Foreign Relations of the United States Diplomatic Papers, 1932, The British Commonwealth, Europe, Near East and Africa, Volume II

458.11 Dexter and Carpenter, Inc./113

The Secretary of State to the Minister in Sweden (Morehead)

No. 96

Washington, February 23, 1932.

Sir: The Department refers to its instruction, No. 54, of May 13, 1931.² concerning the claim of Dexter and Carpenter, Incorporated, against the Government of Sweden for losses and damages sustained because of the failure of that Government to pay a court judgment rendered against the Kunglig Järnvägsstyrelsen, known as the Royal Administration of the Swedish State Railways, and in favor of the claimant corporation. Reference is also made to the note of July 18, 1931.³ enclosed with your despatch, No. 305, of July 23, 1931, from the Swedish Government in reply to your representations.

It appears to the Department that the assertions and conclusions set forth in the note referred to above from the Foreign Office are not supported by complete comprehension of the rather intricate legal and factual situation out of which the claim arose. It therefore seems advisable, before proceeding to a discussion of the note under consideration, to recapitulate and explain in greater detail the facts contained in the statement of the case which was presented to the Foreign Office in the Legation’s note, No. 100, of June 9, 1931.⁴

The original action in this case was brought by the Railways. When the Railways instituted suit it alleged that Dexter and Carpenter had breached a contract which the Railways had made with Dexter and Carpenter. In other words, the Railways asserted that there was a contract between the Railways and Dexter and Carpenter.

Judge Learned Hand, then District Judge, summarized the situation in his opinion as follows:

“The declaration is for breach of contract for the sale of coal. It alleges stripped of irrelevant matter, that the defendant sold and the plaintiff bought a cargo of coal at $31.90 per ton, ‘said price including cost, insurance and freight upon said coal prepaid to the port of Malmo’, the price ‘to be paid against delivery in the City of New York of shipping documents, including insurance policies, bills of lading, and invoice’; that the plaintiff established a letter of credit with a New York bank, which it instructed to pay the price on receipt of the invoice, shipping documents, and ‘policy or policies of insurance’; that the bank, contrary to instructions, paid the purchase price without demanding policies of insurance, and received in lieu thereof only a ‘certificate of insurance’ declaring under the hand of the defendant’s insurance broker that insurance had been under-written in London for account of the defendant; that under the law of England such a certificate was not a policy of insurance within the meaning of such a contract of sale; that the coal was lost at sea and that the plaintiff has paid the bank; that the insurance broker had not taken out any insurance when the certificate of insurance was delivered to the bank.

“The plea makes profert of the contract, which was parol, and which provided for the sale of 150,000 tons of coal at various prices for various points of delivery, in all cases ‘c.i.f.’ (the letters being so written), over 30,000 were to be delivered at Malmo. It alleged that the cargo in question was shipped under the contract; that it was a universal custom in the United States, in cases of ‘c.i.f.’ sales, for the seller to have the option of New York or London insurance; that in case of London insurance the seller might procure it through an American broker, who would in turn through a London broker secure the actual policy, who cabled back when he had fixed it; that on receipt of such a cable the New York broker would issue such a certificate of insurance as the plea made profert of; that this custom was followed in the case at bar, the defendant paid the New York broker, endorsed the certificate and the bank accepted the papers on tender. The certificate of insurance in question recited that insurance of necessary amount had been issued by ‘London underwriters’ for the account of the defendant on the sum [shipment] in question; that policies of London underwriters would be exchanged on demand for the certificate as soon as practicable; that the insurance was placed subject in all respects to English laws and customs governing marine and war risk insurance. Various conditions applicable specifically to coal cargoes were contained in an annexed rider”. (299 Fed. 991.) (Underscoring of quotations added unless otherwise noted.)

The case was before the court on the demurrer of the Administration to a plea in confession and avoidance filed by Dexter and Carpenter. The demurrer was overruled as the Court held, on the sole question presented, that where defendant contracted to sell to plaintiff a quantity of coal to be delivered in New York for shipment to Sweden, at a stated price “c.i.f.”, payment to be made by a New York bank from an established credit against shipping documents, tender of a certificate of insurance issued by a New York broker calling for a policy issued by London underwriters may be good in the United States, where, a universal custom gives the seller in such cases the option of New York or London insurance, and, if the latter is procured, authorizes the use of such broker’s certificate.

This question having been determined on the pleadings, after an examination of the authorities, the case was ready to go to trial. Prior to the trial Dexter and Carpenter entered a counter-claim, alleging repudiation of the contract by the Railways and claiming damages for the breach. After Dexter and Carpenter counterclaimed, and not until after the Railways were apprised of the counter-claim, the Railways as defendants to the counter-claim alleged that the contract for the sale of the coal was not between the Railways and Dexter and Carpenter but that a third party, Beijer and Company, contracted with Dexter and Carpenter for the purchase of coal and thereafter made a separate contract with the Railways for the sale of the coal.

