Pan American Life Insurance Co. v. Blanco

In 1945 the defendant company, a Louisiana corporation, issued to the plaintiff three single premium annuity contracts under which his daughters were the annuitants and under which monthly payments were to begin as each of the plaintiff’s three daughters reached the age of 21. The signatures of the defendant’s officials executing the policies were authenticated before a notary in Havana, and the policies were delivered to the plaintiff there on payment of the premium in dollars by the plaintiff. The contracts provided that the annuities were to be paid in dollars, and that all liquidations were to be paid at the defendant’s head office in New Orleans on delivery of the contract to the defendant. The plaintiff, who was vested with control of the contract, demanded its cash surrender value in Florida after he became a resident of that state. On the defendant’s refusal to pay, the plaintiff sued and the defendant counterclaimed for a declaratory judgment of nonliability. One policy matured in May 1957 before suit was brought, and another in May 1961 in the course of the litigation.

The U.S. District Court for the Southern District of Florida struck out the defendant’s answer and counterclaim, which argued that the defendant was relieved of liability because of Law No. 13 and Decree No. 1384 thereunder, Law No. 568, and Law No. 851 and Resolution No. 3 thereunder. An interlocutory appeal was taken to the U.S. Court of Appeals, Fifth Circuit, on a question certified by the District Court.¹⁰ In support of its contention that

… the Blancos’ rights to enforce payment in dollars in the United States were made unenforceable by Cuban Law No. 568 of September 29, 1959 requiring payments to Cuban nationals to be made in Cuba in pesos, Pan American argues that Cuban Law No. 568 is valid and binding under The Bretton Woods Monetary Agreement of 1945 to which Cuba and the United States are signatories, which was incorporated into the laws of the United States in 22 U.S.C. §286; that the annuity policies in controversy are “exchange contracts” within the meaning of such Agreement and subject to the exchange control regulations of Cuba. In this connection Pan American’s Reply Brief states that “only one other question remains: Is Cuban Law 568 ‘maintained or imposed consistently with’ The Bretton Woods Agreement?” It then quotes portions of a letter from the General Counsel of the Monetary Fund which Pan American contends establishes the fact “that Law No. 568 is a currency control regulation which is ‘maintained or imposed consistently with’ The Bretton Woods Agreement.” No such letter appears in the record. Application of The Bretton Woods Agreement involves other questions of fact and law as to which there is no proof in the record.

These questions were stated in a footnote as follows:

… Has Cuba incorporated the Bretton Woods Agreement into its law as did the United States, in Title 22 U.S.C. §286? Has Cuba complied with its obligations under such agreement? Did Cuba’s withdrawal from the International Bank for Reconstruction and Development, on November 14, 1960 … constitute such a breach of the purposes of the fund as set forth in Art. I as to render such Agreement ineffective as to Cuba? Are the annuity policies in question “exchange contracts” within the meaning of Art. VIII, Sec. 2(b) of the Bretton Woods Agreement? ¹¹

The Court of Appeals noted that, with the exception of Resolution No. 3, none of the Cuban laws or resolutions had been placed in the record, and the court decided that it would not take judicial notice of them. It followed that the defendant must lose on that part of its case which rested on Article VIII, Section 2(b). However, the Court of Appeals held that the action of the District Court was wrong in striking out the defendant’s counterclaim based on Resolution No. 3 and the alleged substitution of the Cuban Government for the defendant. The Court of Appeals held, therefore, that the District Court should not have dismissed the counterclaim and should now decide the case on the merits.

The Blanco case was then consolidated for trial by the U.S. District Court for the Southern District of Florida with two other cases against Pan American Life Insurance Co., by Conill and by Aguirregaviria Zabaleta, and a fourth case, Lorido y Diego v. American National Insurance Co.¹² The three further cases involved actions by plaintiffs on certain policies of life insurance for a declaratory judgment that the policies were in full force and effect; that the cash surrender value where applicable was payable on demand; or that where there were annuity or endowment features, these would be payable on maturity. In the Blanco case there was, as already noted, a counterclaim by Pan American for a declaratory judgment.

American National was a corporation organized and existing under the laws of Texas, with a principal place of business in Galveston. Both defendants had conducted life insurance business in Cuba until some time in October 1960, Pan American through a branch office and American National through a general agent. Cuban law did not require the companies to maintain a certain volume of assets in Cuba, beyond an initial deposit of $25,000, as a condition of doing business there.

