Holzer v. Deutsche Reichsbahn-Gesellschaft - 277 N.Y. 474, 14 N.E.2d 798 (1938)

Rule:

Within its own territory every government is supreme and New York courts are not competent to review its actions. This is true "however objectionable" the court may consider the conduct of a foreign government. 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. It cannot be against the public policy of the State of New York 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.

Facts:

Plaintiff, a German national, and Schenker & Co. G. m. b. H., a German corporation, entered into an employment contract whereby plaintiff would render services in Germany and other locations outside New York. It was alleged that the contract stipulated that in the event that the plaintiff should die or become unable, without fault on his part, to serve during the period of the contract, the defendants would pay to him or his heirs the sum of 120,000 marks, in discharge of their obligations. Plaintiff filed a breach of contract claim, alleging two causes of action. The first cause of action alleged that the corporation discharged the employee on the sole ground that he was Jewish, and that as a result of such discharge, he was damaged in a sum upwards of $50,000. The second cause alleged that, due to incarceration in a concentration camp, plaintiff became unable, without any fault on his part, to continue his employment. In its defense, the corporation alleged that it was required by German law to discharge plaintiff because the latter was Jewish. Plaintiff filed a motion to strike out the corporation’s defense, which was granted by the trial court. The decision was affirmed by the Appellate Division of the Supreme Court in the First Judicial Department. The corporation challenged the order.

Issue:

1. Was the corporation’s defense sufficient in law upon the face thereof?
2. Did the plaintiff’s complaint state facts sufficient to constitute a cause of action?

Answer:

1) Yes, with respect to plaintiff’s first cause of action. 2) No, with respect to plaintiff’s first cause of action.

Conclusion:

The court first noted that every sovereign state was 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. Thus, according to the court, it cannot be against the public policy of the 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. Accordingly, in the case at bar, the court held that, in respect to the first cause of action, it was bound to decide, as a matter of pleading, that the complaint did not state facts sufficient to constitute a cause of action and that the corporation’s defense was sufficient in law upon its face. Defendants did not breach their contract with plaintiff. They were forced by operation of law to discharge him. In respect to the second cause of action, the court held that the words "become unable" within the contract must be interpreted according to German law and the meaning of German words. What that law was would depend upon the solution of questions of fact which must be determined on the trial.

On appeal, the court reversed in part, finding that the first cause of action did not state facts sufficient to constitute a cause of action because the corporation did not breach the employment contract, they were forced by operation of German law to discharge him. With regard to the second cause of action, the court found that the words "become unable" within the contract had to be interpreted at trial. Accordingly, the court reversed the lower court’s order with respect to the first cause of action, but affirmed the order with respect to the second cause of action.