The case then came before the court on a motion by Dexter and Carpenter to strike out certain allegations in the replication to the counter-claim. Judge Hand in his opinion on this motion stated the facts as follows:

“The declaration alleged that the defendant made a contract with a Swedish corporation other than the plaintiff to sell it coal; that the plaintiff through a Swedish bank advanced funds to pay for the coal, which should have been paid out only on the presentation of proper policies of insurance; that the defendant presented improper insurance papers and got the money unlawfully; that the cargoes, though shipped, were lost, and the plaintiff has recovered no insurance. It demanded judgment for the purchase price advanced on the insufficient insurance.

“The counter-claim alleged that the contract set up in the declaration was for the sale of coal, and was made between the defendant and the other Swedish corporation, ‘representing the plaintiff’; that the plaintiff repudiated it when partially completed, because the price of coal had fallen. It demands damages for the breach.

“In the replication the plaintiff ‘appears specially’ and alleges that it ‘is an agency’ of the king of Sweden, and that the counter-claim ‘is in substance and effect an action’ against him, and not maintainable here; that the plaintiff does not consent to try out the counter-claim, and protests against it ‘as an invasion of the immunity’ of the sovereign. These are the allegations which the defendant wishes to have stricken out. The replication also contains traverses of the allegations of the answer. It is verified by the attorney.” (300 Fed. 891.)

The court granted the motion to strike out the allegations in the replication and held that when one files an action, the consequences which it may have in the place where it is filed, including such affirmative relief by way of counter-claim as is there allowed, must be accepted. It also held that when the party before the Court claiming the immunity of a sovereign, either as claimant or as defendant, is neither the sovereign nor his ambassador, “it is now the established rule that the claim will not be recognized unless by diplomatic intervention”.

The case thereafter came to trial both as a suit by the Railways against Dexter and Carpenter for money had and received and as a counter-claim by Dexter and Carpenter against the Administration for breach of contract. The court directed a verdict in favor of Dexter and Carpenter on the main issue, and the jury found a verdict in favor of the Administration on Dexter and Carpenter’s counter-claim. Both parties were dissatisfied and each sued out a writ of error. The case then went to the Circuit Court of Appeals for the Second Circuit on these cross-writs of error.

The opinion of the court, delivered by Circuit Judge Manton correctly summarizes the pleadings as follows:

“The plaintiff, in its amended complaint, alleged that the defendant Dexter and Carpenter, Inc., sold to G. and L. Beijer Import and Export Aktiebolag, a Swedish corporation, 3,577 gross tons of coal c. i. f. Malmo, Sweden, at a price of $114,106.30, payment against delivery in New York of shipping documents, including insurance policies, bill of lading, and invoices. It alleged that the coal was sold by Beijer to the plaintiff at an advance in price; that the open letter of credit in favor of Dexter and Carpenter, Inc., for the purchase of the coal, was issued payable against a bill of lading, invoice, and policy of insurance for invoice price, plus 10 per cent; that the money was transmitted by the Akliebolaget Götenborgs Bank of Sweden to the National City Bank; that the National City Bank paid Dexter and Carpenter, Inc., the money on May 8, 1920, contrary to the agreement, against a certificate of insurance brokers that they had insured the coal with London underwriters in the sum of $125,500. It alleged the coal was loaded on the steamship Alderman and had become a total loss, and the plaintiff had not received payment for the loss; that no insurance had been taken out on the coal by the brokers when they issued a certificate of insurance. At the trial, an amendment was made in the amount of damages demanded, and the action was transformed from one in affirmance of and breach of the contract pleaded into one of money had and received. No allegation was made of rescission of the contract, nor of restitution of consideration received thereunder.”

The court points out that, under the terms of the contract for the purchase of the coal, Fairmont 3/4 screen steam coal known as pool No. 33, was to be shipped to Gothenburg, Malmo, and Stockholm; that the prices varied with each port, but all were to be c. i. f. contracts; that there was a provision that “shipments on this contract are to begin within 30 days after the raising of government embargo on export coal” and to be completed within six months thereafter; that the shipments were to be subject to strikes and government restrictions, and that payments were to be “cash against documents, New York.”

