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First Nat. Bk. v. Anglo-Oesterreichische Bank

Circuit Court of Appeals, Third Circuit
Jan 16, 1930
37 F.2d 564 (3d Cir. 1930)

Summary

In First National Bank of Pittsburgh v. Anglo-Oesterreichische Bank, 3 Cir., 37 F.2d 564, the court held that where the plaintiff was an alien enemy under the definitions of the Trading With the Enemy Act, 50 U.S.C.A.Appendix, § 1 et seq., the statute of limitations applicable to its claim against a United States national was suspended until treaty of peace was concluded between the United States and plaintiff's country because until that time plaintiff had the status of an enemy alien and the courts of the United States were closed to it.

Summary of this case from Sese v. United States

Opinion

No. 4220.

January 16, 1930.

Appeal from the District Court of the United States for the Western District of Pennsylvania; W.H. Seward Thomson, Judge.

Action by the Anglo-Oesterreichische Bank a corporation, citizen of Austria, for use of the Anglo-Austrian Bank, Limited, a corporation, a citizen of Great Britain, for the use of Meyer Grouf, a citizen of New York, against the First National Bank of Pittsburgh, a corporation, organized and existing under the laws of the United States. Judgment for plaintiff, and defendant appeals. Affirmed.

The opinion below by Judge Thomson follows:

This case, in addition to the very substantial amount in controversy, involves legal principles requiring the most discriminating consideration. On the pleadings, the case has heretofore been twice before the court: First, on defendant's motion for judgment raising questions of law; and, second, on plaintiff's motion for judgment for want of a sufficient affidavit of defense. 24 F.2d 119. Both motions on opinion filed being overruled, the case went to trial on the questions of fact and law in issue between the parties.

The plaintiff will be referred to herein as the Anglo-Austrian Bank, and the defendant as the First National Bank. The plaintiff and defendant are each banking institutions, the plaintiff being organized under the Austrian law, with its principal place of business at Vienna. The defendant is a national bank with its place of business at Pittsburgh. Prior to the beginning of the war, the plaintiff had a dollar account with the defendant, and the defendant maintained certain kronen accounts with the plaintiff. The kronen balances of the defendant in Vienna consisted of kronen exchange which it had purchased and deposited with the plaintiff to provide a fund out of which drafts and transmittals, which it had sold, should be paid. The plaintiff's dollar balance with the defendant consisted of the counter value for these purchases with which it credited the plaintiff from time to time. At the beginning of the war, the plaintiff had a dollar balance to its credit on defendant's books of $101,114.42. At this time, the defendant had two credit balances with the plaintiff amounting to 764,539 kronen, and a kronen debit balance of 116,605 kronen, or altogether a kronen credit balance of 647,934 kronen, with interest to December 31, 1917. As a result of the outbreak of the war, all trade and communication between the two countries became illegal and was discontinued until July 14, 1919, when a resolution of the War Trade Board made such trade and communication lawful. While the actual declaration of war against any of the Central Powers was not made until April 6, 1917, for months prior thereto communication between this country and the Central Powers was greatly impaired, so that the defendant had no definite information whether the drafts and wireless transmittals, which it had sold in this country, had been received and executed by the plaintiff, and therefore it had no definite information as to the actual state of the account.

The defendant being a holder of property of an enemy was required under the Trading with the Enemy Act of October 6, 1917 (50 USCA appendix), to report the fact to the Alien Property Custodian by written statement under oath, giving such particulars as the Custodian should require. In obedience to this duty, on February 19, 1918, the defendant filed a report to the Custodian reporting a dollar balance to the credit of the plaintiff of $101,114.42. This report the defendant qualified by the statement that in all probability the Anglo-Austrian Bank was indebted to it, because many transactions, such as unpaid remittances, have, no doubt, been credited to its account, so that instead of the Anglo-Austrian Bank having a balance of over $100,000 with it, it is quite possible that the Anglo-Austrian Bank is indebted to the defendant in a larger amount; that the exact figures could not be given because there had been no reconcilement of the accounts for nearly two years.

