Dougherty v. Equitable Life Assurance Society of United States

193 N.E. 897, 266 N.Y. 71

• Court: New York Court of Appeals
• Decided: December 31, 1934
• Status: Published

Opinions

Crane, J.

On November 16, 1933, the United States extended formal recognition to the Soviet Republic. The first question which arises in this case is as to the effect this recognition gives to the laws of the Soviet Republic passed in 1918 and 1919; the second question relates to the valuation of the ruble after 1924, to be paid under contracts made prior to 1918.

The Equitable Life Assurance Society of the United States had a concession or was licensed to do business in Russia under laws of the Imperial government. In 1890 the Russian government enacted the laws of August 10, 1890, known as the policy rules (Pravila), stating the regulations which were to govern the conduct of the Equitable’s business in Russia. These were inserted in each policy issued by the defendant and became a part of each insurance contract. The defendant was obliged to keep on deposit with the government or the State bank sufficient assets to more than meet the liabilities incurred by the policies issued. The defendant at all times not only kept the required cash deposit, but also bonds, more than equal to the reserve premiums upon all policies issued in Russia.

Paragraph 1, clause 7, of the policy rules provides “ that all disputes which may arise in connection with the assurance operations carried on by the Society in Russia shall be settled according to Russian laws and in Russian courts of justice.” This was plaintiffs’ Special Exhibit A, an interpretation of the original. The defendant’s interpretation, defendant’s General Exhibit 14, reads: “ That the litigation of claims which might arise with the Society in connection with the business pertaining to its operations in Russia be pursued on the strength of our existing laws and in Russian court institutions.’' These varying interpretations mean the same thing, as the referee who decided this case said: “All disputes which may arise in connection with the insurance operations * * * shall be settled according to the Russian laws and in Russian courts of justice.” Another provision, made part of the contract of insurance, was that this right to do business in Russia might at any time be canceled, in the discretion of the government, without explanation. If permission be withdrawn and the defendant expelled from Russia the society “ must immediately liquidate its business in Russia and settle its accounts with the assured in the manner that shall be indicated to it by the Russian government.”

All the policies upon which these twenty-six test actions have been brought were made in Russia by Russian citizens, to be performed there, and the obligation of the contract depended not only upon its specific terms but also upon the Russian law. The referee said: “ The result of these various provisions is that these policies were made in Russia and were to be performed there. All payments to the defendant were to be made in Russian currency. What the insured or his beneficiary was to receive was the sum promised in Russian rubles. Primarily they were to be paid from funds accumulated in St. Petersburg for that purpose. Only if such funds proved insufficient or if for some reason payment could not or was not there made might recourse be had to the general assets of the Society, by which the Russian obligations of the defendant were guaranteed.”

This last statement of the referee had reference to another provision of the rules or Pravila made part of the contract of insurance. It reads, “ That the exact fulfillment of the obligations entered into by the Society regarding the Russian assured shall be guaranteed, besides its sums and security found in Russia, by all the property belonging to the Society.”

Let us pause here to consider this paragraph. It is the obligation of the society in Russia which is guaranteed. When the obligation has once been established the society pledges its funds to meet the obligation. Its funds or^..property may be anywhere. The obligation, however, only arises under Russian law. Until the Russian law, not New York law, determines that there be an obligation, the Equitable is not hable. By the undisputed terms of the insurance policy these obligations, or any disputes about them, are to be determined by the Russian law; the guaranty of all the property of the Equitable only applies to an obligation which is or becomes such under that law. The plaintiffs have read these contracts as if the defendant had said, “ If for any reason we cannot carry on this insurance business in Russia we wifi take over the policies and carry them on from New York. If the Russian law will not give you relief we will guarantee you a continuance of the policy and of our obligations under it in spite of Russian law; no matter how the government of Russia by its legitimate laws may affect the insurance contract or policies, we will carry out the obligation as though it were an obligation to be performed according to New York law.” There is no such contract. Russians in Russia made a contract as to which “ all disputes * * * shall be settled according to the Russian laws.” If the Imperial government had continued, had not been destroyed by revolution, there can be no doubt that the decrees of such government affecting these insurance policies or requiring the Equitable to liquidate in the manner indicated by the government would have been within the very terms of these policies of insurance. The question here presented is whether a different result follows when the Imperial government has been succeeded by a republic.

The specific finding of the referee is, “ The application for the policy herein was made in Russia. The policy herein was issued under, and subject to the law of 1871, Concession and Policy Rules.” These rules, so far as material, are given above. The referee also found as a fact that not only was the contract of insurance made in Russia, but all premiums were to be paid in rubles in Russia at the St. Petersburg office of the defendant. The contract provided: “ The policy shall take effect when (after the actual payment of the first premium) it has been countersigned by the General Manager for Russia.”

