Second Russian Insurance v. Miller

Background

A Russian insurance company established an office in New York and appointed Meinel & Wemple, a New York agent, to handle reinsurance business. A German firm in Hamburg, the Mutzenbechers, managed a reinsurance pool and earned commissions. Meinel collected premiums, set aside commissions in a special account, and stopped regular remittances after war conditions. The Alien Property Custodian demanded and received those funds from the trustee, and the German firm claimed the money as their commissions.

Reasoning

The Court asked whether the transfer of the reinsurance agency to Meinel was genuine or only a cover to keep the German managers in control. The lower courts found the transfer was colorable and that Meinel had set the segregated fund aside for the Mutzenbechers with the Russian company’s knowledge. The Court rejected giving the Russian decree extra-territorial effect to void New York transactions and held that once the American agent had set the money aside for the German firm, the fund was effectively paid and reportable under the Trading with the Enemy Act (the wartime law that required reporting and surrender of enemy property). The Court also noted ordinary American law leaves parties where it finds them when both acted illegally, so the Russian company could not recover the money.

Real world impact

The decision confirms that funds held in the United States by domestic agents for foreign enemy firms can be treated as enemy property under U.S. wartime law. Trustees who hand such money to the government cannot take it free of the foreign beneficiaries’ rights. Foreign decrees do not automatically undo valid domestic transactions when U.S. law and the facts show the money was effectively paid.