All the plaintiffs were Cuban nationals and refugees residing in Florida. None of the contracts provided that the policyholder would be paid solely from assets of the defendant located in Cuba, and the District Court found that all of the defendants’ assets were available for payment under the policies issued by them. All applications for the policies had been made in Cuba in Spanish and had been sent to the defendants’ home offices in the United States, where they were accepted and where the policies were issued. The Pan American policies were in Spanish and the American National policies in English. The policies were forwarded to the defendants’ representatives in Cuba, who had them authenticated and delivered them to the policyholders. Except as noted below in the Zabaleta case, all the Pan American policies provided that all payments, whether of premiums or benefits, were to be made in New Orleans. The Cuban peso was the designated currency in the American National policies, but all payments were to be made in Galveston.

In the Conill case, the defendant issued to the plaintiff in 1941 a life insurance policy under which, in consideration of annual payments, the defendant would pay a stipulated amount to the plaintiff’s beneficiary on proof of the plaintiff’s death. The plaintiff demanded, and was refused, the cash surrender value of the policy.

In the Zabaleta case, the defendant issued a life insurance policy to the plaintiff in 1938 which provided various life insurance and endowment benefits and other options at the plaintiff’s election. The policy had a maturity value and various cash surrender values. In 1952 the plaintiff agreed with the defendant that payments to or by the plaintiff should be made in Cuban pesos in Havana. Before that date, the plaintiff had paid all premiums in U.S. dollars. In October 1958 the plaintiff exercised an option to cease paying premiums and to receive an endowment payment 15 years thereafter. In July 1962 the plaintiff demanded the cash surrender value of the policy. The defendant refused the demand and also refused to consider that the policy had full force and effect.

In the Lorido y Diego case, the plaintiff received two policies of life insurance in 1950 which provided that stipulated amounts be paid to the plaintiff, if living, or to his named beneficiary on the maturity dates. The plaintiff demanded, and was refused, the cash surrender value of the policies.

By pre-trial stipulation it was agreed that the issues of law were the same as stated by the Circuit Court of Appeals in the Blanco case, i.e., whether or not

… Pan American is relieved of liability and performance of its obligations under the contracts by reason of certain Cuban laws and decrees, referring to: (1) Cuban Law No. 13 of 1948 and Cuban Monetary Decree of 1951 under Law No. 13, which Pan American alleged “required all contracts theretofore payable in dollars to or by Cuban nationals in Cuba to be payable in Cuban pesos.” (2) Cuban Law No. 568 of September 29, 1959, which Pan American alleges prohibited the defendant from paying any monies to Cuban nationals anywhere except in Cuba, (3) Cuban Law No. 851 of July 6, 1960 and Cuban Resolution No. 3 of October 24, 1960 under Law No. 851 “which in substance and effect” expropriated the Cuban assets of Pan American “and substituted the Cuban government as the obligor” in “the annuity contracts herein sued on.”

District Judge Choate observed that on December 18, 1953 Cuba had notified the Fund, in accordance with Article XIV, Section 3, that Cuba accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund’s Articles of Agreement. He also noted that Cuba had withdrawn from the International Bank for Reconstruction and Development while continuing to remain a member of the Fund, but that there was no requirement in the Articles of the Fund that a member must continue to be a member of the Bank. He quoted the statement which the Executive Directors of the Fund had authorized in connection with the exchange system of Cuba and which has been quoted earlier in this article.

The court went on to say:

The pre-trial stipulation states the issue in terms of whether or not the court is required to recognize and give effect to these Cuban decrees and laws either under our municipal law or under the two Bretton Woods Agreements and 22 U.S.C. §286 et seq., Acceptance of Membership by United States in International Monetary Fund.¹³

The court held that it was not required to give extraterritorial effect to the Cuban laws and decrees. The defendants had assumed that because the plaintiffs were Cuban nationals by origin, they were subject to Cuban sovereignty and bound by Cuban law. However, the argument could not be accepted, because the plaintiffs were refugees and residents of the United States. Neither the parties nor the subject matter of the actions was subject to Cuban sovereignty. The defendants’ assets in Havana bore no necessary relation to the causes of action.

