Bank of China v. Wells Fargo Bank & Union Trust Co.

Citation209 F.2d 467
Decision Date21 December 1953
Docket NumberNo. 13412,13413.,13412
PartiesBANK OF CHINA v. WELLS FARGO BANK & UNION TRUST CO. (two cases).
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

COPYRIGHT MATERIAL OMITTED

McCutchen, Thomas, Matthews, Griffiths & Greene, Morris M. Doyle, Owen Jameson, San Francisco, Cal., James B. Burke, Burke & Burke, New York, N. Y., for appellant.

Lloyd W. Dinkelspiel, Martin Minney, Jr., Edward W. Rosston, Heller, Ehrman, White & McAuliffe, San Francisco, Cal., for appellee.

Before DENMAN, Chief Judge, and McCORMICK and HARRIS, District Judges.

DENMAN, Chief Judge.

These appeals are from parts of two judgments, stated in a single document, in two actions in the district court. In each of these actions appellant sought and recovered from the appellee moneys deposited with it which it had refused to pay upon appellant's demand. The judgment awarded costs and attorney's fees to the appellee and denied any interest to the appellant on the moneys sued for. The facts in each case present the same questions of law and the two cases were consolidated for hearing both below and here. The two judgments in the single document were duly entered and appealed from.

The questions presented by these appeals are (1) whether the district court erred in denying the Bank any interest on moneys withheld by Wells Fargo after demands by the Bank, for the period prior to the Bank's deposit of the money in court, during which time Wells Fargo retained the deposit with it for its own use; and (2) whether the district court erred in directing that out-of-pocket costs and attorney's fees be paid out of a fund in the registry of the court as an item of costs.

For several years prior to the institution of the first action (No. 13,412) on November 9, 1949, the appellant, Bank of China, was a depositor in appellee, Wells Fargo Bank & Union Trust Co. (For convenience, the parties will hereafter be referred to as the "Bank" and as "Wells Fargo"). The Bank is a corporation chartered as an international exchange bank by the Republic of China. Two-thirds of its stock is owned by the Chinese Government and the remaining stock was and presumably still is held by private shareholders who are Chinese nationals. The Bank is governed by a board of twenty-five directors, thirteen appointed by the Government and twelve elected by private shareholders.

The charter of the Bank provides that its head office should be located in Shanghai. With the successful advances of the Communist armies, the Bank's headquarters was ordered moved with the Nationalist Government from city to city, eventually ending up in Taipeh, Formosa. At the end of April, 1949, the foreign department of the Bank was moved to Hongkong, and new ciphers and test keys were authorized for the operation of its accounts abroad. These were circulated to the Bank's correspondents, including Wells Fargo. On June 27, 1949, Wells Fargo received a cable from Shanghai, which had by then fallen to the Communists. This cable used the discarded test key, was sent in the name of the Bank, and read as follows:

"Using Your Testkey With Us 516 Following the Liberation of Shanghai This Bank was Taken Over by the Shanghai Military Control Commission by Order of the Chinese Peoples Liberation Army East China Command on May Twenty-eighth and the Powers Vested in Its Original Board of Directors are Now Temporarily Vested in the East China Financial and Economic Affairs Administration Stop Those Officers who Escaped to Hongkong and Elsewhere Have Been Dismissed and Can No Longer Represent This Bank Stop Their Specimen Signatures and Testkey Established Between You and Them Should Be Considered Null and Void Stop All Communications From Them Are Unauthorized Stop You Are Requested Not to Make Payment Except by Our Specific Order Stop Please Cable Reply."

On the same day, Mr. Frederick J. Hellman, vice president of Wells Fargo, sent a telegram to Mr. R. C. Chen, head of the Bank's foreign department, which read as follows:

"In Order to Avoid any Possible Future Complications Suggest Your Shanghai Account Be Transferred to Account Reading Bank of China Foreign Department Hongkong. Best Regards."

To this wire, Mr. Chen replied the following day as follows:

"Seven One One Eight Two. Yours June Twenty-Seventh. We Agree to Transfer Our Shanghai Account to New Account Under Title of Quote Bank of China Foreign Department Hongkong Unquote."

Mr. Hellman then sent the following letter to Mr. Chen on June 29:

"This will acknowledge receipt of your wire of June 28, and in accordance with your instructions, under separate advice, we have transferred your Shanghai account to a new account reading — "Bank of China, Foreign Department, Hongkong." We thought it best to advise this move in case the Communists took some legal means to tie up these funds although I admit it is rather far-fetched as I do not believe they would have any standing in court in this country.
"Hoping that you and Mrs. Chen are well, and with kindest personal regards."