The opinion continues with a statement of the further facts presented in the case:

“In considering the plaintiff’s claim to right of recovery, we are concerned with the shipment on the steamship Alderman made on May 12, 1920. It was on this shipment that the letter of credit was issued and money paid. The Alderman met with injury as she was about to sail and remained in port of Philadelphia for repairs. While there, she caught fire from spontaneous combustion of the coal, and it was damaged and what remained was sold in November, 1920. The proceeds of this sale were never received by the plaintiff. The letter of credit of the bank issued on this shipment was dated May 10, 1920, and provided for payments available by draft at sight for coal destined for either of the three places named in the contract at c. i. f. prices. The document required ‘full set ocean bills of lading issued to order (blank indorsed) invoice in triplicate; insurance certificate, including war risk, must cover invoice plus 10 per cent imaginary profits.’ When the money was paid by the defendant bank to Dexter and Carpenter, Inc., an insurance certificate executed by the brokers, invoice, and a certificate of inspection, with a set of bills of lading, were accepted by the defendant bank and transmitted to the Swedish bank. In turn, the Swedish bank transmitted these instruments to the plaintiff by letter dated June 29, 1920, and described the insurance certificates as ‘policies’. Acknowledgment thereof was made by a letter to the Swedish bank, dated July 5, 1920. The broker’s certificate, dated May 11, 1920, certified that the cargo had been insured in London. A letter of credit thus issued was a distinct contract from the underlying contract of sale.” (20 Fed. (2d) 307.)

The Court held that no action for money had and received would lie against the bank and, therefore, that the judgment was properly entered against the plaintiff in favor of the defendant bank. From this point, the bank was out of the case and Dexter and Carpenter was the only defendant.

The Court held that plaintiff’s claim against Dexter and Carpenter could not be maintained:

“Beijer directed Dexter and Carpenter, Inc., to place the insurance abroad and upon doing so, Beijer was notified. One method of placing the insurance was by the use of broker’s certificates, which were tendered in the United States. The letter of credit required that an ‘insurance certificate’ be issued. A certificate of brokers was accepted in full compliance, and this was forwarded with the other documents, and actually received by the railroad company on June 5th. On that day the railroad company in writing accepted the documents unconditionally and gave notice of affirmation of the transaction to the bank. It may not now change its position and say that it has not received proper documents. Rand v. Morse (C. C. A.) 289 F. 339; Shipton v. Western, 10 Lloyd’s L. L. Rep. 762; Dwane v. Weil, 199 App. Div. 719, 192 N. Y. S. 393, affirmed 235 N. Y. 527, 139 N. E. 720. This acceptance of the certificate by the railroad, under the facts here disclosed, bars the maintenance of the present action, based upon the theory of money had and received.”

The opinion then takes up the counter-claim of Dexter and Carpenter:

“In the original complaint filed, the plaintiff alleged that the contract was made for it by Beijer. The defendant Dexter and Carpenter, Inc., asserts that Beijer was the plaintiff’s agent by proper authorization, and that it in all respects ratified the making and carrying out of the terms of the contract. The cablegrams exchanged for the preliminary negotiations leading up to the making of the formal contract between Beijer and Dexter and Carpenter, Inc., indicate that the coal was for the plaintiff’s use, and it paid for the coal as delivered. The subsequent correspondence treated the contract as if the railroad company was the real party in interest. The defendant Dexter and Carpenter, Inc., has interposed a counter-claim for $1,250,000, claiming that the contract for the sale of the 150,000 tons was breached on September 17, 1920, by formal cancellation by the plaintiff. It seeks to review the judgment rendered on this counter-claim, contending that errors were made by the trial judge in his instructions as to the terms of the contract, in his charge to the jury.

“An embargo was placed upon shipments of coal, which was not lifted until May 1, 1920. However, a permit was obtained at the end of March, which allowed Dexter and Carpenter, Inc., to ship one cargo in that month. As soon as the embargo was officially lifted on May 1st, the cargo on the ship Alderman was loaded, and subsequent shipments were made in May and June. In June, 1920, a strike occurred on the railroads carrying coal from the mines to tidewater, which resulted in the issuance of an order by the Interstate Commerce Commission, which became effective on June 24th and directed railroads to carry coal to tidewater only when a permit could be obtained from government officials. The effect of this order was to shut down all coal exports, except when such a permit could be obtained. This information was cabled to Beijer, and it acknowledged receipt thereof in a letter dated June 28th. By correspondence, it was arranged between the parties that bituminous coal could be and was shipped for the railroad’s use. At the same time, Dexter and Carpenter, Inc., wrote on July 31st:

“‘We wish to acknowledge receipt of your cable No. 42 of the 29th, in which you authorize us to charter a steamer for Gothenburg for the State Railway on the basis of $32.90 per gross ton delivered alongside. This to apply against our contract with them and the additional price to cover the cost of bringing the coal to New York, lighterage, loading, etc.’

“On August 13th, Beijer cabled:

“‘State railways decline further shipments over New York also decline any further run mine cargoes meantime owing overstocks all ports.’

