Opinion
No. 6405.
May 25, 1931.
Appeal from the District Court of the United States for the District of Oregon; Robert S. Bean, Judge.
Action by Henry Heine against the New York Life Insurance Company. From an order of dismissal [ 45 F.2d 426], plaintiff appeals.
Affirmed.
This is an appeal from an order of dismissal granted by the court in the exercise of its power of discretion to retain or reject jurisdiction. The action was brought in the state court of Oregon and removed by the appellee to the federal court. It is based on insurance policies, dated November 10, 1911, issued in Germany to a German resident and citizen, written in German language, and payable in Germany in the currency of that country. The appellant seeks to recover as damages the cash surrender value of the policies.
The answer denies liability; pleads stipulations in the policies designating certain specified courts in Germany as having exclusive jurisdiction; pleads novation, in that Kronos Deutsche Leben-Versicherungs Aktien-Gesellschaft, a German insurance company, assumed the liability of the appellee under the policies, with the assent of the appellant; pleads the currency legislation of Germany and the valorization laws, steps taken by the German authorities to rate up certain classes of contracts payable in marks, including insurance policies issued in Germany; pleads a mutual arrangement between the appellee and the German insurance authorities, acting on behalf of the German policyholders, by which a fund was established and placed in the custody of the German insurance authorities to pay and adjust all claims on policies issued by the appellee in Germany, including the policies in litigation. Attached to the answer are certain affidavits and copies of the German laws and decisions of the German courts and the German Federal Insurance Board; a decision of the German Federal Insurance Board fixing the amount of the contribution of the appellee to the valorization fund, for the payment of all policies issued by it in Germany, as $3,000,000 (12,000,000 marks) in addition to 2,000,000 marks when concession was granted, 11,607,000 marks to meet war losses and 37,107,737 marks paid to "Kronos" at the time the German business of the appellee was taken over; a distribution plan issued by the German Federal Insurance Board for the insurance policies issued by the appellee, and a table of the percentages of the gold mark value at which the policies of the various companies were to be rated up for value, listing approximately fifty companies, including appellee. All premiums collected in Germany, together with sums deposited by the appellee for license to do business, were impounded in a reserve depository and invested under German approval for protection of policyholders. The affidavits and statements in the record are by agreement to be considered as a part thereof. They also recite that the mark was the sole circulating medium of exchange and legal tender currency of Germany until the passage of the coinage law of August, 1924, which created and established for the German Reich an entirely new and distinct currency called the Reichsmark, making the Reichsmark the sole legal tender currency of Germany and providing for the conversion of the old mark into the new Reichsmark at the conversion ratio of one-million-million of the former for one of the latter; that by a decree of September 28, 1914, contracts made prior to July 1, 1914, calling for payment in gold were declared not binding; that the Reichs Chancellor was to decide as to the date when this decree should become ineffective; that the decree has not been repealed, nor has the suspension of the redemption of the German treasury bills and Reichsbank gold notes been lifted, and that the laws of August, 1924, in connection with the loss of the war by Germany, constitute the primary cause of the subsequent catastrophic depreciation of the German mark. (The policies in suit were payable in the old currency, Mark D. Rwg.) Also attached is an irrevocable power of attorney to certain named parties, which authorizes and empowers them to sue for, collect, receive, and receipt for all sums due or owing under the policies, or compromise the same, in consideration of the assignment and transfer to them of an undivided 25 per cent. interest in the policies, and all rights accruing thereunder. It is stated that there are no witnesses to any of the transactions resident in the state of Oregon; that practically all of the witnesses reside in Germany or in the state of New York; that no records of the appellee are in the state of Oregon; that all of appellee's original data, correspondence, and documents relating to its business in Germany and policies issued there were kept in Germany and still are there in the possession of the "Kronos" Life Insurance Company; that to defend this action in the courts of Oregon would impose upon the appellee great and unnecessary difficulty, inconvenience and expense; that the appellee maintains and intends to continue in Germany a general representative and attorney in fact, appointed pursuant to the insurance laws of Germany, upon whom legal process may be served; that in all actions commenced in Germany at no time has the jurisdiction of the German courts been evaded or attempt made to invalidate service; that in all such actions the German courts have assumed jurisdiction; that such courts are open and functioning and are competent and ready to take jurisdiction of justiciable matters. It is further shown that there are now pending in the courts of Oregon, against the appellee, cases involving 192 policies issued to German citizens who at all times have been resident in and now reside in Germany, all payable in Germany in German currency, and subject to German law, and, in the same court, actions against the Guardian Life Insurance Company involving 50 policies, and against the Guardian Life Insurance Company and the appellee actions involving 18 policies; that Paul Herrmann, appellant in the companion case submitted herewith, 50 F.2d 387, a resident and citizen of Germany, is plaintiff in many of these cases; that in one case brought by him there are involved 115 policies, in as many separate causes of action; that another case involves 39 policies issued to different persons, and another involves 14 policies, and others of less number. The record also discloses that two cases were brought against the appellee in the state of New York on like policies and that the New York court declined to retain jurisdiction and dismissed the same. Higgins v. New York Life Ins. Co., 220 App. Div. 760, 222 N.Y.S. 819.