On April 9, 1918, the Custodian served a demand on the defendant, stating that after investigation he determined that the Anglo-Austrian Bank was an enemy and "has a certain right, title and interest in all that certain money and property mentioned and particularly described" in the report, and required that said money and property be turned over to him as Alien Property Custodian. This demand was not complied with. On the contrary, about July 3, 1919, defendant petitioned the Custodian (Exhibit 10 in the pleadings), and in substance protested against the Custodian taking that amount of money from them because the entry on their books did not represent the true state of the account, and that when the facts were fully known, the credit balance in favor of the plaintiff would be converted into a net balance in favor of the defendant. The defendant then asked that under subsection (D) of section 7 of the Trading with the Enemy Act (50 USCA Appendix, § 7), they be permitted to deliver to the Custodian Liberty bonds to be purchased by the bank out of the $101,114.42, such bonds to be held by the Custodian separately and earmarked, and to be administered and accounted for as provided by law; the Custodian to have only such right, title, and interest in such bonds as shall remain after the prior satisfaction of petitioner's claim for the amount, if any, by which the net balance now shown on its books to be due the Anglo-Austrian Bank shall appear when the facts become known, to exceed the true net balance due the Anglo-Austrian Bank. In the petition, the defendant declared it to be its intention that only such right, title, and interest in said bonds is to be transferred to the Custodian as shall represent the true net balance in favor of the Anglo-Austrian Bank as the same shall appear when the actual state of the account shall become known.

This petition was granted by the Custodian on "all of the terms, conditions and agreements therein set forth," and agreed that "all Liberty Bonds delivered thereunder will be held, dealt with and delivered in accordance with the terms" of the petition.

This was, in no sense, a compliance with the Custodian's former demand. As shown by the Custodian's letter to the defendant (Defendant's Exhibit C), this was a petition for leave to make a voluntary turnover, as an alternative, to compliance with the demand, and was suggested by the Custodian, himself, who prepared such petition for defendant's guidance, with the suggestion that the bank make such application at once.

After approval of the petition, the Custodian, on August 14, 1919, wrote the Pittsburgh bank, referring to the approval of its petition and his acceptance of the fund according to the terms of the petition, and requesting that the bank return the copy of the demand, as they desired to withdraw and cancel the same. This paper, it appears, was never returned. On August 12, 1919, Liberty bonds for the amount of plaintiff's credit balance, with interest, aggregating $110,868.28, were delivered to the Custodian, with a covering letter referring to the Custodian's acceptance of the voluntary petition, and repeating the conditions under which the bonds were to be held exactly as set forth in the bank's petition.

The receipt of the bonds, with the said letter, was acknowledged by the Custodian on August 21, in which he says: "The above remittance having been made pursuant to a voluntary petition filed by you with this office and which was duly approved by the Alien Property Custodian."

After trade relations had been resumed, namely, on September 6, 1919, the plaintiff sent a cable to the defendant, suggesting, in substance, that in order to settle its legal position, plaintiff wished to close out defendant's account and place the proceeds in currency in a special custody deposit, and that if it could not do so it would deposit the defendant's balance with the law courts in accordance with Austrian law. This proposal was approved by the defendant by cable of September 24, 1919, and on September 27, 1919, the custody deposit was erected.

On January 19, 1920, plaintiff received a letter from defendant confirming the request of plaintiff that its holding a custody deposit for defendant should have the same effect as if the amount had been deposited with the law courts. On January 19, 1920, the plaintiff advised the defendant that the custody deposit had been transferred to a current kronen account, and in October of that year defendant approved the account which then consisted of two accounts, one old and one new: The new kronen account was overdrawn 144,269 kronen; the old kronen account had a balance of 609,886 kronen.

In November, 1920, the defendant petitioned the Custodian, alleging in substance that it had ascertained the amount of its kronen balance with the plaintiff bank to be 609,886 kronen, the dollar equivalent of which, at the rate of 12 cents per krone, was $77,316.52, and under the reservation of title in the letter accompanying the delivery of the bonds to the Custodian, bonds in the ascertained amount were thus returnable to the defendant. In obedience to this action and pursuant to the Custodian's direction, the Treasurer of the United States, on April 25, 1921, paid to the defendant the sum of $77,316.52.

When the plaintiff received defendant's letter of July 6, 1921 (Plaintiff's Exhibit 8 in the Pleadings), advising that defendant had received the amount of $77,316.52 in settlement of its claim against the plaintiff for its kronen balance, the plaintiff vigorously protested this set-off by its letter of September 12, 1921 (Plaintiff's Exhibit 9), and insisted that its account be recredited with that amount. This request being refused, this action was brought to recover the amount so received by the defendant.

