foreign insurance companies doing business in New York, are now replaced

by §$ 514-516 of the New York Insurance Law of 1939 (L. 1939, Ch. 882),

§ 516 having been amended by L. 1940, Ch. 631, § 2.

>

In cases of iietienay where there isa ‘home liquidator

who will distribute for all creditors alike, this principle

ciple permits creditors, regardless of the origin of their

. edlaims, to secure payment ‘here out of the surplus funds

here. Matter, of People ‘(First Russian Insurance “Co.)

and Mdtter of a (Russian Reinsurance Co.), 255 N.

Y, 415, 423, 426.

The soundness of this procedure has been recognized ”

this Court. Hughes, C. J., in an opinion dealing with this

company, thése funds and these creditérs. (296 U. S. 463

control of the property and necessarily had the pertinent

equitable jurisdiction to decide what should be done with

it. In such a ease; the court might direct that-the surplus

assets should be remitted to a domiciliary receiv er—if thee

were one—on appropriate conditions. Matter of People

(Norske Lloyd Ins. Co.), 242 N. Y. 148. Or the court might

direet further liquidation i in order to provide for the pay-

"ment of other claims, if that’ course appealed to the sense. —

of equity in the yartewar cireumstanees’’, citing . Judge:

Pd

"296 U.S. at 476. ®&

The opinion is captioned United States v. Bank . New York and. Trust

Co.,—the case dealing with the surplus funds of the Moscow company. The

held here and may. further require complete distribution

has impelled. the New York courts to transmit to him—*‘on _

appropriate conditions’*—any. surplus not needed for pay-

ment of claims arising out of United States business (City

Equitable and Norske Lloud casés,*supra). But where —

| there-is-o-tnsolvency and no. liquidator at the domicile |

who will make equitable distribution there, the same prin-

at p. 476)'% held that the’New York -ourt, after the pay: _:

ment of domestic creditors and’ policyholders ‘still had >

same opinion covers also the case of United States v. Pink, wherein the ;

' Government sought td get -control of the surplus’ funds of the First Russian

Company, as’ in the present case of United States v. Pink.- Pages 475 and

4% of the opinion oexplain the’ special Arcumstances of the F "irst ehussian

— procecdings.

”

& why

- TO ; .

Cardozo’s opinion in the two cases of Matter of Peopic

(First Russian Insurance Co.) and Matter of Péople (Rus-

sian Reinsurance Co.), 255 N. Y. at 423."

Specifically, as Lehman, ae o .. said in the ‘Messew case

(280 N. ¥. at 312): ‘*Na principle of law constrains us”

“to hold that ‘‘the suitors. who ‘at our invitation have come

- into court must be dismissed empty- -handed: that we must

remit the assets in our control. ‘to another sovereign to

retain or distribute as it sees fit”? %

(b) In determining the rights of creditors, the Court

in the Moscow decision” properly adopted the *‘ recognized

* 9}

The New York legislature has recently prescribed the same procedure

‘wherever the: United States branch of a foreign insurance company is : in

liquidation in New York. § 314, subd. 3 of the Insurance Raw of 1939 now

expressly provides that the liquidation of “the business of the United States

' Branch of an Mlien insurer - having. trusteed assets in this state shall bein

the same terms as those hereinbefore prescribed” (i. ‘e., for thes iquidation

of domestic insurance companies), “except that only the assets of the business

«if such United States Branch.‘shall be included therein.”

12Judge Lehman pointed out that there were two questions involved : “first

whether the Russian decrees were intended to have such (i, "Gy extraterri-

torial) effect, and, second, whether even if so intended the courts of this

State will give thtm their intended effect” (280 N. Y; at 302).

The lower New York courts had found that the Russian “decrees were not

intended to reach out and affect the tithe to assets within the jurisdiction of

the State of New-York: ‘Judge Lehman’ declared that these findings “rested

upon a firm foundation” {280 N. Y. at 310). 5

"But he also found, that the second question as well as the first would

have to be answered yin the negative. At page 307 Judge Lehman said:

“Certainly no decree thonopolizing the business of insurance in Russia,’ taking

over the conduct of’-the imsurance business forrherly conducted in Ruiiss:a

by insurance cogporations, and terminating the obligations of such companies,

could possibly have been intended-to apply to business conducted here, or if

so intended; could be binding here” (italics ours). 3

' And his final. declaration in affirming was (at 314): *The courts helow

have made the proper choice not because the enforcement of confiscatory

decrees of property located elsewhere is contrary to our public policy, hut

because under the law of this State such confiscatory decrees do not affect the

\ Property claimed here” (italics ome). |

aay tee . 11 ‘

: _* 4 As a a ; E “f x

. rule that a state may rigtitly refuse to give effect to ex-—

ternal transfers of property within its borders so far as

they would operate to exclude creditors suing in its courts.

