Tillman v. Russo Asiatic Bank

• Decision Date: 24 July 1931
• Docket Number: No. 402.,402.
• Citation: 51 F.2d 1023
• Parties: TILLMAN v. RUSSO ASIATIC BANK.
• Court: U.S. Court of Appeals — Second Circuit

51 F.2d 1023 (1931)

TILLMAN v. RUSSO ASIATIC BANK.

No. 402.

Circuit Court of Appeals, Second Circuit.

July 7, 1931.

As Modified on Denial of Rehearing July 24, 1931.

Borris M. Komar, of New York City, for appellant.

Evarts, Choate, Sherman & Leon, of New York City (Maurice Leon, of New York City, of counsel), for appellee.

Before MANTON, L. HAND, and AUGUSTUS N. HAND, Circuit Judges.

AUGUSTUS N. HAND, Circuit Judge.

Two causes of action are involved in this appeal. In the first cause of action the following facts are alleged:

The plaintiff opened a current checking account with the defendant, a Russian bank in the city of Petrograd. On September 18, 1918, he had to his credit in the account upwards of 114,000 rubles, and drew a check on the bank for 72,000 rubles to the order of one Heidemann, which was dishonored upon presentation. The plaintiff paid the amount of the check to Heidemann. Thereafter on August 24, 1927, plaintiff brought suit against the defendant for failing to pay the check, and sought recovery in the sum of $37,008, with interest from September 18, 1918, upon the theory that the value of rubles was 51.4 cents in United States currency. Upon the trial, the jury rendered a verdict in favor of the defendant on the first cause of action.

In the second cause of action the following facts were alleged:

On November 18, 1919, the defendant bank delivered its draft to one Fajans, directed to its office in Novorossiysk, Russia, wherein it required such office to pay Fajans 100,000 rubles within four months. This draft was duly indorsed and delivered to the plaintiff. The office could not be found and the draft was not paid, whereupon Fajans indorsed and delivered it to the plaintiff who sued to recover $51,400, with interest from March 18, 1920, alleging, as upon the first cause of action, that rubles were worth 51.4 cents in United States currency. On the second cause of action the court directed a verdict for the defendant on the ground that no proof had been offered of the value of rubles in 1927.

It appeared that the plaintiff was a citizen of the United States. The citizenship of Fajans was neither alleged nor proved.

Various defenses to each cause of action were raised, but the principal question was whether any proof was made of the value of the rubles in United States currency. Where a debt is due in a foreign country payable in the currency of that country, and suit is brought on it in the United States, the Supreme Court has held the plaintiff should recover what that currency is worth in this country on the day of judgment. Justice Holmes, who laid down the foregoing rule in Deutsche Bank v. Humphrey, 272 U. S. 517, 47 S. Ct. 166, 71 L. Ed. 383, said that the date of judgment, and not the date of the breach, was the proper time for figuring the rate of exchange because "a suit in this country is based upon an obligation existing under the foreign law at the time when the suit is brought, and the obligation is not enlarged by the fact that the creditor happens to be able to catch his debtor here."

It is therefore necessary to determine the extent of the obligation of the defendant in Russia. The difficulty with the plaintiff's case is that he failed to establish this and neglected to show that the rubles which the defendant was bound to pay had any value in United States currency at the date of judgment. It is argued that he was precluded from making such proof because the court struck out testimony of his witness Bolotovsky through whom he attempted to show the value of the ruble. Indeed, the exception which is most relied on was directed to the elimination of Bolotovsky's testimony. But this exception cannot avail, for, if we take the Bolotovsky testimony at its face value, it does not establish that the rubles which the defendant neglected to pay were worth anything at the date of judgment. Bolotovsky testified that Romanoff rubles had then practically disappeared, and that Denikin rubles and Kerensky rubles had become worthless. To be sure he said that, by decrees of the Soviet government in 1922 and 1924, a gold standard was established and that the ruble of the New Soviet currency was worth 53 cents at the time when he testified. But the text of these decrees was not proved, and no attempt was made to show whether they wiped out the preexistent rubles as legal tender or established any ratio of exchange for the old currency. We are asked to hold that obligations originally payable in rubles which had disappeared or become worthless should be liquidated in new Soviet rubles worth 53 cents.

