INTERLINK FINANCING CO LTD v. KOREA FIRST BANK OF NEW YORK

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Supreme Court, Appellate Division, First Department, New York.

INTERLINK FINANCING CO., LTD., et al., Plaintiffs-Appellants, v. KOREA FIRST BANK OF NEW YORK, Defendant-Respondent.

Decided: February 13, 2001

SULLIVAN, P.J., ANDRIAS, WALLACH, LERNER and BUCKLEY, JJ. Richard K. Owen, for Plaintiffs-Appellants. Sang Chin Yom, for Defendant-Respondent.

Order, Supreme Court, New York County (Harold Tompkins, J.), entered December 8, 1999, which granted defendant's motion for summary judgment dismissing the complaint, unanimously affirmed, with costs.

The subject account of plaintiff Maeng at defendant bank, a time deposit account when initially opened, became a demand deposit by operation of law when it became subject to immediate seizure upon the government's demand as a result of the seizure warrant obtained by the Internal Revenue Service.   As a Federal Deposit Insurance Corporation member and in accordance with title 12 Code of Professional Regulations section 217.2 (Regulation Q), defendant bank is therefore prohibited from paying interest on demand deposits.   Thus, plaintiff's claim that he was entitled to an award of interest for the period of the seizure is manifestly without merit (United States v. The Philadelphia National Bank, 374 U.S. 321, 83 S.Ct. 1715, 10 L.Ed.2d 915 [stating that member banks of the Federal Reserve System may not pay interest on demand deposits];  Van de Kamp v. Bank of America National Trust & Savings Association, 204 Cal.App.3d 819, 251 Cal.Rptr. 530 [interpreting 12 CFR 217] ).   Even if, as plaintiff claims, defendant issued statements for the period in question indicating that interest had accrued upon the funds in the account, plaintiff could not have reasonably relied upon such statements given the existence of the seizure order.