Harrison v. Sterry, 5 Granch, 289;.Security Trust Co. %

Dodd, Mead & Ca, 173 U. S. 624; Clark vv. Williard, 294

U.S. 211;Parth v. Backus,.140 N. Y. 230°" (Stone, J., in the

. minority concurring opinion in United States v. Belmont,

301 U. S, 324, at 335)."°— : |

peal

.. The New York courts ‘gliowed effect to the decrees of

the Soviet governnient insofar as ‘they terminated ° ‘the

existence of the insurance rompany in Russia (280 N. Y.

at 310, 314). But even so, they properly refused to de-

stroy the rights of. creditors who had been invited to file

their claims against the debtor’s assets held in custody

here in New Y ork by according to the Soviet government,

as successor, a prior right to take this fund." —

(c) If the Insurance Comypany itself had transferred

its assets voluntarily to the Russian government, the trans-

‘ fer. could not have disturbed the jurisdiction in rem of the

‘New York courts té apmy: these funds to the piayment of

these creditors. . \ e

‘This was also in ling with the Court of Appeals’ prior decisions (Jame s.

& Co. vi Second Russian Insurance Co., 3a N. Y. 248, 257 and Vladikav-

kassky Rp. Co. v. New York Trust Co., 263 N. Y. 369, 378).

MApposite is‘ the language of Cardozo, J., in James & Co. v- Second

. Russian Insurance Co., 239 N. “Y. at’257.

“

“As to the Soviet decree, we think its’ attcinpted extinguishment

of liabilities is brutum fulmen, in England as well as here,«and this

whethet 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 avail: able

for seizure in -the jerisdiction of the forum (Barth v. Backus, 140 N.

Y. 230; Matter of People: [City Equitable Fire Ins. Co.|, 238 N. Y.

147, 152; cf. Matter of Barnett’s Trusts, 1902, 1 Ch. 847).”

' Nor inal the Russian Goverginent : as statutory succes.

sor claim greater rights. For if the Russian Government

‘were elaiming the funds as statutory successor for the pur-

posé of making equal distribution among creditors it .would |

on still be within. the jurisdiction of the New. York courts,

| with. physical possession of the assets, to decide whether -

.they should \proceed with the liquidation or whether they

should turn over the assets to the Russian government. _

a ‘In respect of his subjection to the powsr of the local

-s , law’? the position of a.statutory successor ‘‘is ho better

~ than that of the dissolved corporation to whose title he

’ has sueceeded or of its voluntary assignee upon a‘trust for

. all the creditors. He must submit, as-must they, to the .

7 es mandate of the sovereignty that has_the physical c. trol

eee i of what hew ould reduce to his possession”? (Cardozo

writing fon the unanimous court in Clark v. Williare, 294

U.S. at 214; italics ours).

In United States vy. Belmont, oniee deine, ‘3. wakes

‘*‘New York would have been free to enforce 4 local policy

_snbordinating the Soviet Government,™s 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, @ne’’." aS

- . Aeveordingly, had the Russian deees provided for nor-

mal liquidation instead of confiseation, the title created by

_ these decrees could not, if the New4York courts ‘helg other-

wise, impair the rights of foreigr\ creditors legitimately

pursuing their remedies in New York: Clark vy. Willard,

supra; United States v. Belmont; supra; United States v.

Bank of New York and Trust Co., — supra, p. 9; Barth

5

Citing ° es . . ;

James & Cov. Second Russion Insurance Go., 239.N. Y. 248, 257:

Matter of People (City Equitable Fire Ins. Co:), 238 N. Y. 147, 152;

' Matter of Waite, 99 N. Y. 433, 448;-. °*

. #Vladikgvkazsky Ry, Co. v..New York Trust Co., 263 N. Y. 369.

Pee a

8

13

v. ‘Backus, 140, N.Y. 230, .239, 240 ; Se sueiie. Trust Co. V

Dodd, Mead € Co., 103 U, S. 624, 629. a epi ne

C. The recognition of. Soviet , Russia did not affect the }

situation. ee a Soe eaee rey

a). With respect to the fund in eeetion here® ‘recogni-_

tion could do no more than give the Soviet government .

the status of statutory successor of the First Russian Com- ,

pany. It could not increase. the rights, of a statutory Mie

_ cessor as against a court wiih jurisdiction f the res. de-

eing the distribution of the property moran creditors

wet it.

(2) - Years baits recognition, thona_aneditor tect their

aims. ‘Not only that,—a state official had been directed

to place’ property, undet the jurisdiction and i in the custody

of the New York court, in a reserve fund, to be applied

‘to the payment of those claims, -principal and interest.