Passing from the question whether the Cuban legislation had extraterritorial effect, the court then considered the question whether that legislation must nevertheless be applied under the private international law of the forum. It recognized that by applying traditional choice-of-law rules, a strong argument could be made for holding that the contracts were governed by Cuban law. However, it preferred a choice-of-law rule based on the consideration of giving maximum protection to the insured, and on this basis the law of the domicile of the insurers governed. The court held, nevertheless, that the choice of law was not necessary for the determination of these cases, and repeated its opinion that the legislation had no extraterritorial effect.

… Even if the court is mistaken as to the National status of the plaintiffs as refugees, these laws do not apply to cover the situation of a Cuban national enforcing an executory contract in the forum of another jurisdiction according to the terms of an obligation existing prior to the passage of those laws. Further, we do not believe that such laws and decrees can have any force and effect over the persons of these litigants who are not only without Cuba, but, as refugees, are not subject to its in personam jurisdiction…. On the basis of the foregoing, The Bretton Woods Agreement and 22 U.S.C. §286 et seq. would not appear to have any applicability.¹⁴

Menendez Rodriguez v. Pan American Life Insurance Co. and Vento Jaime v. Pan American Life Insurance Co.

In January 1945, the defendant insured the lives of the plaintiffs in these suits, who were then resident in Havana, in the amount of $20,000 each. The applications were accepted by the defendant in New Orleans. The policies provided that annual premiums would be paid for 20 years, and that all payments by either party would be “verified in the City of New Orleans in the legal money of the United States.” From 1945 to 1952 the plaintiffs had paid the premiums in dollars, and from 1952 to 1958 in pesos. In July 1960, the plaintiffs, after having become refugees and residents of Florida, demanded the cash surrender value of the policies in Tampa and were refused. The plaintiffs were advised by the defendant to make the premium payment in Havana and to apply for the cash surrender value there.

The defendant argued that the controversy was justiciable solely under the laws of Cuba and in its courts. It argued, inter alia, that Cuban law prevented it from paying in dollars. For a variety of reasons, including the finding that the policies were governed by Cuban law, the U.S. District Court dismissed the actions on the ground of forum non conveniens. The U.S. Court of Appeals, Fifth Circuit, reversed this decision on the ground that the defendant had not discharged the burden of showing that the plaintiffs could obtain justice in the Cuban courts and that those courts would be more convenient for the determination of the cases. The court also held that the act of state doctrine did not lead to a different result, but it did not deal specifically with Article VIII, Section 2(b).¹⁵ This silence led to a petition for rehearing, which the court denied as follows:

Appellee further suggests here that the Bretton Woods Agreement and certain Cuban currency control statutes require dismissal of this complaint. Since the entry of our opinion in this case this Court has on November 7, 1962 rejected this contention in Pan American Life Insurance Company v. Inocencio Blanco, 311 F.2d 424.¹⁶

It will be noted that the court relied on the decision of the Court of Appeals in the Blanco case, but that court merely held that it would not take judicial notice of the Cuban laws on which the argument as to Article VIII, Section 2(b), rested.

Theye y Ajuria v. Pan American Life Insurance Co.

As in the other cases against Pan American, the plaintiff, a Cuban national, applied, in May 1928, for a policy of life insurance through the defendant’s representative in Havana; the application, in Spanish, was referred to the home office in New Orleans; the application was approved, returned to the local representative, authenticated, and delivered to the plaintiff. The policy stipulated that all premiums were payable in advance at the home office and that on presentation of the policy and proof of the death of the insured, the defendant would pay the proceeds to the beneficiary at its home office. All the annual premiums were paid in dollars until 1942, when the plaintiff exercised one of the options in the policy and had it converted into a paid-up policy. The defendant paid a bonus and made three loans to the plaintiff in 1948, 1950, and 1952; the plaintiff received and repaid all three loans in pesos in Havana. The plaintiff left Cuba in November 1960 and was residing as a refugee in Florida. On arrival in the United States, he demanded the cash surrender value of the policy at the New Orleans office. After the defendant refused the demand, the plaintiff brought suit in the District Court for the Parish of Orleans. In answer to the plaintiff’s petition, the defendant argued that (1) the contract was governed by Cuban law; (2) if the contract had originally been governed by Louisiana law, its situs had been changed to Cuba by the subsequent acts of the parties in connection with the bonus and loans; and (3) under the act of state doctrine and certain provisions of the Fund’s Articles, the laws of Cuba passed since the execution of the policy governed the contract.¹⁷ The trial judge held that the policy when issued and converted was governed by Louisiana law, and that subsequent Cuban laws could not affect obligations under the policy. He gave judgment for the plaintiff in the amount of $7,090.

