Perez v. Chase Manhattan Bank, N.A.

• Citation: 474 N.Y.S.2d 689,463 N.E.2d 5,61 N.Y.2d 460
• Parties: , 463 N.E.2d 5 Esther G.M. PEREZ, as Administratrix of the Estate of Rosa M. Manas y Pineiro, Deceased, Respondent-Appellant, v. CHASE MANHATTAN BANK, N.A., Appellant-Respondent.
• Decision Date: 30 March 1984
• Court: New York Court of Appeals Court of Appeals

Page 689

474 N.Y.S.2d 689

61 N.Y.2d 460, 463 N.E.2d 5

Esther G.M. PEREZ, as Administratrix of the Estate of Rosa M. Manas y Pineiro, Deceased, Respondent-Appellant, v. CHASE MANHATTAN BANK, N.A., Appellant-Respondent.

Court of Appeals of New York.

March 30, 1984.

Andrew J. Connick and Mark N. Parry, New York City, for appellant-respondent.

Gerald D. Roth, Irving Margolies and Peter P. Kenny, New York City, for respondent-appellant.

John L. Warden, H. Rodgin Cohen and Michael Straus, New York City, for The New York Clearing House Ass'n, amicus curiae.

John Leferovich, Jr., Henry Harfield, John E. Hoffman, Jr., and Jennifer Freeman, New York City, for the New York State Bankers Ass'n, amicus curiae.

OPINION OF THE COURT

KAYE, Judge.

Rosa Manas y Pineiro (Manas), a Cuban national, in 1958 purchased five certificates of deposit from the Marianao, Cuba branch of defendant Chase Manhattan Bank (Chase), and first presented them for payment at Chase's New York office in 1974. The issue on this appeal is whether Chase is excused from payment to Manas because, in September, 1959, the Cuban government confiscated Manas' accounts and Chase surrendered the funds representing the certificates. Because the certificates were payable in Cuba and Chase at the time of the confiscation was present there, the Cuban government had the power to enforce and collect Chase's debt to Manas in Cuba, and the Act of State doctrine precludes inquiry by this court into the propriety of a confiscation directed particularly at Manas' assets in Cuba. Having once made payment, Chase is not liable to pay on the certificates of deposit a second time.

Plaintiff, Esther Garcia Manas Perez, is the administratrix of Manas' estate. Manas was the wife of a cabinet minister in the government of Cuba's former leader, General Fulgencio Batista. Between May and December, 1958, she purchased five non-negotiable certificates of deposit, totaling $227,336.47, from Chase by depositing Cuban pesos in that amount at Chase's branch in Marianao, a suburb of Havana. The certificates provided for the payment of 3% interest and had maturity dates between April and June, 1959. Plaintiff claims that political uncertainty in Cuba motivated the purchase of these certificates from a worldwide bank, and that Manas was repeatedly assured by a Chase employee that the certificates could be redeemed wherever Chase had an office, particularly in the United States. However, no place of payment was specified in the certificates. The certificates provided only that payment was to be made in "moneda nacional," or national currency.

When Fidel Castro assumed control on January 1, 1959, Manas' husband took asylum in the Colombian embassy in Havana and thereafter left Cuba for Colombia. Manas remained in Cuba for the first half of 1959, visited her husband in Colombia, returned to Cuba for approximately four months in 1960, joined her husband in Mexico, and both later relocated to the United States. In that period no effort was made to redeem the certificates.

By Law No. 78 of February 13, 1959, the Cuban government created the Ministry of Recovery of Misappropriated Property "to recover property of any type which has been removed from the National Wealth and obtain the complete restoration of the proceeds of unjust enrichments obtained under the cover of the Public Power." The minister was given the power to conduct investigations, freeze bank accounts, take possession of property, and enact "final decisions" returning the confiscated property to the "National Wealth." Chase was thereafter directed to freeze accounts belonging to certain former government officials and their families, and in September, 1959 the ministry ordered Chase to close such frozen accounts--including specifically those represented by Manas' certificates which had by then reached maturity--and remit the proceeds to the ministry. In compliance with that directive Chase turned funds in the amount of Manas' certificates over to the government. Approximately a year after the confiscation of Manas' assets, on July 6, 1960, the Castro government enacted Law No. 851, providing for nationalization of United States firms in Cuba, and by Resolution No. 2 of September 17, 1960, the government nationalized all of Chase's Cuban branches.

It was not until January, 1974 that Manas, by then residing in the United States, for the first time presented her certificates to Chase's office in New York and demanded payment, which was refused. Manas instituted this action in July, 1974 by motion for summary judgment in lieu of complaint, and Chase cross-moved for summary judgment. Both motions were denied, and the Appellate Division affirmed (52 A.D.2d 794, 383 N.Y.S.2d 357). Chase subsequently removed the case to the United States District Court for the Southern District of New York, but the action was remanded (443 F.Supp. 418).

