Hewitt v. Speyer

ROGERS, Circuit Judge (after stating the facts as above). The contention of the complainant is: That the republic of Ecuador intended that the customs revenues should be an effective security for the railway bonds some of which the complainant holds; that these revenues were constituted such security by a special law of Ecuador which must be so construed as to make the security effective: that the technical rules of the Civil Code of that country regarding mortgage, pledge, or guaranty are inapplicable, having been superseded by the special law: that the customs revenues, thus impressed with a charge in complainant’s favor, have been traced into the hands of the defendant Speyer & Co., who took with full knowledge of the bondholders’ claim thereto; arid that under the circumstances the complainant is entitled to an equitable lien on the fund under well-settled principles of equity. He further contends that he is entitled to enforce in this court the lien he claims, irrespective of whether or not there was a valid charge or lien recognized under the law of Ecuador, for the reason that, the parties having agreed that the customs revenues should be a security for the bonds, this court, having jurisdiction of the parties and the fund, can enforce such agreement. In other words, the gravamen of the claim which the complainant asserts is that Ecuador violated his rights under the law of that country by performing its contract with the defendant Speyer & Co., by repaying the loan out of the customs revenues, instead of discharging its obligation to the bondholders on its guaranty of the bonds, which it is asserted had been given a prior lien on such revenues. The cause of action is tints based upon a claim that moneys which should have been paid to the bondholders have been wrongfully paid by the government of Ecuador to the defendant Speyer & Co. [370] It cannot be denied that the'moneys which complainant seeks to reach the defendant Speyer & Co. received under a contract executed in Ecuador, on behalf of its government, and that money so paid was collected in Ecuador by its government from export duties and liquor taxes, and was paid over by its officials by depositing the same in the Banco del Ecuador to the credit of Speyer & Co. So that the question which'this court has to pass upon is whether it is within its jurisdiction to determine whether the government of Ecuador paid to Speyer & Co. money which it had set aside as a security for the payment of ■the holders of the first mortgage bonds of the Guayaquil & Quito Railway Company, or in respect to which it had created a lien in their favor. , If it is within the court’s jurisdiction to consider this question, then it will be necessary to pass upon a number of other questions necessarily involved; but, if the jurisdiction does not exist, we need not inquire further. From what hap been stated, it is evident that the title of Speyer & Co. to the money herein involved is derived from the government of Ecuador and that the court cannot grant the relief invoked without sitting in judgment upon the sovereign acts of that nation. This very clearly it is not within the province of the court to do. In Underhill v. Hernandez, 65 Fed. 577, 13 C. C. A. 51, 38 L. R. A. 405, decided in 1895, this court said that: “Considerations of comity, and of the highest expediency, require-that the conduct of states, whether in transactions with other states or with individ•uals, their own citizens or foreign citizens, should not he called in question by the legal tribunals of another .-jurisdiction. * * * It would be not only-offensive and unnecessary, but it would imperil * * * governments, and vex the peace of nations, to permit the sovereign apts or political transactions of states to be subjected to Ore examination of the legal tribunals of other states.” And this the Supreme Court affirmed in 168 U. S. 250, 18 Sup. Ct. 83, 42 L. Ed. 456, where Chief Justice duller, writing for the court, said: “Every sovereign state is bound to respect the independence of every other sovereign state, and the courts of one country will not sit in judgment on the acts of the government of another done within its own territory. Redress of grievances by reason of such acts must be obtained through the means open to be availed of by sovereign powers as between themselves.” These cases show that the plaintiffs’ claim cannot be adjudicated -in an American court, because to do so would make it necessary to pass on the right of the government of Ecuador to do what was done. And see American Banana Co. v. United Fruit Co. (C. C.) 160 Fed. 184, which was affirmed by this court in 166 Fed. 261, 92 C. C. A. 325, and by the Supreme Court in 213 U. S. 347, 29 Sup. Ct. 511, 53 L. Ed. 826, 16 Ann. Cas. 1047. The law in England is to the same effect. In Webb’s Pollock on Torts, p. 137, Sir Frederick Pollock states the rule as follows: “If we may generalize from the doctrine of our own courts, the result seems to be that an act done by the authority, previous or subsequent, of the government of a sovereign state in the exercise of de facto sovereignty, is not examinable at all in the courts of justice of any other state. So far forth as it [371] affects persons not subject to the government, it is not examinable in the ordinary courts of that state itself. If and so far as it affects the same state it may be, and in England it is, examinable by the courts in their ordinary jurisdiction.” The law thus stated is fully supported by the 'English decisions. Duke of Brunswick v. King of Hanover, 2 H. I,. Cases, 1; Secretary of State v. Kamachee, 13 Moore, Privy Council, 22; Buron v. Denman, 2 Exc. 167; Dose v. Secretary of State, L. R. 19 Eq. 509. We take the principle to be incontrovertible in both countries that our courts, not only will not adjudicate upon the validity of the acts of a foreign nation performed in its sovereign capacity, but also that persons involved with such government in the performance of such acts cannot be subjected to a civil liability therefor. It is true the complainant asserts that his right to recover against the defendants may be sustained without any adjudication as to the legality of the acts of Ecuador; and in complainants’ brief it is said that “it is not complainants who are attacking the validity of any government acts of Ecuador.” The justification for this statement the complainant no doubt finds in his admission that the government of Ecuador did appellant no wrong in entering into the contract with the defendant Speyer & Co., because that contract was made subject to the prior rights of the bondholders, arid not in disregard of them, and “in this form there is nothing unlawful per se in the Speyer contract.” The statement that complainant is not assailing the legality or propriety of the acts of the government of Ecuador does not in all respects accord with the facts; for it is evident that the legality of the use by the government of the customs «duties is necessarily involved in any- decision that Speyer & Co. did not have the right to receive the money, for if it was wrong for Speyer & Co. to receive it as against the complainant and the other bondholders, it was wrong for the government to pay it. There can be no escape from the proposition that either the government of Ecuador wrongfully diverted from the bondholders the moneys paid to Speyer & Co., in which event the courts of the United States must disclaim any jurisdiction to adjudicate upon the matter, or such diversion of the revenues was lawful, in which event the complainant is without a cause of action. The United States Mortgage & Trust Company is a party defendant, and, it is alleged, was requested to bring an action to enforce the bondholders’ rights to the funds in suit and to prevent a distribution thereof, and refused to do so. This allegation it denies, and it declares that no request signed and executed in' the manner provided for in the mortgage was ever presented. However that may be, it is very evident that the objection found fatal to the maintenance of the complainant’s suit as against Speyer & Co. is equally fatal as against the United States Mortgage & Trust Company, as trustee. In arriving at the conclusion we have reached, that the courts of this country are unable to adjudicate upon the complainant’s claim, it is hardly necessary to say that this does not leave the complainant rem-ediless, if his rights have in fact been violated. If the government of Ecuador has violated his rights, it is within the province of another [372] department of tire government of the United States to bring the matter, if it deems justice so requires, to the attention of the government of Ecuador. Judgment affirmed.