Singer v. Yokohama Specie Bank, Ltd. — 293 N.Y. 542

Majority

p. 542

Eugene T. Singer, Appellant, v. The Yokohama Specie Bank, Limited, Defendant, and Elliott V. Bell, as Superintendent of Banks of the State of New York, Respondent.

Argued October 20, 1944;

decided November 30, 1944.

p. 544

Wm. Dwight Whitney, Geo. M. Billings and Jack W. Bobbins for appellant.

I. The New York transaction constituted a promise to pay. A promise to pay may be verbal. (Baldwin’s Bank v. Smith, 215 N. Y. 76 ; Hillas & Co., Ltd., v. Arcos, Ltd., 147 L. T. 514.) II. Assuming that the verbal promise requires written confirmation, this is provided by the letter. (Outlet Embroidery Co., Inc., v. Derwent Mills, 254 N. Y. 179 ; Stulsaft v. Mercer Tube & Mfg. Co., 288 N. Y. 255 .) III. The promise by the New York agency constituted the transaction contemplated by the statute. (Restatement of Contracts, § 75, subd. 2; Civ. Prac. Act, § 209; Salimoff & Co. v. Standard Oil Co., 259 N. Y. 219 .) IV. This was not a transaction prohibited by the Federal freezing regulations. Adjudication and the entry of judgment are expressly authorized by Treasury Ruling 12. (Bollack v. Societe Generale etc., en France, 263 App. Div. 601 ; Polish Relief Comm. v. Banca Nationala a Rumaniei, 288 N. Y. 332 .) V. There is no requirement of law that consideration shall have passed from Standard-Vacuum to the New York agency. The operative fact is the promise (or assent) to make the payment. (White v. Rintoul, 108 N. Y. 222 ; F. N. Bank v. Chalmers et al., 144 N. Y. 432 ; Goodwin v. Bowden, 54 Me. 424 .) VI. The condition of obtaining the Federal license was understood between the parties (Standard and the New York Agency) to be a condition to payment, not a condition to the creation of the debt. (Polish Belief Comm. v. Banca Nationala a Rumaniei, 288 N. Y. 332 .)

Donald Marks for Orvis Brothers & Company, amicus curia .in support of appellant’s position.

I. The statutory class of “ transaction ” claims should not be limited to claims arising out of contracts. (Ter Kuile v. Marsland, 81 Hun 420 ; Bank v. Lee, 7. Abb. Pr. 372; Deagen v. Weeks, 67 App. Div. 410 ; International Shoe Co. v. Hawkinson, 72 N. D. 622 .) H. The statute (Banking Law, § 606, subd. 4) does not preclude the allowance of plaintiff’s claim as that of a nonpreferred creditor. (Matter of Union Bank, 204 N. Y. 313 ; Garlick et al. v. Prudence Co., Inc., et al., 79 F. 2d 77 , 296 U. S. 646 .)

Edward Feldman and Isadore B. Cohen for respondent.

