Petrogradsky Mejdunarodny Kommerchesky Bank v. Nat'l City Bank of New York

• Citation: 170 N.E. 479,253 N.Y. 23
• Parties: PETROGRADSKY MEJDUNARODNY KOMMERCHESKY BANK v. NATIONAL CITY BANK OF NEW YORK.
• Decision Date: 11 February 1930
• Court: New York Court of Appeals

253 N.Y. 23

170 N.E. 479

PETROGRADSKY MEJDUNARODNY KOMMERCHESKY BANK

v.NATIONAL CITY BANK OF NEW YORK.

Court of Appeals of New York.

Feb. 11, 1930.

Action by the Petrogradsky Mejdunarodny Kommerchesky Bank against the National City Bank of New York. Judgment for defendant (133 Misc. Rep. 527, 233 N. Y. S. 255) was affirmed by the Appellate Division (226 App. Div. 866, 235 N. Y. S. 862), and plaintiff appeals by permission.

Reversed, and judgment directed for plaintiff.

Pound and O'Brien, JJ., dissenting.Appeal from Supreme Court, Appellate Division, First Department.

Frederick B. Campbell and Paul C. Whipp, both of New York City, for appellant.

Carl A. Mead and Justus Sheffield, both of New York City, for respondent.

CARDOZO, C. J.

The plaintiff, a Russian bank, chartered in 1869 by the Imperial Russian government, has deposit accounts with the defendant, opened in 1911 [253 N.Y. 27]and 1915, with a balance of $66,749.45 to its credit at the trial.

Following the Soviet rovolution of November, 1917, the assets of the bank in Russia were seized by the revolutionary government, and the directors driven into exile. By decrees of the Russian Soviet Republic in 1917, the bank was declared to be merged in the People's or State Bank, its assets were confiscated, its liabilities canceled, and its shares extinguished, and by a later decree, in January, 1920, the People's or State Bank was itself abolished, a banking system having been found to be unnecessary to the new economic life.

The terms of the plaintiff's charter or ‘statutes' are printed in the record. The governing body was to be a directorate consisting of seven members, of whom three were to form a quorum. One of the directors lost his life in the revolution. The other six made their way to Paris, where they held meetings from time to time, and did such business as they could. All six were alive in October, 1925, when this action was begun. Three have since died, but a quorum, three, survive.

At the time of the revolution the bank had assets of large value outside the territorial limits of the Soviet Republic. The refugee directors have sought and are still seeking to bring these assets together at their present domicile in Paris. Branch banks were in existence in London, Paris, Brussels, and Geneva. The assets in these branches, with the exception of those in Geneva, have been paid to the directors, and are held in the name of the bank to be distributed hereafter as justice may require. At times the payments have been voluntary, and at times in obedience to judgments of the courts. In fulfillment of the same policy, the directors have attempted to collect the balance on deposit with the defendant in New York. They requested payment, but the defendant declined to recognize their authority. They presented a check, signed by directors who had been accredited in former years as competent to draw, but the check was dishonored. In this action, which followed, the defendant insists: (1) That the plaintiff corporation has been dissolved and is no longer a juristic person; (2) that, if it be a juristic person, its former directors are without authority to speak for it; and (3) that the court, in any event, should decline jurisdiction, since a judgment for the plaintiff will leave the defendant unprotected against the danger of conflicting claims. The Trial Term gave judgment in favor of the defendant, and the Appellate Division unanimously affirmed.

