Bank of China v. Wells Fargo Bank & UT Co.

• Decision Date: 17 July 1950
• Docket Number: No. 29287.,29287.
• Citation: 92 F. Supp. 920
• Court: U.S. District Court — Northern District of California
• Parties: BANK OF CHINA v. WELLS FARGO BANK & UNION TRUST CO.

92 F. Supp. 920

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

No. 29287.

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

July 17, 1950.

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

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

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

GOODMAN, District Judge.

For several years prior to the institution of this action on November 9, 1949, Bank of China, Shanghai was a depositor in defendant Wells Fargo Bank & Union Trust Co. It now has to its credit the sum of $626,860.07.

The Bank of China is a corporation established in 1912 under the laws of China. Two-thirds of its stock is held by the Government of China, and the remainder by Chinese nationals. It is governed by a board of 25 directors, 13 appointed by the Government, and 12 elected by the private stockholders. The Articles of Association provide that the Head Office shall be maintained at Shanghai. Branch offices are maintained throughout the territorial mainland of China and abroad.

At the time that the Shanghai office of the Bank of China opened its account with Wells Fargo, and subsequently, facsimiles of signatures of those persons authorized to draw on the account were furnished Wells Fargo. Withdrawals were made from the account either by authenticated cable from the office in whose name the account was carried, or by letter carrying an authorized signature.

Near the end of April, 1949, when Chinese revolutionary forces neared Shanghai, the Head Office of the Bank of China was moved to Canton, presumably by the decision of the Board of Directors. On May 6, 1949, Wells Fargo received from the New York office of the Bank of China a copy of a cable from the Hong Kong office which canceled the cyphec keys previously used by the Shanghai office and stated that thereafter all orders for payment would be executed by the foreign department of the Hong Kong office. On May 24, 1949, Wells Fargo received a letter from the Head Office at Canton announcing the transfer of the Foreign Department of the Bank from Shanghai to Hong Kong and revising the list of facsimiles signatures of officers authorized to sign on behalf of the Bank. Subsequently the Head Office, itself, was transferred to Hong Kong.

On June 27, 1949, Wells Fargo received a cable from Shanghai informing it that the Bank of China had been taken over on May 28, 1949 by the Chinese Peoples Liberation Army and that the powers of its Board of Directors had been temporarily vested in East China Financial and Economic Affairs Administration. In this cable all specimen signatures then on file with Wells Fargo were revoked and Wells Fargo was directed to make no payment except by order from the Shanghai office. On July 21, 1949 a cable was sent to Wells Fargo from Shanghai announcing the appointment of Kung Ying Ping as the new General Manager of the Head Office of the Bank of China, and Chi Chao Ting as the new Manager of its Foreign Department.

On October 7, 1949, Wells Fargo received a cable from the Hong Kong office of the Bank of China directing that $600,000 be remitted to the New York office of the Bank of China. Upon inquiry by the New York office whether this order had been received, Wells Fargo telegraphed on October 15, 1949, that it had, but that the conflicting claims of corporate authority made payment impossible. Subsequently a further demand was made on Wells Fargo, presumably by the Hong Kong office, for payment of the entire balance of $626,860.07 held for the account of the Bank of China, Shanghai. Wells Fargo again refused to pay. On instruction of Hsi Te Mou, a managing director and the General Manager of the Bank, then in New York, T. Y. Lee, the manager of New York office, directed certain attorneys to file this action against Wells Fargo to recover the deposit. Suit was filed November 9, 1949 in the name of the Bank of China. Wells Fargo answered on December 5, setting up the conflicting claims of authority to receive payment. On December 9, 1949, a motion for summary judgment was filed by the attorneys who instituted the action. On December 19, the motion was heard and the cause was set for trial on December 29. Subsequently the trial was reset for February 1, 1950.

On January 26, 1950, a second group of attorneys, claiming that they were the only attorneys empowered to represent the Bank of China, filed a motion to dismiss this action or to substitute themselves as the attorneys of record. On January 30, 1950 when the motion was heard these attorneys appeared, and alleged the facts set out in the next paragraph as proof of their authority to speak for the Bank of China.

On May 28, 1949, the Bank of China, in so far as was physically possible, was taken over by the Chinese Peoples Liberation Army and the powers of its Board of Directors were temporarily vested in the East China Financial and Economic Affairs Administration. This Administration on June 6, 1949 appointed Kung Ying Ping General Manager and Chi Chao Ting and Chan Wu Assistant General Managers. After the overthrow of the Nationalist Government in China and the establishment of the Central Peoples Government in October, 1949, the powers of the Board of Directors of the Bank of China were transferred temporarily to the Financial and Economic Affairs Commission of the Central Government. Subsequently the Peoples Government, by virtue of the stock ownership to which it claimed to have succeeded as the successor of the Nationalist Government, appointed new government directors. On December 24, 1949, the Peoples Government announced that a meeting of the new directors of the Bank of China would be held in Peking upon the arrival of directors elected by the private stockholders. Also on December 24, 1949, the moving attorneys received a cable from Peking signed by Kung Ying Ping, Chi Chao Ting and Chan Wu, the recently appointed managers of the Bank, authorizing them to act as the attorneys for the Bank of China in the present action.

The attorneys for the émigré directors countered these allegations of fact with the assertion that the Nationalist Government now operating from Formosa is the only government of China recognized by the United States. This Court, they urged, cannot recognize any change in the management of the Bank of China resulting from acts of a government unrecognized by the United States.

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Controversies regarding property rights rendered uncertain by changing governments have produced a myriad of judicial decisions. These decisions present a confusing picture. No area of that picture is more murky than that depicting the effect of the recognition or non-recognition of a new government by the forum nation. Research reveals no case, with facts sufficiently similar to those of the present controversy, to be accepted as a controlling precedent. But some general principles may be deduced from prior decisions to shape...