Taft v. Marsily — 13 N.Y. St. Rep. 537

Majority

p. 537

Enos N. Taft, successor to John Todd, as assignee in bankruptcy, etc., Resp’t, v. Ferdinand N. Marsily, App’lt.

(Supreme Court, General Term, First Department,

Filed January 23, 1888.)

Headnote

Bankruptcy—Right of assignee in bankruptcy to collect moneys-arising FROM THE DISTRIBUTION OF THE SURPLUS OF THE GENEVA AWARD.

The distribution of the surplus of the Geneva award to those who had paid enhanced premiums of insurance was a mere bounty by the government of the United States to those who had perhaps suffered during the war, but had no claim either legal or equitable upon anybody for indemnification, and such a claim dies not pass to an assignee in bankruptcy appointed before the subject of the bounty reaches the bankrupt.

The defendants, Louis Engelhom & Ferdinand A. Marsily, wepe on the 13 th day of April, 18G1, copartners in business and continued such until August, 1867.

They between the months of May, 1861, and May, 1S65, in the course of their business paid to underwriters sundry premiums for insurance against risk of capture and destruction of the merchandise insured by any of the cruisers of the Confederate States of America.

In August, 1867, Engelhom & Marsily duly filed their petition in bankruptcy and such' proceedings were thereupon had that the said Engelhom & Marsily were adjudicated bankrupts, and an assignee appointed, of whom the present plaintiff herein is the successor, and an assignment was duly made executed to the said assignee in bankruptcy as provided by the laws of the United States in that case made and provided, which purported to convey and assign all the estate, real and personal, of the said defendants, including all the property of whatever kind, of which they were possessed or in which they were interested or entitled to have on the 12th day of August, 1867.

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On or about the 8th day of May, 1871, the United States of America and the Queen of Great Britain concluded at the city of Washington a treaty, whereby arbitrators were to be chosen to adjust the differences between the two countries, arising from the alleged breach of the obligations resting upon Great Britain as a neutral power during the late rebellion in the United States, in permitting the confederate government to fit out and harbor their cruisers in British ports; thereafter such arbitrators were appointed and made their award known as the “ Geneva award ” in favor of the United States, in pursuance of which the United States, on or about October 1st, 1873, received the sum of fifteen and one-half millions of dollars, as satisfaction for the losses suffered by her citizens from the acts of said cruisers.

No part of said sum was paid on account of premiums for insurance of property against loss or capture on the high seas by so-called confederate cruisers, but the whole of said sum was paid by and received from Great Britain in satisfaction for losses directly resulting from damage caused by so-called confederate cruisers, the government of Great Britain having refused to entertain and pay claims for premiums paid for insurance of property such as were paid by the defendants Engelhorn & Marsily, as above stated.

Thereafter, in the year 1871, an act of congress was passed, entitled “An act to establish^ the Court of Commissioners of Alabama Claims,” which directed the courts to receive and examine all claims resulting from damage caused by the so called “insurgent cruisers” but gave no jurisdiction to receive and examine any claims for premiums paid for insurance against loss or capture on the high seas by so called confederate cruisers, and after the functions of the court were ended, and all claims allowed paid, there was a portion of the said fifteen and one-half millions of dollars left unexpended,

In July, 1882, an act of congress was passed, entitled “An act to re-establish the Court of Commissioners of Alabama Claims, for the distribution of the unappropriated moneys of the Geneva award, and by the provisions of this act, the moneys paid by the defendants Engelhorn & Marsily, for premiums for insurance as above mentioned were made payable in said Courts of Commissioners of Alabama Claims, out of so much of said Geneva award as then remained in the treasury of the United States.

In pursuance of the provisions of that act, the said defendants, without the knowledgment of the plaintiff, filed their claim in said court to recover the war premiums paid by them, and such proceedings were thereafter had on

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said claim that a judgment against the United States and in favor of the defendants was rendered in April, 1884.

The plaintiff brought this action, claiming the right to receive said money from the United States, because of the assignment in bankruptcy made as above set forth in August, 1867.

