Norman, Donald H.

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Federal Courts -- Foreign Aid Appropriations Act -- Survival of Federal Common Law

University of Miami School of Law

University of Miami Law Review Volume 8 Number 4 Miami Law Quarterly Article 19 7-1-1954 Federal Courts -- Foreign Aid Appropriations Act -- Survival of Federal Common Law Donald H. Norman Follow this and additional works at: https://repository.law.miami.edu/umlr Recommended Citation Donald H. Norman, Federal Courts -- Foreign Aid Appropriations Act -- Survival of Federal Common Law, 8 U. Miami L. Rev. 648 (1954) Available at: https://repository.law.miami.edu/umlr/vol8/iss4/19 This Case Noted is brought to you for free and open access by the Journals at University of Miami School of Law Institutional Repository. It has been accepted for inclusion in University of Miami Law Review by an authorized editor of University of Miami School of Law Institutional Repository. For more information, please contact library@law.miami.edu. AIIAAII LA\' QUARTERLYthan priIncipal.- A share dividend does not constitute income to thestockholder. '-1I Unauthorized share dividends are treated as cash dividends.-,The court in the Folsizski2 case cites In re joy's Estate,2 ' in whichthe Michigan court adopted the Massachusetts rule, holding that sharedividends arc applied to principal and are not incoine. : '' The Florida courtin I re Vail's Estate"' adopted the theory of Williams i. \Vestern UnionTelegraph Co., 2 in which Justice Cardozo stated, "A stock dividend doesnot distribute property but simply dilutes the shares as they existedbefore.," ' :' Florida, in adhering to this view, rendered the decision onwhat would be an application of the Massachusetts rule.The Massachusetts rule, as applied by the courts of Michigan andFlorida in the instant cases, represents the adoption of a rule of conveniencethat will not impose the burden on the trustee of a complex disbursementsystem of dividends received. The courts have hereby given the trusteea plain principle to guide him.Alan H. DombrowskvFEDERAL COURTS-FOREIGN AID APPROPRIATIONSACT-SURVIVAL OF FEDERAL COMMON LAWPerformance of a contract to purchase manufactured printing pressesdestined for export to Russia was refused by vendee on the ground thatan export license could not be obtained. Vendor subsequently sold thegoods to the United States at a profit, and vendec brought suit to recoverthe down-payment on the contract price. On appeal from a districtcourt decision for defendant-vendor,' held, reversed. The plaintiff-vendeewas entitled to restitution of the down-payment beyond and above anyinjury suffered by dcfcndant, whcrc an export license had been refusedby the United States, on the ground that national public policy as pro-mulgated by Congress in the Foreign Aid Appropriations Act2 requiredsuch a rin. Anitorg Trading Corp. v. Miehie Printing Press 6 Mlfg. Co.,206 U.2d 103 (2d Cir. 1953).25. Bass v. Commissioner of Internal Revenue, 129 F.2d 300 (1st Cir. 1942);Strassburger v. Commissioner of Internal Revenue, 124 F.2d 315 (2d Cir. 1941);I teims Bakeries v. Commissioner of Internal Revenue, 46 B.T.A. 308 (1942).26. Hclvering v. Griffiths, 318 U.S. 371 (1943); Eisner v. Mancomber, 252U.S. 189 (1920); Townc v. Eisner, 245 U.S. 418 (1918).27. Vogt Mach. Co. v. United States, 39 tlX2d 986 (Ct. CI. 1930).28. 60 N.\V.2d 302 (Mich. 1953).29. 247 Mich. 418, 225 N.W. 878 (1929).30. Minot v. Paine, 99 Mass. 101 (1868).1. 67. So.2d 665 (Fla. 1953).32. 93 N.Y. 162 (1883).33. Williams v. Western Union Tel. Co., 93 N.Y. 162, 189 (1883).1. 108 ". Supp. 170 (S.I). N.Y. 1952).2. 62 Sir^Ar. 1054 (1949).CASENO'IESIn 1937 the case of Erie Railroad v. Tompkins:' purportedly endedthe concept of a "federal common law" which had developed from Swiftv. Thson. This theory was soon limited, and thereafter a body of suchlaw has developed as a result of federal courts deciding cases in accordancewith federal rather than state law.5 A growing series of decisions haveadvanced federal common law or "policy" as controlling in situationswhere state law would seem applicable under the Erie rule,6 were it notfor some connection with fields regulated by the federal government.rfliese decisions have used as their basis the concept that where the right tosue the United States arises under a federal statute, state law is inapplicable, 7and its corollary that federal courts need not follow state law where federalstatutes "otherwise require or provide."8  In the realm of interstatecommunications" and in relation to the National Banking system,"' theFederal Deposit Insurance Corporation," and checks issued by the govern-ment subject to a national law,' 2 a federal "public policy" has beendeeed to control decisions.It is significant to note that in cases where there have appearedconflicts between a "national public policy" and state law, it has beenheld that national policy will prevail.' 