Second, and what is more important, in repudiating its obligation and in notifying the Hungarian Commercial Bank of Pest, by letter of January 20, 1932, that it would discontinue further payments, the National Bank of Hungary did not rely on any legal prohibition or impossibility, or any change in the law of Hungary. It endeavored to justify its course by a change in economic conditions. Pertinent portions of this letter read as follows:
'Answering your questions put in the matter of the exportcredit with the New York Trust Co., we beg to inform you that we are unable to place at your disposal the foreign currencies required for the interests service and for the repayment of credits granted under the Hungarian Exportcredit Agreement, as this would offend the principle of equal treatment claimed with full right by the foreign creditors interested in shortterm loans of this country and especially by the American creditors.
'In view of the principle of equal treatment and the wellknown changes in economic conditions, we are sorry to inform you to be compelled to consider as null and void our letter of August 25, 1931, by which we have consented that the amounts of the maturing drafts be applied for to us and by which we have promised to handle the foreign currencies delivered by the exporters on a special deposit-account. Thus in the future the exporters utilizing this credit will have to deliver to our institution the foreign currencies resulting from their exports and are under existing regulations prohibited to utilize the foreign currencies for the purpose of repayment of their export credits.'
By letter of April 7, 1932, the National Bank of Hungary wrote to the Vice President of the New York Trust Company, in a similar vein:
'Our assumption as regards the revolving employment of the amounts repaid under the credit, which was the principal preliminary condition to our letter of August 25th, not having been realised and the conditions which prevailed in the month of August, 1931, having changed considerably as the crisis deepened, the technical procedure we promised to follow had to be considered as frustrated for objective reasons.'
On June 14, 1932, the National Bank of Hungary wrote to a Vice President of the New York Trust Company along the same line:
'At the outbreak of the crisis, as you certainly are aware of, the Hungarian Government, in order to protect not only the Hungarian economic life but also the interests of the foreign creditors, was forced to take two important restrictive measures.
'One of those measures consisted in making payments in foreign exchanges subject to the authorisation of the National Bank of Hungary. The Bank exercising this competence, even regardless of regulations contained in formal Standstill agreements, had to watch that the foreign exchange reserves shall be distributed under a reasonable scheme and had to care for maintaining an equal treatment of the foreign creditors. This consideration intended to serve the solidary interests of all creditors, has been realised, up to the end of last year, by not allotting foreign exchanges but for interest payments. The more as there were no foreign exchanges reserves to meet capital repayments.
'This has been the position at the end of last year when foreign exchanges reserves became so much depleted that they were insufficient to cover even interest payments.
'The other measure obliged exporters to surrender the equivalent in foreign exchanges of their exports. It was impossible to grant any exception to this rule as the country strongly wanted the full proceeds of exports, or else it would not have been possible to maintain, even to the extent as until the end of last year, the continuity of production and interest payments to foreign creditors.
'Those two measures as well as the foregoing had to be always considered by the Bank, already since the beginning of the restrictions.'
This letter clearly indicates that the Bank had it within its power to make an exception in the matter and continue the payments, but that it felt that as a matter of policy it should not do so. Consequently any defense of impossibility of performance fails.
The Court reaches the conclusion in the light of the foregoing considerations, that a contract existed between the National Bank of Hungary and the plaintiffs' predecessors and assignors, and that the National Bank of Hungary was guilty of a breach in discontinuing performance of the agreement. Consequently, the claims of the plaintiffs against the fund held by the Attorney General are valid.
In this connection it may be observed that the purpose of seizing enemy property is not confiscation. Even in an era of total war, confiscation of enemy property is not sanctioned either by international law or practice. The principal purpose of such seizures is to sequester the property in order to make it impossible for the enemy to use it against this country in time of war. A secondary objective is to secure payment of claims of the United States and its nationals arising against the foreign Government or against the original owners of seized property.
Consequently no reason is perceived for being astute to find justification for a denial of claims of American nationals against such funds. Plaintiffs' claims are valid not only as a matter of law, but as a matter of morals as well. There is no doubt that the group of American banks extended credits to Hungarian exporters; that the National Bank of Hungary undertook to receive repayments and in turn to transmit them to the New York Trust Company; that in large part it failed to do so; and the American banks sustained large losses as a result of this repudiation.
The plaintiffs' motion for summary judgment is granted, and the defendant's motion for summary judgment is denied.
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