Gravenhirst v. Zimmerman

Decision Date01 May 1923
Citation236 N.Y. 22,139 N.E. 766
PartiesGRAVENHIRST v. ZIMMERMAN et al.
CourtNew York Court of Appeals Court of Appeals

OPINION TEXT STARTS HERE

Action by Fred W. Gravenhorst against Leopold Zimmerman and another, composing the firm of Zimmerman & Forshay. A judgment for plaintiff entered upon an order granting a motion for summary judgment was unanimously affirmed by the Appellate Division (202 App. Div. 819,194 N. Y. Supp. 940), and defendants appeal by permission.

Reversed, and application for summary judgment denied.

Crane, J., dissenting.Appeal from Supreme Court, Appellate Division, Second Department.

Osmond K. Fraenkel and Louis Werner, both of New York City, for appellants.

Winthrop W. Aldrich, of New York City, for Equitable Trust Co. of New York, amicus curiae.

Frederick T. Kelsey, Charles C. Pearce, and Harold W. Bissell, all of New York City, amici curiae.

George E. Morgan and Paul G. Gravenhorst, both of New York City, for respondent.

HISCOCK, C. J.

This action involves a transaction in foreign exchange, and leads to the practical question: Who shall bear the loss springing out of that transaction?'

On March 31, 1917, the plaintiff's assignor paid to the defendants the sum of $8,500, in consideration of which they agreed to make a wireless transfer of 47,222 marks to the account of a designated payee at a designated bank in Berlin. Owing to the war into which we were than about to enter, our government at this date had taken control of wireless stations, and mail communications between this country and Germany were soon suspended, and, as the result of these conditions, the marks were not placed to the credit of the payee until January, 1920. The plaintiff, claiming that the original contract was an executory one, and that it had been duly rescinded because of the failure of defendants to comply therewith, brought this action to recover the money paid to them as above stated, and subsequently made an application for summary judgment, which was granted.

[1] The defendants by their answer and by supporting affidavits presented four alleged defenses in opposition to such application which require consideration. They claimed: First, that the transaction was an executed, present sale of exchange, and therefore not subject to rescission; second, that, whatever otherwise might have been the interpretation of their contract, there were certain customs governing the subject of foreign exchange which relieved them from responsibility; third, that a modified contract had been substituted; fourth, that the plaintiff's assignor, whatever right it may have had to do so, never in fact effected a rescission of its contract, and therefore that this action cannot be maintained. If they made it appear that under any one of these defenses a genuine and substantial issue was created, they were entitled to a trial in the regular order, and a summary judgment was improper. General Investment Co. v. Interborough Rapid Transit Co., 235 N. Y. 133,39 N. E. 216.

The first of the questions presented, the one whether the ordinary transaction for the acquirement of foreign exchange results in an executed sale of something or an executory contract to do something, has become one of great importance in banking and commercial circles, and is the subject of earnest discussion. This court has not as yet had occasion to pass upon the question in its familiar form. In Legniti v. Mechanics & Metals National Bank, of New York, 230 N. Y. 415, 130 N. E. 597, 16 A. L. R. 185, we expressly reserved decision of the question. In Equitable Trust Co. of New York v. Keene, 232 N. Y. 290, 133 N. E. 894, 19 A. L. R. 1137, the question arose on demurrer to a complaint, and the allegations of the complaint, without entirely controllingour views as to the nature of the transaction, did somewhat limit them. We come now to the consideration of one of these transactions, presented in what we judge to be a fairly typical manner.

The negotiations between plaintiff's assignor and defendants began with the request by the former for a quotation at which the latter would ‘sell about 45,000 marks wireless,’ and which was duly answered with quotations. This was followed by some telephonic or telegraphic messages which are not considered of importance, and then by the final communications between the parties, which, interpreted in the light of their conduct thereunder, must fix the nature of the transation. The assignor wrote to the defendants a letter containing the following paragraph:

‘Confirming telegram exchanged and phone conversation we accept your rate of 72 for $8,500 wireless transfer to Berlin and shall thank you to transfer the equivalent, viz. 47,222.22 marks to the Deutsche Asiatic Bank, Berlin, in favor of Mr. Max Mittag, Shanghai. As agreed we shall reimburse you by telegraph first thing to-morrow morning for the amount of $8,500 and on receipt of your bill for wireless charges we shall be pleased to send you check for the same.’