I. Appellant’s claim is not provable in the New York liquidation.

p. 545

The communications from Yokohama to the Agency, and from the Agency to Standard, did not give rise to a cause of action against the Agency in favor of Standard. Only preferred claims may participate in the liquidation. (Matter of People [Norskeo Lloyd Ins. Co.], 242 N. Y. 148 ; Matter of People [City Eq. Fire Ins. Co.], 238 N. Y. 147 ; Moscow Fire Ins. Co. v. Bank of New York, 280 N. Y. 286 ; Matter of Beha [Second Russian Insurance Co.], 224 App. Div. 105 ; Matter of Second Russian Ins. Co. [Hamburg Ins. Co.], 219 App. Div. 46 ; McGhee v. Casualty Ins. Co. of America, 15 Ohio App. 457 ; Middleby’s Estate, 249 Pa. 203 ; Hall v. Holland House Co., 12 Misc. 55 ; Osgood v. Ogden, 4 Keyes 70; United States v. Pink, 315 U. S. 203 .) II. Appellant must have a cause of action arising out of a transaction with the agency. (Matter of People [Norske Lloyd Ins. Co.], 242 N. Y. 148 ; Matter of People [City Eq. Fire Ins. Co.], 238 N. Y. 147 ; Matter of People [Norske Lloyd Ins. Co.], 249 N. Y. 139 ; Matter of People [First Russian Ins. Co.], 255 N. Y. 428 ; Moscow Fire Ins. Co. v. Bank of New York, 280 N. Y. 286 ; Aetna National Bank v. Fourth National Bank, 46 N. Y. 82 .) III. The agency never made an independent promise to pay, and at best, what it said was conditioned upon an event which never occurred. (Pink v. American Surety Co., 283 N. Y. 290 ; Home Insurance Co. v. Continental Ins. Co., 180 N. Y. 389 ; Hopper v. Sage, 112 N. Y. 530 ; Stulsaft v. Mercer Tube & Mfg. Co., 288 N. Y. 255 ; Ford v. Snook, 205 App. Div. 194 , 240 N. Y. 624 ; Bradley v. Wheeler, 44 N. Y. 495 ; Green v. Wachs, 254 N. Y. 437 .) IV. No cause of action would arise even if the language used were unconditional. (Carpenter v. Sparta Savings Bank, 182 N. Y. S. 172 ; Morgan v. Lariviere, L. R 7 H. L. 423.) V. Assuming an otherwise unconditional promise, it would be unenforcible for lack of consideration. (Fairchild v. Feltman, 32 Hun 398 .) VI. The communications could not have created any enforcible rights in Standard because the Agency was prohibited by the freezing regulations from complying with the instructions from Yokohama. (Philipp v. Chase National Bank of the City of New York, 34 N. Y. S. 2d 465 ; Segal v. Chemical Importing and Manufacturing Co., 205 App. Div. 220 ; Schneider v. National City Bank of New York, 107 N. Y. L. J. 1824 .)

p. 546

Herbert Wechsler, Assistant Attorney-General; James B. McNally, United States Attorney; Harry Le Boy Jones and Irving J. Levy, Special Assistants to Attorney-General; William L. Lynch, Assistant United States Attorney; Ansel F. Luxford, Assistant General Counsel; Lawrence S. Lesser, Special Assistant to General Counsel; and Irving Moskovitz, Head Attorney, United Slates Treasury Department, for United States of America, amicus curies.

I. The transaction upon which plaintiff predicates his claim is a transfer of credits and foreign exchange transaction within the meaning of and prohibited by Executive Order No. 8389, as amended. II. The prohibitions of the order render the transaction void. (United States v. Von Clemm, 136 F. 2d 968 ; United States v. Pink, 315 U. S. 203 ; United States v. Belmont, 301 U. S. 324 ; Hirabayashi v. United States, 320 U. S. 81 ; Martin v. Mott, 12 Wheat. 19 ; Grogan v. Walker & Sons, 259 U. S. 80 ; Polish Relief Comm. v. Banca Nationala a Rumaniei, 288 N. Y. 332 ; Norman v. B. & O. R. Co., 294 U. S. 240 ; Holyoke Power Co. v. Paper Co., 300 U. S. 324 ; Kennett v. Chambers, 14 How. 42 ; Hanger v. Abbott [1867], 6 Wall 532 ; Straus & Co. v. Canadian Pacific Ry. Co., 254 N. Y. 407 ; Morgan Munitions Co. v. Studebaker Corp., 226 N. Y. 94 .) III. The transaction upon which plaintiff predicates his claim has not been authorized by the Secretary of the Treasury. General Billing 12 does not authorize a transfer of credit by litigation. (Matter of Richardson, 247 N. Y. 401 ; Matter of State Industrial Comm., 224 N. Y. 13 ; U. S. v. Ferreira, 13 How. 40 ; Baltimore & Ohio R. R. Co. v. Pitcairn Coal Co., 215 U. S. 481 .)