The defendant appealed to the Court of Appeal of Louisiana, Fourth Circuit, which reversed the judgment of the lower court.¹⁸ The court held that a sovereign government could enact legislation controlling insurance business within its bounds for the benefit of its citizens. Law No. 568 was adopted before the plaintiff left Cuba on November 4, 1960. Furthermore, the defendant’s business and assets in Cuba were nationalized on October 24, 1960. A sovereign nation had the power to change the situs of its nationals’ contracts and could impair the obligations of contracts.

With these legal propositions before us, the Court must recognize and give effect to the Bretton Woods Agreement signed by the United States, Cuba, and some ninety-five sovereign Nations in 1945. Each signatory to the Compact, which included an International Monetary Fund, bound itself to take steps to implement the principles of the international accord, as part of its domestic law. Our own Congress honored its commitment by enacting a statute to that effect. (22 U.S.C.A. §286 et seq.).

After quoting Article VIII, Section 2(b), the court continued:

By accepting and implementing the above, our Congress has undertaken to make the above principle, a part of our national law. On June 14, 1949, the International Monetary Fund, binding on all its members, including Cuba and the United States, issued the following interpretation of Article VIII, Section 2(b):

“An obvious result of the foregoing undertaking is that if a party to an exchange contract referred to in Article VIII, Sec. 2(b) seeks to enforce such a contract, the tribunal of the member country before which the proceedings are brought, will not, on the ground that they are contrary to the public policy of the forum, refuse recognition of the exchange control regulations of the other member which are maintained or imposed consistently with the Fund Agreement. It also follows that such contracts will be treated as unenforceable notwithstanding that under [the] private international law of the forum [the law under which the foreign exchange control regulations are maintained or imposed] is not the law which governs the exchange contract or its performance * * *.”

Cuban Law 568 of September 29, 1959, required payments between plaintiff and defendant be made in Cuba, regardless of the language of the contract. Despite this, plaintiff attempts to defy the decrees and laws of Cuba, the sovereign to whom he owed allegiance to come into this country and collect his debt in the currency of another nation. This would nullify and frustrate his own sovereign’s legislative will and powers.

Prior to the Bretton Woods Agreement, plaintiff’s position might have been upheld. Our Courts have held it to be the public policy of the forum State to refuse to give effect to exchange control legislation of a foreign sovereign, where such was labelled by the forum as penal, punitive, confiscatory or violative of fundamental concepts of justice. In this connection, the Court calls attention to the cases and authorities cited therein of Menendez Rodriguez v. Pan American Life Insurance Co., 5 Cir., 311 F.2d 429 and Menandez v. Aetna Insurance Co., 5 Cir., 311 F.2d 437.

This Court believes, and so holds, that the Bretton Woods Agreement and our Acts of Congress (22 U.S.C.A. §286 et seq.) supersede the principles enunciated in the above authorities, as to parties or nations who signed the agreement or treaty. It is now our national policy to deny enforcement, in the Court of this land, of contracts which would frustrate the exchange control regulations of another member of the agreement. Our Congress gave recognition to the will of the signatories to the agreement, declaring that the public policy of its members would be better served by a measure of collaboration among them designed to give effect to each other’s exchange control regulations. The U.S. Supreme Court, in Kolovrat v. Oregon, 366 U.S. 187, 81 S.Ct. 922, 928, 6 L.Ed. 218, decided May 1, 1961, interpreted the Bretton Woods Agreement as follows:

“These treaties and agreements show that this Nation has adopted programs deemed desirable in bringing about, so far as can be done, stability and uniformity in the difficult field of world monetary controls and exchange. * * * Doubtless these agreements may fall short of that goal. But our National Government’s powers have been exercised so far as deemed desirable and feasible toward that end, and the power to make policy with regard to such matters is a national one from the compulsion of both necessity and our Constitution.”

We find that the Court below disregarded the above treaty accord between the United States and Cuba and our own Congressional enactments to implement this agreement. Our Courts should not and cannot enforce a contract which transcends the sovereign will of Cuba touching on monetary contracts involving its own nationals. Plaintiff demands should have been rejected.¹⁹

Having disposed of the case on the basis of Article VIII, Section 2(b), the court went on to note that the defendant had maintained reserves in Cuba to meet its Cuban obligations, including the policy involved in this action. The Cuban Government had taken over those reserves and the defendant’s obligations. If judgment went against the defendant in Louisiana, it would have to pay the obligation twice, because it could not satisfy the judgment from the Cuban assets that had been nationalized.