Reéognition could have no effect extraterritorially to divest. .

property rights theretofore acquired in the State of New -

York. Vladikavkazsky. Ry..Co. v. New. York Trust Co.,

_ 263 N. ¥. at 378; Guaranty Trust Co: v. United States,

-304 UL S. 140, 141; Moscow Fire fneuranoe Co. vy. Bank

‘of New York and Trust Co., supra. ' ,

A disinterested. commentator has said: ‘‘So far as the

Writer is able to establish, not a single court of a major

country has ever, either before or after recognition of the

Soviet, réached the. conclusion that a Soviet decree. pur-

In-New York the rule i is the same whether or. not the foreign pre

. ‘enforcing their remedies in New York agairst the assets of a foreig

tion are of the same domicile as that of. the corporation. Hiberni

Lacombe, supra, 84 N. Y. at 375; Barth v. Backus, supra; 140 N. pee

This rule is recognized as the prevailing American daqctrine in Se ¢

Co. v. Dodd, Mead & Co., supra, 173 U. S. at 629. | of

Yermaloff and substantially .ail other creditors on behalf of whom this

brief hag been submitted, were, at the time their claims were filed, non-residents

of Soviet Russia.

~

(

°°

‘

290 U. Sat ae ene ee

. eG : : B)

° - . ’

porting. to cAnfiseate _private propérty could :affect any.

property other than that within Soviet Russia at the tim:

of confiseation’"™ (italics ours). * =~ sts.

bal

-D. “What has been, . said applies with even greater force to

those claimants who are merely awaiting payment ‘of meee

‘i 1931, when the Court of Appeals par that the -

claims should be paid, weth interest, it was applying a New |

York statutory rule which allows interest. as an incident «

to recovery upon amounts due for. a breach of contract a

whether liquidated or unliquidated. New York Civil Ptac-

po Act, § 480; Preston Co. v. Funkhouser, 261 N. Y. 140,

2, -affifmed 290 U.S. 163. “The award of interest is strictly

ae tint of state policy: Klazxgn Co.:v. Stentor Electric

Mfg. Co. . 313. UL S. 487; Funkhouser v. Preston Co. € supra,

-

A

z

The New York courts having, in pursuagcee of their set-

tled doctrine, made a thoroughly appropriate ee as

i7Borchard, C. \eetiiottate. Extroterritorial aid Domestic, $1. American

Journal of International Law 675° €1937).

The same prin¢ciple—the territorial limitation of RAS oe |

was the pasjs of decision in Compania ° Espanola v. Navemar, 303° U.

68, 75,. where attempted appropriation of a Spanish ship’ by the poetics?

government of Spain was denied effect in the Admiralty Courts of the United’

States because the ship’ had never been .surrendered’ to the Spanish -Govern-,

ment, nor ‘actually seized by that Government in its own territorial waters.

Oetjen v. Central Leather Co., 246 U.S. 297, referred: to on nine separate

pages of the Government's brief, has no application. ‘For, as has been fre-

quentl* recognized, it dealt with’ property situated within the confiscating

state at the time -it was seized. And on this ground the case has’ been @s-

tinguished from cases involving the questions with which we are concerned

(See, for example, U. S. v. Belmont, minority concurring opinion, 301 U. $

at 333.)

SThe tederal courts also allow interest in federaf liquidations. aogieee

Iron Co. v. Seaboard ‘Air Line, 233 U. S. 261, 266, 267; Consolidated ko

Products. Co. v. DuRois, 312 U. S. S10, 527, On the allowance of interest

as angessential element of compensation, sce Miller v. Robinson, 266 U. S.

243, 257-8.

“2 - 15

‘ . : “ } -)

to the distribution of property in their eustody-—by apply-

ing it tothe payment of creditors” valid claims—their dis-

position of the res must be respected. This would be 80 «x.

“even where the conflicting decrees are those of sister states

. —jurisdictions whose decrees are entitled to full faith and

credit. Clark vy, Wiliard, 294. U. S. at 213, 214. \ It is:

_ true, a fortiori, as to foreign countries whose decrees are.

allowed effeet only as.a matter of comity. Mose ‘ow Fire

Insurance Co: v. Bank of New. York and Trast Co.» 280

aN. Yoat Bld. |

\

.:. ms ground of deeision’does not depend

: . poliey against confiscation’? nor does it raise any conlict

- befween. Federal and State policy -on :tha rject (Speci i-

fications of Error, 1-7; Petitioner's Brief, 12-13). Nor does

any. “state

it interfere with anything that. the. Soviet government has °

done within its jurisdiction: Applicabla.to this case is the

language of Mr. Justice Stone referring to the facts before.

_the Conrt in United. States v. Belmont, 301 U. S. at 333:

“Ther? is no question here of re- -examgini g the validity of

- acts of a foreign state and no question of the United States’

declar ng and enforcing ‘a policy inconsistent with one that -*

the State of New York might otherwise adopt i in conformity

to its own laws and the Constitution. ”?

16 .

SECOND

The Litvinov assigninent created no ovdrriding Federal |

rights. ‘It did not purport to impair, and did not in fact

- impale, the rights of these creditors. :

‘A. The Litvinov assignment conveyed only.such rights as

- the Soviet government itself ee have successfully aeptenes, in

our -

- “4, The United States took only what Russia had to

transfer.. United States v. Buford, 3 Pet. 12, 30; New

Orleans ¥. United Statés, 10 Pet. 662.% It took subject

to any ‘“‘pregxisting infirmities’’. Guaranty Trust Co. v.

