Leavitt v. Dabney — 30 N.Y. Super. Ct. 350

Majority

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Rufus W. Leavitt et al. plaintiffs, vs. Charles H. Dabney et al. defendants.

Headnote

1. The mere wrongful putting in circulation of bonds issued by foreign governments, payable to bearer, and transferable by delivery, by an agent or functionary of the obligors, having them in his custody, will not, it seems, invalidate the title of a purchaser for value and without notice. This is upon the principle applicable to the diversion of notes, or the wrongful issue of stock, and is carried much further in respect to stolen bonds of a similar character, Per Mokell, J.

2. A court of equity has no power to compel the payment of money, in the hands of an agent of a foreign government, to creditors of such government.

3. Our court's have no jurisdiction over foreign powers; and being without jurisdiction over the parties, they cannot assert an authority over the property of such parties, notwithstanding it is within our territorial limits.

4. There is no proceeding in rem, unless in actions over whose parties we have acquired or can acquire jurisdiction.

6. Agents of foreign governments, acting under instructions from those governments, would violate their trust and duty if they disregarded or disobeyed those instructions; and they have no right, either in respect to the interests of creditors or otherwise, to inquire into, or question the sufficiency or propriety of, the reasons assigned by their principals, for any direction they may see fit to make respecting the agency; nor indeed to require any reasons whatever. Per Monell, J.

6. There is no law under which moneys belonging to foreign governments, in the hands of their agents here, can be impounded or attached at the suit of creditors of such foreign governments; or can in any other way be reached or applied to the payment of debts existing here against the foreign principals. Per Mohell, J.

7. The only jurisdiction which by any pretense, a court of equity can exercise in such a case, is in exerting its restraining power to prevent, pending the litigation, a disposition by the agents, of a fund provided for the payment of interest, which might deprive the plaintiffs of the benefit of such judgment as they may obtain.

(Before Monell, J. at special term,

March —, 1868.)

Motion to continue an injunction.

In July, 1866, the Peruvian and Chilian governments issued conjointly, their bonds of five hundred and a thou

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sand dollars each, amounting in the aggregate, as alleged, to two million, two hundred thousand dollars. The bonds state that the governments of Peru and Chili had authorized the minister plenipotentiary of Peru and the charge d’ affairs of Chili, accredited to the government of the United States, to raise funds and to issue bonds to represent the amount raised. The bonds then declared that said governments of Peru and Chili were indebted to the bearer in the sum of five hundred dollars, (or one thousand dollars,) in American gold. Interest coupons were attached payable on the 1st day of January and July. They were made payable upon the following, among other conditions, namely: “That the bonds will be counter-signed by Messrs. Dabney, Morgan & Co. financial agents of the governments of Ghili and Peru, at whose office the service of this debt will be performed.” “The financial agents shall keep a register of the bonds actually issued, subject at all times to the inspection of the bond holders.” After providing for the mode of payment, the bonds state that, “ in addition to the public faith pledged by the republics of Peru and Chili and the general hypothecation of all national incomes to the security and service of this debt, the government of Peru hypothecates specially and exclusively to the payment of its interest and redemption five hundred thousand tons of Peruvian guano from the deposits of the Chincha Islands, and gives to each holder of these bonds and their legal representatives, the right to take possession of said guano and export it in the quantity required, at the price of twenty-five dollars in gold, per ton, on the failure of the above mentioned governments to pay the interest or effect the redemption of the bonds, or any part thereof, in the manner hereinbefore provided.” The bonds were signed “F. S. Barreda,” with the seal of Peru, and F. S. Baruaga,” with the seal of Chili, and countersigned “Dabney, Morgan $ Go., financial agents.”

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It was alleged by the plaintiffs that they were owners and holders of four hundred and sixty four of such bonds, for $1000 each, and of seventy-two of such bonds, for five hundred dollars each. That previous to their making the loan upon such bonds, and in view .thereof, they were assured by the defendants that the . bonds- were valid, and properly issued, and a good security. Six months interest it was alleged,' would become due on the 1st day of January, 1868, and the plaintiffs allege that the defendants had in their hands the amount in gold sufficient to pay such interest, having received the same for that purpose from the republics of Chili and Peru as financial agents thereof, and that the same was held by the defendants expressly for that purpose. It was further alleged that the defendants had informed the. plaintiffs that they would not pay such interest falling due on the 1st day of January, 1868. ' '

The -relief demanded was that the defendants be restrained from parting with such money received by them for the payment of such interest; that a receiver be appointed ; and that the money in the hands of the defendants be applied to the payment of such interest. The suit was •commenced on the 31st of December, 1867, and before the interest became due, and- the right to'- an injunction was cláimed on the ground of the defendants’ announcement that they would not pay the interest falling due on the 1st day of the succeeding January.

Upon these facts a preliminary injunction was granted.

The motion now is to continue the injunction pending the action.

Upon the motion, the deposition of Mr.. Morgan, and of the..defendants, was-read. He stated, among other things, that on the twenty-third of December, 1867, the defendants received notice from the Peruvian minister, not to pay the interest cupons, falling due on the 1st of

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January, .1868, on the ground that the bonds held by the plaintiffs had been unlawfully issued; that they had been, deposited in Mr. Milhaus’ hands, who contrary to instructions and agreement, had misappropriated or misapplied them, and had no authority to part with them. He further stated that the money in their hands was the money of the Peruvian government.

