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Banco Nacional De Cuba v. Farr

decided: July 31, 1967.


Waterman, Moore and Hays, Circuit Judges.

Author: Waterman

WATERMAN, Circuit Judge:

This is an appeal from a judgment of the United States District Court for the Southern District of New York dismissing the appellant's complaint and the defendant's complaint against impleaded third parties. This litigation has been the subject of three much-discussed previous opinions. In the original hearing of the action before the district court summary judgment was granted in favor of the defendants, D.C., 193 F. Supp. 375 (1961). This disposition was affirmed by this court (307 F.2d 845 (1962)), but reversed by the Supreme Court, Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 84 S. Ct. 923, 11 L. Ed. 2d 804 (1964). The facts have been fully stated in these opinions, see e.g., the opinion of Mr. Justice Harlan for the Court, 376 U.S. 398 at 401-408, 84 S. Ct. 923, 11 L. Ed. 2d 804. On remand the district court has again ruled in favor of the defendants in an opinion reported at 243 F. Supp. 957 (July 30, 1965), later supplemented by opinion of November 16, 1965, 272 F. Supp. 836, at the time judgment was entered.

This action, which has served as the test case*fn1 for litigation concerning Cuban expropriations, involves the disposition of the proceeds of the sale of a cargo of sugar which was expropriated by the Castro government while the cargo was in Cuban territorial waters.

During February and July of 1960 appellee Farr, Whitlock & Co. (a copartnership hereinafter referred to as Farr, Whitlock) an American commodity broker, contracted with a wholly-owned Cuban subsidiary of appellee Compania Azucarera Vertientes-Camaguey de Cuba (C.A.V.) for the purchase of Cuban sugar. The sugar was to be delivered free alongside the steamer in Cuba, and payment was to be made in New York by Farr, Whitlock upon presentation of shipping documents and a sight draft.

Pursuant to the contracts, 22,000 bags of sugar were loaded on board the German vessel S.S. Hornfels which was standing offshore at the Cuban port of Jucaro. The loading took place between August 6 and August 9, 1960. On August 6, 1960 the Cuban government passed a resolution*fn2 providing for the compulsory expropriation of all property located within Cuban territory of appellee C.A.V., a corporation organized under Cuban law but owned to the extent of more than ninety per cent of its capital stock by residents of the United States. As a result of the resolution the consent of the Cuban government was necessary before the S.S. Hornfels was allowed to sail from Cuban waters. This consent was obtained on August 11 when Farr, Whitlock entered into contracts identical to its prior contracts with the subsidiary of C.A.V. with Banco Para el Commercio Exterior de Cuba (Banco Exterior), an instrumentality of the Cuban government. On August 12 the S.S. Hornfels sailed to Morocco with its cargo of sugar.

Banco Exterior assigned the bills of lading to appellant Banco Nacional de Cuba (Banco Nacional), the financial agent of the Cuban government. Banco Nacional sent them to Societe Generale, a French bank which acted as its New York agent, for presentation to Farr, Whitlock in New York. Farr, Whitlock gained possession of the bills of lading on August 29, 1960 without making payment upon presentation. The funds were claimed from Farr, Whitlock on behalf of C.A.V.,*fn3 and Farr, Whitlock for this reason refused to make payment to Societe Generale or to return the bills of lading.

The present action was commenced by Banco Nacional in the United States District Court for the Southern District of New York on October 10, 1960, alleging that Farr, Whitlock had converted the bills of lading by its refusal to return them or to pay over their proceeds to Societe Generale. On October 24, 1960, pursuant to an order of the New York Supreme Court, Kings County, Farr, Whitlock transferred the proceeds of the bills of lading, a total of $173,936.31, to a New York court appointed Temporary Receiver, Sabbatino. The complaint in the present action was amended on October 31, 1960 to include Sabbatino as a defendant.

On March 31, 1961 the district court, acting on various motions of the parties before it, held that it had jurisdiction over the subject matter of the action despite state court control of the funds at issue. It granted summary judgment for the defendants, holding that the taking of the sugar by the Cuban government violated international law in three respects: it was motivated by a retaliatory purpose, not a legitimate public purpose; it discriminated against nationals of the United States; and it failed to provide adequate compensation for the property taken; and inasmuch as the taking violated international law, Cuba did not acquire good title to the sugar upon which to base its claim of conversion.

We affirmed this judgment on July 6, 1962, holding that the failure of the Cuban government to pay adequate compensation to C.A.V. for the taking of its property, combined with the evident retaliatory purpose and the discriminatory effect of the taking upon the rights of American nationals, constituted a violation of international law. We rejected, just as the district court had previously rejected, the appellant's contention that the act of state doctrine applied to this case; and we based in part our conclusion on two letters written by State Department officers evidencing the fact that the Executive Branch had no objection to a judicial determination of the merits of the controversy.