The law of the place of performance generally governs the contract and its discharge. (American Law Institute, Restatement of the Law of Conflict of Laws, § 385; Zimmermann v. Sutherland, 274 U. S. 253; 2 Wharton on Conflict of Laws [3d ed. 1905], § 467-b; 1 Joyce on the Law of Insurance [2d ed. 1917], § 225.) But we are not left to the general rule, whether it be the place of l performance or some other place, because the parties 1 have stipulated that the Russian law shall govern. The policy rules further provided that, if the assured failed to pay a premium on due date or within two months thereafter, the policy would lapse and become null and void and the insurance would terminate unless the defendant permitted the policy to be reinstated after the performance by the insured of certain conditions precedent, except that an assured, who had paid not less than three full annual premiums, was entitled to the surrender value of the policy, if applied for within one year after date of lapse, or to a paid-up policy for a reduced amount, if applied for within six months after date of lapse. All these applications were to be made to the defendant’s general manager for Russia. While it is true that the referee made a finding that these contracts were to be primarily performed in Russia, we understand this to mean that the defendant may pay its assured wherever the assured might be found. But this does not mean "that its obligations are to be determined by the law of the country where the insured may be able to obtain jurisdiction over the defendant. Wherever sued that j obligation is to be determined by Russian law, for such 1 is the contract, and no court of this State has power to I make a new contract for the parties. Not the Russian law, but the contract made between the assured and the Equitable in Russia, is the basis for all these actions, and into that contract we must read that all disputes regarding the obligations of the contract are to be determined by the Russian law. The law of the situs of tangible property may or may not determine the right to its possession and ownership. The right to a sum of money due upon contract is to be determined by the terms of that contract the world over. “ The obligation is not enlarged by the fact that the creditor happens to be able to catch his debtor here.” (Deutsche Bank v. Humphrey, 272 U. S. 517, 519.)

Certain events have become history: The great war began in August of 1914; by March of 1917 the Imperial government of Russia was overthrown, followed by the Kerensky government, which was recognized by us; in turn the Soviet government became the ruling power in Russia on November 7, 1917, and has been the govern ment of that country, recognized at different dates by the various powers in Europe, and on November 16, 1933, recognized by the United States. (American Journal of International Law, vol. 28, pp. 90 and 96.)

Being a de facto government in Russia and, as to that country, de jure also, it passed an act or decree on December 1, 1918, declaring all kinds of insurance a State monopoly. This is known and characterized as the Monopolization Decree. All private insurance companies were to be subject to liquidation and became State property. This to some extent came within the terms of the rules and regulations of the Pravila, as contained in the contract of insurance. The termination of the right to do business in Russia always hung over the head of every policyholder as well as the defendant. Liquidation could be required under the Imperial government, which must be carried out according to its terms and conditions. Such was the contract. By the decree of November 18, 1919, life insurance in its then forms was abolished and all contracts annulled and canceled.

The referee made these findings, which state the situation exactly:

“ The Soviet government is an organization with a written constitution, performing the functions of a government through executive, legislative and judicial branches thereof.

“ The Soviet government has since November, 1917, existed in Russia, clothed with power to enforce its authority within its own territory, obeyed by the people over whom it rules, capable of performing the duties and fulfilling the obligations of an independent power, and able to enforce its claims by military force.

“ On or about December 1, 1918, the Soviet government enacted and promulgated a decree declaring that the business of insurance within Russia should thereafter be an exclusive monopoly of the State, and that every private insurance company then doing, an insurance business in Russia, which included the defendant, should be subject to a complete liquidation. In said decree it was further provided that the conduct of the insurance business thus assumed and taken over by the Soviet government was to be entrusted to a government committee consisting of representatives of named departments of the Soviet government.

“ Under Russian law, the Soviet government by its decrees and action pursuant thereto assumed all obligations of the defendant arising under its Russian policies of insurance, including the policy in suit.

“ On or about November 18, 1919, the Soviet government enacted and promulgated a decree in which it was provided that life insurance in all its forms was cancelled, and that all contracts entered into with insurance companies and savings banks for the sake of life insurance, including the policy in suit, were cancelled and annulled.

“ It was also provided in the decree of November 18, 1919, that a system of social protection should be established under the People’s Commissariat of Labor and Social Insurance of said government.”

