Republic of China v. National City Bank of New York

• Decision Date: 22 December 1952
• Citation: 108 F. Supp. 766
• Parties: REPUBLIC OF CHINA et al. v. NATIONAL CITY BANK OF NEW YORK.
• Court: U.S. District Court — Southern District of New York

108 F. Supp. 766

REPUBLIC OF CHINA et al. v. NATIONAL CITY BANK OF NEW YORK.

United States District Court S. D. New York.

December 22, 1952.

Kirlin, Campbell & Keating, New York City, Cletus Keating, New York City, Robert E. Kline, Jr., Washington, D. C., Louis J. Gusmano, New York City, of counsel, for plaintiff Republic of China.

Shearman & Sterling & Wright, New York City, Chauncey B. Garver and W. Harvey Reeves, New York City, of counsel, for defendant.

IRVING R. KAUFMAN, District Judge.

Plaintiffs, The Republic of China, and others, have commenced an action against the defendant, under Section 632 of Title 12 U.S.C.A. to recover the sum of $200,000 said to be on deposit with defendant and which the defendant refuses to pay. This sum was deposited in the name of plaintiff Shanghai-Nanking Railway Administration, said to be an agency of the Ministry of Communications of the plaintiff, The Republic of China. The Secretary of State, pursuant to Section 25(b) of the Federal Reserve Act has certified to defendant that the deposit in question belongs to the plaintiff, The Republic of China. Defendant has denied the essential allegations of the complaint, pleaded affirmative defenses, and has asserted two counterclaims against plaintiff, The Republic of China. The first counterclaim alleges that on or about August 9, 1920, defendant participated in a loan made by J. P. Morgan & Co. to the Pacific Development Co. in the face amount of $5,000,000, said loan being secured by a $5,500,000 Chinese Government Treasury Note, being the note of the plaintiff herein, The Republic of China. Said loan was not paid on its maturity date by Pacific Development Company and subsequently Pacific Development Company was liquidated. In the course of said liquidation, J. P. Morgan & Co. offered the collateral for sale at public auction and purchased the collateral on behalf of the participants in the loan to the Pacific Development Company. The Chinese Government Treasury Note is still held by J. P. Morgan & Co. and is now past due, and by virtue thereof there is said to be owing to the defendant the sum of $317,720.93 plus interest of $590,386.53.

For a second counterclaim against plaintiff, The Republic of China, the defendant alleges that between April and August 1947 defendant began the purchase of Chinese Government 36th Year Short Term Treasury Notes of The Republic of China. On these notes, the plaintiff, The Republic of China, is said to be indebted to the defendant in the sum of $391,033.60 principal together with interest thereon in the sum of $335,290.94. Defendant demands judgment against the plaintiffs dismissing the complaint with costs, and against the plaintiff, The Republic of China, for the sum of $1,634,432.

Plaintiff, The Republic of China, has moved pursuant to Rule 12 of the Federal Rules of Civil Procedure, 28 U.S.C., to dismiss the counterclaims on the following grounds:

(1) That the Court lacks jurisdiction thereof because plaintiff, The Republic of China, is a friendly sovereign which has not consented to be sued on the matters therein alleged.

(2) That they fail to state claims against plaintiff, The Republic of China, upon which relief can be granted.

In opposition to this motion, the defendant has advanced the contention that the motion is premature because there is no proof before this Court that the property is that of a sovereign. The defendant has alleged that the Shanghai-Nanking Railway Administration is not a mere agency of the government but has independent existence and that the plaintiff, The Republic of China, is not in a position to sue and recover on this bank account. This allegation is contained in the affirmative defenses which defendant has asserted. In support of the contention that whether the organization in whose name the property is held is a sovereign or at least an agency of a foreign sovereign exercising governmental functions is a matter which must be proved by the plaintiff, defendant relies on such cases as Chase National Bank of City of N. Y. v. Directorate General of Postal Remittances & Savings Bank, 1st Dept., 1951, 278 App.Div. 820, 824, 105 N.Y.S.2d 416, on reargument 278 App.Div. 935, 105 N.Y.S. 2d 923, 924; leave to appeal denied, 279 App.Div. 576, 107 N.Y.S.2d 542; appeal dismissed, 1952, 303 N.Y. 800, 104 N.E.2d 360; Hannes v. Kingdom of Roumania Monopolies Institute, 1st Dept., 1940, 260 App. Div. 189, 20 N.Y.S.2d 825; Telkes v. Hungarian National Museum, 1st Dept., 1942, 265 App.Div. 192, 38 N.Y.S.2d 419.

While this point might be well taken if it were directed to a motion to strike the affirmative defenses it is wholly inappropriate here for the simple reason that the counterclaims in question are pleaded, not against the Shanghai-Nanking Railway Administration but against The Republic of China itself.

There is no contention that The Republic of China is not a friendly foreign sovereign. In fact in paragraph XXXIV of the counterclaim, defendant admits that:

"The plaintiff, The Republic of China, is, and at all times hereinafter mentioned was, a sovereign

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