The Supreme Court granted certiorari, 372 U.S. 905, 83 S. Ct. 717, 9 L. Ed. 2d 715 (1963), and reversed us on March 23, 1964, 376 U.S. 398, 84 S. Ct. 923, 11 L. Ed. 2d 804. The Court held that the act of state doctrine did apply to this case, and therefore the courts of the United States were prevented from examining the validity of the acts of the Cuban government under international law "in the absence of a treaty or other unambiguous agreement regarding controlling legal principles * * *." 376 U.S. at 428, 84 S. Ct. at 941. The Court declared that the act of state doctrine had "'constitutional' underpinnings" arising out of the "basic relationships between branches of government in a system of separation of powers." 376 U.S. at 423, 84 S. Ct. at 938.*fn4 The Court did not reach the issue of whether the taking in this case violated international law. See 376 U.S. at 433, 84 S. Ct. 923, 11 L. Ed. 2d 804. It remanded the case to the district court to hear and decide any litigable issues of fact which might develop and for "proceedings consistent with this opinion." 376 U.S. at 439, 84 S. Ct. at 946.

On March 28, 1963, one year before the decision of the Supreme Court was handed down, Banco Nacional, Farr, Whitlock, C.A.V., and Sabbatino agreed that Lehman Brothers would hold a sum of money in escrow to satisfy the final judgment in this case, and Sabbatino transferred $225,000 to Lehman Brothers for this purpose. The agreement also provided that C.A.V. would indemnify Farr, Whitlock for any excess of any judgment against it over the amount in the escrow fund. Thereafter the New York state Temporary Receivership was terminated by order of the New York Supreme Court and Sabbatino was eliminated as a party to this case by a stipulation of the parties.

After this case was remanded to the district court appellant moved for final judgment in its favor but judgment was not entered due to a miscellany of complications, see 243 F. Supp. 957, at 961-962, and while the proceedings relative to the entry of judgment on remand were pending the Hickenlooper Amendment*fn5 was enacted into law on October 7, 1964. It provided:

Notwithstanding any other provision of law, no court in the United States shall decline on the ground of the federal act of state doctrine to make a determination on the merits giving effect to the principles of international law in a case in which a claim of title or other right is asserted by any party including a foreign state (or a party claiming through such state) based upon (or traced through) a confiscation or other taking after January 1, 1959, by an act of that state in violation of the principles of international law, including the principles of compensation and the other standards set out in this subsection: Provided, That this subparagraph shall not be applicable (1) in any case in which an act of a foreign state is not contrary to international law or with respect to a claim of title or other right acquired pursuant to an irrevocable letter of credit of not more than 180 days duration issued in good faith prior to the time of the confiscation or other taking, or (2) in any case with respect to which the President determines that application of the act of state doctrine is required in that particular case by the foreign policy interests of the United States and a suggestion to this effect is filed on his behalf in that case with the court, or (3) in any case in which the proceedings are commenced after January 1, 1966.

On November 12, 1964 an order was entered impleading C.A.V.*fn6 and Lehman Brothers as third party defendants pursuant to Fed.R. Civ.P. 14.

Defendant Farr, Whitlock and the third-party defendants moved for summary judgment dismissing the complaint, based on the Hickenlooper Amendment. On July 30, 1965 the district court granted these motions, witholding final judgment for sixty days to allow the President to exercise his rights under the second proviso of the Amendment. Final judgment was entered on November 17, 1965 after the Court was notified that the Executive Branch did not intend to intervene and to suggest application of the act of state doctrine in this case.*fn7

The district court in a scholarly and well-reasoned opinion held that the Hickenlooper Amendment applied to the case at bar, that the Amendment was constitutional, and that it was bound by our prior determination, 307 F.2d 845 (1962), that the expropriation by the Cuban government violated international law. The same issues are raised before us, and in disposing of them we reach the same result the lower court reached, adopting as our own much of the discussion and points made by the learned judge below.

I. The Applicability of the Hickenlooper Amendment

Appellant first claims that the Hickenlooper Amendment was not intended to apply to "transactions" completed before the date of its enactment. If this is so and the expropriation here is a "transaction" the present case would be excluded from the effect of the amendment, for the expropriation in this case occurred on August 6, 1960, and the Amendment was not enacted until October 7, 1964.

