Sokoloff v. National City Bank

The case is here upon the pleadings.

In June, 1917, the plaintiff paid to the defendant, the National City Bank in the city of New York, $30,225 upon its promise to open an account in favor of the plaintiff in its Petrograd branch, and to repay him this sum in rubles at the rate of twenty-three and one-quarter cents per ruble, or a total of 130,000.rubles, at such times and in such amounts as he by his written orders might demand. The plaintiff, after stating this agreement, alleges that the account was opened; that the plaintiff from time to time drew against it, till the balance was reduced to $28,365- or 122,000 rubles; and that thereafter in November, 1917, and again in February, 1918, checks for the balance were presented and dishonored.

The questions certified to us for answer are directed to two defenses

The second defense is the same as the first except that it pleads the facts as a partial defense rather than a complete one.

The government of the United States refuses recognition of the Soviet Republic as the government of

Courts of high repute have held that confiscation by a government to which recognition has been refused has no other effect in law than seizure by bandits or by other lawless bodies (Russian Commercial & Industrial Bank v. Comptoir D’Escompte de Mulhouse, [1923] 2 K. B. 630, 638; S. C., H. of L., 40 T. L. R. 837; Banque Internationale v. Goukassow, [1923] 2 K. B. 680; Luther v. Sagor & Co., [1921] 1 K. B. 456; S. C., [1921] 3 K. B. 532; cf. White, Child & Berney, Ltd., v. Simmons, [1922] 127 L. T. 571). It would be hazardous, none the less, to say that a rule so comprehensive and so drastic is not subject to exceptions under pressure of some insistent claim of policy or justice. In our own country, Oetjen v. Central Leather Co. ( 246 U. S. 297 ) and Ricaud v. American Metal Co., Ltd. ( 246 U. S. 304 ) are cited sometimes as pronouncements of equal generality, but in truth the point involved was narrower ( 31 Yale L.

Juridically, a government that is unrecognized may be viewed as no government at all, if the power withholding recognition chooses thus to view it. In practice, however, since juridical conceptions are seldom, if ever, carried to the limit of their logic, the equivalence is not absolute, but is subject to self-imposed limitations of common sense and fairness, as we learned in litigations following our Civil War. In those litigations acts or decrees of the rebellious governments, which, of course, had not been recognized as governments de facto, were held to be nullities when they worked injustice to citizens of the Union, or were in conflict with its public policy (Williams v. Bruffy, 96 U. S. 176 , 187). On the other hand, acts or decrees that were just in operation and consistent with public policy, were sustained not infrequently to the same extent as if the governments were lawful ( U. S. v. Insurance Companies, 22 Wall. 99 ; Sprott v. U. S., 20 Wall. 459 ; Texas v. While, 7 Wall. 700 , 733; Mauran v. Ins. Co., 6 Wall. 1 ; Baldy v. Hunter, 171 U. S. 388 ; cf. Dickinson, Unrecognized Governments, 22 Mich. L. R. 29,42). These analogies suggest the thought that, subject to like restrictions, effect may at times be due to the ordinances of foreign governments which, though formally unrecognized, have notoriously an existence as governments de facto. Consequences appropriate enough when recognition is withheld on the ground that rival factions are still contending for the mastery, may be in need of readjustment before they can be fitted to the practice, now a growing one, of withholding recognition whenever it is thought that a government,

We think the defendant, though we were to assume the existence of such exceptions to the need of recognition, has not brought itself within them. There is room for debate whether relief from liability would follow if the acts set up in its answer were those of a government de jure. Whether that is so or not, we find no such injustice or impolicy in enforcing liability as to necessitate an exception to the rule that^acts or decrees, to be ranked as governmental, must proceed from some authority recognized as a government de facto. The defendant is not a bailee for the plaintiff, nor were any of its assets ear-marked to the plaintiff’s use. If that were its position, there would be other tests of liability. Surrender to overwhelming force would excuse the loss or destruction of the subject of a bailment whether the force that overwhelmed was legitimate or lawless. That is not the case before us. The res belonging to the plaintiff was not a physical object committed to the defendant’s keeping, but an intangible right, a chose in action, the right to receive rubles in the future under an executory contract. This contract the defendant has not performed, yet it refuses to return the dollars that were paid to it by the plaintiff upon its promise of performance. Two acts that must be kept distinct in thought are said to justify