In Russia, where all these insured were, with one or two exceptions, these decrees were laws to be obeyed. They were the laws of their government. As to them the Soviet Republic was no body of bandits, confiscating property, but an existing government, carrying out new theories of insurance. If the Russian people, under their Soviet form of government, determined to abolish all private insurance for their citizens and establish a system of social protection by the State, that was their affair, not ours, and however objectionable we may consider the monopolization of all business, including insurance and banking, and the conduct of it thereafter by the government, we at least must admit that other peoples can try the experiment if they desire.

The question now for us to determine is, what effect these laws and decrees of an established government, binding upon the citizens of Russia in Russia, have upon this defendant’s contracts, made in Russia with Russian citizens, to be determined and interpreted and given effect, if any, according to Russian law. Of course we start with the premise that the United States has now recognized the Soviet Republic, and that the government of Russia is in all respects to be treated as any other power in Europe. At the time the referee- heard and decided-this case the Soviet Republic hadrhot been recognized by the United States. His conclusions of law and findings of fact were governed by our decisions existing at that time. We, however, must now give full force and effect to the action of our government. (Ricaud v. American Metal Co., 246 U. S. 304; Luther v. Sagor & Co., [1921] 3 K. B. 532.)

Lefc us reflect upon what would be the rulings of our courts were this same situation to arise in any other European country, where no open and violent revolution had taken place. Suppose one of the recognized nations of Europe should suddenly determine to nationalize its insurance companies, take the assets, cancel the policies, reheve the companies and the assured from all obligations and establish a system of State insurance for all its citizens. Such action, I take it, would be binding upon our insurance companies doing business there as to policies there issued to citizens of that country, to be enforced according to the law of the land. (Russian Volunteer Fleet v. United States, 282 U. S. 481, 492; Wulfsohn v. Russian Republic, 234 N. Y. 372, 375; In re Russian Bank for Foreign Trade, [1933] Ch. 745, 766.) Could the people of that nation come to this country, maintain actions on the policies, and recover upon the plea that the laws of their nation were not binding upon them and could not affect their contracts? | Soviet Russia, as to all the insurance policies here in j question, stands in the same position as if the government I of Russia had never been interrupted by revolution; its decrees have the same force and effect as if they had been issued by the Imperial government. It is difficult at times to turn the mind from actual facts to legal concepts, and vice versa. Here we must join the two. This is the result of recognition under the law of nations. Of course we refer to redress in courts of law and not action by diplomacy or through the State Department, with which we have nothing to do.

The doctrine is simple and has been stated as follows: “ When a government/'" said the United States Supreme Court (Oetjen v. Central Leather Co., 246 U. S. 297, 302, 303), “ which originates in revolution or revolt is recognized by the political department of our government as the de jure government of the country in which it is established, such recognition is retroactive in effect and validates all the actions and conduct of the government so recognized from the commencement of its existence. * * * Every sovereign State is bound to respect the independence of every other sovereign State, and the courts of one country will not sit in judgment on the acts of the government of another done within its own territory. Redress of grievances by reason of such acts must be obtained through the means open to be availed of by sovereign powers as between themselves.” (See, also, Ricaud v. American Metal Co., 246 U. S. 304, which said that this rule applied even to property of an American citizen not residing in a foreign country.) To the same effect, Underhill v. Hernandez (168 U. S. 250).

We have recently applied this law in Salimoff & Co. v. Standard Oil Co. (262 N. Y. 220). To the same effect is Luther v. Sagor & Co. ([1921] 3 K. B., Court of Appeal, p. 532), wherein it was said: “ The government of this country having * * * recognized the Soviet government as the government really in possession of the powers of sovereignty in Russia, the acts of that government must be treated by the courts of this country with all the respect due to the acts of a duly recognized foreign sovereign state [p. 543]. * * * It must be quite immaterial for present purposes that the same views are not entertained by the government of this country, are repudiated by the vast majority of its citizens, and are not recognized by our laws ” [p. 546].

A case exactly in point is Perry v. Equitable Life Assur. Society (decided in the King’s Bench Division in April, 1929, and reported in the Times Law Reports, vol. 45, p. 468). (See, also, Lazard Bros. & Co. v. Midland Bank, Ltd., [1933] App. Cas. 289; In re Russian Bank for Foreign Trade, [1933] Ch. 745, 766, 767; White, Child & Beney, Ltd., v. Eagle, Star & British Dominions Ins. Co., 127 Law Times Rep. [N. S.] 571. See “ Recognition Cases ” by Prof. Dickinson in American Journal of International Law [1931], vol. 25, p. 214.)