“On August 16th, they again cabled that they were overstocked. On September 17, 1920, the railroad service order which forbade the shipment was withdrawn, and made it possible to again ship the coal under the contract. This information was cabled to Beijer, who cabled that the railroad company considered the contract canceled and directed that no further shipment be made. From the pleadings referred to, the correspondence and conduct of the parties, we are satisfied that the defendant Dexter and Carpenter, Inc., could maintain this counter-claim for breach of the contract. Clews v. Jamieson, 182 U. S. 461, 21 S. Ct. 845, 45 L. Ed. 1183; Robb v. Vos, 155 U. S. 13, 15 S. Ct. 4, 39 L. Ed. 52; Royal Bank v. Universal Export Corp. (C. C. A.) 10 F. (2d) 669. Assuming that the railroad company did not intend to assume liability, they in fact did intend to do the acts which constitute an affirmance of the contract and it is not necessary that there shall be actual willingness to assume the consequences of that affirmance.” (20 F. (2d) 307.)

From the last sentence quoted, we see that the court was of the opinion that, as a matter of law, there was a contract between the railways and Dexter and Carpenter.

The Court, however, found certain errors in the District Judge’s charge to the jury, concerning the time within which shipments of coal could have been made and the quality of coal that was to be shipped and therefore ordered the case sent back to the District Court for retrial of the question raised by the counter-claim.

The Railways thereupon petitioned the Supreme Court of the United States to issue a writ of certiorari for the review of this decision but that petition was denied. The case then went back to the District Court for a second trial.

The facts on the second trial were substantially the same as on the first trial. The quotations above from Judge Manton’s opinion give an accurate account of these facts. Dexter and Carpenter introduced evidence to show that the events leading up to the making of the contract with Beijer and Company, including the acts of the Railways’ acknowledged agents, were such as to induce Dexter and Carpenter to consider the Railways the real party in interest and that the subsequent negotiations, including the communications between Dexter and Carpenter and Beijer and between Beijer and the Railways, clearly showed that Beijer was the agent of the Railways for the purchase and delivery of the coal.

District Judge Knox, in his charge to the jury said:

“In order to hold the Railways liable for an unauthorized breach of contract it is necessary for Dexter and Carpenter to convince you by the fair preponderance of evidence, of which I have already spoken, either that Beijer in making the contract acted as the agent of the Railways or that the Railways, if they did not authorize Beijer to make the contract in the first instance, learned of the existence of the contract and then adopted and ratified Beijer’s acts as the acts of the Railways. Unless this proof be before you and unless it convinces you by a fair preponderance of the evidence of the case that such is the fact, the lawsuit is over and a verdict should be rendered for the Railways.”

On these instructions the jury gave a verdict in favor of Dexter and Carpenter, thus confirming the contention of the sellers that, at the time of the breach of contract, there was a contract between the Railways and Dexter and Carpenter. No exception was taken by the Railways to that part of the charge to the jury and it was not covered by any assignment of error.

We have already seen that the Railways’ original suit was based on the allegation that the contract was between it and Dexter and Carpenter. On the second trial the court admitted this complaint as evidence tending to show privity of contract between the plaintiff and the defendant. The important allegations in the Railways’ original complaint are as follows:

“Sixth: That on or about the 6th day of April, 1920, the defendant, Dexter and Carpenter, Inc., sold to G. and L. Beijer Import and Export Akliebolag, a corporation organized and existing under the laws of the Kingdom of Sweden, which was then acting, to the knowledge of Dexter and Carpenter, Inc., in behalf of the plaintiff, and the said G. and L. Beijer Import and Export Akliebolag, so acting in behalf of the plaintiff, bought of and from the said defendant, Dexter and Carpenter, Inc., 3,577 gross tons, of 2,240 pounds to the ton, of Fairmont Screen Steam coal at $31.90 per ton.”

“Twelfth: That the value of the coal if and when delivered at the port of Malmo, Sweden, in accordance with the contract between the plaintiff and the defendant, Dexter and Carpenter, Inc., acting through G. and L. Beijer Import and Export Akliebolag, was at least the sum of $125,515.93.”

This complaint was verified March 20, 1923, after the attorney who verified it had represented the Railways, in connection with this matter, for almost three years.

After Dexter and Carpenter filed their counter-claim, admitting the allegation in the complaint that Beijer and Company was the agent of the Railways, the latter served an amended complaint, verified August 6, 1923, in which the sixth article, quoted above, was altered by alleging a sale by Dexter and Carpenter to Beijer and Company. A further paragraph was added as follows:

“Seventh: That thereupon, and before the tender of the documents for the delivery of said coal under said contract between Dexter and Carpenter, Inc., and G. and L. Beijer Import and Export Akliebolag, the said G. and L. Beijer Import and Export Akliebolag sold the said coal, represented or to be represented by the documents aforesaid, to the plaintiff herein and upon the same terms and conditions except as to price.”

