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MAYER v. HUNGARIAN COMMER. BANK OF PEST

July 28, 1937

MAYER
v.
HUNGARIAN COMMERCIAL BANK OF PEST et al.



The opinion of the court was delivered by: GALSTON

GALSTON, District Judge.

Both defendants appear specially in support of motions to set aside warrants of attachment and orders directing service by publication.

The action was commenced in the Supreme Court, Kings county, state of New York, by a resident and citizen of New York, as the alleged holder of certain bonds of the Hungarian Consolidated Municipal Loans of 1925 and 1926, to recover damages from the two defendant banks. An application for a warrant of attachment was granted December 18, 1936, and funds of both defendants on deposit in banks in the county of New York were attached thereunder. Thereafter an order for the service of summons on the defendants by publication was made on January 12, 1937, and publication so ordered was commenced on January 14, 1937. The case was duly removed to this court on April 8, 1937.

 The plaintiff seeks to recover the sum of $33,880 for damages for breaches of express contracts. In the first cause of action he alleges that on July 11, 1925, the government of the Kingdom of Hurgary, acting on behalf of certain cities of that nation, entered into a contract with Speyer & Co. of New York, wherein the bankers underwrote an issue of bonds called the Hungarian Consolidated Municipal Loan 20-year 7 1/2 per cent. secured sinking fund gold (coupon) bonds, in the sum of $10,000,000. It is alleged that pursuant to said agreement the cities entered into agreement with the defendant Hungarian Commercial Bank of Pest, whereby Speyer & Co. *fn1" appointed said defendant trustee of the loan, and the cities requested and the Hungarian Commercial Bank of Pest agreed to perform certain duties which in the main were to deduct, from the amounts paid into a special account with the other defendant, the National Bank of Hungary, and immediately to place at the disposal of the bankers, the sum of $486,595 each ensuing half yearly period of the loan, and to remit any balance to the said cities. It is alleged that the Commercial Bank agreed to and did give a standing order to the National Bank of Hungary for such balance to be remitted and the National Bank of Hungary agreed to carry out such order. It is further alleged that money so placed at the disposal of the bankers as fiscal agents should be remitted by the defendants to the bankers in New York in dollars to the full amount of said semiannual sums.

 Bonds in the form described in the agreement were issued and delivered to the bankers. It is alleged that the bankers sold the bonds to the general public and that the bonds were actively traded in on the New York Stock Exchange. Plaintiff alleges that he is the owner of 39 of said bonds of the par value of $39,000.

 Continuing, the plaintiff alleges that the Hungarian government, on behalf of the cities, deposited with the National Bank of Hungary, to the credit of the Commercial Bank as trustee under the agreement referred to, the whole or substantial portions of the sums required by the agreement, but that after January 1, 1932, the Commercial Bank in breach of the trust and in violation of the terms and conditions "of said loan agreement," and with the advice, approval and "at the command of the defendant National Bank of Hungary," failed to require that the obligations of the contract and bonds be fully performed; failed to require that the pledged revenues be duly paid and disposed of as specified in the contract and bonds; permitted a default in the payment; failed to give 30 days' notice to the Royal Hungarian government with respect to their defaults, and especially failed to place at the disposal of the bankers money in respect to a half year service of said loan, and diverted the funds on deposit with the National Bank of Hungary, and that as a result "the holders of all the bonds were unable to collect, either in gold or the equivalent thereof * * * the full amount of the coupons due * * * as a result whereof the security of the bonds became impaired." It is then alleged that the market value was affected and at the time the complaint was executed the bonds were quoted upon the New York Stock Exchange at $230 for each $1,000 bond. Plaintiff claims that the alleged breach and violation of the agreement resulted in damage to him of $30,030.

 A second cause of action is in all respects substantially similar in principle to that set forth in the first cause of action and relates to an issue of bonds of 20-year 7 per cent. secured sinking fund bonds in the aggregate principle sum of $6,000,000. Plaintiff alleges that he is the owner of five of said bonds of the par value of $5,000, and that the market value, as a result of the breaches, is only $230 per $1,000 bond, and accordingly he has been damaged in the sum of $3,850.

 The defendants contend that the plaintiff has failed to make out a cause of action specified in section 902 of the Civil Practice Act and that accordingly a warrant of attachment should not have issued.

 Section 902 reads as follows:

 "In what actions attachment of property may be had. A warrant of attachment against the property of one or more defendants in an action may be granted upon the application of the plaintiff, as specified in the next section, where the action is to recover a sum of money only, as a tax or as damages for one or more of the following causes:

 "1. Breach of contract, express or implied, other than a contract to marry.

 "2. Wrongful conversion of personal property.

 "3. An injury to person or property in consequence of negligence, fraud or other wrongful act.

 "4. A wrongful act, neglect or default by which the decedent's death was caused, when the cause of action arose in this state before or after the passage of this act and the action is brought by an executor or administrator against a natural person who, or a corporation which, would have been liable to ...


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