Clark v. Chase Nat. Bank of City of New York

• Decision Date: 01 October 1948
• Parties: CLARK, Attorney General, v. CHASE NAT. BANK OF CITY OF NEW YORK et al. CLARK, Attorney General, v. FEDERAL RESERVE BANK OF NEW YORK et al.
• Court: U.S. District Court — Southern District of New York

82 F. Supp. 740

CLARK, Attorney General, v. CHASE NAT. BANK OF CITY OF NEW YORK et al.

CLARK, Attorney General, v. FEDERAL RESERVE BANK OF NEW YORK et al.

United States District Court S. D. New York.

October 1, 1948.

John F. X. McGohey, Laurence H. Axman, and Tom E. Harris, all of New York City, and Lewis Haffer, of Washington, D C., for Tom C. Clark, Attorney General.

Milbank, Tweed, Hope & Hadley, by Timothy N. Pfeiffer and Rebecca M. Cutler, all of New York City, for Chase National Bank of City of New York.

Walter S. Logan, by Lyon Boston, both of New York City, for Federal Reserve Bank of New York.

Joseph M. Cohen, of New York City, for Leo Zittman.

Sidney Posner, of New York City, for John J. McCloskey, Jr., Sheriff of City of New York.

Katz & Sommerich, by Henry I. Fillman, all of New York City, for John F. McCarthy.

BONDY, District Judge.

In one of the above entitled actions the Attorney General, as successor to the Alien Property Custodian, moves for a decree declaring that he is entitled to the possession of the balance remaining to the credit of the Deutsche Reichsbank on the books of the respondent Federal Reserve Bank of New York and in the other he moves for a decree declaring that respondents Zittman, McCarthy and McCloskey, as sheriff, did not obtain any lien or other interest in the Reichsbank-Direktorium or Deutsche Golddiskontbank accounts on the books of the respondent Chase National Bank, and that the petitioner is entitled to the balances remaining in such accounts. Both proceedings involve similar facts and similar questions of law. The motion papers disclose that there is not any dispute as to any of the material facts.

In December, 1941, Zittman brought an action in the Supreme Court of the State of New York, Kings County, against the Deutsche Reichsbank and Deutsche Golddiskontbank, German nationals, to recover money allegedly due him, and in January, 1942, McCarthy brought an action in the same court against the Deutsche Reichsbank to recover money allegedly due him. At the time of the commencement of these actions, the respondent McCloskey as sheriff purported to levy on the balance due upon the accounts of the German banks in the respondent banks pursuant to attachments issued by the courts. The state courts ordered service of the summonses by publication, and judgments by default were entered in favor of Zittman on March 27, 1942, and in favor of McCarthy on April 24, 1942.

The accounts had been blocked under freezing controls of Executive Order No. 8389, 5 F.R. 1400, as extended to nationals of Germany by Executive Order No. 8785, 6 F.R. 2897, effective June 14, 1941, 12 U.S.C.A. § 95a note. No license or other authorization for the payment of the judgments out of the blocked accounts was obtained and the respondent banks did not pay to the respondent sheriff any part of the balance due on the deposit accounts of the German banks.

On October 3, 1946, the Alien Property Custodian by an order vested in himself the indebtedness owing to the Reichsbank from the Chase Bank and on October 14, 1946, by an order vested in himself the indebtedness owing to the Golddiskontbank from the Chase Bank. Subsequent demands for payment of such indebtedness to the Custodian were refused by the Chase Bank unless the warrants of attachment issued in the actions brought by Zittman and McCarthy were released.

On October 3, 1946, the Custodian by an order vested in himself the indebtedness owing to the Reichsbank from the Federal Reserve Bank. On demand the Federal Reserve Bank remitted to the Custodian the amount thereof less a sum withheld to cover the attachments in the Zittman and McCarthy actions.

By stipulation the objections to the procedure adopted by the Attorney General in these actions were withdrawn, and it was agreed that the Treasury Department from the inception of the freezing controls informed all litigants who, prior to the commencement of attachment actions against funds belonging to blocked nationals, had requested the Secretary of the Treasury to license an attachment that: "Under Executive Order No. 8389, as amended, and the Regulations issued thereunder, no attempt is made to limit the bringing of suits in the courts of the United States or of any of the States. However, should you secure a judgment against one of the parties referred to in your letter, which is a country covered by the Order, or a national thereof, a license would have to be secured before payment could be made from accounts in banking institutions within the United States in the name of such country or national." It was also stipulated that the Treasury adopted the position that the bringing of an action, the issuance of a warrant of attachment therein and the levy thereunder upon blocked property found within the jurisdiction of the court which issued the warrant were not forbidden but that a...