The Railways also omitted the allegation of agency contained in the twelfth paragraph supra.

The original complaint was offered in evidence by Dexter and Carpenter on two grounds: (1) that it was a ratification of the agency; (2) as evidence that Beijer was the agent of the Railways.

The Railways, on the other hand, sought to show that their attorney had no authority to make the allegation contained in the original complaint. The evidence, however, indicates the contrary.

The second decision of the District Court in favor of Dexter and Carpenter was appealed to the Circuit Court. Judge Swan delivered the opinion of the court. (32 F. (2d) 195.) After a recitation of the facts the opinion continues as follows:

“The theory of the counter-claim was that the contract of December 4, 1919, nominally between Dexter and Carpenter and Beijer and Co., was really made by the latter as agent for the Railways, or, if not originally so made, was subsequently ratified and adopted by the Railways as its contract. In opposition to this theory, the Railways contended that Beijer and Co. was an independent contractor, from whom they purchased the coal under a contract originally made on November 1, 1919, and modified by a document dated January 16, 1920. These opposing contentions were submitted to the jury, whose verdict is equivalent to a finding that the Railways either authorized or adopted the contract between Beijer and Co. and Dexter and Carpenter. Without specifying the evidence which leads us to the conclusion, it suffices to say that there was enough evidence to justify leaving the issues of agency and ratification to the jury.

“Much of the evidence relating to the agency of Beijer and Co. consisted of declarations by the agent, which by themselves would be inadmissible to establish the fact of agency. There was, however, other evidence tending to prove such fact. The original complaint of the Railways alleged the agency of Beijer and Co. and the making by them on the Railways’ behalf of a contract with Dexter and Carpenter. This complaint was verified on information and belief by the Railways’ attorney. After the defendant’s counter-claim was interposed, the allegations of agency were stricken from the complaint by amendment, and on the trial much evidence was introduced to prove that the attorney was not authorized to make such allegations, and that he had made them under a mistaken interpretation of the facts then known to him, and without complete information as to the relations between the Railways and Beijer and Co. The court left to the jury the determination of what weight to give to the allegations of the original complaint in the light of all the evidence.

“Error is now assigned to the receipt in evidence of the original complaint, which was offered by the defendant both as evidence of agency, and as a formal ratification of the contract. One ground of objection to its admission was lack of proof of authority of the Railways’ attorney to bind his client by the averments of the pleading. Such an objection is clearly not sustainable. A pleading prepared by an attorney is an admission by one presumptively authorized to speak for his principal. See Putnam v. Day, 22 Wall. 60, 22 L. Ed. 764; Shaft v. Phoenix Mut. Life Ins. Co., 67 N. Y. 544, 23 Am. Rep. 138; N. E. Road Machinery Co. v. Vanderhoof, 19 F. (2d) 331 (C. C. A. 1); Christy v. Atchison, T. & S. F. Ry. Co., 233 F. 255 (C. C. A. 8).

“A further objection was based upon the fact that the complaint had been superseded by an amended pleading. This objection is likewise unavailing. When a pleading is amended or withdrawn, the superseded portion ceases to be a conclusive judicial admission; but it still remains as a statement once seriously made by an authorized agent, and as such it is competent evidence of the facts stated, though controvertible, like any other extrajudicial admission made by a party or his agent. 2 Wigmore, Evidence §1067; Evans v. Daniel, 289 F. 335 (C. C. A. 9); Rankin v. Probey, 136 App. Div. 134, 120 N. Y. S. 413; Daub v. Englebach, 109 Ill. 267; Guy v. Manuel, 89 N. C. 83. If the agent made the admission without adequate information, that goes to its weight, not to its admissibility. There was no error in receiving the original complaint in evidence.

“Likewise, and for similar reasons, it was proper to receive the Railways’ libel against the United States for loss of the cargo of coal shipped on the steamer Alderman. Pope v. Allis, 115 U. S. 363, 6 S. Ct. 69, 29 L. Ed. 393, Lehigh Valley R. R. Co. v. Allied Machinery Co., 271 F. 900 (C. C. A. 2)”. (32 Fed. (2d) 195.)

