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UNITED STATES v. NATIONAL CITY BANK OF NEW YORK

May 5, 1950

UNITED STATES
v.
NATIONAL CITY BANK OF NEW YORK et al. STEINGUT et al v. NATIONAL CITY BANK OF NEW YORK



The opinion of the court was delivered by: RIFKIND

The first entitled action was commenced on August 1, 1947 and the second, on March 28, 1939. Both were tried to the court together.

In form the first is an action by the assignee of a bank-account against the bank for the balance owing to the depositor, demand having been made and refused. In addition, the complaint seeks a declaration that the Receivers have no interest in the deposit-account. *fn1" The simplicity of the form of the action, however, is but the deceptive facade behind which hover a host of questions produced by the rupture of normal Russo-American relations after the collapse of the Kerensky regime in 1917.

The action of the Receivers is based upon a complaint which alleges that they were appointed, by a judgment of the Supreme Court of the State of New York, receivers of the assets in New York of Russo-Asiatic Bank, pursuant to Sec. 977-b of New York Civil Practice Act; that they duly demanded the balance of the Russo-Asiatic account from National City Bank and that their demand was refused. Jurisdiction is founded on 12 U.S.C.A. ยง 632.

 I. The Receivers' Action.

 What was said with respect to the claim of the Receivers in Steingut v. Guaranty Trust Co., 1944, D.C.S.D. N.Y., 58 F.Supp. 623, affirmed 2 Cir., 1947, 161 F.2d 571, certiorari denied 1947, 332 U.S. 807, 68 S. Ct. 106, 92 L. Ed. 385, is applicable hereto and is dispositive of the issue. The Receivers have advanced a new argument. They urge that a foreign law (the Russian banking decrees) purporting to transfer title to property in New York (from Russo-Asiatic to Soviet Russia) is not self-executing; the property must be actually reduced to possession, with or without intervention of local judicial process, before the transfer of title is perfected.

 Clark v. Williard, 1935, 294 U.S. 211, 55 S. Ct. 356, 79 L. Ed. 869, 98 A.L.R. 347. Therefore, argue the Receivers, there was no such barrier to the Receivers as was suggested in Steingut v. Guaranty Trust Co., supra.

 It is unnecessary to repeat what has been said in the Steingut case. A few additional comments will suffice. Section 977-b, though enacted in 1936, after recognition of Soviet Russia, is, in its application to Russo-Asiatic, fore and aft, starboard to port, keel to masthead, built upon the conception of non-recognition. It collides head-on with the national policy embraced in recognition and the Litvinov assignment. This case is not distinguishable from U.S. v. Pink, 1942, 315 U.S. 203, 62 S. Ct. 552, 86 L. Ed. 796, as the Receivers contend, by the circumstance that in the Pink case local creditors had been paid. The local creditors in the Pink case were 'creditors whose claims arose out of dealings with the New York branch', 315 U.S.at page 226, 62 S. Ct.at page 564, of the First Russian Insurance Co. Russo-Asiatic never had a branch in New York. Like the Pink case, 'The contest here is between the United States and creditors of the Russian Corporation * * * whose claims did not arise out of transactions with the New York branch'. 315 U.S.at page 227, 62 S. Ct.at page 564. In such a case, U.S. v. Pink held Clark v. Williard, supra, inapplicable.

 Pink was a state-created stakeholder who had possession. The receivers are state-created stakeholders who seek possession. The claim of the former yielded to the superior title of the United States. A fortiori the claim of the latter must yield to that of the United States.

 II. The Government Action.

 Russo-Asiatic Bank was a large and powerful banking institution organized under the laws of Imperial Russia. Its head office was in Petrograd and it operated branches in many countries. Sometime prior to 1917 it opened an account at the head office of National City Bank in New York City. On December 27, 1917, the amount standing to the credit of Russo-Asiatic on the books of National City Bank was $ 2,261,981.72.

 On November 7, 1917 the Provisional Government of Russia, which had been recognized by the United States following the Czar's abdication, was overthrown by the Bolshevik revolution. The Soviet Government, installed by the revolution, remained unrecognized by our Government until November 16, 1933.

 On December 27, 1917, Russo-Asiatic was, by Soviet decree, merged with the State Bank of Russia, a department of the government; and subsequently, on January 19, 1920, the State Bank, whose name had been changed to People's Bank, was abolished and its surviving functions, assets, and liabilities transferred to the Central Budget and Accounting Department of the Soviet Government.

 On November 16, 1933, by the Litvinov Assignment, Soviet Russia transferred to the United States whatever claims it had against National City Bank. On January 17, 1936, the United States made a demand for payment, which National City Bank refused.

 In its brief, the Government has reduced the principal amount of its claims to $ 2,010,847.45. *f ...


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