3 A notable advancement in thedevelopment of a federal common law has been applied in the caseswhere jurisdiction has been assumed by the federal court on the basisof diversity of citizenship alone. Federal common law has been determina-tive of result where the court, having assumed jurisdiction on a diversitybasis rather than that of a federal question in the case, decided that thesubject matter involved was really governcd by federal policy, enunciatedin such statutes as the Sherman Anti-Trust Act.' - The court in the instant3. 304 U.S. 64 (1937).4. 16 Pet. t (U.S. 1842).5. Ilindcrlider v. La Plata Co., 304 U.S. 92, rehearing denied, 305 U.S. 668 (1938).6. 304 U.S. 64, 78 (1937) ". . . except in matters governed by the FederalConstitution or by Acts of Congress the law to be applied is the law of the state."7. Byron Jackson Co. v. United States, 35 F. Supp. 655 (S.D. Cal. 1940).8. REv. STAT. § 721 (1875), 28 U.S.C. § 725 (1934).9. O'Brien v. \\estcn Union Tel. Co., 113 F.2d 539 (1st Cir. 1940) (interstatetelegraph message containing libel held governed by federal law).10. Deitrick v. Creaney, 308 U.S. 190 (1940) (in interests of uniform regulationfederal courts would determine rules implementing federal statutes),II. D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447 (1942) (policy to protectFDIC expressed in the act was strong enough to require that liability on a note bedetermined without concern for state law)12. Clearfield Trust Co. v. United States, 119 U.S. 363 (1943) (federal courtswould fashion law according to their own standards applicable to checks issued underiederal law).13. Mitchell v. Flintkote Co., 185 F.2d 1008 (2d Cir. 1950), cert. denied, 341U.S. 931 (1951)(recovery denied on contingent commission agreement to obtaingovernment contracts on ground that federal policy against such agreements overridesstate contract law).14. Sola Electric Co. v. Jefferson Electric Co., 317 U.S. 1943 (1942)(ShermanAnti'Irust Act, 26 STAT. 209 (1890) held to control subject matter of patent licensecontract, and case was decided according to federal law); accord, Moore v. IllinoisCentral R.R., 312 U.S. 360 (1941).MIAMI LAW QUARTERLYcase also assumed jurisdiction on the diversity basis, but proceeded todecide the case as if the question had been a federal one from thebeginning.The instant decision presents a set of facts which would call forrestitution of plaintiff's down-payment under both Restatement of Contracts§ 35715 and current New York law." However, at the time the contractwas formed, New York law denied recovery to a defaulting vendee in theabsence of complete frustration of purpose. 17  rfThe court in the instantcase, recognizing the trend in the law in favor of granting restitutionto a defaulting vendee within the proper limitations,"8 interpreted theForeign Aid Appropriations Act of 1949 as providing a theory of contractlaw which in this type of situation entitles plaintiff to restitution. Thepurpose of the applicable section of the act is to save producers or exportersfrom loss where contracts were made for exporting goods, and the exportsbecame impossible.'9 The particular words only relate to the Administrator'sduty to transfer the goods designed for export to a non-participatingcountry, which cannot under the act receive them, to a participatingcountry which can. The court construes this section of the act assetting forth a manifestation of "national policy" which overrides NewYork contract law, reasoning that since it would be inequitable for reliefto be extended to a producer under the act and still allow him to retainthe vendee's down-payment, the plaintiff should have restitution of hisdown-payment where defendant has sold the goods to another withoutloss.It is submitted that the result achieved in the instant case is a justand equitable one and, in theory, perhaps is supportable as an extensionof the federal common law by statutory interpretation. In view of thelanguage of the Foreign Aid Appropriations Act,20 however, it seemsdifficult to discern a clear-cut "national policy" reflecting a theory ofcontract law. An act of judicial legislation seems manifest.Donald 1. Norman15. RESTATEMENT, CONTRACTS § 357 (1932) (provides for restitution in favorof a plaintiff who is himself in default).16. N.Y. PERS. PROP. LAw § 145-a (1952).17. Pinman v. Kurtz, 267 App. Div. 258, 45 N.Y,S.2d 508 (3d Dep't. 1943).18. 62 STAT. 1054 (1949).19. Id. at 1059. "'The Administrator shall provide for the procurement of suchcommodity to transfer to a participating country in accordance with the requirementsof such country, at not less than the contract price of such commodity to the produceror exporter, as the case may be."20. Ibid.

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Federal Courts -- Foreign Aid Appropriations Act -- Survival of Federal Common Law

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