After discussing various other points raised by the Railways, the opinion takes up the question of sovereign immunity. The Railways urged that error was committed in the order of May 29, 1925, which struck out, from the Railways’ reply to the amended counter-claim, its assertion that the plaintiff was an agency of the Kingdom of Sweden and as such entitled to sovereign immunity. On this point the opinion contained the following statements:

“The motion to strike out was made upon all the pleadings, and the complaint alleged that the plaintiff was a Swedish corporation, an averment which remained unchanged, despite amendments of the complaint in other respects. The amended counter-claim also alleged incorporation of the plaintiff. In its reply thereto, the plaintiff, appearing specially, shows by its attorney that ‘the plaintiff is an agency of the friendly foreign sovereign government of Sweden’; that the counter-claim is in effect a suit against such government, and ‘as such is not maintainable in this court without the consent of the plaintiff’; and that the plaintiff does not consent to the determination of the counter-claim. This is not an appearance by the kingdom of Sweden as a party to the suit, nor the assertion of immunity by that kingdom. It is an assertion by plaintiff corporation of a claim of sovereign immunity. But the assertion of the sovereign’s immunity cannot be made by a private party litigant.…⁶

“When a private corporation is sued at law, we do not think it is enough for an attorney to appear for it and say it is a governmental agency, and in his opinion immune from suit.…⁶

“The Government must claim immunity for its agent and should do so in as formal a manner as when Government property is seized.…⁶

“If such protection is to be granted, it must be claimed in the formal and recognized mode.…⁶

“Although unnecessary, prima facie proof of incorporation was made by the introduction in evidence of the admission of this fact contained in the plaintiff’s complaint. We find no proof which contradicts it. It is true that Mr. Tausen, an officer of the Railways, was appointed to his office by a royal commission; but it does not necessarily follow from this that the Railways was not a corporation. It is true, also, that Mr. Lange’s affidavit, in opposition to the motion to produce papers, states that the Railways is a department of the government of Sweden, and is not an independent corporation. But this affidavit is not evidence in the case. At most it can be considered only as a suggestion by an attorney of the court that the party sued in the counter-claim is not a private corporation but a department of a sovereign government. Such a suggestion, however, as already indicated, must be made by an accredited representative of the government.”

The Court found no reversible error and therefore affirmed the judgment below in favor of Dexter and Carpenter and against the Railways.

Certiorari was sought of the Supreme Court of the United States but the writ was denied. Thereafter, as we know, Dexter and Carpenter endeavored to secure payment of the judgment in its favor and failing that to have execution on the judgment. When execution on the judgment was sought the plea of sovereign immunity was properly pressed and allowed by the United States District Court. The decision was affirmed by the Circuit Court of Appeals for the Second Circuit. Certiorari was denied by the Supreme Court.

From the above it may be seen that:

(1) The Railways brought suit against Dexter and Carpenter on the contract of December 4, 1919, (ostensibly between Dexter and Carpenter and Beijer) alleging privity of contract;

(2) The Railways knowingly permitted its attorney to carry on the suit on the basis that the contract was made by Beijer, as agent of the Railways, with Dexter and Carpenter;

(3) The duly authorized legal representative for the Railways was evidently of the opinion, when he instituted suit, with full knowledge of the provisions of the contract, that the Railways was the real party in interest and that Beijer was merely the agent of the Railways;

(4) The Railways did not change its position until after it became apparent that it was greatly to the advantage of the Railways to do so, that is, after Dexter and Carpenter filed the counter-claim.

The files of the Department reveal the following additional facts:

(1) That before Beijer left Sweden for the United States, he was given a diplomatic passport by the Swedish Government and the American Minister at Stockholm was advised by the Foreign Office that Beijer had been “commissioned by the Swedish Government to proceed to Washington” where he would be “temporarily attached to the Swedish Legation in the capacity of technical adviser in order to take part in negotiations with a view to making arrangements for the purchase of coal”;

(2) That after the signing of the contract on December 4, 1919, between the Railways and Dexter and Carpenter, and prior to the purported contract of January 16, 1920, between the Railways and Beijer, the Swedish Legation in Washington applied through the Department of State for permits for the exportation of the coal purchased by the Railways.

(These two facts would seem to indicate perfectly clearly that the coal was bought by and for the Railways and that the contract of January 16, 1920, had no bearing whatever on the previously established contractual relationships between other parties.)

(3) That it was no secret that the coal purchased in the United States under the contract of December 4, 1919, was destined for the use of the Railways. The purchase price exceeded $4,500,000 and the coal which was to be shipped was locomotive coal;

(4) That the preliminary negotiations leading up to the making of the contract between Beijer and Dexter and Carpenter indicate that the coal was purchased on behalf of the Railways and for the Railways’ use;

(5) That the Railways inspected and passed each cargo before shipment;

(6) That the Railways paid for the coal in the United States against delivery of shipping documents;

(7) That the correspondence subsequent to the formal contract treated it as though the Railways were the real party in interest;

(8) That the Railways only sought to repudiate its obligations when it was greatly to the advantage of the Railways to do so because of the fall in the price of coal and because the Railways had an overstock.