The Yokohama Specie Bank, Ltd., to which it will be convenient to refer as “ Yokohama Specie ”, is a banking corporation incorporated under the laws of the. Empire of Japan and was formerly licensed' by the respondent Superintendent of Banks to transact a limited banking business in the State of New York. Under that license Yokohama Specie was permitted to maintain in this State an agency for the trans: action of such a banking business. On December 8, 1941, after a state of war had been declared to exist between the United States and Japan, the Superintendent of Banks, acting pursuant to section 606 of the Banking Law, took possession

p. 547

for the purpose of liquidation of the business, property and affairs of Yokohama Specie within the State of New York and suspended the operation of its New York Agency. While such liquidation was in process the plaintiff asserted his right as a creditor of the New York Agency under an assignment from Standard Vacuum Oil Company — to which reference will be made as ‘ ‘ Standard ’ ’— and filed with the Superintendent of Banks on November 21, 1942, a claim for $557,561.25 against funds of the New York Agency in the possession of the Superintendent. That claim, based upon facts which are not here in dispute and are presently to be considered, was rejected by the Superintendent of Banks upon the ground that applicable law afforded no basis for its payment.

As a means to enforce his claim, the plaintiff instituted the present suit, wherein, upon motion by the defendant at Special Term, the action was severed to permit its continuance against Yokohama Specie and the complaint was dismissed against the Superintendent of Banks. The Appellate Division has granted to the plaintiff leave to appeal from its order unanimously affirming the judgment entered at Special Term and has certified that a question of law is involved which should be reviewed by this court. That question of law arises from the following facts:

On August 27, 1941, Standard, through its Yokohama office delivered to Yokohama Specie in Japan the yen equivalent to $557,561.25 with instructions to pay that' dollar amount to Standard in New York. Two days later, on August 29, 1941, the assistant-treasurer of Standard in New York was advised by telephone by the cashier of the New York Agency of Yokohama Specie that the New York Agency had received from Yokohama Specie the telegraphic transfer of $557,561.25 which amount was available for payment to Standard. In response to this advice the assistant-treasurer of Standard stated to the cashier of the New York Agency that Standard was making the necessary application to the United States Treasury Department for a license which would permit the payment by the New York Agency to Standard. On September 2, 1941, Standard received at its New York office the following confirmatory letter:

p. 548

“ The Yokohama Specie Bank, Limited

New York Agency

Equitable Building

New York, August 29th, 1941.

Standard Vacuum Oil Company

10 Broadway

New York City

New York.

Gentlemen : Att. Mr. Mitho:

Referring to our telephone conversation of today, we wish to advise you that we have received telegraphic instructions from our Yokohama Office to pay you the sum of $557,561.25. We understand that you are filing an application with The Treasury Department of the U. S. A. for a License in order to permit us to make this payment to you.

Awaiting your reply regarding this matter, we remain

Yours very truly,

The Yokohama Specie Bank, Ltd.

(signature illegible)

p. p.. Agent ”

During the preparation by Standard of the application to the Treasury Department a representative of Standard was advised by telephone by a representative of the New York Agency that the payment would be made to Standard from funds of the New York Agency on deposit with Guaranty Trust Company of New York.

Before any payment was made by the New York Agency to Standard there occurred the attack by Japan at Pearl Harbor. Then followed the declaration of war and promptly thereafter the Superintendent of Banks took possession of the funds of the New York Agency and proceeded to liquidate the same pursuant to section 606 of the Banking Law. That statute, after Specifying grounds upon which the Superintendent may take possession of the business and property in this State of a foreign banking corporation, provides in part: “ 4 (a) * * * the claims of creditors of such corporation arising oiit of transactions had by them with its Neiv York agency or agencies or whose names appear as creditors on the books of such agency or agencies shall be preferred against the assets of such corpora

p. 549

tian in this state without prejudice to their right to share in the other assets of such corporation.” (Italics supplied.)

Our problem is concerned chiefly with the interpretation and application of the italicized portion of the statute quoted above.