The learned justice who tried that cause having decided in favor of the plaintiffs, from the judgment thereupon entered, this appeal is taken.

D. M. Porter, for app’lt; Henry D. Hotchkiss, forresp’t.

The single question presented for decision upon this appeal is, has the assignee in bankruptcy of the defendants, Engelhorn & Marsily, the right to collect as such assignee the moneys awarded to them for war premiums pursuant to the provisions of the act of congress of 1882.

In the consideration of this question it must be borne in mind that, in the proceedings of the United States government under the treaty of Washington, as those proceedings 'finally shaped themselves, the government was as the trustee for its citizens attempting to enforce their claims for losses sustained because of the breach of the law of nations by Great Britain, which claims could only be enforced through its intervention, and that the money paid under the Geneva award was paid to satisfy claims of individual citizens of the United States who had suffered loss by reason of the violation by Great Britain of the law of nations, and not by way of indemnity to the United States government.

There was, therefore, a moral obligation upon the part of the United States government when they received the amount awarded as indemnity to its citizens for a certain ■class of losses, to devote the award so received to the purposes for which it was made. In fact the government of the United States became the trustee for these parties whose claims for indemnity it had enforced. Gracie v. The New York Ins. Co., 8 Johns., 237 ; approved, Comegys v. Vasse, 1 Peters, 193.

When the United States government had satisfied all these obligations, there.was no further duty imposed upon it so far as its own citizens were concerned, in respect to the funds in its hands, if any remained. Its duties as trustee had then terminated, and what was done by the United States with such balance was a matter of no concern to any person or government, except, perhaps, that of Great ■ Britain.

Citizens of the United States who had paid war premiums^ ■during the rebellion occupied a very different position in

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respect to the obligations of its government to them, from those who had suffered losses for which the government had received compensation.

In the one case, no duty of reimbursement existed, any more than existed in favor of those who had paid during the war, war taxes which were largely increased undoubtedly because of the action of Great Britain, whereas, in the other, the United states government, in insisting upon indemnity, claimed to represent the losses sustained by its citizens, and such losses formed the basis of its recovery.

The respondent places his right to a recovery upon the grounds stated in an opinion given by Mr. Commissioner French, - one of the members of the court of commissioners of Alabama claims, sustained, as it is claimed, by the authorities cited by him. A large number of authorities are cited and commented upon in the learned opinion referred to, but it seems to us that an examination of those cases demonstrates that a condition of affairs existed in each of the cases cited differing radically from the facts involved in the case at bar.

Each one of these cases depended upon a claim arising out of an unjust capture.

Mr. justice Story, in delivering the opinion of the court in the case of Comegys v. Vasse (supra), says: “The right to an indemnity for an unjust capture, whether against the captors or the sovereign, whether remediable by his own courts or by his own extraordinary interposition and grants upon private petition or upon public negotiations, is a right attached to the ownership of property itself.”

The case then under discussion was one in which our government had demanded indemnity from the government of Spain, because of the illegal capture of vessels and cargoes of American citizens by the latter, and this claim had been recognized by the Spanish authorities. Such indemnity had been demanded by our government as a matter of right and as such it had been granted by Spain, and hence our-government became the trustee for those whose claims it-had enforced by means of the treaty.

The case of United States v. Hunter (5 Mason, 62), depended upon a claim arising under the same treaty.

The case of Milnor v. Metz (16 Peters, 221), was one in which Gauger in the service of the United States, receiving-salary allowed by law, performed extra services, for which the compensation was not provided, and his claim for payment therefor, was for that reason disallowed by the accounting officers of the treasurer, congress having by special act provided for a payment, it was held, that the right to-payment had passed under an assignment of the claimant’s estate and effects made by the claimant in compliance with

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the insolvent law of Pennsylvania, where he resided. This case was decided upon the principle that an equitable claim which could not be enforced in law, i. e., as against the government of the United States, or a foreign government, but existing at the time of the assignment, and afterwards realized, passes to the assignee.

