Case Name: Oscar L. Richard and Others, Respondents, v. The National City Bank of New York, Appellant. (Action No. 2.)
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1931-02-13
Citations: 231 A.D. 559
Docket Number: 
Parties: Oscar L. Richard and Others, Respondents, v. The National City Bank of New York, Appellant. (Action No. 2.)
Judges: 
Reporter: Appellate Division Reports
Volume: 231
Pages: 559–570

Head Matter:
Oscar L. Richard and Others, Respondents, v. The National City Bank of New York, Appellant. (Action No. 2.)
First Department,
February 13, 1931.
Joseph M. Proskauer of counsel [John A. Garver, Carl A. Mead, Philip A. Carroll and J. Alvin Van Bergh with him on the brief; Shearman & Sterling, attorneys], for the appellant.
Walter H. Pollak of counsel [J. Charles Weschler and Charles S. S. Epstein with him on the brief; Weschler & Kohn, attorneys], for the respondents.

Opinion:
Martin, J.
The essential facts in this litigation having been stated by Mr. Justice McAvoy, it will be unnecessary to repeat them at length.
Although many questions have been raised upon this appeal, in view of the several decisions on this subject, we think there is but one now before us for determination. All the other issues appear to have been disposed of by decision of the Court of Appeals. The question involved which we think is still open, especially in view of the proof in this particular case, is the rule of damages to be applied to the facts here proved. At the outset it may be well to call attention to the fact that the plaintiffs were bound to establish their damages by proper proof. That burden was upon the plaintiffs, not upon the defendant.
The deposit which is the subject of this controversy was made in accordance with an agreement between the parties by the terms of which the defendant agreed to deposit 5,665,000 rubles in its Petrograd branch for the plaintiffs' account. That deposit was made by defendant. The account with the defendant's Petrograd branch was opened in January, 1917. Thereafter, from time to time, the plaintiffs withdrew 4,277,000 rubles. The plaintiffs' deposits and withdrawals left in defendant's Petrograd branch on September 1, 1918, when the branch closed, a conceded credit balance of 1,493,862 rubles. At that time the market price for Romanoff rubles. in New York was not less than thirteen cents. The value of rubles in Petrograd was much less. Plaintiffs have recovered judgment for the dollar value of their deposit balance at the rate of rubles in New York with interest from the date of closing.
The defendant, upon these facts, concedes that if it is liable at all it is liable for 1,493,862 rubles. The defendant contends, however, that in the absence of any demand other than the bringing of the suit, the value of the ruble deposit must be estimated, not at the time the Petrograd branch was closed but at the tune when suit was brought, and it insists that Russia, not New York, is the place to measure the value of the rubles, and that it is the value of Kerensky rubles, not Romanoff rubles, that must determine the amount of its liability. There appears to be no question that the ruble was the Russian monetary unit not only on September 1, 1918, but after that date.
The plaintiffs may not, by bringing an action where the damages may be more favorable, change the rule of damages applicable to such action. They are entitled to damages, not to a profit. (Richard v. American Union Bank, 241 N. Y. 163.) How much were they damaged? If they had rubles in Petrograd on September 1, 1918, or thereafter, bearing in mind the actual circumstances then prevailing, what were they worth there to them? That was their damage, and not what they might receive if the rubles were in some other country and to which country they could not send them.
The plaintiffs contend that the measure of damage is the value of rubles in New York city on the 1st day of September, 1918. The appellant contends that the measure of damage is the value of rubles in Petrograd, Russia, on that day, being the time and place of performance and of the breach of contract. Both rely on Sokoloff v. National City Bank (250 N. Y. 69). The respondents contend that it is an absolutely conclusive authority upon then right to recover damages which they say are to be measured by the value of rubles in New York city on the breach day. The appellant contends that it is decisive in its favor when the decision is properly understood and construed. In that case the Court of Appeals said: " The contract was broken, as of September 1, 1918, when the Petrograd Branch ceased to function. On that date he [plaintiff] was entitled to 120,000 rubles in Petrograd. He wanted them and did not get them. His damages are to be measured according to the value of rubles as of that date in Petrograd [mark the words ' in Petrograd '] measured in dollars in New York city, where he has sought his remedy. [Mark the words ' where he has sought his remedy.'] "
That decision does not hold that the damages are to be measured by the value of rubles in New York city but by the value in Petrograd measured in dollars in New York city. The Court of Appeals then says: " This has been our ruling in Gross v. Mendel (171 App. Div. 237; affd., 225 N. Y. 633); Hoppe v. Russo-Asiatic Bank (200 App. Div. 460; affd., 235 N. Y. 37); Kantor v. Aristo Hosiery Co., Inc. (222 App. Div. 502; affd., 248 N. Y. 630)."