By way of defense, the statute of limitations is set up as a bar. This contention cannot be sustained for the following reasons: First, a war can only end by treaty of peace between the belligerents, and while the war continues the courts of each belligerent are closed to the nationals of the other. It naturally follows that while the courts are closed to an alien enemy, the statute of limitations will not be permitted to run against him. On this matter the authorities are in entire accord. Hamilton v. Kentucky Distilleries, 251 U.S. 165, 40 S. Ct. 106, 64 L. Ed. 194; Kahn v. Anderson, 255 U.S. 1, 41 S. Ct. 224, 65 L. Ed. 469; Hijo v. United States, 194 U.S. 315, 24 S. Ct. 727, 48 L. Ed. 994; Givens v. Zerbst, 255 U.S. 11, 41 S. Ct. 227, 65 L. Ed. 475.

Second, the signing of the treaty of St. Germain in 1919 did not terminate the war. Even if effect is given to it by reason of its incorporation into the treaty of Vienna, it did not become effective until the ratification of the latter treaty on November 8, 1921. Haver v. Yaker, 76 U.S. (9 Wall.) at page 34, 19 L. Ed. 571; Dooley v. United States, 182 U.S. 222, 21 S. Ct. 762, 45 L. Ed. 1074.

The joint resolution of Congress of July 2, 1921, did not terminate the war. This resolution was not legally binding on Austria, and regardless of its political effect, it was not a legal restoration of peace as that can be accomplished only by a bilateral treaty of peace. The plaintiff was an alien enemy under the definitions of the Trading with the Enemy Act. That act confirmed the exclusion of enemies from our courts during the war, and at the same time confirmed the general principle which suspends the running of the statute of limitations against the enemy while that status exists. Section 8 (50 USCA Appendix § 8). By section 2 of that act (50 USCA Appendix § 2), the end of the war is defined as the date when the President shall proclaim the exchange of ratifications of the treaty of peace, unless "the President shall, by proclamation, declare a prior date, in which case the date so proclaimed shall * * * be the `end of the war' within the meaning of this Act." The President did not proclaim the joint resolution of Congress, or proclaim the end of the war after the passage of that joint resolution.

The only proclamation made by the President was that of November 17, 1921 (42 Stat. 1946), in which he proclaimed the peace treaty which had been ratified on November 8. This proclamation states that peace is proclaimed as of July 2, 1921. Private rights, however, cannot be affected by this nunc pro tunc declaration, as the treaty itself specified when it shall take effect.

The proclamation cannot vary the terms of the treaty itself. This joint resolution of July 2, 1921 (42 Stat. 105), retained in full force and effect the provisions of the Trading with the Enemy Act, and it follows that the status of the plaintiff was preserved beyond the date of the joint resolution. It has been held that in construing the statute of limitations, this court will follow the rulings of the Supreme Court of the state. Shipp v. Miller, 2 Wheat. 316, 4 L. Ed. 248; Watkins v. Madison County Trust Deposit Co. (C.C.A.) 24 F.2d 370.

The Supreme and Superior Courts of Pennsylvania have held that the statute of limitations in the World War begins to run from the date of the ratification of the treaty, and not from the joint resolution of July 2, 1921. Siplyak v. Davis, 276 Pa. 49, 119 A. 745; Garvin v. Diamond Coal Coke Co., 278 Pa. 469, 123 A. 468; Koswig v. Ellison, 89 Pa. Super. 208.

I find nothing in the facts of the case which would sustain the bar of the statute of limitations. In defendant's letter of December 26, 1919, it confirmed the custody deposit and its effect. In its letter of October 13, 1920, it not only approved the statements of its kronen account, which plaintiff had sent the bank, but stated that it would "carry these amounts forward to new account." This would appear to negative all previous implications of severance of banking relations, as well as any appropriation. It would appear from the evidence that the plaintiff was not informed of any severance or termination of relations until defendant's letter of July 6, 1921, which was received after August 1, 1921, informing it of the set-off at 12 cents, the rate in force in the early part of 1917.

On the facts, therefore, the statute of limitations would not begin to run earlier than August 1, 1921, which was less than six years prior to the bringing of the action.