The plaintiff appealed to the Supreme Court of Louisiana, which held that there was no room for speculation as to the law which the parties intended as the governing law.²⁰ This was the law of Louisiana, and the trial judge was right in holding that Cuban legislation passed after the policy became a paid-up policy had no effect on the obligation which existed at that time.²¹ Nothing that had happened later showed that the parties intended to change the situs of the contract to Cuba.

The court then passed to the argument based on Article VIII, Section 2(b):

Conceding that Cuba had adopted the Articles thereof as part of its national law as alleged by the defendant, an exhaustive study of the Bretton Woods Agreement, as well as all authorities relied on by the defendant, fails to show where the Agreement or any of the cases are controlling under the particular facts of the case at bar inasmuch as a contract payable in the state of Louisiana in United States currency is not a foreign exchange contract.

In Blanco v. Pan American Life Insurance Company, 221 F.Supp. 219, see also 311 F.2d 424, the same defenses to claims by policyholder Blanco and other Cuban refugees were urged therein as here, and in support thereof, the defendant cited the Court of Appeal opinion in the case at bar. That court concluded, however, that Federal courts are not bound by state decisions in interpreting a federal question and disposed of the matter by holding the Bretton Woods Agreement had no applicability in that case because the Cuban government lost whatever jurisdiction it possessed over not only the subject matter of the litigation but also over the persons of the plaintiffs when they fled from Cuba, became alien residents of the United States, political citizens of nowhere, but civil citizens of Florida as they were domiciled there. The court further remarked “* * these laws (relied on by defendant) do not apply to cover the situation of a Cuban national enforcing an executory contract in the forum of another jurisdiction according to the terms of an obligation existing prior to the passage of those laws. Further, we do not believe that such laws and decrees can have any force and effect over the persons of these litigants who are not only without Cuba, but, as refugees, are not subject to its in personam jurisdiction. * * *”

Moreover, courts, including those of this country as well as those of foreign jurisdictions, in interpreting contracts involving matters affected by the Bretton Woods Agreement are uniform in their holding that the laws of the state or nation where the parties intended the contract to be performed govern.^{22, 23}

Judgment for the plaintiff was affirmed.

Pan American Life Insurance Co. v. Raij

The plaintiff applied for and received a 20-year endowment policy according to the practice of Pan American as described in the other cases. The policy provided that all payments by either party would be made in dollars in New Orleans. All premiums were paid until November 1960, when the premium was refused and returned by the defendant. Subsequent tenders of premium were refused, and the plaintiff sued for a declaration that he was entitled to pay the premiums and have them accepted and that the policy was in full force and effect. The defendant relied on Resolution No. 3 and Decree No. 1384. On June 6, 1962 the Circuit Court found for the plaintiff on the ground that these measures did not change the contract in the absence of agreement by the parties to the change.

The District Court of Appeal of Florida, Third District, affirmed this decision. On a petition for rehearing, the court said:

The appellant has filed a petition for rehearing, pointing out that, in rendering the opinion in this cause, the court overlooked and failed to consider its contention that this transaction was governed by the Bretton Woods Agreement relating to the International Monetary Fund and the Federal legislation pertaining thereto. See: 22 U.S.C.A. §286 et seq. At the time of the original opinion in this cause, this Agreement was considered and deemed to be not applicable, for the reason that the contract involved was a contract with an American company, made in the United States, payable in United States Dollars; that premiums had been accepted in United States Dollars since 1942, and that the effect of the chancellor’s decree was only to require the appellant to continue to accept premium payments in United States Dollars. Not only were we of the opinion that the Bretton Woods Agreement was not applicable to the contract in the instant case, we were further of the opinion that the Bretton Woods Agreement pertained only to contracts “involving the currency of any member” of the Fund and that an American contract, upon which payments were to be made to or by the appellant in United States currency, was not an unenforceable contract within the provisions of Article VIII, §2 (b) of the Bretton Woods Agreement.²⁴

On a further appeal, the Court of Appeal held that the decision of the District Court must be quashed on the ground that it was in conflict with the Ugalde case, which is summarized below, but on further consideration, the Court of Appeal held that it was not clear that there was a conflict and reversed itself.²⁵

Varas v. Crown Life Insurance Co.