United States, supra, 304 U.. S, at 142. As Lehman, J,

. stated in the Moscow case, 280 N. Y. at 304: .The

- Unitéd States ‘‘invokes the aid of the court only to en-

force. the tights of the Soviet Government, whatever they

omight be, which the United States has acquired by -assigng,

ment, to property within this State and ‘Subject. to the law,

of the-State. “ ; ; .

2. The assiotuntat States what Russia transferred:

u <The amounts admitted to be due or that may be found

to be due’’ to the Russian Government ‘‘as successor of”

prior gov ernments of Russia, or otherwise, from American

nationals, including corporations, companies, partnerships,

re ass6 iations 3 © ©”? (BR. Wea).

These general terms may include a variety of things:

- claims for money deposited here by the Imperial Russiaw >

‘Government or the. Provisional Russian Government ( State),

of Russia v.National City Bank, 69 Fe@. [2d], 44; ef. Guar-,

anty Trust Co. v. United States, 304 U. 8. 126); judgments,

_ in tort Ye poutract ; -actions a here by ‘haee sine |

19'The nature ‘and legal effect of any contract; indeed, are not ee

‘dy its transfer tothe United States” (United States v. Nashville, etc., Ry. *

- Co., U8 U.S. 120, 125). eaiks :

due ' 17

ments (Le high® alley R. Co. v. State of Russia, 21 Fed.

[2d] 396, ¢. d. 275 U. S. 571); claims that had arisen out of

its own. business *ransactions here. before ‘recognition

(Russian Republic v. Cibrario, 235 N. Y. 255) .and local

funds .of extinct Russian corporations against which no |

beneficial rights are asserted in oir courts (United States

v. Belmont, 301 U. S. 324)..

‘oo

‘3. Nothing in th@language of the assignment discloses

an intention to transfer to the United States any of the

property situated in New York free from the preexisting

claims to which that property had been subjected by the

prior judicial acts of that State. As this Court has said

of this assignment: ‘‘There is nothing in either document

(the assignment of. Litvinov and™the acceptance by_the

President) to suggest that the United States was to ac-

quire or exert any. greater ‘right than its transferor, or -

: that the President by mere executive action purported ory

- intended to alter or diminish the rights of the debtor with

respect to any assigned claims, or that the United States,

as assignee, is. to do niore than he Soviet Government _

_ could have done after; diplom recognition—that is, col-

‘lect the claims in conformity to local law’’ ah tt Trust

. Co. y. United States, 304 U. S. at 143).”°

So far as the language of .the atelanié- assignment ex-

pressly touches the point, the indication is definitely the

other way, for the Soviet Gov érrment agrees ‘‘not to make’

ary claims with respect to * * * judgments rendered

or that may be rendered by American courts in so far-as

they relate to property, or rights, or “interest therein in

which the Union. of Soviet ‘Socialist Republics or -its

nationals ,may have had or. may claim to have an in-

- terest’? (R. 36a, 36b). ’

“Where the United States intervenes to protect its interest in. property

administered by a court of equity “its rights must be adjudicated in recogni-

tion of the rights and demands of others interested in the same property.”

‘United States v. Ansonia Brass Co., 218 U. S. 452, 472.

‘B. The Litvinov. assignment t and i its acceptance did not set

up an overriding federal policy. a

1. Even if .it ‘were assumed that the. Litvinov assign-

ment and the paper accepting it could have prev ided for

taking over this reserve fund in New York free and clear

of the rights. of creditors, quite obviously that was not

done here. ’

(a) There was nothing, as wehave seen, to show that

the United States intended to etilarge whatever rights tle

Soviet Gavernment. had. There was none .of the ‘Scon-

fliet”’, ‘*repugnanee”’ or ‘‘irreconcilability’* (Hines v.

| Davidowitz, 312 U.S. 52, 67) which is indispensable in

~ showing that a treaty or Sediaval law has overridden 4 state

act. There is nothing, in short, to suggest that the United

States, as assicnee, gould do more than ‘‘eollect the claims

in conformity to local law’’. Guaranty Trust Co. ¥. Un nited’

States, quoted more fully, supra, page 17.

(b) Had the assignment contained language ‘which

would. even have raised a doubt and thereby called for

recourse’ to® the principles of _constructionfae conclusion

~ would be unchanged. For ‘‘evern the language of a treaty

wherever reasonably possible will be censtrued so as not

_ to override state laws or to impair rights arising under

them’’ (Guaranty Trust Co. v. United States,-supra, 34 -

U. S. at 143; see Mso. Russian oe . v. United

States, 282° U. §. at 491, 492).°

" (e). These pee en are in no Wise affected : the

decision in United States v. Belmont, supra, 301-U. . ot.