1. We think the plaintiff is not dissolved, but is still a juristic person with capacity to sue.

The decrees of the Soviet Republic nationalizing the Russian banks are not law in the United States, nor recognized as law. Sokoloff v. National City Bank of New York, 239 N. Y. 158, 145 N. E. 917, 37 A. L. R. 712;James & Co. v. Second Russian Ins. Co., 239 N. Y. 248, 146 N. E. 369, 37 A. L. R. 720;Russian Reinsurance Co. v. Stoddard, 240 N. Y. 149, 147 N. E. 703. They are exhibitions of power. They are not pronouncements of authority. ‘Acts or decrees, to be ranked as governmental, must proceed from some authority recognized as a government de facto.’ Sokoloff v. National City Bank of New York, supra, page 166 of 239 N. Y., 145 N. E. 917, 919. Exhibitions of power may be followed or attended by physical changes, legal or illegal. These we do not ignore, however lawless their origin, in any survey of the legal scene. They are a source at times of new rights and liabilities. Ex facto jus oritur. Exhibitions of power may couple the physical change with declarations of the jural consequences. These last we ignore, if the consequences, apart from the declaration, do not follow from the change itself. Cf. Russian Reinsurance Co. v. Stoddard, supra. There may be exceptions to this as there are to most principles of equal generality. If so, it is only when ‘violence to fundamental principles of justice or to our own public policy might otherwise be done.’ Sokoloff v. National City Bank of New York, supra, page 166 of 239 N. Y., 145 N. E. 917, 919. The everyday transactions of business or domestic life are not subject to impeachment, though the form may have been regulated by the command of the usurping government. Sokoloff v. National City Bank of New York, supra; James & Co. v. Second Russian Ins. Co., supra; MacLeod v. United States, 229 U. S. 416, 428, 33 S. Ct. 955, 57 L. Ed. 1260;Baldy v. Hunter, 171 U. S. 388, 18 S. Ct. 890, 43 L. Ed. 208;Sokoloff v. National City Bank of New York, supra, page 165 of 239 N. Y., 145 N. E. 917, 918; Connick, The Effect of Soviet Decrees in American Courts, 34 Yale L. J. 499, 506. To undo them would bring hardship or confusion to the helpless and the innocent without compensating benefit. On the other hand, there is no shelter in such exceptions for rapine or oppression. We do not recognize the decrees of Soviet Russia as competent to divest the plaintiff of the title to any assets that would otherwise have the protection of our law. At least this must be so where the title thus divested is transferred to the very government not recognized as existent. For the same reason we do not admit their competence in aid of a like purpose to pass sentence of death on the expropriated owner. Death, if it has followed, is not death by act of law. Hervey, The Legal Effects of Recognition in International Law, passim, 38 Harv. L. Rev. 818, 822; cf. Noel-Henry, Les Gouvernements de Fait devant le Juge, pp. 98, 107, 108.

In saying this we assume, though we are not required to decide, that the decrees were intended to extinguish the life of the nationalized banks, and not merely to strip them of ownership or usufruct. Cf., however, Russian C. & I. Bank v. Comptoir D'Escompte De Mulhouse, [1925] App. Cas. 112; Banque Internationale De Commerce De Petrograd v. Goukassow, [1925] App. Cas. 150; Employers' Liability Assur. Corp., Ltd., v. Sedgwick, [1927] App. Cas. 95; Wohl, Nationalization of Joint Stock Banking Corporations in Soviet Russia, 75 U. of Penn. L. Rev. 385, 386, 392, 395, with references to decisions in France and Germany. Even so, the jural consequence of dissolution will not follow from what was said, unless, though nothing had been said, it would result from what was done. The dissolution of the banks was not ‘mere ordinary legislation, such as might have been had there been no war’ (United States v. Insurance Companies, 22 Wall. [U. S.] 99, 103, 22 L. Ed. 816), but legislation closely interwoven with the overthrow of the old order and the creation of a new one. These and like circumstances have a bearing on the meed of recognition that is due in foreign lands. There is a distinction not to be ignored between the life of a human being and the life of a persona ficta, the creature of the state. When a human being dies, his death is equally a fact whether it is brought about legally or illegally, whether he has died of illness in his bed or has been murdered on the highway. The event is not conditioned by the juristic quality of the casue. But in respect of juristic beings, the quality of the cause may determine the event as well. The personality created by law may continue unimpaired until law rather than might shall declare it at an end. Conceivably, the law will declare it at an end when marauders have brought frustration to the purpose for which personality was given. That is another question. What is not to be lost sight of is that even so it is the law and not merely an assassin that must pronounce the words of doom.

Putting aside, then, as irrelevant the fiat of the Soviet government that the jural consequence shall be death, we are rbought to the question whether the law of the Imperial government of Russia or of the later Provisional government would have ascribed the consequence of death to the supervening changes irrespective of the fiat. These changes in briefest summary are the loss of the Russian assets, the dispersion of the stockholders, and the exclusion of the directors as well as all subordinate agents from the soil of the old empire.

An answer to that question leads us to the contentious problem of the origin and nature of juristic personality. The theories, broadly speaking, are two, though subject to many variations within the main lines. The one is the concession theory, by which corporate personality is invariably the gift and creature of the state. Holdsworth, History of English Law, vol. 9, p. 48; Kohler, Philosophy of Law, Modern Legal Philosophy Series, p. 68; Dewey, The Historic Background of Corporate Legal Personality, 35 Yale L. J. 655. ‘Corporate life and form,’ says Holdsworth, supra, ‘cannot exist without the permission of the state, express, presumed or implied.’ This is the prevailing theory in Anglo-American law, though rifts in its uniformity are visible here and there. Cf. United Mine Workers of America v. Coronado Coal Co., 259 U. S. 344, 385, 387, 42 S. Ct. 570, 66 L. Ed. 975, 27 A. L. R. 762. The other is the theory that even in the...