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

• Decision Date: 17 March 1952
• Docket Number: No. 29287,29703.,29287
• Citation: 104 F. Supp. 59
• Court: U.S. District Court — Northern District of California
• Parties: BANK OF CHINA v. WELLS FARGO BANK & UNION TRUST CO.

104 F. Supp. 59

BANK OF CHINA v. WELLS FARGO BANK & UNION TRUST CO.

Nos. 29287, 29703.

United States District Court N. D. California, S. D.

March 17, 1952.

A. Crawford Greene, Morris M. Doyle, Owen Jameson, McCutchen, Thomas, Matthew, Griffiths & Greene, San Francisco, Cal., James B. Burke and Burke & Burke, all of New York City, for plaintiff.

Robert W. Kenny, Los Angeles, Cal., Martin Popper, and Wolf, Popper, Ross & Wolf, all of New York City, Benjamin Dreyfus, Francis J. McTernan, Jr., San Francisco, Cal., seeking to be substituted as attorneys for plaintiff.

Heller, Ehrman, White & McAuliffe, Lloyd W. Dinkelspiel, and Martin Minney, Jr., all of San Francisco, Cal., for defendant.

GOODMAN, District Judge.

Plaintiff, a Chinese corporation, filed these actions to recover the total sum of $798,584.64 on deposit in the defendant Bank. Defendant Bank filed answers asserting its willingness to pay the sum, but alleging that it was unable to do so because of conflicting claims of corporate authority to receive payment. Thereafter the attorneys for the plaintiff moved for summary judgment in plaintiff's favor. Later, a second group of attorneys, claiming that they were the only attorneys empowered to represent the plaintiff Bank of China, filed a motion to dismiss these actions or in the alternative to substitute themselves as the attorneys for the plaintiff. These motions were argued and submitted to the Court for decision.

On July 17, 1950, the Court filed its opinion¹ wherein it directed the disposition of the cause, in accordance with an order providing as follows:

"1. That the trial of this cause will be continued sine die;

"2. That the said motion for summary judgment is denied without prejudice;

"3. That said motion for dismissal or in the alternative for substitution of attorneys is denied without prejudice;

"4. That the defendant is hereby permitted to deposit in the Registry of this Court the said sum of $798,584.64, subject to the further order of this Court pending a decision herein on the merits;

"5. That the defendant Wells Fargo Bank & Union Trust Co., shall be and it is hereby relieved of any and all claims for interest for use of the fund or because of its failure or refusal to pay said fund to plaintiff Bank of China or any other claimant thereto which may now or hereafter be asserted against it by plaintiff or any other claimant to said fund or any part thereof, upon condition that it deposit the sum of $798,584.64 in the Registry of this Court within ten (10) days from the date hereof;

"6. That upon the defendant's depositing said sum as provided in paragraph 5 hereof, it shall be and is hereby discharged of and from all liability in the premises either to plaintiff Bank of China or to anyone claiming through or on behalf of plaintiff, and plaintiff and all those persons now before this Court who are assertedly acting in the name of plaintiff are restrained from enforcing or attempting to enforce any claim or claims against said defendant relating to said sum of money or said deposit or from taking any proceedings against defendant in relation thereto;

"7. That there is reserved to defendant the right to assert against said fund and to prove its costs and attorneys' fees reasonably incurred in this action."

An appeal was taken from the foregoing order. Subsequently the Court of Appeals dismissed the appeal without prejudice and remanded the cases to this Court, stating: "The District Court may deem it expedient to re-examine the case in the light of changing world conditions and such additional evidence as may be made available to it by the respective parties." 190 F.2d 1010, 1012. Thereafter plaintiff renewed its motion for summary judgment and the intervening attorneys renewed their motion to dismiss or in the alternative for their substitution as attorneys for plaintiff. The motions came on for hearing on November 20, 1951. Additional documentary evidence was presented; the motions were argued and submitted on briefs thereafter filed.

Pursuant to the direction of the Court of Appeals, this Court is now in a position to re-examine the cases in the light of the additional evidence and "changing world conditions."

Not only has additional documentary evidence been submitted, but there is no doubt that "world conditions" have materially changed since the Court's decision of July 17, 1950. On the present record, the Court can justly and properly decide these motions without further continuance sine die.