The plaintiffs have relied upon Buerger v. New York Life Assur. Co. (43 Times Law Rep. 601, decided May 23, 1927, by the Court of Appeal), which held that these Russian decrees did not invalidate insurance policies taken out with foreign insurance companies. The two judges concurring in this decision emphatically placed their ruling upon the fact that the evidence for the plaintiffs was uncontradicted, while Lord Justice Scrutton wrote a well-reasoned dissent. This case was not followed by Mr. Justice Branson in the Perry Case (supra), although he referred to it. He said: “ The Court of Appeal by a majority reversed his [Mr. Justice Greer] decision on this point, holding that the learned judge was not entitled to disregard the uncontradicted evidence of the only expert on Russian law who had been called before him” [p. 470].

The opinion of the People’s Commissariat of Justice, interpreting the existing laws on the request of the Central and Local Authorities to the effect that the decrees of November 18, 1919, had no application to contracts of life assurance, made by Russian subjects with companies having assets in the United States, means, as we understand it, that the Soviets were legislating for Russians in Russia as to matters over which they had jurisdiction. Naturally their acts could not affect contracts made in New York nor contracts to be performed here according to New York law. The decrees speak for themselves and were in evidence before the referee. They canceled all insurance policies made in Russia, to be paid there; insurance in Russia was dead; these policies could not be enforced there, for such was the law. All questions or disputes about the policies were to be settled by Russian law. The referee felt that he should exercise his own judgment in construing the decrees of 1918 and 1919, the Monopolization Decree and the Cancellation Decrees, and in this he acted according to authority. In Petrogradsky M. K. Bank v. National City Bank (253 N. Y. 23, 34) we said: “ True, of course, it is that there is no judicial notice of the law of foreign lands. This does not mean, however, that the mere opinion of a witness will control the judgment of a judge except to the extent that it is a reasonable inference from statute or from precedent or from the implications of a legal concept, such as contract or testament or juristic personality.” (See, also, Civ. Pr. Act, § 391.) Judge Andrews, the referee, said: “Whatever witnesses called as experts may say, I must interpret the result of these decrees.”

It might be noted in passing that Lord Justice Bankes, who wrote the prevailing opinion in Buerger v. New York Life Ins. Co. (supra), later in White, Child & Beney, Ltd., v. Eagle, Star & British Dominions Ins. Co. (127 Law Times Rep. [N. S.] 571), reviews Luther v. Sagor & Co. (supra) and finds it still the law.

The plaintiffs seek to make a distinction between the seizure of tangible property (Salimoff and Sagor cases) and the disposition and canceling of rights to intangible property. We can see no distinction in this instance. The right to collect money by a Russian citizen on a contract to be interpreted according to Russian law is no different in this respect than the right to tangible property in Russia or the possession thereof. Both rights are dependent upon the law of Russia. Referring to ■unclaimed deposits due by a California bank, the United States Supreme Court, in Security Sav. Bank v. California (263 U. S. 282, p. 285), said: “ Thus the deposits are clearly intangible property within the State. Over this intangible property the State has the same dominion that it has over tangible property.”

The plaintiffs, respondents, have referred to certain of our cases as indicating that the recognition of the Soviet Republic by this country gives no validity to previous decrees. All of these, with one exception, had to do with contracts made out of Russia, most of them with contracts made in New York, to be governed by New York law. The language of any opinion must be confined to the facts before the court. No opinion is an authority beyond the point actually decided, and no judge can write freely if every sentence is to be taken as a rule of law separate from its association. Thus, in Frenkel & Co. v. L’ Urbaine Fire Ins. Co. (251 N. Y. 243), it was held that the law of France confiscating the property of Germans could not affect a contract held by our citizens to be performed here. James & Co. v. Second Russian Ins. Co. (239 N. Y. 248) also related to a contract made out of Russia; and as to the effect of the ^trade agreement made between Great Britain and Russia we since have / had the Lazard Case (supra).

Sokoloff v. National City Bank (239 N. Y. 158) related to a deposit made in the National City Bank in the city of New York, governed solely by New York law. Vladikavkazsky Ry. Co. v. New York Trust Co. (263 N. Y. 369) applied peculiarly to a New York contract, a deposit in a New York bank, which the depositor sought to get back. The bank sought to set up title in the third party.

Much reliance is placed upon Sliosberg v. New York Life Ins. Co. (244 N. Y. 482). This case declared section 169-a of the Civil Practice Act unconstitutional as depriving parties entitled to sue here on certain insurance policies of a remedy for an indefinite period of time. This is all the case did decide. All other points discussed were merely incidental. To the suggestion that the Constitution did not apply to foreign contracts, Judge Kellogg took the point of view that the policy in suit was a New York contract. That this was unnecessary, see Cook v. Moffat (46 U. S. 295); Western Nat. Bank v. Reckless (96 Fed. Rep. 70, particularly pp. 77 and 78); Lamb v. Powder River Live Stock Co. (132 Fed. Rep. 434, 439).