It is the theory of the defendant that the Custodian's demand on the defendant in April, 1918, had the effect of transferring title to the Custodian of the plaintiff's dollar balance, and that therefore no suit will lie by the plaintiff. This position does not seem to be sustained by the record. The defendant's report to the Custodian explained that the balance was only apparent and not real and that a reconcilement of the mutual accounts would in all probability disclose that the plaintiff was a debtor rather than a creditor of the defendant bank. In effect, therefore, defendant did not report $101,114.42, but that sum when reduced by an indeterminate sum to be ascertained in the future which might wholly sweep away the amount so reported and the Custodian on the other hand demanded only the defendant's "right, title and interest in all that certain money and property mentioned and particularly described" in the defendant's report. As hereinbefore stated, the defendant declined to comply with the Custodian's demand. The Custodian was provided under law with the means to reduce the credit balance to his possession, the defendant being left to its remedy under section 9 of the Trading with the Enemy Act (50 USCA Appendix § 9 note). He did not employ that means, but, on the other hand, made an agreement with the defendant by which the latter was permitted to make a voluntary turnover of the entire credit balance, with interest, with the express arrangement that the title was to be reserved to the defendant until such time as the accounts were reconciled and the exact amount due ascertained. At that time, and not at any earlier date, the Custodian was to get title to bonds in the amount of the ascertained balance. It would appear that the Custodian had the right to make demands and afterwards to qualify or limit them as he deemed proper, and the defendant, having proceeded under this agreement, is not in a position now to question its validity. The agreement made by the Custodian, and his withdrawal of the demand, resulted in his title attaching only to that portion of the funds delivered which he ultimately retained. Under the Trading with the Enemy Act, a payment to the Custodian is a defense only to the extent of such payment, and it would appear to follow, therefore, that the Custodian's demand is no bar to the plaintiff's action.

Under the authorities, the right of setoff depends on the fact that the debts have mutually matured, and are due and payable in the hands of the parties for and against whom the set-off is sought. A debt not yet due and payable cannot be set off against one presently suable. In Pennsylvania the statute allowing a set-off is section 14 of the Practice Act of May 14, 1915 (Pa. St. 1920, § 17194), which provides: "In actions of assumpsit a defendant may set off or set up by way of counter-claim against the claim of the plaintiff, any right or claim for which an action of assumpsit would lie, and a verdict may be rendered in his favor for the amount found to be due, and judgment entered thereon."

This act is declaratory of the law as it has existed in Pennsylvania for long years. The rule that only demands which are mutually payable may be set off has been recognized in a long line of Pennsylvania decisions. Dougherty v. Central Nat. Bank, 93 Pa. 227, 39 Am. Rep. 750; Chipman v. Ninth National Bank, 120 Pa. 86, 13 A. 707; Russ v. Sadler, 197 Pa. 51, 46 A. 903; Kurtz v. County National Bank, 288 Pa. 472, 136 A. 789, 51 A.L.R. 1475.

The New York cases definitely establish the same rule. Patterson v. Patterson, 59 N.Y. 574, 17 Am. Rep. 384; Munger v. Albany City National Bank, 85 N.Y. 580; and many others.

The federal courts have followed the same rule. Schuler v. Israel, 120 U.S. 506, 7 S. Ct. 648, 30 L. Ed. 707; Fifth National Bank v. Lyttle (C.C.A.) 250 F. 361; Irish v. Citizens' Trust Company (D.C.) 163 F. 880.

Under the clearly established rule, the First National Bank was not entitled to the right of set-off, unless it matured its kronen account in Vienna, and of this there appears to be no legal evidence. The outbreak of the war was not the equivalent of a demand maturing the kronen account. Zimmermann v. Miller (D.C.) 2 F.2d 629; Zimmerman v. Hicks (C.C.A.) 7 F.2d 443.

The Joint Resolution of Congress of July 2, 1921, nor the treaty of Vienna of November 8, 1921, could not accomplish this result, even if they contained, which they did not, provisions maturing mutual demands, for the reason that the alleged set-off is claimed as of July 1, 1920, more than a year earlier.