Tliere the =question was solely as to the Seay of a

complaint which declared that the United States, under the

Litvinov assignment, was entitled to money that had beet

placed on deposit with the defendant bankers by ‘a Russia:

_ corporation, _ It did not appear that tha bankers ‘had afy .

as va

. . ©

i

19

interest in the matter “beyond that of a custodian’’. (p.

332). So far as the record disclosed, no creditors sought

payment out of the deposit. The court did not. pass upon—

on. the contrary, ,it-specifically eXcluded—a situation in

which the rights of creditors or other adversé claimants

might be ‘involved or impaired (p. 3338) :

“We do not sical the status of adverse

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 con- -~

‘stitute a cause of action against the respondents

(the bankers). ig

(¢) Government counsel sav (Brief, 54):

3

“Phe controlling principle is that the Constitu-

tion forbids the states to take. hostile action.

against a foreign power without the consent of

the-Federal government.’”*"

No hostility to Russia is evinced by refusing to treat it’

more favorably than any other friendly country or fhan a

sister state. There i is nothing in the assignment to require

that it be given any such preferential tre atment. Certainly,

there is nothing in the assignment to indic ate that Russia

could’ expect, or that the United States intended, that

vested rights here in the United States ‘would be destroy ed

or disregarded. ;

All that, the nited States agreed was to take what

rights the Soviet Government had and to notify that Gov-

ernment of any sums ‘realized by the Government of the

o °

*iThis is the same, argument that was urged in the Government’ s brief in

the Moscow case at 31, et seq.

.

.

claims, if there be any, of others not. parties to .

ee

20

9 ; . is

United. States’’ from the assignment to it of amanats

that-‘‘mway be-found-to be due’’ theoviet , Government.

(Assignment, R. 36e, 36d; italics aw : ?

In the Guaranty Prust Company case, the U nited States

made an arguijent similar to the one just quoted regarding

the Litvinov assignment. The predecessor of. the Soviet

Government had made a deposit with the trust company.

The trust company sought the protection of the Statute

of Limitations.- The United States contended (304 U. S.

at 13!) that ‘‘the statute is inoperative and ineffective

sinte it conflicts with and impedes the execution’ of the

Executive Agreement between the ‘Soviet Government and

tlie United States by. which ‘the assignment was effected.”

The court, noting that there was nofhing in the Litviney

assignment or, its: acceptance fo suggest ‘‘that the Presi- :

dent by mere éxecutive action purported ‘or intended to

alter or diminish the rights of the debtor with respect to

anv assigned claims”’’, i mean the contention (at, 136,

143).

aa If the Litvinov assignment had expressly stipulated

what the Government contends it did, it would still net

suflice to.disturb the rights of these creditors, for they are:

vested rights of property (EBttor v, Tacoma, 228 U.S. 148,

156) which the Fifth Amendment protects against uncon-

— destruction by Anh nited States. Meade v: Unided

States; 2 Ct. Cl. 224, : Osborn: v. Nic holson, 13 Wall.

654, 662 32; Lynch v. U Bel States, 292 U. S. 571, 579, 580;

Lanisey ille Bank v. Radford, 295 U. 8.555, 601-2.”

The, Fifth Amendment applies to friendly aliens as well

es to citizens (Russian Volunteer Fleet v. U ‘nited States,

282 U. S. 481, 489, 491-2).". - .

* 22In the Belmont case thig Court held een ‘on the Bee before it 10

question of the Fifth Amendment was presented, but it was careful to say:

“it does not appear that respondents [the banker defendants who had set "

the defense that the United States had no title] have any interest in the |

matter beyond that of a custodian. Thus far, no question under the Fifth

Amendment is involved” (301 U. S. at p. 332, italics ours).

CG :

e

——The-President’s mandate is ‘‘to exercise his executive

power under the Constitution’ (Myers v. United States,

272 U. S. 52, 123, italics, ours). Neither he nor Congress

_ ean give validity ‘to a treaty provision that attempts what

the Constitution expressly forbids (The Cherokee Tobacco,

11 Wall. 616, 621; Geofroy v. Riggs, 133 U.S. 258, 267). .

“Certainly a treaty’? made by the United States ‘‘could

not divest: rights of Property already vested in (within)

‘the State, even if the words ofthe treaty imported such"

an intention,’” said Chief Justice Taney in Prevost v. Gre-

- neaux, 60 U. 8. 1, 7, holding that the succession ‘of.a per-

son ‘dying in 1848 could net be disturbed by a treaty made

in 1853 although the right of succession was not asserted

until after the treaty.

This Court has consistently refused to construe the ‘Lit-

~ -yinov assignment as being intended to interfere -with cred-

itors” rights against assets in the United States. (l/nited

States v’ Bank of New York and Trust Co., 296 U. 8S. at 478-

480; United States v. Belmont, 301 U. S. at 332-3, 335-7." .

