Watts Watts Company v. Unione Austriaca Di Navigazione/Opinion of the Court

On August 4, 1914, Great Britain declared war against Germany and on August 12, 1914, against Austria-Hungary. Prior to August 4, Watts, Watts & Co., Limited, a British corporation, had supplied to Unione Austriaca di Navigazione, an Austro-Hungarian corporation, bunker coal at Algiers, a dependency of the French Republic. Drafts on London given therefor having been protested for nonpayment, the seller brought, on August 24, 1914, a libel in personam against the purchaser in the District Court of the United States for the Eastern District of New York. Jurisdiction was obtained by attaching one of the steamers to which the coal had been furnished. The attachment was discharged by giving a bond which is now in force. The respondent appeared and filed an answer which admitted that the case was within the admiralty jurisdiction of the court; and it was submitted for decision upon a stipulation as to facts and proof of foreign law.

The respondent contended that the District Court, as a court of a neutral nation, should not exercise its juris dictional power between alien belligerents to require the transfer, by process of judgment and execution, of funds by one alien belligerent to another; an act which it alleged was prohibited alike by the municipal law of both belligerents. The libelant replied that performance of the contract by respondent-that is, the payment of a debt due-was legal by the law of the place of performance, whether that place be taken to be Algiers or London; that it was immaterial whether it was legal by the Austro-Hungarian law, since Austria-Hungary was not the place of performance; and that the enforcement of legal rights here would not infringe the attitude of impartiality which underlies neutrality. The District Court held that it had jurisdiction of the controversy, and that it was within its discretion to determine whether it should exercise the jurisdiction; since both parties were aliens and the cause of action arose and was to be performed abroad. It then dismissed the libel without prejudice, saying:

'From the standpoint of this neutral jurisdiction the     controlling consideration is that the law of both belligerent      countries [Great Britain and Austria-Hungary] forbids a      payment by one belligerent subject to his enemy during the      continuance of war. This court, in the exercise of     jurisdiction founded on comity, may not ignore that state of      war and disregard the consequences resulting from it.' 224      Fed. 188, 194.

The dismissal by the District Court was entered on May 27, 1915. On December 14, 1915, the decree was affirmed by the Circuit Court of Appeals, on the ground that it was within the discretion of the trial court to determine whether to take or to decline jurisdiction (The Belgenland, 114 U.S. 355, 5 Sup. Ct. 860, 29 L. Ed. 152), and that the exercise of this discretion should not be interfered with, since no abuse was shown (229 Fed. 136, 143 C. C. A. 412). On June 12, 1916, an application for leave to file a petition for writ of mandamus to compel the Court of Appeals to review the exercise of discretion by the District Court was denied (Ex parte Watts, Watts & Co., 241 U.S. 655, 36 Sup. Ct. 726, 60 L. Ed. 1224), and a writ of certiorari was granted by this court (241 U.S. 677, 36 Sup. Ct. 726, 60 L. Ed. 1232). The certiorari and return were filed July 21, 1916. On December 7, 1917, the President issued a proclamation declaring that a state of war exists between the United States and Austria-Hungary. The case was argued here on April 17, 1918.

This court, in the exercise of its appellate jurisdiction, has power not only to correct error in the judgment entered below, but to make such disposition of the case as justice may at this time require. Butler v. Eaton, 141 U.S. 240, 11 Sup. Ct. 985, 35 L. Ed. 713; Gulf, Colorado & Santa Fe Ry. Co. v. Dennis, 224 U.S. 503, 506, 32 Sup. Ct. 542, 56 L. Ed. 860. And in determining what justice now requires the court must consider the changes in fact and in law which have supervened since the decree was entered below. United States v. Hamburg-Amerikanische Packetfahrt-Actien Gesellschaft, 239 U.S. 466, 475, 478, 36 Sup. Ct. 212, 60 L. Ed. 387; Berry v. Davis, 242 U.S. 468, 37 Sup. Ct. 208, 61 L. Ed. 441; Crozier v. Krupp, 224 U.S. 290, 302, 32 Sup. Ct. 488, 56 L. Ed. 771; Jones v. Montague, 194 U.S. 147, 24 Sup. Ct. 611, 48 L. Ed. 913; Dinsmore v. Southern Express Co., 183 U.S. 115, 120, 22 Sup. Ct. 45, 46 L. Ed. 111; Mills v. Green, 159 U.S. 651, 16 Sup. Ct. 132, 40 L. Ed. 293; The Schooner Rachel v. United States, 6 Cranch, 329, 3 L. Ed. 239; United States v. Schooner Peggy, 1 Cranch, 103, 109, 110, 2 L. Ed. 49. In the case at bar the rule is the more insistent, because in admiralty cases are tried de novo on appeal. Yeaton v. United States, 5 Cranch, 281, 3 L. Ed. 101; Irvine v. The Hesper, 122 U.S. 256, 266, 7 Sup. Ct. 1177, 30 L. Ed. 1175; Reid v. American Express Co., 241 U.S. 544, 36 Sup. Ct. 712, 60 L. Ed. 1156.

Since the certiorari was granted, the relation of the parties to the court has changed radically. Then, as earlier, the proceeding was one between alien belligerents in a court of a neutral nation. Now, it is a suit by one belligerent in a court of a cobelligerent against a common enemy. A suit may be brought in our courts against an alien enemy. McVeigh v. United States, 11 Wall. 259, 267, 20 L. Ed. 80. See also Dorsey v. Kyle, 30 Md. 512, 96 Am. Dec. 617. If the libel had been filed under existing circumstances, security for the claim being obtained by attachment, probably no American court would, in the exercise of discretion, dismiss it and thus deprive the libelant not only of its security, but perhaps of all possibility of ever obtaining satisfaction. Under existing circumstances dismissal of the libel is not consistent with the demands of justice.

The respondent, although an alien enemy, is, of course, entitled to defend before a judgment should be entered. McVeigh v. United States, supra. See also Windsor v. McVeigh, 93 U.S. 274, 280, 23 L. Ed. 914; Hovey v. Elliott, 167 U.S. 409, 17 Sup. Ct. 841, 42 L. Ed. 215. It is now represented by counsel. But intercourse is prohibited by law between subjects of Austria-Hungary outside the United States and persons in the United States. Trading with the Enemy Act of October 6, 1917, c. 106, § 3 (c), 40 Stat. 412, Public-No. 91-65th Congress. And we take notice of the fact that free intercourse between residents of the two countries has been also physically impossible. It is true that, more than three years ago, a stipulation as to the facts and the proof of foreign law was entered into by the then counsel for respondent, who has died since. But reasons may conceivably exist why that stipulation ought to be discharged or modified, or why it should be supplemented by evidence. We cannot say that, for the proper conduct of the defense, consultation between client and counsel and intercourse between their respective countries may not be essential even at this stage. The war precludes this.

Under these circumstances, we are of opinion that the decree dismissing the libel should be set aside and the case remanded to the District Court for further proceedings, but that no action should be taken there (except such, if any, as may be required to preserve the security and the rights of the parties in statu quo) until, by reason of the restoration of peace between the United States and Austria-Hungary, or otherwise, it may become possible for the respondent to present its defense adequately. Compare The Kaiser Wilhelm II (C. C. A.) 246 Fed. 786, L. R. A. 1918C, 795; Robinson & Co. v. Continental Insurance Company of Mannheim, [1915] 1 K. B. 155, 161-162.

Reversed.