Vladikavkazsky Ry. Co. v. New York Trust Co.

• Decision Date: 27 February 1934
• Citation: 189 N.E. 456,263 N.Y. 369
• Parties: VLADIKAVKAZSKY RY. CO. v. NEW YORK TRUST CO.
• Court: New York Court of Appeals Court of Appeals

263 N.Y. 369

189 N.E. 456

VLADIKAVKAZSKY RY. CO.

v.NEW YORK TRUST CO.

Court of Appeals of New York.

Feb. 27, 1934.

Action by the Vladikavkazsky Railway Company against the New York Trust Company. From an order of the Appellate Division (238 App. Div. 581, 264 N. Y. S. 669), modifying an order of the Special Term and striking out portions of the answer, defendant appeals by permission of the Appellate Division on questions certified.

Order affirmed, and questions answered.Appeal from Supreme Court, Appellate Division, First department.

Vermont Hatch, Adrian L. Foley, and William G. Mulligan, Jr., all of New York City, for appellant.

Walter H. Pollak, Murray I. Gurfein and Thomas I. Emerson, all of New York City, for respondent.

HUBBS, Judge.

The plaintiff-respondent was a railroad corporation under the old régime in Russia. This action was brought to recover a deposit in the defendant-appellant, a bank in New York city.

The bank interposed the defenses, so far as this appeal is concerned, that a government director has not signed an order for the withdrawal of the deposit and that the surviving directors now residing in Paris, France, have no authority to withdraw the funds. It also denies that the corporation is continuing in existence. Those defenses and the denial have been stricken from the answer and the Appellate Division has certified to this court the question of the sufficiency of the defenses and the effect of the denial. The questions certified are as follows:

‘1. Is the first separate and partial defense to the first cause of action set forth in the complaint sufficient in law upon the face thereof?

‘2. Does the matter set forth in the second complete equitable defense constitute a defense?

‘3. Was the affirmative allegation in paragraph first of the answer properly stricken out?’

The bank does not assert in the answer that it owns the fund on deposit with it or that it has a lien upon it. It does assert in its first separate and partial defense that an interest exists in the fund in favor of a former Russian government, a third party, not a party to this action. As a basis of such partial defense, it alleges that in 1900 the Wladikawkas Railway Company issued interest-bearing bonds which were unconditionally guaranteed by the Imperial Russian government and that certain of those bonds were sold to and are now owned by citizens and residents of this state; that from time to time money was deposited with the defendant bank, in an account denominated ‘Wladikawkas Railway Company Account’ for the express purpose of paying specified coupons on those bonds; that on January 20, 1915, there remained a balance in such account of $3; that prior to September, 1918, other remittances were received by defendant through and by order of the minister of finance of the Russian government, so that there remained thereafter in that account $46,584.18; that in April, 1915, a signature card was filed with the defendant bank bearing the signatures of the persons authorized to withdraw the funds from that account and providing that for the withdrawal of funds the signature of three directors and a government director were required. It is also alleged that the Russian government has never through a director appointed by it requested the withdrawal of the fund, and that the Russian government has such an interest in the fund that the defendant is prohibited from making any payment therefrom without its order and consent.

It is also alleged that in 1918, ‘under the ordinances and decree of the sovereign government of Russia, said Vladikavkazsky Railway Company was liquidated and nationalized, its property confiscated or taken over by said government, and it has continued since said time, and is now, wholly insolvent.’

It is not alleged in the complaint that the money deposited in the account was the money of the railroad company. The allegation is that the money was deposited ‘in the name and to the account and order of plaintiff.’ It is not disputed that the money was deposited in the name of and to the order of plaintiff. The answer does not allege that the money deposited was that of the Russian government. We cannot assume that it was money of the Russian government, as it appears from other allegations of the answer in referring to other deposits, that, when the defendant desired to do so, it specifically denied that certain funds (not here involved), deposited with it, was the money of the railroad company and alleged specifically that such other deposit was made from government funds.

This is an action at law. In such an action the mere assertion by a defendant bank that a deposit was made in an account of a plaintiff by a third party does not justify a bank in refusing to pay over to the party in whose name the fund is deposited. Petrogradsky Mejdunarodny Kommerchesky Bank v. National City Bank, 253 N. Y. 23, 28, 170 N. E. 479, 481;Lewine v. National City Bank of New York, 248 N. Y. 365, 162 N. E. 284;Parks v. Knickerbocker Trust Co., 137 App. Div. 719, 722, 122 N. Y. S. 521.

Stripped of the conclusion of law that the Russian government has an interest in the fund, the only allegations of fact to sustain the defense are that the fund was deposited through and by order of the minister of finance, that the Russian government was guarantor of the bonds and interest coupons, and that a signature card required the signature of the government director for the withdrawal of funds.

The fact that the Imperial Russian government guaranteed the payment of the bonds with interest did not give it any legal interest in the money deposited in the defendant bank, especially as the answer does not allege that the money deposited was the money of the Russian government. The deposit, made with the intent and for the purpose of paying the interest coupons, did not vest a legal interest in the funds deposited in any one except the railroad corporation in whose name the bank account stood. The deposit created the relation of debtor and creditor between the railroad company and the defendant bank. The account remained subject to the control of the railroad company, and it had the legal right, as against the bank, to withdraw the funds at its pleasure to be used for any purpose which it desired. The answer does not assert that a trust was imposed by the Imperial Russian government or that any agreement was entered into between that government and the bank. Staten Island Cricket & Baseball Club v. Farmers Loan & Trust Co., 41 App. Div. 321, 58 N. Y. S. 460, approved in Title Guarantee & Trust Co. v. Haven, 214 N. Y. 468, 108 N. E. 819, and in Erb v. Banco di Napoli, 243 N. Y. 45, 152 N. E. 460, 50 A. L. R. 1009;Noyes v. First National Bank of New York, 180 App. Div. 162, 167 N. Y. S. 288, affirmed 224 N. Y. 542, 120 N. E. 870;Gledhill v. Schiff, 224 N. Y. 593, 120 N. E. 863;Matter of Interborough Consolidated Corp. (C. C. A.) 288 F. 334, 32 A. L. R. 932, certiorari denied, sub nom. Proges v. Sheffield, 262 U. S. 752, 43 S. Ct. 700, 67 L. Ed. 1215.

The signature card filed with the bank by the railroad company requiring the signature of three directors and of a government director was a revocable instrument which it could alter or withdraw. In any event, the Russian government has repudiated the payment of the bonds and interest, and the answer does not allege that there is now any government director, but the contrary is readily inferred from the answer. Under those conditions, none of the allegations of fact alleged in the first partial defense constitute a legal reason why the defendant bank should not pay over to the plaintiff the fund on deposit, and the first partial defense was properly stricken from the answer.

We are also in agreement with the Appellate Division in its decision that the first complete defense and set-off should be stricken out. That defense alleges that the...