It appears that for several years a vigorous campaign has been conducted in Germany to secure control of policies issued in Germany by American companies, approximately 28,000 for prosecution in the American courts, upon the representation that a much larger recovery might be had in the American courts than from German courts or German administrative bodies. (The term "American" in this memorandum means United States.)
It further appears that there is pending in the state court for Multnomah county, Or., an action brought by one Luetjohann, a citizen and resident of Germany, against the appellee, on a like policy, in which case a motion has been filed to compel the appellee to bring to Portland for inspection by plaintiff's counsel, who also represents all the plaintiffs in the various actions brought on the German policies, the following:
"All of the day books, journals and ledgers kept by defendant during the years 1922 to 1928, whether in book form or otherwise; and
"All balance sheets and trial balances;
"Also all lists, registers and other records containing the names of all policyholders and the amounts and kinds of insurance issued and in effect during said years;
"All other books, papers, documents and records in the possession of defendant which disclose the amount of profits made each year by defendant and which disclose the present whereabouts, amount and situs of the assets and surplus of the defendant and the investments thereof;
"All books of account, papers, documents and records in the possession of the defendant which disclose the unit value, i.e., American dollars or other units, in which the profits, surpluses and assets of the defendant were earned by defendant and were kept during said years and are now kept and figured and calculated in said books of accounts."
It appears that the books and records so requested comprise:
"Hundreds of volumes of current books of accounts, consisting of many kinds of cash books, journals and ledgers, kept by the numerous departments of defendant's business, and they also include hundreds of thousands of unbound sheets of accounts. These day books, journals, ledgers and accounts constitute the current books of account of the defendant in its various departments. They are in constant daily use by scores of the accountants and actuaries of the company and they could not be removed from defendant's New York office without hopelessly disrupting all of the departments of the defendant's business and stopping the company's operations.
"The `lists, registers and other records containing the names of all policyholders and the amounts and kinds of insurance issued and in effect during the years 1922 to 1928, inclusive,' demanded by plaintiff, are kept by defendant only in card form. There are separate cards for each kind of information concerning each policy, including index cards, brief cards, mortality cards, premium cards and dividend cards. These cards are kept in different departments and each card contains only such information concerning the policy as is necessary for the purpose of the department in which it is kept. * * * The company had outstanding during the period covered by plaintiff's request more than 2,500,000 policies. It would be necessary, therefore, in order to meet plaintiff's request, * * * to send to Oregon many millions of policy cards, which constitute all of defendant's records concerning its individual policies issued and in effect during the years 1922 to 1928. These cards are in daily use by hundreds of defendant's employees in making loans, computing dividends, converting policies, paying claims, answering inquiries and otherwise dealing with its policies and policyholders. The removal of these cards from the company's New York office would absolutely stop the company's functioning in regard to its policies and policyholders.
"Some idea of the volume of books and records requested by plaintiff may be gleaned from a recent experience of the New York Life Insurance Company in moving its headquarters from 346 Broadway to its present headquarters, 51 Madison Avenue. The distance between the old headquarters and the new is about one and one-half miles. It took thirty trucks, in constant operation for four days and nights, to move the books and records of the company.