The case of Phelps v. McDonald ( 99 U. S., 298 ), was one in which a claim existed against the United States, of which the commission organized under the treaty between the United States and Great Britain of May 8, 1871, took cognizance and for the payment of which an award had been made.

In the case of Leonard v. Nye ( 125 Mass., 455 ), the claim which was held to have passed by assignment, was one of those embraced within the provision of the award and arose out of an unjust capture. In the case of Bachman v. Lawson ( 109 U. S., 659 ), the claim also was one arising from an. unjust capture. Each and every one of the forgoing cases depended for its decision upon the principle that the claim was-founded upon the law of nations according to which a foreign government is bound to indemnify against unjust capture, and it was the recognition of this law which formed the basis of the Geneva award. It may be true that remuneration cannot be recovered against the foreign government by action at law; but if justice be not done, the government of the injured citizen in the exercise of its discretion, will protect and enforce his rights, a duty which the government of the United States attempted to fulfill by the treaty of Washington, towards the citizens who had been injured by the violation of the law of nations. by Great Britain. ■

The cases cited, therefore, have no bearing upon the question- now before us for decision. In the case at bar it is not pretended that under the law of nations any person who paid war premiums had any claim against the foreign government as in the case of capture. Indeed the unani-mous decision, of the Geneva tribunal was hostile to this view, and it was expressly held that such claims presented no demand which was recognized by the law of nations, and they were accordingly entirely excluded from consideration by that tribunal. Those persons, therefore, who had paid enhanced premiums of insurance had no claim against the foreign government such as exists and is recognized by the law of nations in the case of unjust capture. One important point which must not be lost sight of in the consideration of this question is the fact that even in the case of an unjust capture, the claim of the party injured is liot primarily against his own government, but against the foreign government which has, in violation of the law

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of nations, inflicted the damage, and the government of the party injured is only the agent through which the demand is enforced, and a claim arises against it only when collection has been made from the off ending foreign government.

Because of enhanced premiums of insurance paid, no claim arises as we have seen .against the foreign government, because of that fact the party paying had-no demand to be enforced, and if any payments were made on that account by the offending foreign government it would be a mere donation having no foundation in right.

It is undoubtedly true that if the government of Great Britain had made a payment to our government out of good will, because of claims for enhanced premiums of insurance, that upon the receipt of that money a moral obligation would have rested upon our government to distribute such fund amongst those who came within the class, but. there being no claim existing in favor of these parties against the foreign government which our own government could or did enforce, there was not even a moral obligation upon our government to devote money, which had been paid to them for one purpose to another object.

In its whole course against Great Britain, the government of the United States was enforcing rights recognized to exist under' the law of nations and all that was allowed was indemnity for the violation of those rights.

The distribution of the surplus of the Geneva award to those who had paid enhanced premiums of insurance was, therefore, the giving of a mere bounty to those who had perhaps suffered during the war, but who had no claim, either legal or equitable, upon anybody for idemniflcation.

To hold that such a claim upon the charitable consideration of the government could pass by assignment would make it necessary for us to decide that a pension, granted upon the ground of disabilities incurred in the military service, would pass by assignment made subsequent to the rendition of the service and before the right to a pension had been given by the government.

• It seems to have been assumed by the learned commissioner that the case of Emerson's Heirs v. Hall (13 Peters, 410), is seemingly in conflict with the cases cited by them. Upon examination we fail to find any such seeming con-, flicfc. The case certainly is in conflict with the conclusion reached by the learned commissioner, but the cases cited to support that conclusion proceed upon facts essentially different from those before the court in-the cases which, were then and' are now under consideration.

In the case of Erwin v. The United States ( 97 U. S., 392 ),

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it was held that there was a claim against the government, and that it passed to the assignee.

In the case at bar there is no claim against anybody because of the alleged harm done, and consequently there was nothing upon which the assignment could act.

The judgment appealed from must, therefore, be reversed and a new trial ordered, with costs to the appellant to abide the event.

Daniels and Bartlett, JJ., concur.