The opinion of the court was delivered by: HOLTZOFF
This action is brought by alleged creditors of the National Bank of Hungary, against the Attorney General of the United States, to secure payment of their indebtedness out of property seized by the Attorney General under the provisions of the International Claims Settlement Act, 22 U.S.C.A. § 1631 et seq. The matter is before the Court on cross-motions for summary judgment.
Certain property of the National Bank of Hungary was sequestered by the Attorney General on May 28, 1956, pursuant to the provisions of the above-mentioned statute, 22 U.S.C.A. § 1631a. In brief, this provision of law authorized the seizure of any property belonging to Bulgaria, Hungary, or Rumania, or any national of any of these countries, which had been blocked during the War years and remained blocked as of August 9, 1955. At the time of the institution of this action, the sum of $ 168,158.07 was available in the account of the National Bank of Hungary in the Office of Alien Property of the Department of Justice.
The statute under which the seizure had been made further provided that the property vested thereunder in the designee of the President should be equitably applied to the payment of certain debts owed by its original owner and prescribed a procedure for filing, examination, and payment of such claims. An unsuccessful claimant was accorded the right of judicial review by a civil action in the United States District Court for the District of Columbia, 22 U.S.C.A. § 1631g.
Pursuant to this statute, the plaintiffs filed claims with the Office of Alien Property of the Department of Justice, against the National Bank of Hungary, in the sums of $ 684,142.98 and $ 159,883.04. They were based on an alleged breach of contract, whereby it is asserted that the National Bank of Hungary undertook to repay to the plaintiffs certain advances made by them or their assignors to Hungarian exporters. The claims were rejected and this suit followed. The Government contends that there was no contract as between the plaintiffs or their assignors and the National Bank of Hungary; and that even if such a contract existed, impossibility of performance due to Hungarian law excused the failure to fulfill the obligation. The questions to be determined are: first, whether the alleged contract existed; and, if so, second, whether the refusal to carry out the commitment was justified.
The following is a brief summary of the transactions, which gave rise to the alleged contract. On December 19, 1928, the New York Trust Company, the plaintiffs' predecessor and assignor, entered into a contract with eight Hungarian banks, by which the former agreed to make certain advances to enable Hungarian exporters to obtain payment in dollars for products exported from Hungary. By this agreement a self-liquidating revolving credit was created in the sum of five million dollars. The New York Trust Company on the one hand agreed to accept drafts in an aggregate sum not exceeding this amount; and on the other hand, the Hungarian banks guaranteed the payment of the drafts. A number of American Banks participated with the New York Trust Company in this project. For some time the credit was extended, drafts were accepted in this country, and repayments were made by the Hungarian banks. In Hungary, the Hungarian Commercial Bank of Pest was the conduit through which remittances were transmitted to the New York Trust Company.
On August 25, 1931, the Hungarian National Bank wrote a letter to the Hungarian Commercial Bank of Pest, by which the former undertook to receive and keep in a separate account the repayments made by exporters and to use the fund thus created to meet the drafts previously discounted by the New York Trust Company.
On December 31, 1931, however, the National Bank of Hungary discontinued the payments. The New York Trust Company protested.
The foregoing statement clearly constituted a contractual undertaking to reimburse the New York Trust Company for the advances made by it in connection with the discounting of bills or drafts involved in this series of transactions. It is claimed in behalf of the Government that if this document constituted a contract, it was a contract with the Hungarian Commercial Bank of Pest, and not with the New York Trust Company. The plaintiffs urge, however, that the Hungarian Commercial Bank of Pest acted as agent of the New York Trust Company and, therefore, the contract was in effect made with the latter.
The plaintiffs' contention is well founded. The Hungarian Commercial Bank of Pest was the agency through which repayments were made by the National Bank of Hungary to the New York Trust Company. The Hungarian Commercial Bank of Pest acted as the agent of the New York Trust Company in receiving repayments in behalf of the latter. In fact, the National Bank of Hungary recognized the Hungarian Commercial Bank of Pest as the agent of the New York Trust Company, as appears by letter from the National Bank of Hungary to a Vice President of the New York Trust Company, of April 7, 1932, in which the writer explicitly referred to 'your agent, the Commercial bank' (Transcript pp. 148-9).
In this connection, it is important to observe that although on the oral argument, Government counsel contended that the Hungarian Commercial Bank of Pest was not the agent of the New York Trust Company, they had taken the contrary position in the memorandum previously filed in connection with the pending motions. In that memorandum Government counsel refer to the above mentioned letter as having been 'written by the National Bank of Hungary as National Administrator of Foreign Exchange to the Hungarian Commercial Bank of Pest in Budapest, as agent for the New York Trust Company.' (P. 13.) The Court concludes that the Hungarian Commercial Bank of Pest acted as agent of the New York Trust Company and that, therefore, the above-mentioned letter constituted a contract between the National Bank of Hungary and the New York Trust Company.
The second objection raised in behalf of the Government is that even if a contract existed between the National Bank of Hungary and the New York Trust Company, the performance of this obligation was rendered impossible by a change in the Hungarian law contained in the so-called 'Moratorium Decrees'. In the light of the conclusion about to be reached, it is unnecessary to pass on the question of law whether a change in the law of a foreign country may be deemed such an impossibility of performance as will excuse failure to fulfill a contractual obligation. Irrespective of that question, the objection raised by the Government on this aspect of the litigation is untenable for a number of reasons.
First, the Hungarian law has not been sufficiently or properly proved in this proceeding. The law of a foreign country, especially a country in which the common law does not prevail, is a matter of fact and has to be proven as a fact. Such proof may be adduced either by a certified or exemplified copy of the statutes and decrees of the foreign country, or by opinions of experts, or preferably both. No proper proof of the specific provisions of the Hungarian decrees, to which the Government referred, has been introduced and consequently the Court may not take notice of them.