De Cuellar v. Brady

881 F.2d 1561, 1989 WL 91563
CourtCourt of Appeals for the Eleventh Circuit
DecidedSeptember 1, 1989
DocketNos. 88-5606, 88-5667
StatusPublished
Cited by12 cases

This text of 881 F.2d 1561 (De Cuellar v. Brady) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eleventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
De Cuellar v. Brady, 881 F.2d 1561, 1989 WL 91563 (11th Cir. 1989).

Opinion

FAY, Circuit Judge:

This appeal presents a novel question concerning the interpretation of the Cuban Assets Control Regulations, 31 C.F.R. Part 515 (1987). The plaintiff, a Cuban refugee residing in the United States, brought this suit seeking a writ of mandamus ordering the Secretary of the Treasury to issue her a license to redeem certain bonds issued by the Republic of Cuba. The Secretary, through the Office of Foreign Assets Control, had denied her application for a license stating that the redemption of her bonds was blocked under the Cuban Assets Control Regulations. The district court held that the sinking fund securing the bond issue qualified as a trust, and the plaintiff was therefore entitled under the Regulations to a general license to redeem the bonds. De Cuellar v. Baker, 686 F.Supp. 890 (S.D.Fla.1988). We find that the Secretary’s denial of the plaintiffs application was based upon a reasonable interpretation of the Regulations and accordingly we reverse the order of the district court.

I

The statutory basis for the Cuban Assets Control Regulations (“the Regulations”) is the Trading with the Enemy Act (“the Act”), 50 U.S.C.App. § 1 et seq. Section 5(b) of the Act provides in part:

During the time of war or during any other period of national emergency declared by the President, the President may, through any agency that he may designate ...
(A) investigate, regulate, or prohibit, any transactions in foreign exchange, transfers of credit or payments between, by, through, or to any banking institution ... and
(B) investigate, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, [1563]*1563transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest....

In 1977 Congress amended § 5(b) so that its applicability no longer extended to national emergency situations during peacetime. Act of December 28, 1977, Pub. L.No. 95-223, 91 Stat. 1625 (1977).1 Section 101(b) of the Act however, contained a grandfather clause such that economic measures taken pursuant to § 5(b) prior to 1977 could be continued. “The President may extend the exercise of such authorities for one-year periods upon a determination ... [that such] extension ... is in the national interest of the United States.” The Regulations have been extended each year.

In 1963 President Kennedy issued an embargo on all trade with Cuba. Under the authority given to him under the embargo, the Secretary of the Treasury promulgated the Cuban Assets Control Regulations on July 8, 1963. 31 C.F.R. Part 515. The Regulations prohibit all transactions that “involve property in which a foreign country designated under this part, or any national thereof, has at any time on or since the effective date of this section had any interest of any nature whatsoever, direct or indirect.” 31 C.F.R. § 515.201(a)(1). Cuba is a designated national. 31 C.F.R. § 515.305.

Notwithstanding the general prohibition of § 515.201, Subpart E of the Regulations provides for the issuance of general licenses upon application to the Secretary, by which an individual may be permitted access to property otherwise blocked by the Regulations. Persons who do not qualify under one of the general license provisions may apply for a specific license to be issued at the discretion of the Secretary. 31 C.F.R. § 515.801. Section 515.524, under Subpart E, provides, in part, as follows:

(a) Any bank or trust company incorporated under the laws of the United States, or of any State, territory, or district of the United States, or any private bank subject to supervision and examination under the banking laws of any State of the United States, acting as trustee of any trust administered in the United States or as legal representative of any estate of an infant or incompetent administered in the United States in which trust or estate one or more persons who are nationals of a designated foreign country have an interest, beneficial or otherwise, or are co-trustees or co-representatives, is hereby authorized to engage in the following transactions:
(1) Payments of distributive shares of principal or income to all persons legally thereto upon the condition prescribed in paragraph (b) of this section.

II

The plaintiff Margarita Rosa De Cuellar is the sole remaining beneficiary of a United States personal trust established in 1936 by her mother. The trust consists of 133 “Republic of Cuba External Sinking Fund 4 ¥2% Bearer Bonds” with a face value of $127,000. The bonds were issued in 1937 under an indenture contract between the Republic of Cuba and Manufacturers Hanover Trust (“MHT”). Under the indenture agreement (“the Agreement”), Cuba was to retire the bond series through annual payments of principal and interest to a sinking fund held by the indenture trustee, MHT, from 1938 through 1977. As trustee, MHT was responsible for redeeming these bearer bonds upon their maturity with the funds accumulated in the sinking fund.

The Agreement also provided that once the bonds matured in 1977, bondholders had six years to redeem the bonds or “the Agent shall return to the Republic the amounts corresponding to the remaining Bonds which, not having been redeemed nor purchased, should have been paid on June 30, 1977 and shall not have been presented for payment.” Agreement Í1 25. [1564]*1564Under the Agreement, the bonds were secured by “the pledge of [Cuba’s] good faith and credit,” and by “a first preferential right and lien” on 90% of Cuba’s tax revenues and economic resources. The pledge of tax revenues and resources was secure “[s]o long as any of the bonds of this issue shall remain outstanding.” Agreement TÍ 7. The bonds were payable in full at their maturity in June 1977, however in the event that there were insufficient funds in the sinking fund, MHT was to distribute the funds pro rata. Agreement II 21.

Cuba made its required payments to the sinking fund until December 31, 1960, when it defaulted. On July 8, 1963, the sinking fund was blocked pursuant to the Cuban Assets Control Regulations. As of that date MHT, the paying agent, held $640,098 in the sinking fund. (R3-65-1).

On May 12, 1987, the plaintiff filed a petition with the Secretary seeking a specific license authorizing her to redeem her bonds with her distributive share of the sinking fund. Her request was denied by Richard Newcomb, the Director of the Office of Foreign Assets Control (“OFAC”).2 The Director stated that the sinking fund was blocked because the Republic of Cuba retained a contingent reversionary interest in the fund.3

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Bluebook (online)
881 F.2d 1561, 1989 WL 91563, Counsel Stack Legal Research, https://law.counselstack.com/opinion/de-cuellar-v-brady-ca11-1989.