It seems clear that the Sokoloff case holds that the value of rubles as of date of breach in Petrograd, Russia, should govern in apply ing the rule of damages. On that day plaintiffs were entitled to rubles in Petrograd.
The cases relied upon by the Court of Appeals and made the basis of the Sokoloff decision sustain the defendant's contention.
In the first case there cited, that of Gross v. Mendel (171 App. Div. 237), Mr. Justice McLaughlin said: " The defendants agreed to pay to the plaintiffs, in Germany, on the dates specified in the respective bills of exchange, the number of marks therein called for. Having failed to do this, the plaintiffs were entitled to recover in United States money — the action being brought here — a sum sufficient to have purchased the marks at the time the defendants agreed to pay them, with protest fees and interest from that time to the' entry of judgment, at the rate of six per cent."
That case specifically holds that the plaintiff is entitled to the number of pounds which would have purchased, at Leipzig, Germany, the number of marks called for, together with the protest fees. At page 240 the court said: " When the defendants refused payment of the bills of exchange, which they had accepted, the plaintiffs, except for the war then existing between England and Germany, could have immediately drawn upon them at London for the number of pounds which would have purchased, at Leipzig, Germany, the number of marks called for, together with the protest fees."
It should be noted that Mr. Justice McLaughlin, writing for this court, also said: " There is no reason, as it seems to me, why a different rule should be applied in the case of foreign money, where a recovery is sought here in our money, than would be applied to contracts for the delivery of wheat, cotton or other specific articles of merchandise."
And at page 241 we find the following: " that the amount to be recovered should be a sum sufficient to purchase the amount of foreign money at the time and place of the default. (Pavenstedt v. N. Y. Life Ins. Co., 203 N. Y. 91; Chrysler v. Renois, 43 id. 209; Scofield v. Day, 20 Johns. 102; Comstock v. Smith, 20 Mich. 338; Bissell v. Heyward, 96 U. S. 580.) "
Thereafter in Hoppe v. Russo-Asiatic Bank (200 App. Div. 460; affd., 235 N. Y. 37) this court said: " We are also of opinion that the measure of damages adopted by the learned trial justice was correct. Plaintiff was entitled to recover a sum sufficient for the purchase of the pounds sterling at the time when the defendant refused to honor the demands of B. B. Hoppe & Co., together with interest from that date to the time of entry of judgment. This was the rule recognized in the somewhat similar case of Gross v. Mendel (171 App. Div. 237; affd., 225 N. Y. 633), in which the memorandum of the Court of Appéals at page 633 reads as follows: ' The Appellate Division held as a matter of law that all of said bills of exchange were to be converted into money of the United States at the rate of exchange between Leipzig and New York prevailing at the time of maturity of each of said bills of exchange.' "
In the more recent case of Kantor v. Aristo Hosiery Co., Inc. (222 App. Div. 502; affd., 248 N. Y. 630), this court held that a similar contract was a commodity contract. That is emphasized by. the following language: " The obligation here to deliver pounds sterling in return for hosiery is essentially the same as the obligation in the Hoppe case to deliver francs in return for dollars. To differentiate between a debt and a claim for damages is to lose sight of the economic fact that foreign currency is a commodity."
In Societe Des Hotels Le Touquet Paris-Plage v. Cummings (L. R. [1922] 1 K. B. 451) the court " Held, reversing the judgment of Avory, J., that the debt, being payable in France in French currency, did not cease to be a French debt by reason of its being sued for in England, and as, if the action had been brought in France, the payment made would have been a good discharge of the debt notwithstanding the depreciation of the French franc as expressed in English currency since the date when the money became due, that payment must equally be a good discharge of the debt for the purposes of the English action; and that the plaintiffs were entitled to recover no more than nominal damages for the non-payment at the due date, and the costs of action down to plea pleaded."
In Deutsche Bank v. Humphrey (272 U. S. 517) the court said: " We may assume that when the bank failed to pay on demand, its liability was fixed at a certain number of marks, both by the terms of the contract and by the German law — but we also assume that it Was fixed in marks only, not at the extrinsic value that those marks then had in commodities or in the currency of another country. On the contrary, we repeat, it was and continued to be a liability in marks alone and was open to satisfaction by the payment of that number of marks, at any time, with whatever interest might have accrued, however much the mark might have fallen in value as compared with other things." (See, also, Hicks v. Guinness, 269 U. S. 71, and Comstock v. Smith, 20 Mich. 338.)
The plaintiffs were entitled to the value of rubles in Russia on the breach day. If the plaintiffs had been paid their rubles in Russia on the day the bank closed, or at any subsequent day, they would not have had any such value as they now claim or any such value as they have recovered in this action. It was established that there were many ruble transactions at about that time and it was also shown just how much the plaintiffs would have been able to obtain for these rubles if they had them in their possession.
