Friede v. National City Bank

165 N.E. 452 | NY | 1929

F. Blumenthal Company of New York owed H. J. Cahn of Petrograd a sum in excess of $83,000. The Cahns had an account with the Azoff Don Bank of Petrograd but none with defendant. The two banks were correspondents and the Azoff had a debit balance approximately of $20,000 with the National City. In November, 1917, after the Soviet revolution had been accomplished, Cahn Brothers cabled defendant to collect from Blumenthal and "credit Azowdon Bank Petrograd our account." On December 26 Blumenthal deposited $83,716.43 with defendant "on instruction received from Messrs. H. J. Cahn, Petrograd for account of the Banque de l'Azoff Don Petrograd." On the same day defendant cabled the Azoff, "received Eighty three thousand seven hundred sixteen 43 H. J. Cahn," and on the following day made this entry to the credit of that bank, "Dec. 27 pay't F. Blumenthal Co. order H. Cahn $83,716.43." The cable sent December 26 from New York could not by any possibility have passed the British and Soviet censors and have been delivered in Petrograd as early as ten o'clock the next morning. December 27 is the date upon which the Soviet decree abolishing private banking property rights, creating a State monopoly and taking over all bank assets and liabilities was issued. Before ten o'clock in the morning of that day a detachment of the revolutionary Red Guard took possession of the Azoff Don Bank and a commissar representing the Soviet government assumed charge. Neither the building nor the assets have ever been restored to the former bank officials and no credit for the $83,716.43 has ever been entered upon the books of the Azoff. In January, 1918, its capital was confiscated and the shares declared null and void. In February H. J. Cahn cabled defendant to cancel the credit, if already entered, and to return the money to Blumenthal. Three days later they sent another message requesting the bank in New York to notify the Azoff of the cancellation and to return the money to Blumenthal. On February 26 defendant informed the Azoff, "Cahn instructs us pay Blumenthal Eighty three thousand seven hundred sixteen dollars 43. Authorize us to debit your account," and ten days later it notified the Cahns that it had cabled the bank in Petrograd for authority to refund. After the receipt of this message one of the Cahn brothers visited the bank. It was then under the control of the Soviet government and, pursuant to the decree of December 27, was in process of liquidation. The manager of the foreign department of that bank who had been retained in its service by the revolutionary government sent on March 14, at the request of Cahn and with the commissar's approval, the following message to defendant: "Your cables December 26, February 28, information payment account Cahn $83,716.43 dollars we consider cancelled. Banque Azoff Don." Defendant debited the $20,000, which the Russian bank owed, leaving an approximate balance of $63,000 which, however, it did not return to Blumenthal but retained in its own possession. This sum with accrued interest amounted approximately to $71,000 on October 21, 1919, when M. Sergey Friede commenced an action against the Azoff Don Bank. In that action he caused a warrant of attachment to be served upon the National City Bank for the purpose of reaching this deposit. In July, 1920, H. J. Cahn sued defendant for the $83,000 and recovered a judgment exceeding $98,000. That judgment was satisfied by payment of the $71,000, with interest, to the Cahns. They indemnified defendant against liability to the present plaintiffs. This action by Friede's representatives in aid of the attachment was begun in April, 1922.

Before possession of the $71,000 can be obtained in this action proof must be made that it was the property of the Azoff Don. The attaching creditors have no better right than had the Russian bank. The National City never regarded this balance as a trust fund for the benefit of the Cahns. It treated the credit as one establishing the relation of debtor and creditor between itself and the Azoff. No such relationship however, was thereby created. A credit cannot be forced upon a bank or an individual. Before it can become effective, it must be accepted. (Whitehouse v. Bank of Cooperstown, 48 N.Y. 239; Cutler v.Am. Ex. Nat. Bank, 113 N.Y. 593; Baldwin's Bank v. Smith,215 N.Y. 76, 84, 85.) Acceptance depends upon the intent of both parties (Marine Bank v. Fulton Bank, 2 Wall. [U.S.] 252;Comm. Bank v. Armstrong, 148 U.S. 50, 58, 59), but mutual intent obviously cannot exist when the facts are known to only one. Knowledge by the Azoff of the credit to it in New York could have been acquired only by some kind of communication received from defendant. (Simson v. Ingham, 2 B. C. 65, 73.) Before such information could be imparted, the Soviet decree of nationalization became effective. Among its purposes were "the resolute eradication of banking," liberation from "exploitation by banking capital" and the establishment of a single State bank. It directed the liquidation of private banks and the temporary management of their business by a council of the State bank. The offices and assets of the Azoff were seized by the military forces of the Commune and that bank's voluntary functions were paralyzed. As long as it remained capable of transacting its business it never accepted this credit. No act indicating an intent to accept was ever performed either by the bank's officers or by any representative of the Soviet. In the face of proof that no entry of this credit was ever made on the books of the Azoff and that even defendant's messages of December 26 and February 26 were ignored until March 14, when they were answered by a rejection of the credit, no acceptance can be implied. The relations existing between the two banks were disrupted by the upheaval of December 27. In the turbulent condition of affairs in Petrograd, with soldiery hostile to private banking interests occupying the Azoff Don offices, with liquidation confronting the bank, every presumption of acceptance is overborne. Acceptance followed by confiscation surely would create no benefit to the bank and, in the absence of some benefit, acceptance will not be presumed. (Jackson v.Tallmadge, 246 N.Y.. 133, 138.)

A subordinate question is in the case. It affects the rate of interest payable by defendant on an item of $7,885.72, which is unrelated to the Cahn deposit and which was properly credited by defendant to the Azoff. This credit was not transferred to the sheriff when the warrant of attachment was served and demand made. Plaintiffs claim six per cent interest but only the current bank rate of two per cent has been awarded. We agree that only two per cent is recoverable. If the warrant had been honored and the property delivered to the sheriff, the amount of this credit would have been kept by him to answer a judgment which might be obtained against defendant (Civ. Prac. Act, § 940) until such a time as execution might be issued on such a judgment (Civ. Prac. Act, § 969). Plaintiffs are not entitled to interest against the sheriff and they possess no right to interest against defendant in excess of the usual increment to the fund on deposit.

The judgment of the Appellate Division should be affirmed, with costs.

CARDOZO, Ch. J., POUND, CRANE, LEHMAN, KELLOGG and HUBBS, JJ., concur.

Judgment affirmed.