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Gonzalez v. Industrial Bank

Court of Appeals of the State of New York
Nov 1, 1962
12 N.Y.2d 33 (N.Y. 1962)


declining to apply the act of state doctrine where the legal situs of the intangible property at issue, debt, was the U.S.

Summary of this case from Jiménez v. Palacios


Argued September 25, 1962

Decided November 1, 1962

Appeal from the Appellate Division of the Supreme Court in the First Judicial Department, OWEN McGIVERN, J.

Mark F. Hughes, Joseph M. Callahan and Kenneth J. Bialkin for appellant. Leonard B. Boudin and Mary M. Kaufman for respondents.

The important issues in this action by a nonresident against a foreign corporation are whether defendants' motion to dismiss the complaint should have been granted on the ground that the court lacked jurisdiction, and on the further ground of failure to establish a cause of action.

The jurisdictional question involves the application of subdivision 3 of section 225 of the General Corporation Law, i.e., did the cause of action pleaded arise within this State? The Appellate Division found that the cause of action, if any, arose in Cuba, and accordingly reversed a judgment of Special and Trial Term in favor of plaintiff and dismissed the complaint. We think the Appellate Division erred in resting its jurisdictional determination on the cases of Amsinck v. Rogers ( 189 N.Y. 252) and Swift Co. v. Bankers Trust Co. ( 280 N.Y. 135) which dealt with problems of choice of law. Whether jurisdiction exists under section 225 must be determined upon the facts pleaded without regard to applicable law. Fairly read, the complaint alleges a wrong occurring within New York.

Plaintiff purchased from Industrial in Cuba a United States currency draft upon the Colonial Trust Company in New York City, payable to her order. She paid the equivalent amount of Cuban pesos and all charges and taxes incident to the purchase and transfer of dollars. Industrial later repudiated its agreement by directing Colonial not to pay the draft when presented.

Defendants' answers admit that Industrial issued the draft and that it was not paid upon presentment but otherwise deny the allegations of the complaint. They also plead the affirmative defenses of lack of jurisdiction of the subject matter, fraud and illegality under Cuban law.

On the facts of this case, i.e., a draft payable to the person who purchased it, there is a necessarily implied promise by the drawer not to affirmatively interfere with the contemplated performance of the drawee. (Cf. Schweitzer v. Fargo, 255 N.Y. 60, 64.) Nothing contained in the cases relied upon by the Appellate Division, which deal with choice of law, militates against the conclusion that the order countermanding payment took effect upon its receipt by Colonial in New York, and, unless excused, gave rise to a cause of action here under section 225. Upon the point that a cause of action arises where that is done which should not be done, Hibernia Nat. Bank v. Lacombe ( 84 N.Y. 367) is still sound law. Special and Trial Term, therefore, properly took jurisdiction of this action, and, in our opinion, for reasons somewhat different from those there relied upon, properly disposed of the affirmative defenses raised by defendants. We are of the further opinion that remission to the Appellate Division for the purpose of passing on the affirmative defenses and for review of the questions usually involved in an exercise of discretion is unnecessary.

Plaintiff's failure to present the draft before it became overdue affords no defense to this action under New York law, which here governs questions of presentment ( Swift Co. v. Bankers Trust Co., 280 N.Y. 135, supra). Not only is no question of damage to a drawer through a drawee's insolvency involved but, under section 139 of the Negotiable Instruments Law, defendant, having countermanded payment, waived presentment on the ground that it had no right to expect that the drawee would pay.

As we read the clearly stated Cuban currency regulations existing at the time of this transaction, plaintiff's written application for the sale of the draft was in full compliance with them. The alleged falsity of plaintiff's declaration in the application that the transaction was for a required commercial purpose, i.e., investment in realty in the United States, has not been and now cannot possibly be demonstrated, since the funds were denied plaintiff after her arrival in the United States. It is clear, moreover, that no attempted confiscatory act of the Cuban government, thereafter enacted, could diminish plaintiff's rights in respect to Industrial's funds at all times located in New York. The case of United States v. Pink ( 315 U.S. 203) has no application here. There being no present policy of the executive branch of the United States Government requiring acquiescence in the confiscatory acts of the Cuban government, the well-known policy of this State against such acquiescence is operative. ( Vladikavkazsky Ry. Co. v. New York Trust Co., 263 N.Y. 369; Moscow Fire Ins. Co. v. Bank of New York, 280 N.Y. 286. )

Defendants moved for a postponement of trial and, later, for a new trial, in order to obtain expert witnesses to testify (1) as to the effect of Cuban decrees which we deem irrelevant, and (2) as to the effect of Cuban parol evidence rule which, it is asserted, would hold this transaction to be a completed sale of a draft — which conclusion we assume, but find not to affect the result. The denial of defendants' motion by Special and Trial Term does not, therefore, in any way prejudice defendants.

Under the view we take of this case, the proof offered by defendants through those witnesses could not alter our disposition of the questions of law which we decide on the admitted facts and documentary proof without resort to any parol evidence. Defendant Industrial having taken plaintiff's pesos and having exacted the full commission and taxes on the transaction was under a duty to refrain from doing anything which would tend to prevent the payment of the draft issued by it to the plaintiff purchaser. The countermand of payment issued to Colonial in New York constituted a wrong and breach of contract committed by Industrial in New York against plaintiff.

The judgment below should be reversed and that of the Supreme Court reinstated, with costs in this court and in the Appellate Division.