In Thorington v. Smith, 8 Wall. 1, 19 L. Ed. 361, where a resident of the Confederate States agreed to pay another resident of those states $10,000 for a purchase of land, the Supreme Court held that the debt was to be liquidated in Confederate notes rather than in lawful money of the United States and that the plaintiff was entitled to recover in money of the United States the value of the Confederate money contracted to be paid. The decision in Effinger v. Kenney, 115 U. S. 566, 6 S. Ct. 179, 29 L. Ed. 495, was to the same effect.

It is perfectly true that an obligation payable "in terms of the currency of a country takes the risk of currency fluctuations and whether creditor or debtor profits by the change the law takes no account of it." Deutsche Bank v. Humphrey, 272 U. S. at page 519, 47 S. Ct. 166, 167, 71 L. Ed. 383. See, also, Legal Tender Cases, 12 Wall. 457, 20 L. Ed. 287; Richard v. American Union Bank, 241 N. Y. at page 167, 149 N. E. 338, 43 A. L. R. 512; Matter of James, 248 N. Y. at page 6, 161 N. E. 201. But the question here is whether the rubles which the defendant agreed to pay were the same currency that the Soviet decrees of 1922 and 1924 established as governmental currency or had anything in common with the latter except the name. There is no proof of equivalence between the Soviet ruble which Bolotovsky said was worth 53 cents and the earlier Romanoff, Denikin, or Kerensky rubles. Indeed, the only testimony seems to indicate that the old rubles had no such equivalence, for they were said to have disappeared or to have become worthless. There was no proof that the Soviet decrees required debtors to pay obligations existing prior to their enactment in the new currency. We think that proof of the value of the rubles which the plaintiff sought to recover upon either the first or second cause of action was wholly lacking.

Moreover, if, as the plaintiff once contended at the trial, the indebtedness of the bank might be liquidated either in Romanoff, Denikin, Kerensky, or Soviet rubles, the debtor had the privilege of paying in currency of the least value. Restatement of the Law of Contracts by American Law Institute, § 335; Williston on Contracts, § 1407; Matter of People (Russian Reinsurance Co.) 255 N. Y. at page 423, 175 N. E. 114. The old rubles had no, or certainly no proved, value at the time of the trial. Under the charge, the jury evidently found that the rubles which the bank contracted to pay were worthless when the suit was brought on August 24, 1927. This date, rather than the date of judgment, the court inadvertently adopted as the time for fixing the value of rubles in United States currency, but it was admitted at the argument before us that values had not changed between the date mistakenly adopted and the date of judgment. We can discover no proof that the rubles which the bank had agreed to pay had any value at either date, and we accordingly hold that on the merits the defendant was entitled to the direction of a verdict on the first cause of action. Other considerations affect the second cause of action which we shall discuss hereafter.

The plaintiff greatly relies on the recent decision of the New York Court of Appeals in Matter of People (First Russian Ins. Co.) 255 N. Y. 428, 175 N. E. 118, 119. There the holder of a policy in a Russian insurance company, who was entitled to the payment of 10,000 rubles in June, 1923, was allowed to recover at the rate of 51½ cents per ruble. Judge Cardozo interpreted the record as establishing that in June, 1923, "the Russian ruble was again on a gold basis, and that, where token rubles were paid in satisfaction of a debt, the number would have to be increased to the extent necessary to make the payment equivalent to one in gold." In other words, he in effect treated the obligation as calling for payment in gold and requiring liquidation in Soviet rubles of the new gold standard. But he most carefully added: "We do not attempt to say to what extent a different record, exhibiting in a different light the history of the ruble, would exact a different conclusion."

In the case at bar the evidence goes no farther than to indicate that a gold Soviet ruble was of the same value as an Imperial gold ruble coin. There is no proof that the defendant bank was bound to pay its obligations in gold. The old currency in which the drafts were originally payable had become worthless. When the Soviet government established a new currency, it is not shown to have provided by its decrees that old obligations were to be payable in the new currency, ruble for ruble. Indeed, that such was the meaning or effect of the decrees seems inherently unlikely. The plaintiff should have produced the decrees and proved their contracts, if it sought to establish that the claims having a value, nominal at the time, were made payable in a new currency worth 53 cents per ruble. It had the burden of proving the value of the rubles in United States currency at the date of judgment. That burden it has not sustained.

For the foregoing reasons the judgment as to the first cause of action is right.

The judgment upon the second cause of action was rendered without jurisdiction. The lack of jurisdiction was not mentioned in the briefs filed for argument or upon the argument, but has since been called to our attention and discussed in supplemental...