"The experience of the auditors of the New York State Department of Insurance is also instructive on this point. The auditors examine the accounts of the company every three years. It takes 25 or 30 accountants from the State Department of Insurance a period of approximately four months to cover the books and records of the company for a three-year period."
It appears that the Appellate Division of the German courts reviewed the history of the activities of the appellee and held that it had at all times been under the supervision of the German Insurance Board, referred to the fact that it had an office and general representative in Germany and large assets, in addition to those transferred to "Kronos," and said: "As the court below expressly stated, the company always fulfilled every order of the German Insurance Board." And it appears that the legal tender status of the German mark was confirmed by decision of the German Supreme Court April 16, 1921, reported in decisions of the Supreme Court in Civil Cases, vol. 102, p. 98, holding that the stipulation of the contract with relation to the payment is binding, and that the German courts have uniformly held that insurance policies issued in Germany to German nationals are German contracts and that their construction, the extent of the liability and the remedy or discharge thereunder are determinable exclusively by German law. Ferensdorff, nee Herz v. Swiss Life Insurance Annuity Institute, decided by the Supreme Court December 18, 1929; Messerschmitt v. N Y Life Ins. Co., decided by the Berlin Court of Appeals March 12, 1930; Hardt v. N.Y. Life Ins. Co., decided by the same court on the same date; Marx v. N.Y. Life Ins. Co., decided by the District Court, Mainz (Germany) January 27, 1930; Protective Assn. of Holders of Foreign Insurance Policies v. Swiss Life Insurance Annuity Institute, decided by the Munich Court of Appeals April 15, 1929 (affirmed by the Supreme Court February 21, 1930); Daunert v. Guardian Life Ins. Co., decided by the Berlin Court of Appeals July 11, 1928; decision of the German Insurance Board October 25, 1928, in the Matter of New York Life Insurance Company, affirmed by decision of the Appellate Division February 13, 1929. The following decisions by French, Austrian, Jugoslavian and other courts, and by the Tripartite Claims Commission, of which Judge Parker was chairman, are cited by appellee to the same effect: Credit Lyonnais v. Credit National, Cour d'Appel de Paris, decided February 18, 1927; Maslova v. Urbaine Life Ins. Co. (4th Chamber, Tribunal of Commerce, Dept. of the Seine, Paris), decided July 19, 1926, reported fol. 156, case 6; Bauchon v. Credit Lyonnais (1st Chamber, Civil Court), decided October 26, 1925, affirmed by Court of Appeals of Paris, Dalloz Law Reports, June 17, 1927; Banque Hypothecaire de Bale v. Riegart, Cour de Cassation, decided January 23, 1924, reported in Gazette des Tribunaux April 28, 29, 1924; Banque Hypothecaire v. Riff, decided January 11, 1926, Dalloz L.R. 1926, p. 85; Ghan v. Orloff, Dalloz L.R. 1927, p. 62; decision of Supreme Court of Austria, January 18, 1927, Ob. III 993-28 "Zentralblatt" No. 102 ex 1927; decision of May 25, 1927, by Tripartite Claims Commission, 21 Am. Journal International Law, 610.
This brief statement of the record, made up of affidavits and documents, is not denied, while the material parts of the answer are denied by the reply. It has been set out to the end that the history of the issue and procedure can be more fully appreciated.
C.T. Haas and E.B. Seabrook, both of Portland, Or., for appellant.
Huntington, Wilson Huntington and Clark Clark, all of Portland, Or., for appellee.
Before WILBUR and SAWTELLE, Circuit Judges, and NETERER, District Judge.
The agency in Germany was established as a distinct entity, a German creation under German law. A reserve fund was made and all premiums received were placed in that fund and invested in Germany under German official approval. Upon creation of "Kronos," all funds and property of appellee in Germany were delivered to and supervision and execution of power assumed by the German Federal Insurance Board, and additional deposits made by the appellee, as required by the German valorization laws, in accordance with the decisions of the German Federal Insurance Board. The laws in relation thereto have been interpreted to apply to like policies, and many similar cases are now pending before the German courts, they being open, able, competent, and efficient, and the German Federal Insurance Board being active and fully functioning.