It seems to me that the defendants have confused the two questions which this case poses — where "the cause of action arose" within the sense of section 225 of the General Corporation Law and what law is to be applied. These are two separate and distinct matters. The statute has nothing to do with the choice of law question, the question as to whether the law of the forum or the law of the foreign jurisdiction is to be applied. The purpose of section 225 is to limit cases to be tried in New York to those which have some reasonable connection with this State and, accordingly, we need not be concerned with technical definitions of the term "cause of action". We must simply determine, in deciding whether the Supreme Court has jurisdiction, whether it is reasonable to close the doors of our courthouse to a plaintiff asserting the sort of claim here involved, based as it is upon an undertaking or direction by a Cuban bank, with funds on deposit in New York, that its customer be paid out of such funds in New York.

In my view, New York had sufficient nexus with the transaction to give the Supreme Court jurisdiction to entertain the present litigation. And, as bearing on this, I would point out that of the cases cited below — Hibernia Nat. Bank v. Lacombe ( 84 N.Y. 367); Amsinck v. Rogers ( 189 N.Y. 252); Swift Co. v. Bankers Trust Co. ( 280 N.Y. 135) — the Hibernia National Bank case is the only one which deals with the question before us, as to where the cause of action arose, while the two others deal solely with the question of choice of law. It is only after the court decides the question of jurisdiction, of where "the cause of action arose" (General Corporation Law, § 225), that it may go on to consider whether the law of Cuba or of New York applies in reaching a decision on the substantive issue presented.

I concur, therefore, in the view expressed in the Per Curiam that the Supreme Court had jurisdiction to try the present case, but I cannot agree with the majority's conclusion that the judgment rendered at Special and Trial Term should be reinstated. Since the Appellate Division held that the courts of this State did not have jurisdiction to try the action, it did not reach or pass upon the other points raised in the trial court and in the Appellate Division by the defendants, points which depended for their resolution upon the determination of both questions of law and issues of fact and discretion. Under such circumstances, a regard for orderly appellate procedure requires this court to remit the case to the Appellate Division for consideration of those questions upon the merits. (See, e.g., People ex rel. Schick v. Marvin, 271 N.Y. 219; Matter of O'Kelly v. Hill, 283 N.Y. 78; Matter of Electrolux Corp., 286 N.Y. 390; see, also, Cohen and Karger, Powers of the New York Court of Appeals, pp. 661-662.) There is neither reason nor justification for bypassing the Appellate Division, particularly where, as here, issues of fact and discretion which have a direct bearing upon underlying questions of law are involved.

Among the questions which were raised in the Appellate Division by the defendants, as appellants, was (1) whether it was an abuse of discretion for the trial court to refuse to adjourn the trial when their only witnesses (who were to testify with respect to issues, posed by their affirmative defenses) were suddenly prevented from appearing at the trial; (2) whether the act of state doctrine precluded the court from entertaining jurisdiction; (3) whether the law of New York or of Cuba is applicable in determining the rights and obligations of the parties upon the instrument; and (4) whether the transaction underlying the cause sued upon was illegal under the law of Cuba on the ground that it violated Cuban currency regulations and other laws.

The judgment should be reversed and the case remitted to the Appellate Division for consideration of the issues on the merits.

I would affirm the judgment of the Appellate Division in this case. It is clear to me, at least, that the transaction in Cuba was simply the purchase and sale of a foreign draft, and whatever may have been the oral negotiations they were merged in the written draft. To say that the draft was merely evidence of some other agreement, or the means by which such agreement was to be carried out, would complicate the law of commercial instruments beyond calculation. The holder of any foreign draft could readily make such a plea or argument.

Beyond this the very essence of the Appellate Division's decision is contained in this language: "The drawer of a draft does not contract to pay at the place on which the draft is drawn but only guarantees acceptance and payment at that place, and engages only, in default of payment, to reimburse the holder at the place where the draft was made" ( 16 A.D.2d 347, 350-351).

This language follows almost verbatim the language of this court in Amsinck v. Rogers ( 189 N.Y. 252, 257): "The drawer of such a bill does not contract to pay the money in the foreign place on which it is drawn, but only guarantees its acceptance and payment in that place by the drawee, and agrees, in default of such payment, upon due notice, to reimburse the holder in principal and damages at the place where he entered into the contract."

In Swift Co. v. Bankers Trust Co. ( 280 N.Y. 135, 144), this court readopted this rule stated in the Amsinck case, and wiped out any distinction between checks and bills of exchange, or to put it more accurately recognized that the distinction had been wiped out by statute. It also distinguished the case of Hibernia Nat. Bank v. Lacombe ( 84 N.Y. 367, 376).

I take it that the foregoing principles apply irrespective of the manner in which a bill of exchange is dishonored. At least I can find no case to the contrary, or any case in which an affirmative act on the part of the drawer leads to a distinction in the application of these principles.

Chief Judge DESMOND and Judges DYE, FROESSEL and BURKE concur in Per Curiam opinion; Judge FULD dissents, in part, in an opinion; Judge FOSTER dissents in a separate opinion in which Judge VAN VOORHIS concurs.

Judgment reversed, etc.

Summaries of

Gonzalez v. Industrial Bank

Court of Appeals of the State of New York
Nov 1, 1962
12 N.Y.2d 33 (N.Y. 1962)

declining to apply the act of state doctrine where the legal situs of the intangible property at issue, debt, was the U.S.

Summary of this case from Jiménez v. Palacios

declining to apply the act of state doctrine where the legal situs of the intangible property at issue, debt, was the U.S.

Summary of this case from Jiménez v. Palacios

declining to apply the act of state doctrine where the legal situs of the intangible property at issue, debt, was the U.S.

Summary of this case from Jiménez v. Palacios
Case details for

Gonzalez v. Industrial Bank

Case Details


Court:Court of Appeals of the State of New York

Date published: Nov 1, 1962


12 N.Y.2d 33 (N.Y. 1962)
234 N.Y.S.2d 210
186 N.E.2d 410

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