United States v. Moscow Fire Insurance Co., 309 U.S.

624; 309 U. S 697.) And even if the question were here a

" question de nov‘o, the same result would be required by these.

settled preference for constructions that donot raise consti-

tutional problems. ‘‘Even the language of 4 treaty when-

ever reasonably possible will be construed’’ so as not to.

~ destroy rights previously vested under State law ( expressly

stated, as the-rule for construing the Litvinov assignment,

in Guaranty Trust €o. v. United States, 304 U. S., at 1438,

qnoted supra, p. 18; and illustrated by the decisions in

Prevost wv. Greseana;\ supra; New Orleans v. United States;

10 Pet. at 731).

With.the demonstration that no Federal right was cre-

ated by the Litvinov assignment which could override the

_disposition made of this Tund’ by the New York courts,

1, eae .

. a) >

.:. C. J., written in 1931, that ‘‘there would be manifest in-

et

.Pe titjoner’ 8 suggestion that it may wish to re- litigate the

~elaims and re-examine their validity and amount (Brief,

pp. 10-12; especially footnote 2) is to be disregarded as

_ irreley ant.. No such, ground for continuing the action is

“ asserted in She aid etl dismissal (R. 50-1).

This blithe suggestion is ‘sale in 1941; after these claims

have. been examined, found to be valid,” and their validity

affirmed (in 1937) by the New York Court of Appeals (274

NN. Y. 545). Contrast the considered opinion of Cardozo,

equity if at this late date an ancillary receiver were ‘to

remit them’’—these very creditors—‘‘to their legal rem:

edies and thus compel them to prove anew”’ (255 N. Y.

at worn:

CONCLUSION

- The writ ‘should be dismissed, or. the judgment affjrmed,

on the authority of United States v. Bank of New. York

and Trust Co., 296 U.S. 463, 478-480; United States v. Bel

mont, 301 U. S. 324, 332-3, 335-7; Guaranty’ Trust Co. ¥.

United States, 304 U. S. 140, 142 3; United States v. Moscow

Fire Insurance Co., 309 U.S 3. 624; 309 U. 5, 697.

; Respectfully submitted,

CARL S. STERN ws"

Counsel for Victor Yermaloff ,

and other creditors

| : Amicus Curiae

~ Cant 8. Sterns Sarre ee a

Fr EDERIC C. Pitcher

of Counsel

23[t is to be assumed that the highly experienced persons to whom the

duty of adjudication has been, confided by the State of New York have

carried it out “withthonor and capacity” (Arkansas Commission vy. Thompse*,

313 U. S. 132, 139). °

—- + ee ee eee ee ee

3B

APPENDIX cen

Order and Judgment on Remitiitur Entered ‘on the Decision

- of the Court of Appeals of the State of New York, 255

N. Y. 415. (From United States v. ptewsx rarer hail 1 463—

Record on Appeal, 37-42.)

AT a Special. Term Part I of the Siinienia Court

of tRe State ‘of New York, held in and for

the County of New York, at the Coynty

Court House, in the Borough of Manhaftan,

City of New York, on the 13th day of July,

1981.

Present—Hon. Wruatam T. Cotuiss, Justice. AR.

(Tire as Betow.]

A motion ren been made for an ian resettling the

order herein, dated and entered June-16, 1931, upon the

remittitur of the Court of Appeals, .

?

NOW . ... (Recital of Moving Papers, omitted) it is

ORDERED that the said order of June 16th, 1931 be ,

and the same hereby is resettled so-as to read as follows:

ee ee $ . Dn

&

.

24

, wie

re

AT a Special Term Part-I of the Supreme Court

of the State of New York, held in and for

the County of New York, at the Countf

Court House, in the Borough of Manhattan,

1931,

*. Present—Hon. Ponts Incranam, Justice.

= =

i at

In the. Matter

of

The Application of Tae Prorte or tHe State or New

York, by James A. Beha, Superintendent of Insuranee

of the State of New York, for an order to take pos.

session of the property and conserve the assets for the

benefit of the creditors of the 2 ap

First Rv sstian Insv nee ComPany,

& .

‘ESTABLISHED IN 1827,

and the interests ‘of its policyholders, creditors,

stockholders and the public.

a

\

es

——

oO

ORDER ‘ON REMITTITUR OF THE 285

COURT OF APPEALS.

' The appellant First Russian Insurance Company Estab-

lished in 1827, and the appellant G. Frank Dougherty and,

the appellant James A. Tillman, having appealed fo the

Court of Appeals from an order of the Appellate Division

of the Superme Court, First Department, dated May 2.

City of New York, on the 16th day of June,

“

= mm 28: ea ats Oe lt lCUmlU Ml CW!