The defendant's evidence showed, substantially without dispute, that at the same time t'hat ruble currency notes were then selling at thirteen cents per ruble in New York city, dollars were being ¡sold in Petrograd on t'he basis of about four cents per ruble.
The evidence may be summarized as follows:
Link testified that " you got more rubles for a dollar in Russia than you got in New York." As early as June, 1918, " you got twenty rubles for a dollar." There was a very active market in ruble currency for dollars in July and August, 1918, in Petrograd, Moscow and Vologda. The foreign missions, like the American missions, were constantly " dealing in foreign exchange, because they needed millions and millions of rubles to buy commodities in Russia." The American Embassy, the American Consulate, the American Military Mission and American Red Cross in Petrograd and Moscow were dealing in ruble dollar transactions. Link personally testified to a transaction of 600,000 rubles for the American Military Mission on August 20, 1918, which' bought rubles for a dollar draft on the Secretary of State of the United States. All of the transactions of these foreign missions were between twenty and twenty-three rubles for the dollar. It was quite a wide market from August 1, 1918, until September 1, 1918. There must have been 100 or 150 such transactions running into quite a lot of money.
Link also testified to a sale of $5,000 for 100,000 rubles to an engineer named Schinz on July 15, 1918.
In July or August, 1918, Link testified that the salaries of the American employees of the Petrograd branch were paid by dollar drafts on the New York branch, and these drafts were sold in Petrograd, Vologda and Moscow. Acting for defendant's employees, he caused to be sold about $12,000 of these drafts at a rate between twenty and twenty-three rubles for a dollar. About twelve of these sales took place on August 15, 1918, in Petrograd. Others took place in Moscow and Vologda.
Koelsch corroborated this testimony as to the Moscow branch, the dollar drafts of the Moscow personnel being sold in August, 1918, for twenty or twenty-two rubles to the dollar. He also saw a number of sales of dollars for twenty or twenty-three rubles to the dollar at the British Club, made up of Englishmen and Americans. The transactions ran into substantial figures.
Shaw, another employee of the bank, was in Tashkent in Turkestan from April to September, 1918. Having sold all his dollar drafts and United States currency, he had to return to Moscow to get Inore money with which to buy necessities. He got as far as Samara, when he was informed by the American Consul that all the Americans had been forced to leave Moscow. As early as 1917 all the Russians wanted to sell rubles and buy dollars and " you would have to be deaf and dumb not to know what the exchange rate was for dollars." He had to sell dollars in Tashkent in order to live and in August and September he personally sold two checks for about $150 each on the Auburn Trust Company, Auburn, N. Y., for about eighteen or twenty rubles to the dollar and got a better rate, about twenty-two rubles to the dollar, for his $300 in gold eagles. These rates were only for Romanoff rubles. To quote Shaw's own language: " It was a question of bargaining. The rate was 20 or 18 or 20 or 22 or 23 or 24, maybe 25 to the dollar, and whether you could get 18 or 19 or 20 or 21 or 22 would depend upon your ability as a trader." There was a market in Tashkent, in the Bazaar. In fact there was a market anywhere in Russia. Shaw also testified that there were, of course, other transactions about which he had heard in a general way, but the only other transaction which he actually saw was the case of an Irish governess of a Russian family in Tashkent who wanted to convert rubles into dollars and the Russian merchant sold her a $3,000 draft on his agent in New York at the rate of twenty rubles to the dollar in August, 1918.
If the plaintiffs on September 1, 1918, had grain in a warehouse owned by defendant in Petrograd, and defendant on that day converted the grain to its own use, the plaintiffs would be entitled to damages. The damages would be the value of the grain at that time in Petrograd, not the market value of the grain in New York city.
It may be argued that the rubles had no value in Russia, but the proof in this case, practically uncontradicted, is to the contrary. If they were without value that would be plaintiffs' loss. It may be that in the other cases heretofore decided the value of rubles in Russia was not proved, or that question may not have been raised. In fact it may be noted that appellant's counsel asserts that the question here involved was not before the court in the Sokoloff case.
It is argued that the defendant bank agreed to respond in damages for any loss sustained by the plaintiffs. The bank did not agree to pay the market value of rubles in New York city. It agreed ~J to pay and is hable for damages, and must pay the damage suffered ' by the plaintiffs, which is the value of the rubles in Petrograd on September 1, 1918.
We do not see any escape in this case from the conclusion that the rule of damages to be applied is that stated in Gross v. Mendel (supra). In other words, the plaintiffs are entitled to the value of rubles at the time and place of the breach, which was Petrograd, on the 1st day of September, 1918, when the Petrograd branch was closed.
The judgment should, therefore, be reversed and a new Mai ordered, with costs to the appellant to abide the event.
Dowling, P. J., and O'Malley, J., concur; McAvoy, J., dissents.