In interpreting a statutory provision, we first direct our attention to the applicable words in the statute in order to analyze the meaning and effect of those words in relation to the subject matter treated. The words of the Amendment which deal with the expropriations it is intended to apply to are:

The case before us would seem to fall within the above statutory language. Here a claim of title is being asserted by a party claiming through a foreign state based upon a taking after January 1, 1959.*fn8 It may be noted that the statute refers specifically to a "case," not to a mere claim or cause of action which had not been the subject of court action prior to the enactment of the statute. This use of "case" indicates that Congress meant to affect the result of pending litigation as well as to affect a more nebulous group of unlitigated claims. Moreover, it is well established that when a statute specifically applies to past transactions, as the Hickenlooper Amendment does, it applies to pending cases too, because a case must be decided according to the law as it exists at the time of final judgment. See, e.g., Hamm v. City of Rock Hill, 379 U.S. 306, 85 S. Ct. 384, 13 L. Ed. 2d 300 (1964); United States v. Alabama, 362 U.S. 602, 80 S. Ct. 924, 4 L. Ed. 2d 982 (1960) (per curiam); Hines v. Davidowitz, 312 U.S. 52, 61 S. Ct. 399, 85 L. Ed. 581 (1941); Carpenter v. Wabash Ry., 309 U.S. 23, 60 S. Ct. 416, 84 L. Ed. 558 (1940); Dinsmore v. Southern Express Co., 183 U.S. 115, 22 S. Ct. 45, 46 L. Ed. 111 (1901); United States v. Schooner Peggy, 5 U.S. (1 Cranch) 103, 109, 2 L. Ed. 49 (1801) (Marshall, Ch. J.); cf. Vandenbark v. Owens-Illinois Glass Co., 311 U.S. 538, 61 S. Ct. 347, 85 L. Ed. 327 (1941). It is true, as appellant points out, that these cited cases differ from the present case in some particulars; one is a criminal case, others involve whether injunctive relief should be granted or denied, and others involve the effect of a new treaty or a change in the case law; and none involve the effect of a new statute. In total, however, they lay down a rule both reasonable and just and appellant gives no convincing reason why the rule should not be applied in this case where a statute has become law while the case has been pending.

Appellant argues that in the absence of a clear indication that retroactive application is intended there is a presumption that a statute is intended to operate prospectively only. This proposition is well supported by authority, but there is no ambiguity in the Hickenlooper Amendment that would permit the presumption to be operative, for in the language of the Amendment which we have discussed above there is a clear expression of a legislative intention that it is to be applied retroactively. That the statute, enacted in 1964, applies to takings effected after January 1, 1959 is a clear indication that retroactivity was intended.

The legislative history of a statute is useful when the meaning of the statute is not apparent from the language. Though, as we have said, we have had no difficulty in ascertaining that the Hickenlooper Amendment applies to a case based on a taking after January 1, 1959, we will nevertheless examine the legislative history of the amendment to consider whether it provides any basis for appellant's contention that it was not intended to apply to cases pending at the time of its enactment.

During the spring and summer of 1964 Congress was considering amendments to the basic Foreign Assistance Act. The House passed a version of the Foreign Assistance Act of 1964 and sent it to the Senate where it was referred to the Committee on Foreign Relations. At this point Senator Hickenlooper proposed the amendment in issue here and it was included in the version of the Act reported to the Senate in essentially the same form as it is now, expect that the 1964 version applied only to cases commenced before January 1, 1966. The Senate Report stated:

The amendment is intended to reverse in part the recent decision of the Supreme Court in Banco de Nacional de Cuba v. Sabbatino. The act of state doctrine has been applied by U.S. courts to determine that the actions of a foreign sovereign cannot be challenged in private litigation. The Supreme Court extended this doctrine in the Sabbatino decision so as to preclude U.S. courts from inquiring into acts of foreign states, even though these acts had been denounced by the State Department as contrary to international law.

In the Sabbatino case, the Banco Nacional de Cuba sued to recover the proceeds of a sale of Cuban sugar by an American-owned company on the ground that the sugar, which had been expropriated, belonged to the Cuban Government. The lower courts dismissed the suit, but the Supreme Court reversed these decisions and remanded the case for further proceedings on the ground that it would not inquire into the act of the Cuban State.

The effect of the amendment is to achieve a reversal of presumptions. Under the Sabbatino decision, the courts would presume that any adjudication as to the lawfulness under international law of the act of a foreign state would embarrass the conduct of foreign policy unless the President says it would not. Under the amendment, the Court would presume that it may proceed with an adjudication on the merits unless the President states officially that such an adjudication in the particular case would embarrass the conduct of foreign policy*fn9

The bill, including the amendment, was then passed by the Senate and sent to a conference committee. The conference report explains several of the provisions which appear in ...

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