Opinion
No. 152.
April 21, 1930.
Appeal from the District Court of the United States for the Southern District of New York.
Action by the American Union Bank against the Swiss Bank Corporation. From a judgment that plaintiff recover $27,890.83 from defendant granted upon a motion to strike out defendant's answer, defendant appeals.
Affirmed.
The complaint alleged that the plaintiff was a New York bank and the defendant a Swiss moneyed corporation; that on or about May 28, 1920, the defendant, in consideration of the promise by the plaintiff to pay it $18,000, agreed with the plaintiff to transmit by cable 3,000,000 Polish marks to Polska Bank in the city of Warsaw for the credit of the Bank of the United States in the city of New York; that, pursuant to the agreement, the plaintiff duly paid to the defendant the sum of $18,000, but defendant failed to perform its agreement and to pay the 3,000,000 Polish marks to the Polska Bank in Warsaw for account of the Bank of the United States; that, prior to the commencement of this action in August, 1928, the plaintiff demanded of the defendant repayment of the sum of $18,000, with interest from June 9, 1920, but the defendant refused to repay any part of the same.
The answer set up four defenses, only two of which are relied on here. The first consisted of a denial that the defendant entered into such an agreement as was alleged and a denial that it failed to make the transfer of Polish marks for account of the Bank of the United States. The second defense alleged that the defendant and its agent, the Commerce Bank in Warsaw, performed all the acts necessary to effect the transfer. This defense was to the effect that any failure of the Polska Bank to set up the credit was a matter for which the defendant was not responsible, and was due to the negligence of the Polska Bank, which was not the agent of the defendant.
The negotiations between the plaintiff and defendant began with a cablegram on May 27, 1920, from the defendant in Zurich, Switzerland, to the plaintiff in New York, as follows:
"Your yesterdays rate 65 * * * sell best three million Warsaw limit 60 safeguard interests wire urgent."
The plaintiff cabled to the defendant in reply on May 28th, 1920:
"Suisbanque, Zurich.
"Sold three million Warsaw 60 value June sixth pay Polskakasa account Bank United States * * * market closed firmer holiday Monday thanks for order indications lower. * * *"
The plaintiff confirmed this cable of May 28 by a letter to the defendant of the same date as follows:
"We beg to enclose herewith mail confirmation of our cable to you of even date, in which we informed you that we sold the amount of Three Million (3,000,000) Polish Marks, at the rate of 60, value June 6th.
"We instructed you to remit the amount to the Polish State Loan Bank, Warsaw, to be placed to the credit of the Bank of United States, New York. * * *"
On June 1, 1920, the Swiss Bank wrote to the plaintiff:
"We beg to enclose our exchange of cables of the 27th and 28th ult., according to which you sold for our account.
"Pol. M. 3,000,000. Exchange Warsaw at the rate of 60 cents which we shall remit to the Polska * * * for account of the Bank of the United States value June 6th.
"In accordance with our standing instructions, you will have paid the equivalent of $18,000, to Messrs. Ladenburg, Thalman Co., New York, for our account."
On June 9, 1920, the Swiss Bank wrote to the plaintiff:
"With reference to our letter of June 1st regarding your sale for our account of:
"Pol. M. 3,000,000 — exchange Warsaw at the rate of 60 cents which we remitted to the Polska * * * for account of the Bank of the United States, Value June 6th, we just received a cable from the Chemical National Bank of New York informing us that you have paid over to them, for our account, the sum of $18,000 — which represents the equivalent of the above Polish marks.
"According to our mutual agreement, you ought to have paid in said Dollars to Messrs. Ladenburg, Thalman Co., New York, and we shall be glad, if you will act in future accordingly. * * *"
The plaintiff paid the $18,000 to the Chemical National Bank of New York on June 6, 1920, for the account of the defendant to purchase the 3,000,000 Polish marks. Record pp. 56, 174, 230.
On May 31, 1920, the defendant cabled the Polska Bank to the effect that it would receive June 6th from the Commerce Bank 3,000,000 Polish marks which it "will dispose of shortly."