H. A. Oram, for the plaintiffs.

C. Tracy, for the defendants.

Ho claim is made against the defendants in this case, founded upon any representation alleged to have been made by them in respect to the validity or value of the bonds. If any such claim was made, the representations stated to have been made by the defendants' would, I think, fall far short of being sufficient to sustain a cause of action. They were merely expressive of an opinion of, and a belief in, the validity and value of the bond, and contain no evidence of any fraudulent purpose on the part of the defendants.

Hor is there any question properly involved, in respect to the bona fide ownership of the bonds by the plaintiffs. For the purposes of the action, and upon the proofs before me, it appears that they made advances upon the security of the bonds, which were of the genuine issue of the Peruvian and Chilian governments, without any notice that they had been, as is now alleged, misappropriated or misapplied by some functionary or agent of those governments. Having received the bonds under such circumstances, it is not probable that the mere wrongful putting in circulation of bonds payable to bearer and transferable by delivery, by an agent of the obligors, having them in his custody, would invalidate the title of a purchaser for

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value and without notice. This is upon the principle applicable to the diversion of notes, or the wrongful issue of stock; (Merchants’ Bank v. N. Y. and N. H. R. R. Co., 13 N. Y. Rep. 599 , 611,) and is carried much farther in respect to stolen bonds of a similar character.

-¡Nor do I perceive that any inquiry into the sufficiency or insufficiency of the reasons assigned by the defendants for the non-payment of the January interest, is legitimately involved in the motion now before me. I am bound,, perhaps, to assume that such reasons were in fact sufficient, or were, at least, regarded as sufficient by the Peruvian and Chilian governments, to authorize their witholding payment. At any rate, the defendants, the agents of, and acting under instructions from -those governments, would violate their trust and duty, if they disregarded or disobeyed those instructions; and they had no right, either in respect* to the interests of creditors or otherwise, to inquire into or question the sufficiency or propriety of the reasons assigned by their principals, for any direction they might see fit to make respecting the agency; nor, indeed, to require any reasons whatever.

The sole question then is, have the plaintiffs stated facts which, in their legal effect, are sufficient to authorize the interference by a court of equity, to compel the payment of money, in the hands of an agent of a foreign government, to creditors of such government.

So action can be sustained by these plaintiffs -against the Preruvian and Chilian governments. Our courts have no jurisdiction over foreign powers, and disputes or claims arising between or in favor of our own government or the citizens of our government and a foreign power can be settled only by treaty or by war.

Sor am I aware of any law under which the moneys in the defendants’ hands can be impounded or attached at the suit of a creditor; or can in any other way be reached

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or applied to the payment of debts existing here against their foreign principals ; and it is, therefore, probable that the plaintiffs are without remedy, beyond such as is provided in the bond, or such as they may induce the government of the United States to resort to in their behalf. The only jurisdiction which by any pretense a court of equity could exercise, in a case like this, is in exerting its restraining power to prevent, pending the litigation, a disposition of the fund provided for the payment of interest, which might deprive the plaintiffs of the benefit of such judgment as they might obtain. So far as any other relief is concerned, the remedies at law, would if the plaintiffs have any remedy, be quite adequate.

But while courts of equity recognize and protect rights and redress wrongs, their jurisdiction over these subjects is confined to such rights or wrongs only, as are exclusively and exactly distinguished from that portion of remedial justice which is exclusively administered by courts of common law. And while courts- of equity administer remedies for rights which are not recognized by courts of common law, the foundation which sustains the ■jurisdiction of either court is the same; and the-cause of action must be such that the court can take hold of it and apply appropriate remedies and give appropriate redress. There is no principle of equity which will sustain its assuming jurisdiction merely because at law there is no remedy; unless the facts are such as make up. a case exclusively for equitable relief. In other words, there must be a cause of action, whether resort is had to the one forum or the other.

In this case it seems quite clear that the plaintiffs have not made out a claim for the equitable ‘relief they seek to obtain. As before remarked, our courts have no- power over the foreign principals, under whose authority and pontrol the defendants can alone rightfully act. And

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being without jurisdiction over the parties, we cannot assert an authority over the property of such parties, notwithstanding such property is within our territorial limits. The fund in question is the property of the Peruvian or Chilian governments, and not the property of the defendants, and there is no proceeding in rem unless in actions over whose parties we have acquired or can acquire jurisdiction.

I cannot, therefore, discover any ground upon which this action can stand. I have endeavored to find some analogy in principles applicable to equitable assignments or equitable liens, but without success. The plaintiffs cannot reach the fund, because they cannot reach its owners. It is a misfortune, it may be a wrong, but our courts are without power, and the plaintiffs must be left to pursue such other course as may be open to them. If this act of repudiation is without justifiable reason, it should properly be, (if not & eausus belli,) the subject of diplomatic negotiation between these foreign powers and the government of the United States.

The injunction must be dissolved, with the usual motion costs.