It is obvious that this litigation is not the normal outgrowth of usual business activity and relation, but that it is the creation of activity to secure representation of some 28,000 insurance policies executed in Germany by American companies, written in the German language, in the relation of collection agent or agencies, and file actions thereon in the state and federal courts of the United States, an indirect appeal from the German judiciary and the German Federal Insurance Board.
Incidentally, it may be said that the courts of the United States have uniformly applied the law of the place to insurance contracts. Orient Insurance Co. v. Daggs, 172 U.S. 557, 19 S. Ct. 281, 43 L. Ed. 552; Mutual Life Ins. Co. of N.Y. v. Cohen, 179 U.S. 262, 21 S. Ct. 106, 45 L. Ed. 181; Mutual Life Ins. Co. v. Hill, 193 U.S. 551, 24 S. Ct. 538, 48 L. Ed. 788; Northwestern Mut. Life Ins. Co. v. McCue, 223 U.S. 234, 32 S. Ct. 220, 56 L. Ed. 419, 38 L.R.A. (N.S.) 57. And, when suit was entertained, the cause of which arose in a foreign country, the courts granted relief according to the laws of the country where the action arose. Slater v. Mexican Nat. Ry. Co., 194 U.S. 120, 24 S. Ct. 581, 48 L. Ed. 900. It has been held that discharge under a foreign obligation in accordance with the foreign law is a complete defense. Zimmerman v. Sutherland, 274 U.S. 253, 47 S. Ct. 625, 71 L. Ed. 1034. It has also been held that the courts of the United States will not inquire into the validity, wisdom or justice of the laws of a foreign country, or the administration of foreign agencies. League v. De Young, 52 U.S. (11 How.) 185, 13 L. Ed. 657; Canada Southern Ry. Co. v. Gebhard, 109 U.S. 527, 3 S. Ct. 363, 27 L. Ed. 1020; Underhill v. Hernandez, 168 U.S. 250, 18 S. Ct. 83, 42 L. Ed. 456; Hewitt v. Speyer (C.C.A.) 250 F. 367.
Nor does it appear that enlarged rights may be obtained over the German law should a suit by a policyholder be entertained by the courts of the United States. Sutherland v. Mayer, 271 U.S. 272, 46 S. Ct. 538, 70 L. Ed. 943; Deutsche Bank v. Humphrey, 272 U.S. 517, 47 S. Ct. 166, 71 L. Ed. 383; see, also, Zimmerman v. Sutherland, supra. Such holding is in harmony with other courts. See, Chesterman's Trust, (1923) 2 Chancery 466, where the court had before it a debt payable in German marks which had greatly depreciated, and it was held that it might be paid in the depreciated marks or in their exchange value converted into British currency. The same rule was applied in British Bank v. Russian Bank, (1921) 38 Times Law Reports 65, in which Mr. Justice Russell said that he "had great sympathy with the defendants, but it must be remembered that the same causes that caused the fall in the value of roubles had produced great depreciation in the plaintiff's securities." This was approved in Anderson v. Equitable Assurance Society, (1926) 134 Law Times 557.
It is asserted by appellant that, jurisdiction being apparent on the face of the record, it may not be challenged by motion but must be by plea, and that when, as here, jurisdiction is challenged by plea, by the answer, and put in issue by the reply, issue must be submitted to the jury for decision on the merits, and that there is no precedent for the order of the trial court.
As to the last objection, to have a precedent there must be an antecedent case; but the lack thereof does not defeat a right or privilege. No fault can be found with the cases cited by the appellant, the following of which are the more prominent: Farmington v. Pillsbury, 114 U.S. 138, 5 S. Ct. 807, 29 L. Ed. 114; Hartog v. Memory, 116 U.S. 588, 6 S. Ct. 521, 29 L. Ed. 725; Mexican Central Railway Co. v. Pinkney, 149 U.S. 194, 13 S. Ct. 859, 37 L. Ed. 699; City Railway Co. v. Citizen's Street Railroad Co., 166 U.S. 557, 17 S. Ct. 653, 41 L. Ed. 1114; Union Mutual Life Insurance Co. v. Kirchoff, 169 U.S. 103, 18 S. Ct. 260, 42 L. Ed. 677; York County Sav. Bank v. Abbot (C.C.) 131 F. 980. These cases do not point the way. One sustains dismissal when the fact appears to a legal certainty; another, where a party is collusively added; another holds that the evidence considered must be pertinent to the issue, or to the inquiry by the court; another holds that where there is reasonable plausibility of bona fide claim, jurisdiction will be passed to trial on the merits, and another is one where the court holds that claim rightly viewed unfounded must be denied.
