Court Opinion

ID: 5854842
Source: CourtListenerOpinion
Date Created: 2022-01-13 00:59:14.103842+00
Date Added: 2024-06-11T08:44:13.935587
License: Public Domain

Murphy, P. J.,
dissents in a memorandum as follows: Plaintiff First International Bank of Israel, Ltd. moved for summary judgment in lieu of complaint (CPLR 3213) on two notes made by defendants Jacob Klein & Son, Inc. (Klein) and L. Blankstein and Son, Inc. (Blankstein) to the order of defendant Leo Siegman. The plaintiff is a bank organized and existing under the law of Israel. The notes were part of two series of notes given by Klein and Blankstein in their purchase of diamonds from Siegman. The latter, in turn, had indorsed the notes to plaintiff. The critical issue presented is whether the plaintiff is entitled to recover on the notes as a holder in due course (Uniform Commercial Code, § 3-302). In defense of these actions, the defendants’ principals maintain that the notes were only given as collateral. They further allege that, in accordance with the custom and trade of the Israeli diamond and banking businesses, the notes were actually given before Klein and Blankstein had ever received any diamonds from Siegman. The defendants’ principals also aver that plaintiff made loans on the notes with knowledge that Siegman might not deliver all or part of the diamonds covered by the notes. It is further alleged that the plaintiff was aware that Klein and Blankstein had the right to reject diamonds for deficiencies after delivery. The defendants’ principals assert that adjustments are normally made on the plaintiff’s records to reflect the actual transactions effected between Siegman and his buyers. Klein maintains that Siegman presently owes it the sum of $207,656. Blankstein simply states that its note in question does not reflect the amount owing to *503Siegman. The principals for Klein and Blankstein contend that the plaintiff is not entitled to recover upon the face amount of the notes since it took the notes subject to future adjustments and defenses which they might raise. The rule that excludes parol evidence in contradiction of a written agreement has no application in preventing the admission of evidence of conditions which render the agreement ineffective as a binding contract. As between parties to a negotiable instrument, parol evidence is admissible to show that a note, absolute in form, although delivered to a payee, was not to become a binding obligation except upon the happening of a certain event (22 NY Jur, Evidence, § 632, pp 142-143; Smith v Dotterweich, 200 NY 299). This principle applies even though a bank or trust company happens to be the plaintiff in a particular case (Long Is. Trust Co. v International Inst. for Packaging Educ., 38 NY2d 493; Salt Springs Nat. Bank of Syracuse v Hitchcock, 238 App Div 150). The plaintiff’s senior manager, Amos Idelson, does not specifically deny that, in financing the diamond trade in Israel, notes are taken by his bank subject to future transactions. Likewise, Idelson does not specifically deny that, as part of plaintiff’s banking business, it regularly cancels notes to reflect the fact that Siegman is not entitled to the moneys covered by the notes. Furthermore, he does not deny that his firm has taken these notes subject to defenses that might exist between Siegman and his buyers (cf. Budget Charge Accounts v Petrowski, 155 NYS2d 681). The affidavit of plaintiff’s attorney is of no probative value on these points. Thus, a triable question of fact exists as to whether plaintiff is a holder in due course or whether it has taken subject to any defense Klein and Blankstein might raise (Rafkin v Continental Diamond Mines, 19 AD2d 615). If it is shown that plaintiff is not a holder in due course, then a factual determination must be made at trial as to whether any moneys are owing from Klein and Blankstein to Siegman. Although the parties do not develop the point, a latent issue is presented as to whether New York State or Israeli law governs upon the facts to be found in this case. If Israeli law is found to govern, then public policy considerations might preclude the New York State courts from enforcing all or part of the applicable Israeli law. Of course, a question of fact is also presented as to the governing Israeli law. At trial, Siegman may also wish to raise counterclaims or setoffs based upon his charges that plaintiff has unlawfully retained his diamonds and has engaged in other unlawful activities in Israel. For the reasons stated, both orders should be affirmed.