Section 169-a applied to contracts made by citizens in New York as well as to those made by Russians in Russia.

An action to enforce a contract of insurance, even if made in Russia, could be maintained in the New York courts. The Russian law, however, might be applicable to its enforcement. Judge Kellogg recognized this, for he says: “ The policy sued upon was issued in Russia; it was made subject to Russian laws;” and he concluded with this marked reservation and explanation: "We do not mean to say that this defendant has presently no defense to this action. That question is not now involved. For, the defendant is not now urging that the Soviet decrees canceling all Russian insurance policies are binding upon this plaintiff, a Russian citizen resident in Russia when the decrees were passed. On the contrary, it is urging that the stay law willresult in supplying a defense not now possessed ” (pp. 492, 498).

As the question decided in this Sliosberg case related solely to the constitutionality of section 169-a of the Civil Practice Act, and came up on a motion for a stay, the points now up for review were not so thoroughly discussed or presented as they have been in these cases, after extended evidence taken before a referee. Under these circumstances we do not feel justified in taking the Sliosberg case as the final word upon these Russian policies.

Recognition does not compel our courts to give effect to foreign laws if they are contrary to our public policy. Some writers have suggested that non-recognition was an insufficient reason for the refusal of our courts to enforce the laws of another country; rather, it should have been that those laws were contrary to our public policy. (“ The Unrecognized Government in American Courts,” by Professor Borchard, 26 American Journal of International Law, [1932] 261, 268; “ Judicial Aspects of Foreign Relations,” [1933] Louis L. Jaffe; “ Comparative and International Aspects of American Gold Clause Abrogation,” by Arthur Nussbaum, vol. XLIV, Yale Law Journal, p. 53 [November, 1934].)

However, it cannot be against the public policy of this State to hold nationals to the contracts which they have made in their own country to be performed there according to the laws of that country. When they have specifically stipulated that the laws of their native land shall govern their acts we give effect to those laws after recognition by this country the same as we would give effect to the laws of any nation which had not developed out of revolution.

Our conclusion, therefore, is that, since recognition, the Soviet decrees became the laws of Russia, governing the policies here in question, and that obligations thereunder were at an end.

Assuming, however, that these contracts of insurance were not terminated by these Soviet decrees, and that the plaintiffs may recover the premiums paid prior to 1918, upon the theory of repudiation by the company in 1920, we also find that the plaintiffs cannot maintain this action, for the reason that the rubles in which payment is to be made are valueless. The courts below have treated these insurance policies, issued in Russia prior to 1918, as continuing contracts, at least for the paid-up amount to which a holder might be entitled after three years’ premiums had been paid. As the company wrote off from its books its assets and liabilities in Russia in 1920, the referee considered this a repudiation of these contracts entitling the plaintiffs to rescind at any time within six years after they learned of the fact. The Appellate Division has held that in the cases where the policies became due upon proof of death or survivor-ship the assured could sue for the amount any time they desired to do so; that there was no limitation upon the time within which they might present this proof. Nineteen of these cases are based on rescission, in which the plaintiffs desire to get back the money paid in premiums. The actions were commenced between 1925 and 1930, and the courts below have allowed the valuation of the ruble as of the time when the actions were commenced.. The chervonetz currency of 1924 has been taken as the. standard of exchange. This we consider error.

We again turn to the findings of the referee as a correct statement of the currency situation in Russia between 1918 and 1925. All life assurance operations were to be effected in “ Russian credit value,” which the referee found to mean “ legal tender paper currency Russian rubles, and not gold or silver.”

“ In 1889, when the defendant began to operate in Russia the only legal tender paper currency in circulation in Russia were State Credit Notes,”

“ By decree of July 24, 1914, the exchange of State Credit Notes for gold coins was suspended.

“ In 1917, the Provisional Government of Russia issued State Credit Notes in denominations of 1,000 and 250 rubles, which became known as ‘ Duma ’ rubles.”

In 1917 came the “ Kerensky ” ruble, which circulated equally as legal tender with the old Imperial rubles, or State Credit Notes, and the “ Duma ” rubles. In 1917 when the Soviet government came into power it continued all these legal tender issues.

Then follow the referee’s findings, which state the facts as succinctly as possible:

“ By decree of May 15, 1919, the Soviet government authorized an unlimited issue by the People’s Bank of Credit Notes of 1918 pattern and decreed that all other legal tender currency then in circulation which included the old State Credit Note, should continue to circulate equally and should be accepted by all institutions and persons on a par with Credit Notes of the newly created Soviet pattern.