Every requirement appears to be met substantially by the record. Process in this case was served upon the statutory agent of the appellee in Oregon, appointed as a condition to do business in that state and for the convenience and protection of residents to whom policies may be issued and afford them access to the courts of the state or district.
The appellant contends that, notwithstanding the agreement that the German courts shall have exclusive jurisdiction, such agreement is not binding on the federal courts, vested with their jurisdiction by the United States Constitution, of which they cannot be deprived by foreign laws or agreement. The appellant also contends that these are not actions upon the policies. But, whatever the designation may be, the basis is the policies.
No alien has a constitutional right to sue in the United States courts. Kline v. Burke Construction Co., 260 U.S. 226, 43 S. Ct. 79, 67 L. Ed. 226, 24 A.L.R. 1077. The United States District Courts have such jurisdiction as the Congress confers. 28 USCA § 41, grants jurisdiction as follows:
"First. Of all suits of a civil nature, at common law or in equity * * * between citizens of a State and foreign States, citizens, or subjects. * * *
"Third. Of all civil causes of admiralty and maritime jurisdiction, saving to suitors in all cases the right of a common-law remedy. * * *"
Civil cases and actions in admiralty and maritime jurisdiction have equal status, and the courts have uniformly, where the question has arisen, declined to entertain jurisdiction in admiralty suits by nonresidents when in the discretion of the court it would be inconvenient and inexpedient to do so. And no distinction has been made to civil cases.
Nor is the right to challenge the jurisdiction or to invite the discretion of the court waived or forfeited by removal from the state to the federal court, or the right of the court, after issue joined, to make investigation on notice and, in its discretion, decline jurisdiction after such inquiry. 28 USCA, § 81, provides that in all suits removed the court shall proceed as if the suit had been originally commenced in the district court and the same proceedings had been taken in such suit in said district court as shall have been had therein in said state court prior to its removal.
Upon the face of the record the district court had jurisdiction when the case came to it from the state court. When the issue first came to its attention, and upon inquiry and examination, the court became cognizant of the status and relation and no doubt had inherent power to protect itself from a deluge of litigation by nonresidents, inspired by contingent retainers to avoid or overcome foreign laws and interpretation and application thereof by foreign courts of the country of the situs of the contract; and it had the power to prefer resident litigants of the district in access to overcrowded calendars, for, as Justice Holmes said in Douglas v. New York, N.H. H.R. Co., 279 U.S. 377, 387, 49 S. Ct. 355, 356, 73 L. Ed. 747: "There are manifest reasons for preferring residents in access to often overcrowded Courts, both in convenience and in the fact that broadly speaking it is they who pay for maintaining the Courts concerned"; and it had the power to prevent imposition upon its jurisdiction and use of the court as a "cover for injustice to the defendants" (Cuba R. Co. v. Crosby, 222 U.S. 473, 479, 32 S. Ct. 132, 133, 56 L. Ed. 274, 38 L.R.A. (N.S.) 40) by reason of the enormous expense involved in bringing across the continent witnesses from Germany and New York and the records of appellee which plaintiff demands as necessary in another case and, if so, must also be necessary in this case, the removal of which would destroy the ability of the appellee, representing more than 2,500,000 policyholders, to function.
Comity between the United States and Germany should also have consideration.
With the foregoing, nothing can be added to the opinion of Judge Robert S. Bean, who at the time of his recent demise was the dean of the American bench, and whose death terminated a creditable judicial career of more than forty-eight years on the state and federal bench. His opinion is reported in (D.C.) 45 F.2d 426, and is adopted as a part of the opinion of the court.
Affirmed.