Plaintiff is the Receiver for Papantla Royalties Corporation (Papantla), a dissolved Delaware corporation; defendant, Petroleos Mexicanos (Pemex) is a "decentralized Institution pertaining to the Republic of Mexico"; Pemex is neither a Delaware corporation nor is it licensed to do business in this State.
The Receiver alleges that Papantla is the legal owner of certain oil royalties and participation rights which were not officially expropriated when the Mexican government nationalized its oil industry in 1938. He says that Pemex was created for the purpose of managing that industry and has recognized Papantla as the owner of royalty and participation rights by making certain payments for them. The claim is for an accounting and payment of the moneys owed.
Plaintiff secured a sequestration order under 10 Del.C. § 366, directing seizure of defendant's property in Delaware consisting of "all contractual obligations, rights debts or credits, which are due or will become due" to Pemex from ten major oil companies. Responses to the order show that only Mobil Oil Corporation (Mobil), a New York corporation licensed to do business in Delaware, holds property for defendant; it owes Pemex about $500,000.
This is the decision on the motion of Pemex to vacate the sequestration and/or to dismiss the complaint for lack of jurisdiction.
A mere recitation of these few facts suggests many serious legal problems beginning with the effort to sue an agency of a foreign sovereign and continuing through a wide-ranging attempt to sequester credits due or to become due on the books of ten international oil companies. Pemex has responded with a succession of legal arguments, many of which may have merit. But in the view I take of the case, application of the Act of State Doctrine is a primary issue and decision as to it determines subject matter jurisdiction.
The "classic American statement" of the Act of State Doctrine is found in Underhill v. Hernandez, 168 U.S. 250, 18 S.Ct. 83, 42 L.Ed. 456 (1897):
In Underhill plaintiff sought damages against the commander of revolutionary forces in Venezuela for alleged assaults and false imprisonment. The revolution eventually succeeded and its government was recognized by the United States. In applying the Act of State Doctrine, the Court noted that while revolutions and rebellions inconvenience other nations, the fact remains that the acts complained of were the acts of a military leader who represented an entity which was later acknowledged by the Executive Branch as the de jure government of Venezuela. The Court ruled that the legality of the government and its acts could not be challenged in courts in the United States.
Although Underhill was decided in 1897 it has been followed on many occasions over the years by the Supreme Court: see, for example, Oetjen v. Central Leather Co., 246 U.S. 297, 38 S.Ct. 309, 62 L.Ed. 726 (1918); Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 84 S.Ct. 923, 11 L.Ed.2d 804 (1964); First National City Bank v. Banco Nacional de Cuba, 406 U.S. 759, 92 S.Ct. 1808, 32 L.Ed.2d 466 (1972); 12 A.L.R.Fed. 707. Indeed, in Sabbatino Justice Harlan stated that in subsequent cases the Court has not "manifest[ed] any retreat from Underhill". On the contrary, he wrote, Oetjen and Ricaud v. American Metal Co., 246 U.S. 304, 38 S.Ct. 312, 62 L.Ed. 733 (1918), reaffirm it in "unequivocal terms". And in the First National City Bank case, the Court stated that, although not inflexible, the "doctrine precludes any review whatever of the acts of the government of one sovereign State done within its own territory by the courts of another sovereign State". The scope of the doctrine is determined according to federal law, 12 A.L.R.Fed. 736, which Chief Judge Wright applied in this District in Interamerica Refining Corp. v. Texaco Maracaibo, Inc., 307 F.Supp. 1291 (D.Del. 1970).
Plaintiff contends that the Doctrine does not apply because there was no formal expropriation. His purpose is to distinguish between "expropriation" (presumably meaning a formal act of seizure or acceptance by the Mexican government) and "appropriation" (presumably meaning a use or taking in fact without formal act.
But the distinction which plaintiff argues is immaterial because the test is not whether the acts complained of were legal under Mexican law nor is the formality of taking significant. The test is simply this: were the acts done within the territorial limits of Mexico and were they done by Mexico in its governmental capacity? 12 A.L.R.Fed. 730.
As to the place of taking, there is little doubt that this was accomplished in Mexico where the oil properties are located. And even if it be assumed that the sequestered property (the debt due from Mobil) has a Delaware situs, this makes no difference. Plaintiff's claim is for an accounting arising out of conduct ("appropriation"), in Mexico. Sequestration is a process to compel appearance here; it is but a means to an end, not an independent basis for action in this jurisdiction. And on this aspect of the case Oetjen is direct authority for the proposition that the place of the government's act, not the presence of property within the jurisdiction of the reviewing court, is controlling.
In Oetjen animal hides were seized from a Mexican citizen by a general of revolutionary forces as a "contribution" and later were sold to a Texas corporation. The revolutionaries ultimately prevailed and their government was recognized by the United States. Claiming that the seizure was illegal and that he was the lawful owner, an assignee of the original owner attempted to replevy the hides in an American court. The Supreme Court applied the Act of State Doctrine and refused to examine plaintiff's claim to title, saying, "The remedy of the former owner, or of the purchaser from him, of the property in controversy, if either has any remedy, must be found in the courts of Mexico or through the diplomatic agencies of the political department of our government."
A companion case to Oetjen, Ricaud v. American Metal Co., supra, arose under similar circumstances. There, lead bullion was confiscated by the Mexican revolutionary forces. In a suit to determine title, the Court ruled that it would not review an act done by a general of a government later given diplomatic recognition when the act was committed within that country's geographical borders.
Thus it is clear beyond doubt that the acts on which plaintiff bases his claim took place in Mexico and there is no doubt either that Mexico holds the oil properties and the revenues derived from them in a governmental capacity. Indeed, Mr. Gaither states in his affidavit that:
In sum, the criteria for applying the Act of State Doctrine does not depend upon the legality of Mexico's conduct, nor upon whether the taking was accomplished by
Plaintiff points out, quite correctly, that the holding in Sabbatino was overruled by Congress with the passage of the Hickenlooper Amendment to the Foreign Assistance Act of 1964. 22 U.S.C. § 2370(e)(2);
Finally, plaintiff argues that Pemex is primarily a proprietary enterprise and not a governmental activity, but that makes no difference in this case. The seizure here was not by Pemex, but the Mexican government. The fact that the appropriated rights were subsequently administered by Pemex ("a decentralized institution of the Mexican Government") does not change the nature of the taking. Harris and Company Advertising Inc. v. Republic of Cuba, 127 So.2d 687 (Fla.Dist.Ct.App.1961), upon which plaintiff relies, is inapposite; it involved sovereign immunity, not the Act of State Doctrine.
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The law is clear that any redress for the taking involved in this case must be sought
. . ."
The Amendment does not violate the Constitution. Banco Nacional de Cuba v. Farr, 2 Cir., 283 F.2d 166 (1967).