“ By decrees of the Soviet government dated June 28, 1922, and September 8, 1922, the issuance of all pre-1922 currencies was discontinued as of July 1, 1922; until October 1, 1922, they were exchangeable into 1922-pattern rubles at the rate of 10,000 old rubles equal to 1 ruble of the 1922-pattern.

“ By decree of October 24, 1922, the Soviet government issued the 1923-pattern; and it was provided that 1 ruble of the 1923-pattern should be equal to 100 rubles of the 1922-pattern (or 1,000,000 rubles of State Credit Notes of the pre-1922 patterns).

“ The Romanoff (Imperial) Duma and Kerensky rubles remained full legal tender in Russia under the Soviet government until October 1, 1922.

“ By decree of August 22, 1923, the Soviet government ordered that the 1922-pattern rubles should cease to be legal tender as of October 1, 1923, and that they should be exchangeable into rubles of the 1923-pattern at the rate of 100 rubles of the 1922-pattern equal to 1 ruble of the 1923-pattern.

“ By decree of the Soviet government dated February 5, 1924, there was established a new Soviet pattern called ' Treasury Notes in Rubles in Gold,’ ” known as the “ State Treasury Notes of 1924.”

“ By decree of the Soviet government dated March 7, 1924, money tokens of 1923-pattern were withdrawn from circulation by way of redemption into the new State Treasury Notes of 1924, at the rate of 50,000 rubles of the 1923-pattern equal to 1 ruble State Treasury Note of 1924.

“ By the decree of November 3, 1921, and by a decree of April 6, 1922, it was expressly provided that all contracts and obligations stipulated or established in legal tender currency rubles of pre-1922 patterns could be discharged by payment of one ruble in the new currency rubles of the 1922 pattern for each 10,000 rubles of the obligation.

“ By decrees of June 28, 1922, and September 8, 1922, all currency rubles of the pre-1922 patterns, namely State Credit Notes, Douma Notes, and Kerenski, as well as all the Soviet patterns were withdrawn from circulation by way of their redemption in currency rubles of the new 1922 pattern at the rate of 10,000 currency rubles of the pre-1922 patterns for one currency ruble of the 1922 pattern, and ceased to be legal tender on October 1, 1922.

“ By a decree of February 14, 1924, it was provided that issuance of paper money of all the previous patterns was forthwith to be discontinued.

“ By a decree of March 7, 1924, it was provided for the withdrawal from circulation of the currency rubles of 1923 pattern by way of their redemption into State Treasury Notes at the rate of one ‘ ruble in gold ’ in State Treasury Notes for 50,000 rubles in currency rubles of the 1923 pattern, and the currency rubles of the 1923 pattern ceased to be legal tender on May 10, 1924.

“ By the decree of February 5, 1924, it was expressly provided that all contracts and obligations stipulated or established in currency rubles of the then existing patterns could be discharged, at the time of their maturity, by payment of the new State Treasury Notes of 1924, expressed in ‘ rubles in gold,’ and namely at the officially quoted rate of exchange of the ‘ gold ruble ’ in terms of currency rubles of the 1923 pattern.

“ By a decree of March 7, 1924, the rate of currency rubles of the 1923 pattern in terms of ‘ rubles in gold ’ in State Treasury Notes of 1924 was definitely fixed at 50,000 currency rubles of 1923 pattern equal to one * ruble in gold ’ in State Treasury Notes of 1924.

“ By virtue of the decrees of February 5, 1924 and March 7, 1924, all contracts and obligations expressed in currency rubles of 1923 pattern could be discharged, at the time of their maturity, by payment of the new State Treasury Notes of 1924 expressed in ‘ rubles in gold ' at the fixed rate of one 1 ruble in gold ’ in State Treasury Notes for 50,000 rubles of the obligation.

“ By a decree of July 25, 1922, and by another decree of October 11, 1922, the new Soviet State Bank was authorized to issue bank notes expressed in ‘ chervontzi/ representing the gold contents of the former Imperial Russian 10-ruble coins.

“ Under Soviet law contracts and obligations expressed in legal tender currency rubles of the pre-1922 pattern, or of the 1922 pattern, or of the 1923 pattern, were not deemed to be expressed in Chervonetz bank notes.

“ Under Soviet law the ratio of legal equivalence between State Treasury Notes of 1924 and the currencies which were legal tender and in circulation in Russia prior to March 7, 1924, is as follows:

“ One ruble in State Treasury Notes of 1924 or subsequent issues is legally equivalent to 50,000 rubles of the 1923 pattern.

“ One ruble in State Treasury Notes of the 1924 or subsequent issues is legally equivalent to 5,000,000 rubles of the 1922 pattern.

