Nature of the Case
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Facts
Farr, Whitlock & Co. (D) an American commodity broker, contracted to purchase Cuban sugar, free alongside the steamer, from a wholly-owned subsidiary of C. A. V., a corporation organized under Cuban law whose capital stock was owned principally by United States residents. Farr, Whitlock (D) agreed to pay for the sugar in New York upon presentation of the shipping documents and a sight draft. President Eisenhower exercised a power to limit imports of sugar from Communist Cuba. In response, the Cuban President and Prime Minister nationalized by forced expropriation property or enterprises in which American nationals had an interest. The payment for the taking by Communist Cuba was literally a joke. The sugar covered by the contract between D and C. A. V. was loaded, destined for Morocco. The consent of the Communist Cuban Government was necessary before a ship carrying sugar of a named company could leave Cuban waters. Farr, Whitlock (D) entered into contracts, identical to those it had made with C. A. V., with the Banco Para el Comercio Exterior de Cuba, an instrumentality of the Communist Government. This ship sailed for Morocco. Banco Exterior assigned the bills of lading to P, also an instrumentality of the Communist Government, which instructed its agent in New York, Societe Generale, to deliver the bills and a sight draft in the sum of $175,250.69 to Farr, Whitlock (D) in return for payment. Societe Generale's tender was refused by Farr, Whitlock (D) as it was notified of C. A. V.'s claim that as rightful owner of the sugar it was entitled to the proceeds. Farr, Whitlock (D) accepted the shipping documents, negotiated the bills of lading to its customer, and received payment for the sugar. Farr, Whitlock (D) was served with an order of the New York Supreme Court, which had appointed Sabbatino (D) as Temporary Receiver of C. A. V.'s New York assets, enjoining it from taking any action in regard to the money claimed by C. A. V. that might result in its removal from the State. Farr, Whitlock (D) transferred the funds to Sabbatino (D). , to abide the event of a judicial determination as to their ownership. P sued Ds alleging conversion. The court found that the sugar was located within Cuban territory at the time of expropriation and determined that under merchant law common to civilized countries Farr, Whitlock (D) could not have asserted ownership of the sugar against C. A. V. before making payment. It concluded that C. A. V. had a property interest in the sugar subject to the territorial jurisdiction of Cuba. The court believed that the act of state doctrine was inapplicable when the questioned foreign act is in violation of international law. It held that an invalid taking under international law does not convey good title. The court found that the Communist expropriation decree was motivated by a retaliatory and not a public purpose, it discriminated against American nationals, and it failed to provide adequate compensation. Summary judgment was granted to Ds. The Court of Appeals affirmed. The Supreme Court granted certiorari.
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