The opinion of the court was delivered by: KAUFMAN
On July 19, 1950, plaintiff brought this action in the Supreme Court of the State of New York, to regain possession of certain securities valued at $ 950,000 and a cash balance of approximately $ 108,000 held by the defendant Chase Bank in an account in the name of impleaded defendant Escomptobank, N.V. An order of interpleader was entered on August 7, 1950, in the Supreme Court, consented to by plaintiff, under which Chase Bank was directed to hold the securities to the credit of the action and was thereupon relieved of all further liability in respect thereof. The impleaded defendant filed its petition and bond for removal to this Court on October 27, 1950.
By order of this Court dated January 28, 1952, 12 F.R.D. 261, plaintiff was given leave to amend its complaint so as to add a second cause of action against defendant Chase Bank in personam, for an alleged failure to account for dividends and other income received from the said securities since June 1940. Defendant Chase Bank thereupon asserted a claim-over against impleaded defendant Escomptobank, N.V. in the event that it (Chase Bank) should be held liable on plaintiff's second cause of action. On plaintiff's motion, made during the course of the trial, the second cause of action was dismissed with prejudice and consequently the defendant's cross-claim was also dismissed.
It is not disputed that plaintiff at all material times was, and continues to be, the owner of the securities and cash, the subject of this action. The impleaded defendant Escomptobank claims the right to possession of the securities; intervenor, Foreign Exchange Institute of Indonesia, an agency of the Republic of Indonesia, supports the claim of Escomptobank; intervenor, Foreign Exchange Commission of Suriname, claims the right to possession of the securities by virtue of the foreign exchange enactments of Suriname.
The facts presented are complex and crucial, encompassing events which transpired in the hinterlands of Indonesia (formerly Netherlands Indies) and the more immediate surroundings of the Chase National Bank of New York. No precise precedent has been found although there has been considerable litigation in this field. Freutel, Exchange Control, Freezing Orders and the Conflict of Laws, 56 Harv.L.Rev. 30 (1942).
Plaintiff corporation was organized under the laws of the Netherlands East Indies on July 1, 1899, for a term of fifty years. There are four stockholders; its managing director, Charly G. G. von Freyburg, his mother, his brother, and his sister. Charly von Freyburg and his mother resided in the Netherlands East Indies until 1946 and the two other stockholders have at all relevant times resided in Europe. The business of the corporation was the operation of its sugar factory at Probolinggo, Java, in the Netherlands Indies, at which place its principal officer was maintained.
Impleaded defendant at all material times was, and still is, a corporation organized and existing under the laws of the former Netherlands Indies, since December 27, 1949, the Republic of Indonesia. It is engaged in the banking business there, and in the Netherlands.
Prior to 1939 the plaintiff corporation and its stockholders individually had securities and money, all of which were converted into securities of American companies. On May 2, 1939, Charly von Freyburg, who had come to New York, opened a custody account in the name of the plaintiff with the defendant Chase and deposited therein the securities, the subject matter of the action. The plaintiff executed the usual custody agreement with Chase
(Plaintiff's Exhibits 1 and 2) and the securities have at all times since May 2, 1939, been in the vaults of the Chase Bank in the City of New York.
On May 21, 1940, shortly after the occupation of the Netherlands by the German Armed Forces, the Governor General of the Netherlands Indies promulgated an ordinance (Defendant's Exhibit BB) effective May 22, 1940, known as the 'Foreign Exchange Ordinance, 1940' which had the express object of 'preventing injury to the country's foreign exchange position.' The ordinance empowered the Governor General to promulgate, by Government decree, regulations concerning the recording, delivery, and other utilization in accordance with the purposes of the ordinance (Section 8) of inter-alia, domestic and foreign securities held by 'resident'- which term included corporations domiciled or maintaining an officer in the Netherlands Indies. Section 1, sub. 1(b).
The ordinance further provided that any such delivery or other utilization was to be effected against compensation 'to be determined by, or on behalf of the Governor General.' Section 8.
The ordinance further authorized the promulgation of rules concerning the acquisition and disposition of foreign securities by resident corporations. Section 9(a)(1).