It is assumed that it is not necessary at this point again to summarize the course of action followed by the Railways in asserting immunity as a part of the Swedish Government. Such a summary is contained in the Legation’s note of June 9, 1931, to the Minister for Foreign Affairs.⁷ It would seem, as stated in that note, that the course followed by the Railways throughout was one of expedience; that it was willing to use the courts of the United States only so long as it was clearly to its advantage to do so and that it intended to disregard any obligation imposed by those courts.

In spite of the facts of this case as above briefly outlined and the protracted judicial proceedings in the courts of the United States, which were initiated by the Swedish State Railways, the Swedish Government refuses to recognize the justice of the claim represented, in the main, by the judgments of those courts and, as indicated in its note of July 18, 1931,⁸ assigns the following reasons for such refusal:

• First: That, according to the regulations governing the activities of the Swedish State Railways, it is neither authorized nor obligated, in the absence of a judgment rendered by a Swedish Court, to satisfy any claims other than those which are clear and incontestable, and the claim of the United States, based upon the above-mentioned judgments cannot be regarded “as fulfilling this condition.”
• oSecond: That according to Swedish law, and in the absence of any expressly formulated convention contrary thereto, judgments rendered by foreign tribunals are not executory in Sweden, and the Swedish Government stands in the same position in this respect as a private individual under the law of Sweden.
• Third: That the question of determining whether the claim is justified depends upon the interpretation to be given to a contract made in Sweden between the Swedish State Railways and a Swedish Company, the interpretation of which can be made only in accordance with Swedish law.
• Fourth: That the only remedy available to Dexter and Carpenter is a suit in the Swedish courts.
• Fifth: That the Swedish Government also refuses to recognize its obligation under the judgment of the court, because the Swedish State Railways pleaded sovereign immunity from the right of execution on that judgment, and such immunity was recognized by the court.

The Department confidently believes that, upon careful reconsideration by the Swedish Government of the very untenable position which it has thus taken in this matter, it will desire to recede therefrom. The Department hopes that in such reconsideration careful thought will be given to the following observations concerning the points just enumerated.

Point One.

It is not perceived that the regulations governing the activities of the Swedish State Railways have any bearing on the subject under consideration, namely, the claim of the Government of the United States against the Government of Sweden on account of the refusal of the latter to respect its obligation to respond to the judgment of the Courts of the United States to which the Swedish State Railways appealed for an adjudication of its contract relations with Dexter and Carpenter. Neither the validity of that claim, nor the justice of the judgment upon which it is based, can be determined or affected by any administrative regulations governing the activities of the Swedish State Railways. Moreover, if it be true that under the administrative regulations controlling the Railways at that time it was not authorized to satisfy a judgment rendered by a foreign tribunal, it is difficult to understand how the Railways permitted itself to assume the anomalous position of using the courts of the United States, to enforce alleged rights, with no intention of assuming obligations which might be imposed by those courts as a result of the transaction under litigation. The litigation initiated in the United States by the Swedish State Railways was protracted and the Railways not only was afforded but took advantage of every possible recourse under the laws of the United States for the full protection and adjudication of its rights. It was not until after final judgment had been rendered against the Railways and effort was made by Dexter and Carpenter to execute that judgment that the Swedish Government pleaded sovereign immunity on behalf of the Railways. The court respected that plea, adding, however, that:

“It is regrettable that Sweden may thus escape payment of a valid judgment against it. Appellant has been misled in the belief that this plaintiff was a separate entity—apart from the government—and now, when a sufficient number of years has passed making possible a plea of limitation or laches against suing in Sweden (see letter to the League of Nations), appellee appears and pleads its sovereign immunity. Whatever may be appellant’s remedy to collect its valid judgment, it should not be necessary to resort to further litigation. It is hoped that the judgment of our courts will be respected and payments made by the Swedish government. But we are required to affirm the order appealed from.” (43 Fed. (2d) 707, 710.)

This Government is firmly convinced that the contention of the Swedish Government that the judgment of the court of the United States (from the execution of which that Government thus pleaded and was granted sovereign immunity) was not such a judgment as could create, in the circumstances, a clear and incontestable obligation, that is to say that it was a denial of justice, is thoroughly untenable.

It is believed that the adoption of such a position places upon the Swedish Government the obligation of stating very specifically in what respect and for what reasons it considers that judgment a denial of justice.

Point Two:

If the Swedish Government were in a position successfully to demonstrate that the American courts failed to administer justice in the litigation in question, it can readily be understood why it might desire to resort to this method to avoid the obligation of that judgment.

Inasmuch, however, as, in the view of the United States, the courts did not fail properly to administer the law of the case and inasmuch as the obligation represented by the judgment was and is both a legal and moral obligation, it is difficult to understand why the Swedish Government should adopt such a course of action as is indicated in the third paragraph above for the purpose of defeating the effects of a litigation which it initiated and pursued in the courts of the United States during a period of seven years and until an effort was made by the American contestant in that litigation to execute the judgment which ultimately resulted from that protracted litigation.