The action proceeded to trial in June of 1980. The following three questions were submitted to the jury:

"1. What was the intention of [Manas] and [Chase] with regard to the currency with which the certificates of deposit were to be repaid? 1. U.S. dollars; 2. Cuban pesos.

"2. What was the intention of [Manas] and [Chase] with regard to the place of presentment of the certificates of deposit? 1. New York only; 2. Marianao, Cuba only; 3. any branch of the defendant Chase anywhere in the world, including New York and Marianao, Cuba; 4. any branch of defendant Chase anywhere in the world, excluding Marianao, Cuba.

"3. Were [Manas'] funds on deposit in defendant Chase in Marianao confiscated by the Cuban government's Ministry of Misappropriated Funds?"

The jury found that the certificates of deposit were repayable in United States dollars, that the certificates could be presented to any Chase branch in the world, including New York and Cuba, and that Manas' funds on deposit in Chase's Marianao branch were confiscated by the Ministry of Misappropriated Funds.

Both parties then moved for judgment. In view of the jury's findings, Trial Term held that Chase's debt to Manas had its situs in Cuba as the certificates were capable of being repaid in Cuba and Chase's Cuban branches were open and operating subject to the laws and jurisdiction of the Cuban government at the time of the September, 1959 confiscation. Trial Term thereupon entered judgment for Chase in December, 1980, concluding:

"In the case at bar, both the persons and the res were within the territorial dominion of the acting State at the time of the confiscatory taking. In this court's opinion, under the facts as established at trial, the situs of the debt herein was Cuba. In order for this debt to be beyond Cuban jurisdiction in this case, it would have been necessary for the jury to have found that the place of presentment was only outside of Cuba. The jury finding that payment could be anywhere did not change the situs of this debt from Chase in Cuba while it functioned there. It only created an option for plaintiff to collect the debt elsewhere prior to the confiscation. Although it is true, as asserted by plaintiff, that the parent bank is ultimately liable for the obligations of the branch (Sokoloff v. National City Bank of N.Y., 130 Misc. 66, 224 N.Y.S. 102, affd. 223 App.Div. 754, 227 N.Y.S. 907, affd. 250 N.Y. 69, 164 N.E. 745), such a liability does not alter the situs of the debt. When the branch's liability is extinguished, as under the facts herein, the parent is relieved as well.

"Accordingly, this court holds that the judicial self-limiting act of State doctrine applies herein as the confiscation of plaintiff's funds was an official act of a sovereign government fully executed within its own jurisdiction and whose validity this court must refuse to inquire into, thereby implicitly giving the act extraterritorial effect." (106 Misc.2d 660, 666-667, 434 N.Y.S.2d 868.)

The Appellate Division reversed (93 A.D.2d 402, 463 N.Y.S.2d 764), holding that: (1) the Act of State doctrine applies to the taking of intangible property such as Chase's debt to Manas only "where the obligation is found to be situated exclusively within the foreign State"; (2) "the Act of State doctrine should not be, and apparently never has been, applied to relieve an American bank of obligations owed by its branches to depositors" (93 A.D.2d, p. 409, 463 N.Y.S.2d 764); and (3) under the rationale of Vishipco Line v. Chase Manhattan Bank, 660 F.2d 854 (2nd Cir.), cert. den. 459 U.S. 976, 103 S.Ct. 313, 74 L.Ed.2d 291, when Chase's Cuban branches ceased operation due to the bank nationalization in 1960, Chase was not relieved from its obligation to redeem the certificates at its other branches, even though the nationalization decree provided that the Cuban government (through Banco Nacional de Cuba) assumed the liabilities of Chase's Cuban branches. Chase appeals to this court from that determination, and plaintiff cross-appeals from that portion of the Appellate Division's order relating to the computation of interest on the certificates. Because the Appellate Division's analysis erroneously ignores the impact of the September, 1959 confiscation specifically seizing Manas' deposits before Chase's Cuban branches ceased operation, and otherwise misperceives the applicability of the Act of State doctrine, we now reverse.

The basic premise of the Act of State doctrine is that "the courts of one country will not sit in judgment on the acts of the government of another done within its own territory." (Underhill v. Hernandez, 168 U.S. 250, 252, 18 S.Ct. 83, 84, 42 L.Ed. 456; Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 416, 84 S.Ct. 923, 934, 11 L.Ed.2d 804; see Restatement, Foreign Relations Law of United States 2d, § 41.) Whether the property seized is tangible or intangible is not dispositive. (Menendez v. Saks & Co., 485 F.2d 1355, 1364 (2nd Cir.), revd. on other grounds sub nom. Alfred Dunhill of London v. Cuba, 425 U.S. 682, 96...