These communications were followed by a number of cables in the old testkey from Shanghai to the effect that the Communist Government of China was the only legal government and that they had taken over all government properties formerly held by the Nationalist Government.

The deposits made by the Bank and its various branches which were in the hands of Wells Fargo at the commencement of the controversy were as follows:

                  Head Office ................ $626,860.07
                  Hongkong Branch ............    9,923.08
                  New York Branch ............    2,525.63*
                  Tientsin Branch ............  156,739.28
                  Tsingtao Branch ............    5,036.58
                                                __________
                      Total .................. $801,084.64
                

On October 7, 1949, the Foreign Department of the Bank made a demand upon Wells Fargo for $600,000 of the funds in the Head Office Account which had at that time been transferred to the "Bank of China, Foreign Department, Hongkong" account. This demand was refused by the following cable, sent from Mr. Hellman to Mr. Chen:

"Replying Your Cable to Me Re Request for Transfer of $600,000 My Letter To You of June 29th was Sent Without Reference to Our Legal Counsel Who Now Advise It is Impossible to Make Transfer Voluntarily and Only After Suit Commenced by You and Judgment in Your Favor. We Are Aware of Bank of America\'s Decision but Again Our Attorneys Do Not Agree That We Can Take Similar Action. Personally Deeply Regret Inability to Comply With Your Request. Best Regards."

On November 9, 1949, the first suit (Appeal No. 13,412) was filed. The filing of this suit constituted a demand for the balance of $26,860.07 in the Head Office Account. Motions for summary judgment were filed and were taken under submission. Trial was set for December 29, 1949. On December 27, the Bank requested and received a continuance to February 1, 1950. On January 26, 1950, attorneys representing the Bank as purportedly constituted under the Communists appeared. The second suit (Appeal No. 13,413) was commenced on April 26, 1950. This second suit constituted a demand for the $174,224.57 which the Bank had on deposit with Wells Fargo through its various branches. The two cases were consolidated for hearing in the district court.

The court felt that the conditions in China and the state of the evidence were such that it could not at that time determine which group claiming to represent the Bank had lawful authority. Accordingly, on August 7, 1950, it entered essentially the same order in each of the actions. These ordered the cases continued sine die, denied the motion for summary judgment without prejudice, and provided that Wells Fargo was relieved of all claims for interest on the moneys provided that they be deposited with the registry of the court. See D. C., 92 F.Supp. 920. The sums of $626,860.07 and $171,724.57 were deposited in the registry of the court pursuant to these orders on August 14, 1950. Appeals taken to this court were dismissed without prejudice, and the cases were remanded to the district court that it might re-examine them in the light of changing world conditions and such additional evidence as might be made available to it by the respective parties. 9 Cir., 190 F.2d 1010. On remand, the court entered judgments, D.C., 104 F. Supp. 59, which (1) directed that the sums in the registry of the court, less the amounts allowed as costs and attorney's fees, be paid to the group representing the Nationalist Government; (2) directed that Wells Fargo be paid its out-of-pocket costs of $240.63 and attorney's fees of $10,000 as costs out of the moneys deposited in the registry of the court; and (3) denied the Bank interest on any part of the moneys. No appeal was taken from the first part of the judgments, but the Bank has appealed from the latter two parts.

These actions are diversity suits between a subject or an agency of a foreign state (Nationalist China) and a citizen of the United States. 28 U.S.C. § 1332(a) (2). The Bank is claiming that it was deprived of its money wrongfully and is seeking damages therefor. Under the Rules of Decision Act, 28 U.S.C. § 1652, the measure of damages must be determined by the laws of California. Carter Oil Co. v. McCasland, 10 Cir., 190 F.2d 887, certiorari denied, 342 U.S. 870, 899, 72 S.Ct. 113, 96 L.Ed. 654.

It is not disputed by Wells Fargo that the Bank is the owner of the moneys that it held and ultimately deposited with the court. Likewise it is not disputed that the moneys were due upon demand by the Bank; and that the general rule in California is that where money is due upon demand and a demand is made and refused, interest is allowable from the date of the demand. Anderson v. Pacific Bank, 112 Cal. 598, 603, 44 P. 1063, 32 L.R.A. 479; Black v. Vermont Marble Co., 137 Cal. 683, 685, 70 P. 776; Commercial Discount Co. v. Bank of America, 61 Cal.App.2d 721, 726, 143 P. 2d 484. What Wells Fargo does contend is...

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