The erection of the custody deposit could not have this effect, as defendant claims such account was not erected, and that if it was, it did not change the relations of the parties. When the old kronen account was re-established and notice given the defendant of that fact, the latter in writing approved the account. It does not appear that anything took place between the defendant and the Alien Property Custodian which could be held to be the equivalent of a demand. The defendant did not avail itself of the provisions of section 8 of the Trading with the Enemy Act (50 USCA appendix § 8), which provides: "Any person not an enemy or ally of enemy who is a party to any lawful contract with an enemy or ally of enemy, the terms of which provide for a termination thereof upon notice or for acceleration of maturity on presentation or demand, * * * may terminate or mature such contract by notice or presentation or demand served or made on the alien property custodian in accordance with the law and the terms of such instrument or contract and under such rules and regulations as the President shall prescribe."

The record fails to disclose that defendant served any notice or demand on the Custodian to accelerate the maturity of the contract under such rules and regulations as the President shall prescribe.

On account of the fact that the defendant did not know what amount, if any, would be owing to the Custodian on the reconcilement of the account, I find nothing that would be the equivalent of such demand as would legally mature its kronen balance.

Even if it could be found from the record that there was such maturity of the kronen account as would entitle defendant to set-off, such set-off, if allowable, is claimed by defendant to be made as of July 1, 1920. The law appears to be well established that the only rate at which dollars and kronen can be set off against each other is the rate at the time of the set-off. Deutsche Bank v. Humphrey, 272 U.S. 517, 47 S. Ct. 166, 71 L. Ed. 383; Zimmermann v. Sutherland (Wiener Bank-Verein), 274 U.S. 253, 47 S. Ct. 625, 71 L. Ed. 1034; Zimmerman v. Hicks (C.C.A.) 7 F.2d 443.

In case the demand in the petition of March 21, 1921, for the return of defendant's funds, entitled defendant to a set-off, the rate of exchange between dollars and kronen at that time was 100 kronen equals $.215 or a total of $1,311.26. Again, if the set-off was as of July 1, 1920, the defendant would be entitled to a credit by way of settlement of $4,127.14.

This on the theory that the kronen account had been matured, entitling the defendant to a set-off, which I am unable from the record to find.

It is true that the defendant stated in its communication with the Custodian that it desired to convert the amount of its kronen balance at the rate of 12 cents per krone, and that the Custodian, through its counsel, replied, "With regard to the rate of exchange to be used as a basis in adjusting this account, it appears that this is a matter which should be subject to an understanding between you and the Anglo-Austrian Bank. Very probably this matter was considered in your correspondence with that bank, and if twelve cents per krone was agreed upon, this office will of course raise no objection to such rate."

This clearly shows that the Custodian believed that the question of rate of conversion was a matter of agreement, and that he had no authority to fix it. As no such agreement had been arrived at, the law on the subject is, of course, applicable.

From the foregoing, the court finds that the plaintiff is entitled to judgment against the defendant for the amount set forth in its statement of claim, with interest, and on presentation of an order to that effect judgment will accordingly be entered.

Gifford K. Wright and George E. Alter, both of Pittsburgh, Pa. (Alter, Wright Barron, of Pittsburgh, Pa., of counsel), for appellant.

Patterson Crawford, Arensberg Dunn, of Pittsburgh, Pa. (Samuel R. Wachtell, of New York City, of counsel), for appellee.

Before WOOLLEY and DAVIS, Circuit Judges, and MORRIS, District Judge.


Affirmed on the findings and reasoning of Judge Thomson's opinion.


Summaries of

First Nat. Bk. v. Anglo-Oesterreichische Bank

Circuit Court of Appeals, Third Circuit
Jan 16, 1930
37 F.2d 564 (3d Cir. 1930)

In First National Bank of Pittsburgh v. Anglo-Oesterreichische Bank, 3 Cir., 37 F.2d 564, the court held that where the plaintiff was an alien enemy under the definitions of the Trading With the Enemy Act, 50 U.S.C.A.Appendix, § 1 et seq., the statute of limitations applicable to its claim against a United States national was suspended until treaty of peace was concluded between the United States and plaintiff's country because until that time plaintiff had the status of an enemy alien and the courts of the United States were closed to it.

Summary of this case from Sese v. United States
Case details for

First Nat. Bk. v. Anglo-Oesterreichische Bank

Case Details

Full title:FIRST NAT. BANK OF PITTSBURGH v. ANGLO-OESTERREICHISCHE BANK, for Use of…

Court:Circuit Court of Appeals, Third Circuit

Date published: Jan 16, 1930

Citations

37 F.2d 564 (3d Cir. 1930)

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