The defendant’s liability was unaffected by the attempt to terminate its existence and the seizure of its assets. A government of Russia could not terminate its existence either by dissolution or by merger, for it was a corporation formed under our laws, and its corporate life continued until'the flaw of its creation declared that it should end. What a Russian government could do was to deprive it of the privilege of doing business upon Russian soil. But the ending of its Russian business was not the ending of its duty to make restitution for benefits received without requital. _As to this, there would be no dispute if its assets had been left intact. The situation in a legal aspect is not changed by the fact that the property of the Russian branch has been scattered or despoiled. Plaintiff did not- pay his money to the defendant, and become the owner of this chose in action, upon the security of the Russian assets. He paid his money to a corporation organized under our laws upon the security of all its assets, here as well as elsewhere. Everything in Russia might have been destroyed by fire or flood, by war or revolution, and still the defendant would have remained bound by its engagement. The plaintiff had no means of knowing whether the assets physically in Russia were large or small. He might fairly assume, if he gave thought to it at all, that the reserve in cash or bullion at the disposal of the Russian branch would be only a small proportion of the Russian liabilities. Even now, the defendant does not state that it kept any more rubles or securities in Russia after its agreement with the plaintiff than before. It states, indeed, that its Russian assets were over 240,000,000 rubles and that its Russian liabilities were over that amount, but it does not state that the excess was the same for each. If assets physically

If merger and seizure of assets do not avail as a defense, the question remains whether the defendant gains anything by the subsequent decree which confiscated the accounts of depositors as a “ revolutionary tax.” At the time of this decree, the Russian assets were already lost. The defendant did not surrender them or any part of them for the purpose of discharging a tax or other liability imposed on its depositors. The question is not here whether credit would have to be allowed if payment had been made for such a purpose out of assets that would otherwise have been retained by the depositary. The ruling of the Supreme Court in Williams v. Bruffy ( 96 U. S. 176 ) suggests the difficulties that even then would have to be surmounted. Certain- we think it is that a

The defendant places some reliance upon the doctrine of frustration. The contract with the plaintiff was subject, it is said, to the implied condition that the business of the branch in Russia would be permitted to continue. Such a condition might be important if the plaintiff were claiming damages. It has no bearing upon this action, in which the remedy is restitution (Cantiare San Rocco v. Clyde Shipbuilding & Eng. Co., 1924, A. C. 226; Dolan v. Rodgers, 149 N. Y. 489 ; 2 Williston, Contracts, § 885).

The defendant’s last reliance is upon the intention of the parties. Nothing in its statement of that intention exempts from liability. It was “ intended ” by the parties that the said agreement “ should be performed in Russia,” and that “ the performance thereof should be governed by the laws of Russia and by the orders or .decrees of any government which might exercise authority therein.” Two defects at least make this statement insufficient:

(a) If the obligations of the parties were varied by agreement, the making of that agreement is the ultimate and issuable fact which should have been stated in the answer. There is a studious omission to make any statement of the kind: Instead there is an averment of intention, which for all that appears was undisclosed by word or deed. "Assent in the sense of the law is a-matter of overt acts, not of inward unanimity in motives, design or the interpretation of words ” (Holmes, J., O’Donnell v. Clinton, 145 Mass. 461 ; White v. Corlies, 46 N. Y. 467 ; 1 Williston, Contracts, § 95; Anson, Contracts, § 34).

(b) If an intention undisclosed were equivalent to one revealed, what has happened is not fairly within the range of what is said to have been foreseen. These decrees do not regulate the performance of the agreement. They wipe the agreement out and annul its -obligation. Performance has been thwarted. Restitution remains due.

The order should be affirmed with costs, and the questions certified answered in the negative.

Hiscock, Ch. J., Pound, McLaughlin, Crane, Andrews and Lehman, JJ., concur.

Order affirmed.