' “ One ruble in State Treasury Notes of the 1924 or subsequent issues is legally equivalent to 50,000,000,000 of all the pre-1922 patterns.

“ Under Soviet law, all obligations expressed in legal tender currency rubles of pre-1922 patterns, maturing between November 3, 1921 and October 1, 1923, could be discharged at the time of their maturity in rubles of the 1922 pattern, at the rate of one currency ruble of 1922 pattern for each 10,000 rubles of the obligation or any part thereof.

“ Under Soviet law, all obligations expressed in legal tender currency rubles of pre-1922 patterns, maturing between October 24, 1922 and May 10, 1924, could be discharged at the time of their maturity in rubles of the 1923 pattern at the rate of one currency ruble of the 1923 pattern for 1,000,000 rubles of the obligation or any part thereof.”

The referee refused to find the following request:

“ Under Soviet law, all obligations expressed in legal tender currency rubles of pre-1922 patterns, maturing after March 7, 1924, could be discharged at the time of their maturity in State Treasury Notes, at the rate of one ‘ ruble ’ in State Treasury Notes for 50 billion rubles of the obligation or any part thereof.”

The refusal to find this request does not mean that there was no ratio established for paying pre-existing obligations in the new treasury notes of 1924. In fact the referee has failed to find that there is any Soviet law establishing that pre-existing obligations payable in State credit notes, such as the obligations of these insurance policies, were to be paid ruble for ruble in the 1924 gold treasury note. The plaintiffs’ proposed general finding of fact LXVII that, since June, 1924, the Soviet State Bank has freely exchanged State credit notes and chervonetz bank notes one for the other, does not refer to pre-existing State credit notes, but to the 1924 issue of State treasury notes. (See plaintiffs’ reference in their supplemental brief, p. 125, where the statement is made that there are State treasury notes and chervonetz notes which are exchangeable one for the other, referring to this finding of the referee.) (See “ Judicial Aspects of Foreign Relations,” by Louis L. Jaffe, p. 192.)

The referee also found “ that chervonetz bank notes are legal tender in Russia for the payment of all private debts,” but he fails to find at what ratio, if any, preexisting obligations are payable in the chervonetz, or that they are payable “ ruble for ruble.” Since June 1, 1924, the only paper currency in circulation in Russia has been the State treasury notes and the chervonetz bank notes.

To summarize this currency situation according to these findings, we find that at the outbreak of the war in 1914, the Russian ruble was worth in exchange about fifty-one cents of our money. The circulating medium was paper notes, called “ State Credit Notes.” These were legal tender and, without doubt, as the referee found, were the money of the country at the time the policies were issued. After the war began the value of this money steadily declined. Some form of money there had to be to, carry on the ordinary transactions of life, and the money of Russia fluctuated in its purchasing or exchange value each year and according to events. To meet these changing values additional issues were created, more paper money was printed until, by 1922, it had become virtually worthless.

Events, not legislation, very largely control the inherent value of money. This process of decline was not peculiar to Russia. All countries suffered from it, by reason of the war and what happened thereafter. Germany with its mark, France with its franc, England with its pound, and the United States with its dollar have all been affected by a shift in currency values. Money does not keep at a uniform rate of exchange or purchasing power; with the crises which come to all nations at some time, debts must follow the ups and downs of the money market. So well known is this fact that many obligations have been contracted to be paid in gold of a certain standard, weight and fineness, and even these contracts, we have said, may be subject to the money regulation intrusted to Congress. (Norman v. B. & O. R. R. Co., 265 N. Y. 37.)

The Soviets, in order to give to their money an exchange value, created the chervonetz bank notes, taking the chervonetz as a standard, worth ten rubles. Having placed its notes or currency on a supposed gold basis, with a reserve of gold to meet them, the ruble became worth fifty-one cents of our money. On the withdrawal of all other paper money, by 1924 the chervonetz bank notes and the State treasury notes became the only circulating medium or legal tender. The plaintiffs’ claim, sustained by the referee, is, that all previous obligations, even those created in 1918 and before, were payable “ ruble for ruble ” in this new gold currency, whereas the day before its creation their obligations were worthless.

If a policy issued by the defendant had been payable in Russia anywhere from 1918 to 1924 the amount to have been paid would have amounted to nothing. If the plaintiffs had rescinded between these dates there could have been no recovery. Every one, both in Russia as well as in other countries, has suffered by the depreciation of money values and by the wiping out of reserves, savings and capital investments. Yet because these plaintiffs elected to rescind after 1924 they are to have their money back with interest as of the ruble value before the war commenced.