25

130, and aa in the office of the Clerk ‘of the said

ppellate: Division on June.11,.1930, whieh. order modified |

nd reversed in part and affirmed in part ‘an order entered

| the office of the Clerk of the County of New York. on

eptember 10, 1929, providing among other hings;for the

isposition of the surplus assets of the First, Russian In-

irance Company, .Established in. 1827, and sdid appeal

aving been argued at the Court of Appeals; and the Court

f Appeals having ‘on the 1ith day of February, 1931,

rdered, adjudged and décreed that the order of the ‘Appel

ite Division of the Sipreme Court. so appealed from’ as:

foresaid, and ‘the order. of the Special, Term of the Su:

reme Court entéred as aforesaid on ‘September ‘10, 1929,

p reversed : that an order be entered dissolving the injune.

on. containedein the erder directing-liquidation ; and that

1¢ surplus assets of the First-Russian Insurance Comnany

tablished in 1827 be — in aedordance. with its

pinion; and the said Court of “Appeals, having further

rdered and adjadged that the - proceedings herein be re-

litted to the Supreme Court of the State of New York

» be proceeded upon according to law, °

ay > \: ae

NOW, on. reading the remittitur of the C art of Appeals

led herein on the 1st day of May, 1931, and on readixg

@ said opinion of the Court of Appeals, and pon reaging

nd filing the notice of. motion herein: dated gens

nd the affidavits of Frederick B. Campbell, verif

1931, Mare D..Ratnér, verified April 22, 193

hchael J. ‘Imchanitzky, verified April 29, ‘1934,

f the service bahege the Ba ge affidavit

Frederic C. ~ehsccn verified May 2, 19: ; anil of Borti is\

[: Komar, verified May 25, 1931 it is

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96

ORDERED, ADJUDGED AND DECREED:

e That the order and judgment of the Court of ines

be, and the same hereby are made the- order and Judgment |

bee this- Court: ;

7 That the order of the Appellate Division of the Su.

| preme Court for-the First Department, dated May 29, 1930,

and filed and entered on June 11, 1930, in the office of the

* Clerk of said Appellate Division, be, and the same hereby

is Teversed.

3. That the order of the Special Term of New York

County, entered and filed in the office of the Clerk of the’

County of New ‘York on the 10th day of September, 192%,

“be, and the same hereby is reversed.

4, That the injunction ciatained _in_ the liquidation

order herein dated and entered. August 8, 1925, as resettled

by order dated. and entered September 11, 1925, be, and

_hereby is vacated and dissolved. .

5. That thre invichinebinl of Insurance of the State

_of New York be and he is hereby permitted, authorized

and directed to pay all claims of domestic. creditors in full

with interest whidh are determined ard which have not

heretofore baen i and all expenses of liquidation.

6. "That the Beperisitentant of Insurance be and -he is

hereby directed to ascertain, fix and determine as ‘soon as

possibie. the amounts of any and all. lawful and valid claims

heretofore filed heréin on. which attachments were obtaintd .

_ prior to the order directing liquidation in the above em

titled proceedings and as to such of said claims or debts

_as are found valid to pay the same in full with interest.

7. That, the Supetintendent. of Insurance be and he !s:

hereby permitted, authorized and directed as soon as pos

07 . r

sible. after the entry_of this. order to pay in full ‘with in-

* terest all claims heretofore ‘filed in this proceeding, which

have been determined and found by the Referee heretofore

appointed. herein to be valid debts: or obligations of :the

First Russian Insurance Company, Established. in 1827 or

of its United States Branch, regardless of the! fact, that

wome or all of such claims may be of foreign prisin and

might have heretofore — Saget as ‘foreign’? claims

or claims of ‘the ‘‘second”’ or ‘‘third’’ class by the Super-

‘intendent of Insurance or ne the said Referee. Peseen |

7

8 That the Superintendent of lnewvenns ‘be and he

hereby is directed to ascertain, compute and report to thi§

Court with his-recommendations as soon as possible, the

amount and validity of any and all other claims heretofor

filed in this’ preceeding as to such of: said claims as are

- found by him to be valid debts or obligations of the First

Russian Insurance Company, Established in 1827, or of its!

United-States Branch, to pay the same in ‘full with interest,

as aud wen directed, by this court regardless ‘of the fact!

that some or all of such claims may be of foreign origin:

and might have heretofore. md” of thind™ ‘*foreign’’

9 claims or claims of*the ‘‘second’’ orf ‘third’’ elass.** ¢.

9. The Superintendent of Insurance ‘shall set aside and

| Tetain in his possession funds sufficient to pay all claims.

heretofore filed in full with interest; the funds so retajned

shall be. known as the ‘‘reserve fund for ited claims.’’

,

10. Tn addition to the + peserve fund for filed ania,’

the Superintendent of Insurance shall set aside and ‘retain

*Claims in cofnection . with a : United States branch of eee insurance

company were divided into ' three, general classes: First, upon policies issued

‘0 residents or citizens by the United States. branch; second, upon policies

issued by the Gempany outside of the United States’ to persons: residing

“within the United States; third, upon policies issued to non-residents of this

country by foreign agencies of the insurance company. , Matter of People

(Norske Lioyd Insurance Co.), 242 N. Y.-148, 155.

