American Reserve Ins. Co. v. China Ins. Co.

• Decision Date: 22 April 1948
• Citation: 79 N.E.2d 425,297 N.Y. 322
• Parties: AMERICAN RESERVE INS. CO. v. CHINA INS. CO., Limited.
• Court: New York Court of Appeals Court of Appeals

297 N.Y. 322

79 N.E.2d 425

AMERICAN RESERVE INS. CO.

v.CHINA INS. CO., Limited.

Court of Appeals of New York.

April 22, 1948.

Appeal from Supreme Court, Appellate Division, First Department.

Action by the American Reserve Insurance Company against the China Insurance Company, Limited, for reinsurance premiums, in which plaintiff procured a warrant of attachment against defendant's funds in the New York City branch of the Bank of China. From an order of the Appellate Division, 272 App.Div. 1011, 74 N.Y.S.2d 927, unanimously affirming an order of the Special Term, Hammer, J., denying defendant's motion to vacate the warrant, defendant appeals by permission of the Appellate Division, which certified a question as to whether the warrant should be vacated in view of arbitration provisions in a reinsurance treaty between plaintiff and defendant and absence of any arbitration award.

Order affirmed, and certified question answered in the negative. James B. Burke, of New York City, for appellant.

Arnold T. Koch, of New York City, for respondent.

CONWAY, Judge.

The plaintiff, a New York insurance company, entered into a treaty with the defendant, an insurance company organized and existing under and by virtue of the laws of the Republic of China, with its principal office at Shanghai, China, for the reinsurance of certain Chinese risks. Under a formula set up in the treaty, defendant was to pay to plaintiff certain premiumsand the plaintiff was to reimburse defendant for losses. Statements of account were to be rendered quarterly, and payment was to be made by the plaintiff if losses exceeded premiums due, or by the defendant if the accrued premiums exceeded losses. The defendant, in July, 1946, sent plaintiff a statement of account covering the period from April 1, 1945, to March 31, 1946. That statement showed a balance due plaintiff of 4,117,135.59 Chinese national currency dollars, the United States dollar equivalent of which was $95,318.67. In August, plaintiff requested payment. Defendant replied in October that it was prevented from paying the amount due, ‘not by our own unwillingness to remit to you your due balances, but solely by rulings promulgated by our government that foreign exchange will not be sanctioned by our government Banks for reinsurance premiums.’ The defendant also said: ‘Your credit balance is at present being retained by us, and we shall be glad to receive your advices.’

The treaty of reinsurance contained an arbitration clause, which, except for the provisions relating to the appointment of arbitrators, is as follows: ‘In the event of any question arising as to the meaning of or in any way connected with or relating to this Agreement whether before or after the termination of the notice under this Agreement such question shall be settled in an equitable rather than a legal manner and all differences shall be referred to * * * Arbitration in Chungking * * * The obtaining of an Award under the procedure herein provided shall be a condition precedent to any right of action in respect of any claim. The Arbitrators and Umpire will not have to undergo any judicial formalities and may abstain from following the strict rules of Law.’

Plaintiff brought suit in the Supreme Court for the balance due and procured an ex parte warrant of attachment against the property of the defendnat in the New York City branch of the Bank of China.

The defendant, appearing specially, moved to vacate and set aside the warrant. That motion was denied at Special Term and the Appellate Division affirmed, certifying the following question: ‘In view of the provisions for arbitration in the reinsurance treaty between the plaintiff-respondent and the defendant-appellant and the absence of any arbitration award should the warrant of attachment obtained herein by the plaintiff-respondent be vacated?’

Under sections 902 and 903 of the Civil Practice Act a plaintiff seeking an attachment must show, inter alia, that he has a cause of action. If plaintiff's complaint and affidavits fail to establish a prima facie cause of action, or if they clearly establish the plaintiff must ultimately be defeated, the defendant may vacate the warrant of attachment. Zenith Bathing Pavilion v. Fair Oaks S. S. Corporation, 240 N.Y. 307, 311, 148 N.E. 532, 533;Wulfsohn v. Russian Republic, 234 N.Y. 372, 377, 138 N.E. 24, 26;Lamborn v. Lake Shore Banking & Trust Co., 231 N.Y. 616, 132 N.E. 911;California Packing Corporation v. Kelly Storage & Distributing Co., 228 N.Y. 49, 53, 54, 126 N.E. 269;Bard-Parker Co. v. Dictograph Products Co., 258 App.Div. 638, 640, 17 N.Y.S.2d 588, 590, 591; 7 Carmody on New York Pleading and Practice, pp. 601, 621.

The defendant contended in the Appellate Division that there are matters of dispute concerning he meaning of the treaty of reinsurance, and that, under the arbitration clause above quoted, these must be referred to arbitration before any action may be brought under the treaty. Since the ‘obtaining of an Award * * * shall be a condition precedent to any right of action in respect of any claim’, defendant urges that plaintiff has not established a prima facie case in his complaint and affidavits, and accordingly, that the warrant of attachment should be vacated. The plaintiff urges that even if there be arbitrable matters, the only manner in which to enforce the right to arbitrate is through the procedure provided by the Legislature in the...