In 1944, the plaintiff’s mother, as guardian of the plaintiff, applied to the defendant, a Canadian company with a place of business in Cuba, for insurance on the life of the plaintiff, who was then a resident of Cuba. The defendant executed and delivered a 20-year endowment policy in the face value of $5,000 to the plaintiff or her mother in Havana. The contract was in Spanish, but provided that all payments by either party were to be in U.S. dollars. All premiums were paid in Cuba, in dollars from 1944 to 1951, and in pesos thereafter. In August 1960 the plaintiff left Cuba as a refugee and became a resident of the United States. In April 1961 the plaintiff demanded the cash surrender value of the policy at an office of the defendant in Pennsylvania. On the defendant’s refusal, the plaintiff sued for the cash surrender value, or alternatively, the return of the premiums.

The court of first instance found for the plaintiff in the amount of the premiums. Both parties appealed, with the plaintiff claiming the cash surrender value. The defendant argued, inter alia, that its obligation was to pay in Havana, which it was prepared to do. It also argued that Decree No. 1384 modified its dollar obligation and Law No. 568 prohibited payment in dollars, and that, as a result of provisions in the Fund’s Articles, it was prevented from paying in the United States. The appellate court, the Court of Common Pleas, Montgomery County, Pennsylvania, held that when a life insurance contract fixes no place of performance, the presumption is that this is where the contract was made. Therefore, no demand for performance could be made in Pennsylvania. But the plaintiff could not return to Cuba to recover there, and any agent collecting for her in Cuba would not be able to forward the money to the United States. In these circumstances, the plaintiff was entitled to recover in quasi-contract the value of the premiums that had been paid.

The plaintiff is obligated to go to Cuba in order to receive any benefits under the insurance contract. It is excusably impossible for her to do so. She had partly performed the contract before this impossibility arose. She is entitled to recover the value of that performance.

Her right to recovery is not based on the contract but is under the theory of unjust enrichment…. Therefore, the law governing the performance of the insurance contract is not applicable, and any Cuban law which might bar such a recovery is of no effect. Since no contractual right is being enforced here, the International Monetary Fund Agreement is not involved.

It is true that the defendant has partly performed the contract on its side in that it insured the life of the plaintiff for a period of 17 years. In return for this service the defendant had the use of the plaintiff’s money during this period. The total premiums paid are less than the cash surrender value of the policy at the time the demand was made. The use of the plaintiff’s money free of any charge for interest is fair compensation for the insurance coverage provided. The result reached is equitable as well as legally proper.²⁶

The parties appealed to the Superior Court of Pennsylvania, which noted that:

… Since oral argument, we have been asked by the defendant company to disregard the question raised as to the impact of the International Monetary Fund Agreement as on April 2, 1964, effective on that date, the Republic of Cuba had withdrawn from membership.²⁷

The Superior Court disagreed with the lower court’s decision that the plaintiff could recover only the premiums, and held that the plaintiff was entitled to recover on the cash surrender option in Pennsylvania, and that the Cuban monetary laws were not applicable. The theory on which it proceeded was that the cash surrender option was an irrevocable offer which became a contract when and where the election was made to exercise the option, and the law of this place was the law governing performance. This contract was distinct from the principal contract and could be subject to a different governing law.

On the subject of Article VIII, Section 2(b), the Court said:

We agree that the currency laws of Cuba must be honored by the government of the United States and by our courts if Cuban law is applicable. The power of a sovereign state over its currency is absolute. This was especially true when both countries were signatories to the Breton [sic] Woods Agreement, a treaty of the United States and therefore a part of the supreme law of the land. The Breton Woods agreement specifically requires the recognition and honoring of Cuba’s currency laws. The Breton Woods agreement brought into being the “International Monetary Fund Agreement”, 60 Stat. 1401–1411, 1945. However, Cuba has withdrawn from membership so that a new look must perchance be taken at the cases based on the fund agreement when membership was held by both countries. It is true, however, that even prior to the currency treaty foreign exchange regulations were held to be applicable in suits in the United States. This is in line with our public policy to prevent evasion of currency obligations in the nation where the obligation is payable.²⁸