°

os a P

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Aes 88

in his possession funds sufficient to pay; (1) all further

reasonable expenses of liquidation; (2), all taxes whieh

may then be due or become due to the Government of the’

United States and the State of New York; and. the funds

- 80 set aside-and rétained shall be known as the reserve ,

- fund for taxes and Peacoat of liquidation. ”’

‘11. The surplus: seme then remaining in the posses:

sion of the Superintendent of Ingurance over and above |

‘the sums set aside and retained by him as and for the

“<reserve fund fer filed) claims’’ and the ‘“‘réserve fund

‘for taxés and expenses of. liquidation, ” shall be known and

described as the ‘‘aterued surplus fund’’ of the First Rus-

- sian. Insurance Company, Established ‘in 1827 and its

— United States vesharenes. in the above entitled proceeding. - |

12. The ‘accrued surplus fund”? as hereinabove “de.

fined and increment received thereon shall be held: by the

_ Superintendent of Insurance for a period of four months”

after the date of ‘the entry of this order, for the purpose

-of and subject to attachment and/or execution by creditors

or other persons, ‘firms or corporations having HE 1ims

against the First Russian Insurance Cornpany, Established

in 1827 orits United States Branch, which claims were not,

prior to the date of the entry of this order, filed with the.

Siaperintendent of Insurance; and etch and every cred-

itor or other person, firm or corporation having or assert:

ing. such claims against the First Russian f Insurance Com.

pany, Established in 1827, or its United States Branch,

shall be permitted to maintain an action against said Coni-

.pany in the Courts of- this State through levy of attach

ment or execution or otherwise against said “acerued -

surplus fund’’ in the nanner provided by law.

| of the said period of four

his ‘order, the Superintendent

is hefeby: authorized and .di-

13. After the expiration

months after the entry, of

of Insurance’ shall. and he

29

rected te pay over to the First Russish Insurance Com-

pany, Established in -1827, as represented ' by a quorum of

its boafd of directors, consisting of Leonid Davydoff,

Count Alexandre Mordvinoff and Victor de Yermoloff, .any

balanée of the said ‘accrued surplus fund’? tlien remain- .

ing in his. hands which has not been levied wn by virtue

of warrant of attachme nt or execution.

“4M. The ‘reserve fund for filed claims’? shall be held -

separate and apart from the ‘‘accrued surplus fund’’ and

from any other funds. or assets of the .First. Russian. In-

y

surance Company, Established in, 1827 and its United “

.States Branch, and said ‘‘reserve fufid for filed claims!’

shall not be subject to levy by warrant, of attachment or

execution. : *

15; If any: claim heretofore filed herein. is disallowed.

and the disallowance thereof &/nfirmed by a final order

of the court, then the Superintendent. of Insurance shall

transfer the’ amount set aside for the payment of such

disallowed claims to the ‘‘acerued surplus fund’? and_ it.

shall thereupon: become and be held and disposed of in

the manner herein ‘provided -for the disposition | of the

a ‘‘acerued surplus rane. "

=

‘

" 16. If any claim becetefers filed is allowed in a reduced,

‘amouat and the: allowance in such reduc&l amount con-

firmed by a final order of the court, then the Superinten- _

dent ‘of Insurance shall transfer the excess of the amount

_ Set aside for the payment thereof over-and above the

amount necessary to satisfy the claini“in its then. reduced

amount to the ‘‘accrued surplus fund,’’ and it shall there-

upon become and be held and disposed of. in the manner . ©.

herein: provided for the disposition of the ‘said “accrued

surplus ‘fund’’,

‘17, After the final disposition of all claims heretofore —

. filed herein either by peymnent thereof or by a final order

ot

fund’’, - ;

“from March 7 is 1929 down to-the date of thiis order.

a]

2

of Phe court confirming thé disallowance thereof, the So-

pgrintendent of: Insurance is authorized and directed to

ifansfer to the ‘‘accrued surplus fund’’ any balance of

aid ‘‘reserve fund for filed claims”’ and any other funds

or assets of the said Company then. remaining: in his hands

after making reservation of funds sufficient to pay his

proper charges and ex cpensess and said sums so transferred

shall the -Feupon become part of the said ‘‘acerued surplus

fund’? and be held and disposed of in the manner herein

provided for the disposition of the said ‘‘acerued. surplus

.

a

_18/ The Superintendent of fancbuneb 3 is hereby directed

to makt and file within. forty-five days from ‘the date of

this order an account: of his proceedings as liquidatos of

the. First Russian Insurance Company, ‘Established*in 1827

19. Any party to this proceeding may hereafter apply

at the ° at of this decree for such further ‘relief as he

may be advised. - Pte ede ent

: Enter,

‘ . P, &

J. §.¢.

_ Enter |

W. T.C.

J.S.C