On June 8, 1920, the defendant cabled the Polska Bank:
"Credit Bank United States Three Million Polmarks Value sixth, Order Nemeth bank of New York" (the plaintiff).
On June 9, 1920, the defendant wrote the Polska Bank:
"Further to our wire of the 31st ultimo we cabled you on the 8th inst. requesting you to transfer to the Bank of the United States by order of the Nemeth State Bank, New York (the plaintiff) the sum of
"Polish Marks 3,000,000 — value June 6 which we confirmed to you herewith."
On May 31, 1920, the Swiss Bank cabled to its correspondent, the Commerce Bank of Warsaw:
"Pay sixth Polskakasa Warsaw Three Million Polish Marks."
The Swiss Bank confirmed this cable by letter of June 1, 1920, to the Commerce Bank as follows:
"We confirm our telegram of the 31st ultimo asking you to pay for our account to the Polska * * * at Warsaw the sum of
"Polish Marks 3,000,000 — on the 6th of June before noon for which please charge our account under advice. * * *"
Although the Swiss Bank had directed the Commerce Bank to pay Polska Bank on June 6th, 1920, the Commerce Bank wrote to the Polska Bank for the first time on June 10th:
"On the order of and for the account of the Societe de Banque Suisse, Zurich, we are holding to pay you Polish Marks 3,000,000 which sum we request you to charge to our account under advice."
It is to be noticed that the foregoing request on June 10, 1920, by the Commerce Bank to the Polska Bank was to credit the account of the defendant with 3,000,000 Polish marks, but was not to credit the account of the United States Bank.
The defendant in its answer (fol. 87) described the foregoing transaction as follows:
"The said transaction was a purchase by the plaintiff from the defendant in Switzerland of foreign exchange."
On April 10, 1923, after disputes arose between the parties, the defendant wrote to the plaintiff:
"We beg to acknowledge receipt of your letter dated March 16th, regarding our sale to you on May 28th, 1920 of: Pol. Mks. 3,000,000 — at 60, T.T. Warsaw, which amount we remitted to the Polska * * * for the account of the Bank of the United States. * * *"
On June 22, 1923, the defendant again wrote to the plaintiff, saying:
"Re: Our sale to you on May 28th, 1920, of Polish Marks 3,000,000 transfer to Polish State Loan Bank, Warsaw, for a/c of Bank of United States, New York City."
On May 28, 1920, the plaintiff agreed to sell 3,000,000 Polish marks at 60 cents to the United States Bank, value June 6th. On June 8, 1920, the Credit Suisse, a Swiss bank other than the defendant Swiss Bank Corporation, but having a somewhat similar name, instructed the Commerce Bank at Warsaw to pay to the Polska Bank by order of the plaintiff for credit of the Bank of the United States 3,000,000 marks. This payment was made on June 9, 1920. It therefore appears that there were two amounts of 3,000,000 Polish marks each to be paid by the Polska Bank for account of the plaintiff, one resulting from the transaction with the defendant and the other from the transaction with the Credit Suisse. Because of a confusion by the Polska Bank of the transaction involved here with that of Credit Suisse, no credit was set up by the Polska Bank, as defendant had directed in its cable of June 8, 1920, and its letter of June 9.
The plaintiff and defendant both supposed that the Polska Bank had set up the credit for the United States Bank, as the defendant had directed it to do, and not until June, 1922, did the plaintiff learn from the Bank of the United States that the credit had never been set up by the Polska Bank. In October, 1922, the Polska Bank tendered the marks to the Bank of the United States, but the latter then refused to accept them. Thereafter the plaintiff brought this action to recover back the money it had paid to the defendant on the ground that defendant had failed to perform its contract and plaintiff was entitled to restitution.
The plaintiff made a motion for summary judgment on the pleadings and on affidavits from which the facts above stated appeared. The motion was granted by the District Court, and judgment for plaintiff followed, ordering a recovery of $18,000, interest, and costs, to the aggregate sum of $27,890.83. From the judgment, defendant appeals.
Appleton, Rice Perrin, of New York City (T.F.D. Haines and Lee J. Perrin, both of New York City, of counsel), for appellant.
Charles C. Pearce, of New York City, for appellee.