Confederation Life Association v. Ugalde

In 1948, the plaintiff, then a resident of Havana, applied to the defendant, a Canadian company, for a life insurance policy. The policy was delivered to the plaintiff in Havana. Both the application and the policy were in Spanish. The policy provided that all payments under it were to be made in dollars, and the place of payment was to be Havana. After the adoption of Decree No. 1384, the defendant informed its policyholders in Cuba that pesos would be substituted for dollars under the contracts. The plaintiff made subsequent payments of premium in pesos. In October 1961, the plaintiff demanded the cash surrender value of the policy in the United States, but the defendant offered to pay pesos in Havana and refused to pay dollars in the United States. The plaintiff sued in a Florida court of first instance, and summary judgment was entered for him for $13,825.52, the cash surrender value of the policy.

The defendant appealed to the District Court of Appeal of Florida, Third District, which reversed part of the decision of the lower court by a majority of two judges to one.²⁹ The defendant argued that the contract was governed by the law of Cuba, and that payments under it had to be made in pesos at par with the dollar. The plaintiff argued that the law of Florida applied, and that it would be against public policy under that law to enforce a Cuban law that enabled the defendant to discharge its obligation in pesos. The District Court of Appeal held that neither Florida nor any jurisdiction other than Cuba had any contacts with the contract, which was made and was to be performed in Cuba, and the law of which was therefore the governing law. The defendant had offered performance in accordance with that law. Cuba had the right to prescribe its legal tender and to provide that contracts payable in Cuba must be discharged in Cuban legal tender. There was nothing in this repugnant to the public policy of Florida. The majority opinion did not deal with Article VIII, Section 2(b).

Notwithstanding the line of argument that it had adopted, the majority did not dismiss the plaintiff’s claim. It held that the courts of Florida were open to the plaintiff, and the error of the lower court was not in entertaining the action or giving judgment for the plaintiff, but in the amount of the judgment. The majority saw the issue, therefore, as one of the applicable rate of exchange. It remitted the case to the lower court with instructions to enter judgment for the plaintiff in dollars in such amount as represented 13,825.53 pesos at the rate of exchange on the date of the original judgment.

The minority judge held that two contracts were involved. The first of these was made in 1948 and insured the plaintiff’s life. It contained a continuing irrevocable offer by the plaintiff to enter into a contract to pay a cash surrender value. This offer became a second contract when the plaintiff accepted the offer by demanding the cash surrender value in Florida on October 11, 1961. The defendant had broken this contract; Florida law governed it; and the plaintiff was entitled to the full cash surrender value in dollars. However, if Cuban law applied, the Cuban legislation and decrees prohibited the transfer of funds from Cuba but did not affect funds “which may have already been located abroad or possessed by nationals in other states.” The defendant had resources in Florida to discharge its obligation to the plaintiff and the defendant could use them for this purpose without violating Cuban law.

The defendant appealed to the Supreme Court of Florida, which confirmed the statement of law and conclusion of the District Court of Appeal that Cuban law governed the contract.³⁰ However, the court also dealt with the impact of the Fund’s Articles:

The Cuban laws relating to the establishment of currency control are similar to those which have been enacted in this country with respect to our own currency and are not violative of United States policy. The Florida Courts are obligated by the International Monetary Fund Agreement to apply the cited Cuban laws to the contract here involved.³¹

The conclusion that Cuban law governed, reinforced by the effect of the Articles, led the court to conclude, not that the plaintiff could recover the dollar equivalent of the peso cash surrender value, but that he could not recover at all. The defendant had offered performance in accordance with the contract, and therefore there was no breach of contract and no cause of action.³²

After the withdrawal of Cuba from the Fund, the plaintiff presented a motion for the reconsideration and modification or reversal of the judgment. He argued that the Supreme Court of Florida had based its judgment on the membership of Cuba and the United States in the Fund and on Article VIII, Section 2(b). However, the provisions of the Articles were for the benefit of member states, and Cuba was no longer a member. The date of proposed relief determined the applicability of Article VIII, Section 2(b), so that it would not now be a violation of the Articles if that provision were not applied.³³ The defendant replied that the court’s opinion that the contract was governed by Cuban law, under which there had been no breach, was not affected by the withdrawal of Cuba from the Fund. On July 1, 1964, the Supreme Court of Florida denied the plaintiff’s motion, and a subsequent petition to the U.S. Supreme Court for certiorari was denied.³⁴