The question now presented is essentially one of law. The attorneys who initiated this action contend that the controlling corporate authority of the Bank of China is vested by its Articles of Association in the Nationalist Government of China. They note that the Bank of China was directed by representatives of that Government when the deposit in suit was made. The Nationalist Government, they point out, not only still exists, but is the only government of China recognized by the United States. The Bank of China, they assert, still functions under the control of the Nationalist Government at its present seat on the Island of Formosa and at branch offices in various parts of the world. The Bank of China, so functioning, is the plaintiff in this action, they say, and the rightful claimant to the deposit in suit.

The intervening attorneys contend that the Peoples Government of China, as the successor in fact to the Nationalist Government in continental China, has succeeded to the corporate rights of the Chinese State in the Bank of China. They allege that the operations of the Bank of China throughout the Chinese Mainland and in certain branch offices abroad are now conducted by new Government directors appointed by the Peoples Government in conjunction with the directors representing private stockholders. It is only through these banking operations, they argue, that the corporate purposes of the Bank of China are now being realized. Only through operations so conducted, they say, can the rights of the Chinese State as majority stockholder and those of the private investors be given any substance. Such corporate operations, the intervening attorneys urge, are the true indicia of rightful ownership of the deposit.

The issue before the Court has therefore been reduced to a comparatively narrow one. It appears from the record, that there are two Banks of China now functioning. The question is: Which Bank of China is legally entitled to the deposit in suit?² For convenience, the plaintiff will hereafter be referred to as the "Nationalist" Bank of China, and the Bank of China represented by the intervening attorneys as the "Peoples" Bank of China.

At the outset, the Court must determine whether these causes may finally be disposed of by summary judgment. Rule 56(c), F.R.C.P., 28 U.S.C. If there is "a genuine issue as to a material fact," summary disposition of the causes cannot be made. This does not mean that any factual dispute bars summary judgment. The dispute must be as to material facts; and the issue thus resulting must be "genuine."

Fairly summarized, the showings made for and against the motion for summary judgment follow:

For the "Nationalist" Bank of China:

The Articles of Association of the Bank of China show that it was established in 1912. It was reorganized in 1928 as an international exchange bank under special charter of the Nationalist Government, and its status was revised in 1935 by order of the Ministry of Finance. At that time one half of the Bank's capital stock was held by the Government and one half by private investors of Chinese nationality. In 1942 the status of the Bank was again revised by Government decree whereupon the Government invested additional funds and became the holder of two-thirds of the capital stock. Since the 1942 revision, 13 of the 25 authorized directors have been appointed by the Minister of Finance on behalf of the Government, and the remaining 12 have been elected by the private stockholders. Thirteen directors constitute a quorum. In addition to the power to conduct ordinary domestic and foreign banking, the Articles of Association entrust the Bank with the authority to issue government bonds in foreign markets and to handle public funds deposited abroad as well as government treasury funds. The Minister of Finance is authorized by the Articles to restrain any action of the Bank in violation of the Articles or detrimental to the Government. Duly authenticated certificates of the Minister of Finance of the Nationalist Government and the Secretary of the Bank of China set forth the governmental decrees and directors' resolutions by which, during the year 1949, the head office of the Bank was moved from Shanghai respectively to Canton, Chungking, and finally to Taipeh, Formosa, as the armies of the Nationalist Government retreated before revolutionary forces. Other certificates of the Secretary of the Bank and the Nationalist Minister of Finance attest to the ratification of these suits on behalf of the Nationalist Bank of China by the Board of Directors and the Nationalist Government, as majority stockholder.

For the "Peoples" Bank of China:

By affidavits, several of the intervening attorneys and one Frederick Field, a United States citizen resident in New York City who claims to be the attorney-in-fact for the Peoples Bank of China, attest to the following facts: In May of 1949, the Chinese Peoples' Liberation Army took possession of the physical plant of the Head Office of the Bank of China in Shanghai. The powers of the Board of Directors of the Bank in respect to its operations in the area controlled by the Peoples' Army were then vested in an organization denominated "East China Finance and Economic Administration." By October of 1949, the so-called "Peoples Government" had supplanted the Nationalist Government in dominion over the Chinese Mainland. The Peoples Government, claiming to have succeeded to the ownership of...