Before SWAN, AUGUSTUS N. HAND, and CHASE, Circuit Judges.
The plaintiff has brought action to recover the consideration advanced on the ground that the defendant agreed with the plaintiff to transmit 3,000,000 Polish marks to Polska Bank in the city of Warsaw for the credit of the Bank of the United States, and failed to perform its obligation. The defendant insists that the plaintiff was merely acting as defendant's agent in selling the marks to the Bank of the United States for defendant's account, whereas plaintiff claims to have made the contract on its own behalf as principal. Upon such a contract, and not one of agency, the complaint was based.
This relation of agent is sought to be established by the letter of the Swiss Bank to the plaintiff on June 1, 1920, in which the Swiss Bank speaks of the plaintiff as having sold the marks "for our account." A similar characterization is employed in the letter on June 9, 1920, of the Swiss Bank to the plaintiff. But we regard the words "for our account," used in these letters, as having no such dominant significance as is sought to be given them by the defendant. After the dispute between the parties arose, the Swiss Bank, in its letters to the plaintiff of April 10, 1923, and June 22, 1923, spoke of the transaction as "our sale to you on May 28th, 1920," and in its answer to the complaint (Record fol. 87) alleged that: "The * * * transaction was a purchase by the plaintiff from the defendant in Switzerland of foreign exchange." Nowhere is an agency set forth either in pleadings or proof.
But the defendant says the words in its cable of May 27, 1920, "sell best three million Warsaw" were a direction to the plaintiff as defendant's agent and were not, as plaintiff argues, words embodying an offer by defendant to sell to it as a principal in the transaction. Defendant adds that this is especially so because the following words, "limit 60," meaning that 60 cents was the lowest price the Swiss Bank would take, were absurd when used by a seller to a buyer. Yet that is by no means necessarily so. The parties had dealt with one another before, and the market was fluctuating. In such circumstances the seller might well have urged the purchaser to offer the best price it reasonably could and nevertheless say that 60 cents was the least price that the seller would take. The plaintiff advanced all the money, and we can see no basis for holding that it was doing this as agent apparently without compensation. Why should the defendant have been paid the $18,000 by the plaintiff instead of by the Bank of the United States if it was really selling to that bank rather than to the plaintiff? Moreover, it is hard to see why the cable of the plaintiff on May 26th, informing the Swiss Bank that the marks were to be rendered available to the United States Bank at the Polska Bank in Warsaw, was a communication from an agent to a principal. Neither this cable nor any other communication revealed to the Swiss Bank the terms of the contract between the plaintiff and the United States Bank which is stated in the record (fol. 648) to have been at 61 cents. From the whole record we think it plain that the cable by the Swiss Bank to the plaintiff on May 27, 1920, was an offer to sell at not less than 60 cents and the reply by plaintiff on May 28, was an agreement to purchase at 60 for delivery on June 6, the marks to be made available to the United States Bank at the Polska Bank in Warsaw. And, when the plaintiff used the words, "Sold three millian Warsaw 60 value June sixth pay Polskakasa account Bank United States, * * *" it is to be regarded as saying to the Swiss Bank: The marks you offered to sell are sold to us at 60 and are to be made available by payment at the Polska Bank on June 6th for account of the Bank of the United States. We are of the opinion that the Swiss Bank agreed with the plaintiff to make a credit for 3,000,000 available for the United States Bank at the Polska Bank in Warsaw on or before June 6, 1920.
The Swiss Bank initiated the financial operations in Poland through its agent and correspondent, the Commerce Bank of Warsaw. But the Commerce Bank did not transmit marks to the Polska Bank or notify the Polska Bank until June 10, 1920, that they were "holding to pay you Polish marks 3,000,000 which sum we request you to charge to our account." Even then the Polska Bank did not open a credit for the United States Bank on its books. The plaintiff paid for the marks by a check on the Chemical Bank which was dated June 5, was sent to the Chemical Bank on that date, and was marked "Paid" on June 7, so that on June 6th the funds were available to the Swiss Bank. It is quite unreasonable to suppose that a seller of rapidly fluctuating exchange had the right to wait until June 10 (four days after the time agreed upon to perform) before fulfilling its contract.