Applying the law as stated in Parker v. Hoppe (257 N. Y. 333), the referee determined that the value of the ruble was to be taken as of the date of rescission, or, after 1925, and as the chervonetz currency was the legal tender at that time, he went no further to determine whether prior obligations were payable ruble for ruble in this currency in Russia. Even he, however, realized the injustice of such a ruling, for he decided that as these plaintiffs had paid their premiums in a depreciated currency they could only recover the exchange value of the ruble as of the date when they had paid the premium. Surely these parties, by suing here in this State, cannot profit by the shift in jurisdiction and recover here what they could not get in Russia.

We fail to discover in these findings of fact, outside of the rulings of law, any statement that pre-existing obligations in Russia were to be paid in 1924 in the chervonetz gold ruble note, ruble for ruble. On the contrary, when we find, as above stated, that with every shift in the currency there has been an established ratio, according to which pre-existing obligations could be paid in the new currency, and that all pre-existing patterns, both of the 1922 and 1923 pattern, could be redeemed at a certain ratio, there was a clear indication that the 1924 gold ruble was never considered or made to be on a parity with the ruble of pre-existing obligations or the State credit note. The plaintiffs can only recover when they show that by the law of Soviet Russia pre-existing obligations are to.be paid “ ruble for ruble ” in the new chervonetz' gold note, or, that there is an established ratio between such gold standard and the pre-existing ruble of the obligation. It is the ruble recovery in Russia — what would they get there — which is sued for here. When established it is translated into our money.

This is the view taken by other courts where this question has arisen, recently by the Circuit Court of Appeals for the Second Circuit (Tillman v. Russo Asiatic Bank, 51 Fed. Rep. [2d] p. 1023, opinion by Judge Augustus N. Hand). So, too, Perry v. Equitable Life Assur. Society (45 Times Law Rep. 468). 1 Sedgwick on. Damages ([9th ed. 1912], §§ 268 and 269) gives the following rule: “Where an entirely new standard of value is adopted by the government, the amount to be paid is found by giving such a sum in the new currency as shall be declared by law equal in value to the amount due in the old currency.” (See, also, Succession of Serralles v. Esbri, 200 U. S. 103; Anderson v. Equitable Life Assur. Society, 42 Times Law Rep. 302; Heine v. New York Life Ins. Co., 50 Fed. Rep. [2d] 382.)

The plaintiffs have been somewhat justified in placing their reliance upon Matter of People (First Russian Ins. Co.) (255 N. Y. 428), which was followed by the referee, and no doubt is the basis for his conclusion. Like the case of Buerger v. New York Life Assur. Co. (supra), there was no contradictory testimony to the very meager statements of the law given by the Russian lawyer-expert. The proceeding was to determine upon a plan to dispose of the surplus moneys in the hands of the Superintendent of Insurance due foreign creditors. All domestic creditors had been paid and a large sum remained to be distributed to foreign claimants. How was it to be done? Many plans were submitted and this court finally had to adopt its own measures. A foreign policyholder named Bermant had been excluded by the courts below as not coming within the class of foreign creditors to be paid and his appeal turned primarily upon this question. On the hearings before the referee a witness had given an outline of the currency values in Russia, including the chervonetz bank notes, as the only existing legal tender money. The point was not contested and no further evidence given or offered. In fact the claimant did not refer to the matter in his principal brief, but in a supplemental brief. The referee made no findings of fact on the currency question. That the determination of this court was to be confined to the record before it Chief Judge Cardozo gave fair warning. He said: “ The decision must be understood to be confined to the record now before us. We do not attempt to say to what extent a different record, exhibiting in a different fight the history of the ruble, would exact a different conclusion. In particular we reserve the question whether the insurer would be hable on the basis of the gold coinage if in truth it had an option to discharge the debt in gold or by the same number of rubles in depreciated paper ” (p. 432).

The Russian money question has now been fully presented to the court, all the decrees, some of which were not in the First Russian case, are in evidence, and the referee has made exhaustive findings of fact. We feel, as did the judges in the Tillman Case (supra), who had our decision before them, that the intimation of our chief judge should be followed, and the First Russian case not considered as a binding authority in face of a more thorough and, in many respects, different record.

For the reasons here expressed we are of the opinion that, even talcing the plaintiffs’ view of these cases, they cannot recover. The ruble which they could recover is valueless; they at least have not proved its value in the present Russian currency.

In seven of these cases the referee found for the defendant and dismissed the claims for various reasons. We need not itemize these claims. Sufficient to :say that we agree with the referee in his findings. As there could be no recovery in any of these cases under our decision, we need not enter into a discussion of the individual facts.

The judgments of the lower courts should, therefore, be reversed, and the complaints dismissed, with costs in all courts.