This Government is unable to accede to the view that in this respect the Swedish Government stands in the same position as would a private individual, for the reason, among others, that this claim originates from the assertion by the Swedish Government of a right to sovereign immunity, which right would not, of course, attach to any private individual.

Point Three:

While the position of the Swedish Government in this respect is not entirely clear, it would appear to have been chosen with a view to other aspects of the situation than the facts out of which the claim arose. If the Swedish State Railways had formulated its position in this matter in accordance with what the Swedish Government now contends the facts to be, in this respect, the Railways obviously would not have brought suit in the United States against Dexter and Carpenter for an alleged violation of their contract obligation toward the Railways but, instead, would have brought suit in Sweden against the concern which the Swedish Government now contends was the only party with which the Railways had privity of contract. In that circumstance, Dexter and Carpenter would not have been put to the inconvenience and expense of defending the protracted litigation prosecuted against them in the United States by the Railways and undoubtedly would have brought its suit for damages in the courts of Sweden.

It is not considered to be accurate to say that the question of determining whether the claim is just depends upon Swedish law. The contract on which the justice of this claim depends is the contract between the Swedish Railways, and the American vendors, the same contract on which the Swedish State Railways instituted proceedings in the United States Courts. This contract was properly to be interpreted in accordance with the law of the place in which it was made and in which it was to be performed, namely, the United States.

The Department can not but believe that the adoption at this time of the attitude that the rights of the parties depend upon an entirely different and subsequent contract and upon the law of Sweden is completely out of harmony with the conduct and attitude of the Swedish State Railways during the existence of the contract and at all times prior to the development of the possibility that it might be held accountable for the cancellation of its contract obligation, and that upon reconsideration that attitude will be found to have been assumed without due regard of the facts and the justice of the case.

Point Four:

In point three above the Swedish Government appears to contend that there was no privity of contract between the Swedish State Railways and Dexter and Carpenter. In point four it states that the only remedy available to Dexter and Carpenter was and is a suit in the Swedish Courts. Obviously, if these contentions are correct, such a suit could only be brought by Dexter and Carpenter against the local Swedish concern with which the Railways now contend it and Dexter and Carpenter had separate contractual relationships. The note of July 18, 1931, from the Swedish Foreign Office concludes, however, with the statement that any judgment which Dexter and Carpenter might obtain in Swedish courts as a result of a suit there “would be obligatory for the said Administration”, i.e., the Swedish State Railways. The obvious import of this statement is that the Swedish State Railways and Beijer and Company are, for the purposes of liability in this case, one and the same. The rights of the American claimant in this case depend, of course, upon its contract of December 4, 1919, with the Swedish State Railways. Inasmuch as the question of such rights has been fully litigated in the jurisdiction where the contract of Dexter and Carpenter was made and was to be performed and, moreover, in the jurisdiction which the Railways chose for the determination of those rights, to insist now that this litigation be repeated in Sweden is to say that the judgment of the court of the United States constitutes a denial of justice or that the Swedish Government refuses to comply with the legal and moral obligation resulting from that judgment.

Point Five:

The recognition by the courts of the United States of the immunity of the property of the Swedish Government from the process of judicial execution in this country has no bearing, of course, upon the question of the justice of the judgment of the American court nor upon the question of the obligation of the Swedish State Railways to respect that judgment. Aside from the fact that it is conceived to be somewhat out of harmony with the relationships of the two Governments for the Swedish Government to ask immunity for a Swedish commercial institution which not only engaged in business in the United States but also chose the courts of the United States as the appropriate tribunals to adjudicate disputes arising from its own commercial undertakings in this country, the Department is of the opinion that the Swedish Government is entirely unjustified in setting up as a defense to the merits of the claim, which is founded upon the just judgment of the Courts of the United States, the fact that this Government recognized the plea of sovereign immunity from execution on that just judgment. It is believed that the Swedish Government will desire to reconsider its position in this respect.

You are requested to communicate the above to the Swedish Foreign Office and state that this Government confidently expects that the further consideration of the claim, which it hopes the Swedish Government will give to it, will lead to the conclusion that the claim should be settled by the payment of the amount of the judgment with interest.

Very truly yours,

For the Secretary of State:

James Grafton Rogers

2. Ibid., p. 1009.
3. Ibid., p. 1014.
4. Not printed.
6. Omission indicated in the original instruction.
6. Omission indicated in the original instruction.
6. Omission indicated in the original instruction.
6. Omission indicated in the original instruction.
7. Not printed.
8. Foreign Relations, 1931, vol. ii, p. 1014.