The ordinance also created a Netherlands Indies Foreign exchange Institute, with its principal office at Batavia, Java, and charged that body with the duty of making available any foreign exchange required for the the maintenance of the national economy, and to promote the just and efficient utilization thereof. Section 15, subs. 1 and 2. Further, the ordinance created a Netherlands Indies Foreign Exchange Fund, for the account of which any such delivery, etc., was to take place. Section 18, subs. 1 and 3.
Section 19 et seq. contained 'penal provisions' providing for imprisonment and/or fine for violation of any regulations issued 'by or pursuant to' the ordinance.
It is significant to note that agreements involving a violation of any regulations prescribed pursuant to the ordinance are declared null and void by Section 29.
On May 25, 1940, the Governor General issued a decree, effective in Java on May 27, 1940 (Defendant's Exhibit BB) to 'execute (implement) the Foreign Exchange Ordinance.' Section 6, sub. 3(b) of this decree directed 'all persons being in the Netherlands Indies' to place securities held abroad, of which they had the power to dispose, in the custody of one of four named banking institutions- one of these being impleaded defendant herein. The method of accomplishing this in the case of impleaded defendant here was 'to cause such securities * * * to be deposited for his' (read: their) 'account in the name of one of the banking institutions named in subsection 1 with a correspondent of such banking institution abroad.' Section 6, sub. 3(b).
The Governor General's Decree of May 25, 1940, shortly afterwards was replaced by a similar decree promulgated July 4, 1940, and effective July 17, 1940 (Defendant's Exhibit BB). The later decree repeats the directions to residents as to delivery of their foreign securities (Section 7, sub. 1(b)), and the manner of such delivery, in virtually identical terms. Subsection 5 of Section 7 of the July 4th, decree expressly empowers the Foreign Exchange Institute 'to fix the point of time after which any securities delivered * * * in accordance with subsection 1 may be restored to the persons entitled thereto upon their request.'
Section 9 of this decree authorizes the Governor General, and any person or body acting on his behalf to direct delivery of securities to the Foreign Exchange Fund and other 'utilization' thereof 'in accordance with the Foreign Exchange Ordinance, 1940.'
A few days prior to June 13, 1940, Mr. von Freyburg discussed with a Mr. Pino, an agent of the Escomptobank, in Sourabaya, Netherlands Indies, the transfer of a Wono-Aseh account from another local banking institution, with which he was dissatisfied, to the Escomptobank. Mr. von Freyburg stated that he was informed at that time by Mr. Pino that the custody account of Wono-Aseh with the Chase Bank by placed in the name of a Netherlands Indies Bank and it was then agreed that Wono-Aseh would transfer its account with Chase to the Escomptobank. To accomplish this result, on June 13, 1940, plaintiff mailed to the Escomptobank the following letter (Plaintiff's Exhibit 3) addressed to the Chase National Bank:
'I request you herewith to transfer all my holdings and credit balance to the credit of the account which you carry for the Nederlandsch Indische Escompto Maatschappij of Batavia (D.E.I.)
'I am giving you the above instruction to comply with a decree, issued by our Government, to the effect that residents here, who have accounts with banks outside our country, should transfer these accounts to the custody of one of the Netherlands Indian banks at their choice. The shares of course remain my property, the difference being that my name will for the time being disappear from your books.
'In future I will give my instructions as to their disposal to the agency of the aforementioned Bank in Sourabaya, who will pass them on to you in their own name of course.'
This letter was sent to Escomptobank to be forwarded to Chase. With it plaintiff enclosed a covering letter addressed to Escomptobank's Sourabaya branch (Plaintiff's Exhibit 4), in which plaintiff referred to its letter to Chase as 'written instructions * * * to transfer the shares of stock which are deposited with it in our name, together with the credit balances into the name of your banking institution,' and reiterated that such transfer was being made 'in pursuance of the provisions of the Foreign Exchange Ordinance, 1940.'
The transfer of plaintiff's securities to impleaded defendant was finally accomplished, pursuant to U.S. Treasury License, on August 6, 1940- when plaintiff's account with Chase Bank was closed, and a Custodian Agreement covering the securities was executed between Chase and Escomptobank (Defendant's Exhibits U and W). Thereafter periodic statements were sent ...