The plaintiff concedes that neither his name nor the name of his assignor, Standard, appears as a creditor on the books of the New York Agency of Yokohama Specie. However, the plaintiff asserts that, within the provisions of section 606, subdivision 4, paragraph (a), its assignor, Standard, had a transaction with the New York Agency the details of which, when considered together, were sufficient in law to qualify for payment the claim in suit.

The Superintendent of Banks has thus far successfully maintained that the deposit by Standard with Yokohama Specie in Japan and the subsequent telegraphic instructions by Yokoiiama Specie to its New York Agency, followed by the communications, mentioned above, from that Agency to Standard in New York, did not create enforcible rights in favor of Standard arising out of a transaction by Standard with such Agency within the terms of section 606, subdivision 4, paragraph (a) of the Banldng Law.

Prior to December 8, 1941, the date when the declaration of war caused the Superintendent of Banks to take possession of the business and property of Yokohama Specie in New York, the Superintendent had issued to that foreign corporation a statutory license under which it was permitted “ * * * to maintain an agency [in the City of New York] for the purpose of transacting the business of * * * receiving money for transmission or transmitting the same by * * * cable or otherwise * * * ”. When on August 27, 1941, Yokohama Specie at its home office in Japan accepted funds from Standard it thereby became indebted to Standard in the amount then deposited. When on August 29, 1941, following instructions from Standard, and acting under its New York license, Yokohama Specie transmitted those funds by cable from Japan to its New York Agency, we think the consequent oral and written communications, to which reference has been made — by which the New York Agency advised Standard that it was in funds from its Yokohama home office which it was instructed to pay to Standard — served to create an enforcible legal obligation

p. 550

by the New York Agency to make such payment. (See Sayer v. Wynkoop, 248 N. Y. 54 , 58-60; Goodwin v. Bowden, 54 Me. 424 , 425; Griffin v. Weatherly [1868] L. B. 3 Q. B. 753, 758-9; 2 Williston on Contracts [Rev. ed.], § 349, p. 1035; Mechem on Agency [2d ed.], p. 1072; Tiffany on Agency [2d .ed.], p. 355.)

The fact that Federal regulations governing transactions in foreign exchange prevent the payment to Standard until a license under Executive Order No. 8389, as amended, is procured does not make conditional the obligation of the New York Agency to pay. (See United States Treasury Department, General Buling No. 12 (4) under Executive Order No. 8389 as amended; also Feuchtwanger v. Central Hanover Bank, 288 N. Y. 342 .)

Our conclusion is that the course of dealing which culminated in the advice to Standard by Yokohama Specie’s New York Agency, given in accord with instructions from its home office in Japan, was a transaction had by a creditor (Standard) of a foreign corporation (Yokohama Specie) “ with its New York agency,” within the provisions of section 606, subdivision 4, paragraph (a) of the Banking Law. Any payment of funds by Yokohama Specie’s New York Agency to Standard as an incident of such transaction is subject to the provisions of Executive Order No. 8389, as amended.

The judgments should be reversed and the motion by the Superintendent of Banks denied, with costs in all courts.

Lehman, Oh. J., Lottghban, Bippey, Conway, Desmond and Thacher, JJ., concur.

Judgments reversed, etc.