Defendant argues that the words "60 value June 6" in plaintiff's cable of May 28, 1920, related to the time when interest would begin to run on defendant's obligation and not to the time of performance. There is nothing really to substantiate this. The contract took effect in New York when the plaintiff accepted defendant's offer, and was to be performed on June 6, 1920 under that law. Moreover the relief sought is restitution because of failure of defendant to perform, and for that reason the law of New York, where the money was paid, governs. Such was the holding in Sokoloff v. National City Bank, 239 N.Y. at page 170, 145 N.E. 917, 37 A.L.R. 712. But, even if the law of Poland applies, because the marks were to be made available there, the agreement is not shown to have been subject to any peculiar interpretation under Polish law or custom. The defendant filed the affidavit of Goetz to the effect that, by means of the various letters and telegrams heretofore mentioned, the defendant had in effect set up the credit for the United States Bank at Polska Bank as agreed. But Goetz pretended to no knowledge of Polish law. His statements about the effect of the various transactions are the mere personal conclusions of a banker. While the Polska Bank had undoubtedly been given the means of establishing the credit, it never in fact had carried out the defendant's directions or set up any credit on its books. Moreover, Exhibit C, attached to the answer, indicates that the defendant regarded the time for performance as June 6, for on June 1, 1920, it cabled its agent, the Commerce Bank:
"We confirm our telegram of the 31st ultimo asking you to pay for our account to the Polska * * * at Warsaw the sum of: Polish Marks 3,000,000 — on the 6th of June before noon for which please charge our account under advice."
The contract was to establish a credit at the Polska Bank which the United States Bank could use on June 6, or, if that was a Sunday, on the next business day. That, in our opinion, was the meaning of "Value June 6th." Such an obligation the defendant failed to perform.
But there is a more fatal difficulty than delay until June 10th, for the defendant failed to perform even then. It had contracted to establish a credit at the Polska Bank for the United States Bank. It was not enough to tell the Polska Bank to do this, or to place the Commerce Bank in funds whereby the transaction might be carried out. Indeed, the Commerce Bank was not instructed by the defendant to do anything more than to pay 3,000,000 marks to the defendant's account. So that at best, the defendant only placed the Polska Bank, on June 10, in a position where it might have set up a credit for the United States Bank, but did not actually obtain the credit. The Polska Bank failed to set up the credit or even to debit its account with the Commerce Bank with the amount of 3,000,000 marks. Judge Mack, in the District Court, held that under such circumstances the defendant did not perform its contract. There is a plain difference between a credit at the Polska Bank for the defendant and one for the United States Bank. The first could be drawn against by the defendant irrespective of the wishes of the plaintiff or the United States Bank, while the second would create a direct indebtedness of the Polska Bank to the United States Bank and make the credit available as agreed. Sokoloff v. National City Bank, 250 N.Y. at pages 77, 78, 164 N.E. 745.
It is said that the Polska Bank was the agent of the plaintiff, and that its failure to set up the credit for the United States Bank as provided in the agreement must be imputed to plaintiff and is a bar to its recovery. We do not regard this contention as sound. Here is a definite contract to pay to Polska Bank for account of Bank of the United States. The credit was not set up and until that was done the contract was not performed. Sokoloff v. National City Bank, 250 N.Y. at pages 77, 78, 164 N.E. 745.
The case of Myers v. Brown, 142 App. Div. 658, 127 N.Y.S. 374, where a bank was selected by the plaintiff to make a payment of moneys remitted by Brown Bros., differs from the present. Here the plaintiff designated Polska Bank as the final depositary, but required payment to it for account of the United States Bank. The deposit was never made for account of the United States Bank; that is to say, the credit was never set up. No such question as the identification of the beneficiary arose here, as in Myers v. Brown, supra.
We hold that the defendant failed to perform its contract, and must therefore restore the consideration paid. Aschen Munich Fire Ins. Co. v. Guaranty Trust Co. (C.C.A.) 27 F.2d 674; Richard v. Credit Suisse, 242 N.Y. 346, 152 N.E. 110, 45 A.L.R. 1041.
Judgment affirmed.