In response to this defendants delivered to the assignor a memorandum which read as follows:

‘To Zimmerman & Forshay, 9 and 11 Wall Street:

‘Terms: Cash or certified check.

+-------------------------------------------+
                ¦M 47,222, wireless transfer at 18¦$8,500 00¦
                +---------------------------------+---------¦
                ¦Wireless expenses                ¦10 60    ¦
                +---------------------------------+---------¦
                ¦                                 ¦$8,510 60¦
                +---------------------------------+---------¦
                ¦Check                            ¦8,500 00 ¦
                +---------------------------------+---------¦
                ¦Due us                           ¦$ 10 60  ¦
                +-------------------------------------------+
                

‘Neither Zimmerman & Forshay nor their correspondents are responsible for delayed payment or nonpaymentof the above amount caused by any delay or error on the part of the Cable Co. in the transmission or the delivery of the message ordering the payment.

‘In case of nondelivery of cable message payment will be effected by our correspondent upon receipt of our mail confirmation.

‘Kindly remit. Payable to Deutsche Asiatic Bank, Berlin, for account of Max Mittag, Shanghai, through Deutsche Bank, Berlin.’

To this memorandum the assignor answered:

We are in receipt of your favor of 31st ult. As requested inclose check for $10.60 in settlement of cost of wireless regarding transfer of 47,222 marks to the Deutsche Asiatic Bank Berlin, for the account of Mr. Max Mittag, Shanghai.’

Immediately defendants delivered to the wireless telegraph company a message for transmission to the Deutsche Bank in Berlin, where they had an account, instructing said bank to pay to the Deutsche Asiatic Bank of Berlin for the account of the said Max Mittag the sum of marks in question.

[2] It would be impossible within reasonable limits, and we think rather profitless, to attempt to review all of the authorities which have debated the issue whether such a transaction as this was a sale or an executory contract, or to attempt to analyze at length all of the arguments and different theories which have been earnestly urged upon us in favor of the former answer to that question. The transaction as evidenced by the agreement between the parties, and as interpreted by the acts of the defendants in trying to effectuate their agreement, seems to us to contain certain fundamental features which cannot be eliminated, and which give to the contract the character of future performance; that is, make it executory rather than an executed sale and transfer. We are aided in determining what the undertaking is by clearly seeing what it is not.

Concededly the defendants did not deliver to plaintiff's assignor any marks, and did not set apart actual money which it then undertook for the account of the purchaser to designated payee in a given bank. Certainly desingated payee in a given bank. Certainly no actual money passed from the banker to or for the account of the customer. But it has been urged that the customer purchased a contract to create a credit for its payee, and that thus there was an executed sale. This seems to us to involve a mere redundancy of words. If a person made a contract with a carpenter whereby in consideration of the payment of a certain sum of money the latter agreed to build a house, nobody, we believe, would think of calling this the purchase of a contract, but would regard it as a simple contract whereby something was to be done in the future. The same reasoning seems to us to apply to the agreement in one of these transactions, whereby the banker agrees to erect a credit for a given amount of foreign money.

In the Keene Case, supra, the theory was especially pressed upon us that one of these transactions was a sale of credit, and therefore executed; but we answered that theory in language entirely applicable here. We said:

‘In such an agreement [one relating to foreign exchange] there is no guaranty or necessary implication that the contractor has any credit which he is selling or agreeing to sell or that he will place the credit through a third party as correspondent. He can fulfull the terms of such an agreement through his branch office, and he can after making the agreement create for himself the credit which will enable him to place to the credit of the other party to the agreement the funds in question. We are unable to see how such an agreement is other than a contract for future action, no matter how speedily accomplished, or how it can be a sale of an existing right.’

On the present appeal a strenuous effort is made to liken a transaction in foreign exchange to the purchase of a draft or bill of exchange and then to force the conclusion that because the latter transaction is regarded as a purchase or sale the former also must be stamped with that character. Assuming that there may be some similar features in the case of a purchased draft and of an order for the transmission of foreign exchange, we think there is no similarity between them in respect of the question which we are...

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