Cases cited

Baldwin's Bank of Penn Yan v. Smith 215 N. Y. 76 N.Y. 1915-05-25 p. 544
Outlet Embroidery Co. v. Derwent Mills, Ltd. 254 N. Y. 179 N.Y. 1930-07-08 p. 544
Stulsaft v. Mercer Tube & Manufacturing Co. 288 N. Y. 255 N.Y. 1942-06-04 p. 544, p. 545
M. Salimoff & Co. v. Standard Oil Co. 259 N. Y. 219 N.Y. 1932-06-01 p. 544
Commission for Polish Relief, Ltd. v. Banca Nationala a Rumaniei 288 N. Y. 332 N.Y. 1942-07-29 p. 544, p. 546
White v. Rintoul 108 N. Y. 222 N.Y. 1888-01-17 p. 544
First National Bank of Sing Sing v. Chalmers 144 N. Y. 432 N.Y. 1895-01-15 p. 544
Ter Kuile v. Maraland 81 Hun 420 N.Y. Gen. Term 1894-11-16 p. 544
In re the Matter of the Examination of the Union Bank 204 N. Y. 313 N.Y. 1912-02-02 p. 544
Richardson v. Chicago, Rock Island & Gulf Ry. Co. 296 U. S. 646 SCOTUS 1935-12-09 p. 544
In re People 242 N. Y. 148 N.Y. 1926-02-24 p. 545
Carpinter & Baker v. City Equitable Fire Insurance 238 N. Y. 147 N.Y. 1924-05-13 p. 545
Moscow Fire Insurance v. Bank of New York & Trust Co. 280 N. Y. 286 N.Y. 1939-04-11 p. 545
Hall v. Holland House Co. 12 Misc. 55 N.Y.C.P. p. 545
Osgood v. Ogden 4 Keyes 70 N.Y. p. 545
United States v. Pink 315 U. S. 203 SCOTUS 1942-02-02 p. 545, p. 546
In re the People of New York 249 N. Y. 139 N.Y. 1928-07-19 p. 545
In re People 255 N. Y. 428 N.Y. 1931-02-10 p. 545
Ætna National Bank v. Fourth National Bank 46 N. Y. 82 N.Y. 1871-09-05 p. 545
Pink v. American Surety Co. 283 N. Y. 290 N.Y. 1940-07-24 p. 545
Home Insurance v. Continental Insurance 180 N. Y. 389 N.Y. 1905-02-03 p. 545
Hopper v. Sage 112 N. Y. 530 N.Y. 1889-03-05 p. 545
Ford v. Snook 240 N. Y. 624 N.Y. 1925-05-05 p. 545
Bradley v. Wheeler 44 N. Y. 495 N.Y. Comm'n App. 1871-05-06 p. 545
Green v. Wachs 254 N. Y. 437 N.Y. 1930-11-18 p. 545
United States v. Belmont 301 U. S. 324 SCOTUS 1937-05-03 p. 546
Hirabayashi v. United States 320 U. S. 81 SCOTUS 1943-06-21 p. 546
Martin v. Mott 12 Wheat. 19 SCOTUS 1827-02-02 p. 546
Grogan v. Hiram Walker & Sons, Ltd. 259 U. S. 80 SCOTUS 1922-05-15 p. 546
Norman v. Baltimore & Ohio Railroad 294 U. S. 240 SCOTUS 1935-02-18 p. 546
Holyoke Water Power Co. v. American Writing Paper Co. 300 U. S. 324 SCOTUS 1937-03-01 p. 546
Hanger v. Abbott 6 Wall 532 SCOTUS p. 546
F. A. Straus & Co. v. Canadian Pacific Railway Co. 254 N. Y. 407 N.Y. 1930-11-18 p. 546
Morgan Munitions Supply Co. v. Studebaker Corporation of America 226 N. Y. 94 N.Y. 1919-03-21 p. 546
In re Richardson 247 N. Y. 401 N.Y. 1928-03-01 p. 546
Self-Insurer's Ass'n v. State Industrial Commission 224 N. Y. 13 N.Y. 1918-05-28 p. 546
United States v. Ferreira 13 How. 40 SCOTUS p. 546
Baltimore & Ohio Railroad v. United States ex rel. Pitcairn Coal Co. 215 U. S. 481 SCOTUS 1910-01-10 p. 546
Sayer v. Wynkoop 248 N. Y. 54 N.Y. 1928-05-01 at 58-60 p. 550
Feuchtwanger v. Central Hanover Bank & Trust Co. 288 N. Y. 342 N.Y. 1942-07-29 p. 550

Statutes and regulations cited

Banking Law p. 544, p. 546, p. 548