File No. 311.624 D63.

The German Ambassador to the Secretary of State.

No. 2177/10.]

Mr. Secretary of State: By direction of my Government I have the honor to draw your excellency’s attention to a case of unequal treatment accorded by American courts to German and American citizens which came to light in the herein below-described litigation.

In August, 1901, the Discontogesellschaft of Berlin brought suit in the circuit court of Milwaukee, Wis., against Gerhard Terlinden, a German subject, who was prosecuted in Germany on account of various criminal acts there committed, had fled to the United States, and was subsequently extradited, for reparation of the damage sustained on account of the aforesaid criminal acts. He took this action in accord with the receiver, who in the meanwhile had been appointed in Germany to take charge of Terlinden’s estate, in that it intended to turn over to the estate the money recovered through the suit. At the same time it caused to be legally attached, among other things, an asset of $6,420 held by Terlinden in the First National Bank of Milwaukee. On February 19, 1904, it obtained a judgment in the sum [Page 519] of $94,145.11 against Terlinden, for whom Attorney Umbreit appeared as counsel in the suit.

Then Attorney Umbreit sued Terlinden for the fees due him, and on March 22, 1904—that is to say, after the attachment effected on account of the Diskonto-Gesellschaft and the judgment rendered in its favor—also attached the above-mentioned account in the bank. Terlinden was not represented in that suit and on June 11, 1904, a judgment by default in the sum of $7,500 was rendered against him.

Both of Terlinden’s creditors—the Diskonto-Gesellschaft and Umbreit—now laid claim on the ground of the decisions rendered in their favor as preferential satisfaction of their demands out of the asset attached by both. The Diskonto-Gesellschaft obtained in the above-named circuit court a judgment based on its prior established right, by which its claim in that respect was recognized. Upon Attorney Umbreit’s appeal, however, the supreme court of the State of Wisconsin reversed the judgment of the first court and granted Umbreit the right of preferential satisfaction out of the attached bank credit. The ground on which the judgment was based was that the Diskonto-Gesellschaft, as a German juristice person, even on account of a prior attachment, could not be held to be entitled to seeking preferential satisfaction out of property in Wisconsin as against a citizen of Wisconsin (Umbreit); that is to say, an action brought in an American court by an alien residing out of the State of the court of trial can not, except in case of the protection of proprietary rights to real or personal estate in the said State or of rights growing out of a contract with a resident of the State being in question, be deemed “an action maintainable as a matter of right.” Such actions, together with the mortgage rights exercised in connection therewith, are rather receivable solely on the general principles of “comity. The consequences to be expected from a judgment in favor of the Diskonto-Gesellschaft—namely, the removal of the property in dispute to Germany there to be administered upon for the benefit of Terlinden’s German creditors—should however be regarded as incompatible with the public policy of Wisconsin.

The Supreme Court of the United States, to which the Diskonto-Gesellschaft then appealed, found no occasion to alter that decision. On the contrary, in a decision of February 24, 1908, it declares it to be a principle obtaining throughout the territory of the United States of America that, so long as there is no provision of positive law or treaty with foreign States to the contrary, it is for every State of the Union to determine how much it will allow, in accordance with the principles of “comity” and in proportion to these rights, foreign creditors who come in conflict with “local creditors.” The treaty of May 1, 1828, between the United States and Prussia here coming under consideration contains no provision which stands against this conclusion.

In contradistinction to this judicial construction which has obtained recognition here and according to which American creditors are, in principle, given preference over foreign creditors as to the forcible guarantee and collection of their claims on debtors in America, the German law provides that, no matter whether the creditors are natives or aliens, residents of Germany or other countries, priority is conclusive in all cases as to the precedence of rights established on [Page 520] coercive measures. Paragraph 804, section 3, of the Rules of Civil Procedure (Reichsgesetzblatt, 1898, p. 410) reads as follows:

The lien established on an earlier attachment takes precedence over that established by a later attachment.

The same principle also obtains in the case of seizure proceedings, paragraph 930, section 1, of the same law, containing the following provision:

The execution of the seizure of movable property is effected through the process of attachment. Attachment is affected according to the same principles as any other attachment and establishes a lien with the effects specified in paragraph 804.

How injurious the different American judicial construction may prove to the interest of German creditors is shown by the present case. Nor has it escaped notice in Germany and America and it has been keenly discussed in the German press as well as in several American papers. The German Government is of opinion that the law condition above described is apt to effect unfavorably the lively relations which bind to one another wide circles of the people, especially in the commercial world, of both countries. The inequality in the treatment of the respective citizens and subjects could be removed by a special provision in the sense of article 24 of the law putting into effect the rule of civil procedure which would apply to Americans in Germany the principle observed in America towards the Germans. The Imperial Government, however believes it would be preferable to remove the law inequality under consideration by means of an understanding between the two Governments. The question then would be to conclude an arrangement to the effect that the subjects or citizens of one party would derive from the attachments obtained by them in a court of the other party by way of seizure or distraint the same rights as are enjoyed by the citizens or subjects of the other party residing within the district of the court.

I should be especially thankful to your excellency if you would kindly acquaint me with the position of the Government of the United States on this question.

Accept, etc.,

J. Bernstorff.