Republic of China v. National Union Fire Ins. Co.
| Decision Date | 29 April 1957 |
| Docket Number | 3510-3514.,No. 3507,3508,3507 |
| Parties | THE REPUBLIC OF CHINA, China Merchants Steam Navigation Company, Limited, and The United States of America, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, Pennsylvania, and American International Underwriters, Limited. (seven cases). THE S.S. HAI HSUAN. THE S.S. TENG KENG. THE S.S. CHENG KUNG. THE S.S. CHIAO JEN. THE S.S. HUNG CHANG. THE S.S. TSAI ER. THE S.S. LIN SHEN. |
| Court | U.S. District Court — District of Maryland |
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
Kirlin, Campbell & Keating, New York City, and Washington, D. C. (Ronald A. Capone, Washington, D. C., advocate), and Ober, Williams, Grimes & Stinson, Baltimore, Md. (William A. Grimes, Baltimore, Md., advocate), proctors for libelants, The Republic of China and China Merchants Steam Nav. Co., Ltd.
George Cochran Doub, Asst. Atty. Gen., Walter E. Black, Jr., and Leon H. A. Pierson, U. S. Attys., James H. Langrall, Asst. U. S. Atty., Baltimore, Md., Allan Briggs, Atty., Export-Import Bank, and John Beach, Atty., Maritime Admn., Washington, D. C. (Thomas F. McGovern, Admiralty & Shipping Section, Washington, D. C., advocate), proctors for libelant, The United States.
Bigham, Englar, Jones & Houston, New York City (Martin P. Detels and Vincent L. Leibell, Jr., New York City, advocates), and Lord, Whip & Coughlan, Baltimore, Md. (George W. P. Whip, Baltimore, Md., advocate), proctors for respondents.
These suits are brought on (A) marine risk and (B) war risk policies to recover for the loss of seven vessels which had been sold by the United States to the Government of the Republic of China (Nationalist Government), subject to mortgages to secure the unpaid balances of purchase price, and were being operated by the Nationalist Government through China Merchants Steam Navigation Company (CMSN), a government-owned corporation. Most of the masters, officers and crews of the seven vessels defected to the Chinese communist regime in January, 1950, ran up the red flag on their respective ships, and held them for the Communist Government. They had previously disobeyed the orders of the owner of the ships by entering or remaining in a British port and refusing to sail to Taiwan or Japan.
The insurance, i. e., the policies taken together, covered inter alia losses due to barratry of the masters or mariners or to the consequences of civil war, but excluded capture and seizure. The principal question in each case is whether the loss was caused by "barratry", or by "seizure", or by both, as those terms are used and understood in the marine insurance field. The parties are agreed that none of the vessels was "captured".
Libelants contend that the losses were caused by a series of barratrous acts, which were committed for various economic and other personal reasons, or, in the alternative, as a consequence of the civil war in China; that the term "seizure" as used in marine insurance policies, does not include the defection of the master or of the mariners, but requires proof of force, used or threatened, by the armed services or representatives of some government. Alternatively, libelants contend that if both barratry and seizure were causes of the loss, recovery may be based on barratry.
Respondents contend that the losses were not caused by barratry, but by seizure of the vessels; that a loss caused by seizure was excluded from coverage, even though barratrous acts preceded the seizure and might also be considered a proximate cause of the loss. Respondents also contend that libelants did not do all they were required to do under the sue and labor clause in the policies, and that the United States should have accepted an alleged offer to pay off the mortgage on one of the ships.
I have made and filed findings of facts based upon nearly 300 proposed findings submitted by libelants and by respondents. The following narrative statement, supplemented by additional facts set out in the discussion of the several points of law, sets out the essential facts.
The Republic of China was proclaimed in 1911. For more than a decade thereafter, war lords controlled many of the provinces, but during the middle 1920's the Kuomintang, under the leadership of Chiang Kai-shek, established a strong national government at Nanking. Following World War II, Taiwan (Formosa), long a part of the Chinese empire, but surrendered to Japan after the Sino-Japanese war in 1904, was reincorporated into China as a province.
The Chinese communist movement was relatively unimportant until 1937, when it became active in organizing resistance to Japan in northern China. After World War II, communist armies dominated the countryside as far south as the Yangtse, although Peiping, Shanghai and Nanking remained in the control of the Nationalist Government, as well as most of southern China. The communist regime claimed to exercise governmental authority over northern China. Early in 1949, the communist armies started driving southward, and as of April 19, 1949, a state of civil war existed. The Nationalist Government, under increasing pressure from communist forces, moved its capital from Nanking to Canton in April, 1949; thence it moved to Chungking in October, to Chengtu in November, and to Taipei, Taiwan, on December 9, 1949. By that time nearly the whole mainland of China was under the control of communist forces, acting for the rival de facto government, which on October 1, 1949, had proclaimed itself the government of China under the name of the Central People's Government of the People's Republic of China, and had purported by decree to dismiss the ministers of the Nationalist Government and to appoint new ones.
The United States has never recognized the Communist Government as a de jure government, but continues to recognize the Nationalist Government, which is a member of the United Nations, as the only de jure government of China.
As of midnight January 5/6, 1950, the British Government recognized the Communist Government as the de jure government of China. At the same time, it ceased to recognize the Nationalist Government as a de jure government. Following the action by the United Kingdom, a number of other European and Asiatic nations extended de jure recognition to the Communist Government.
On various dates during 1946 and 1947, the United States sold to "the Government of the Republic of China" a number of vessels, including the seven involved in these suits. At the same time, the Government of the Republic of China executed and delivered to the United States, represented by the Maritime Commission (Maritime) in certain instances, the Export-Import Bank of Washington (Eximbank) in others, a note and a preferred ship mortgage or hypothecation to secure deferred payments of the purchase price of each vessel. Under the terms of the mortgages, security title was vested in the United States. Events of default occurred in October, 1949, and the mortgages were declared in default by Maritime and Eximbank on or about January 17, 1950; this action gave the United States the right to retake the said vessels.
As of December 31, 1956, the balances due on the several notes, with interest, were as follows:
Total Interest
Outstanding (3½% to date
Balance of default declared, Total Principal
Ship Principal 6% thereafter) & Interest
---- ----------- ------------------- ---------------
Eximbank
--------
Lin Shen $416,100.00 $185,329.80 $601,429.80
Teng Keng $390,640.00 $173,989.99 $564,629.99
Tsai Er $390,640.00 $173,989.99 $564,629.99
Maritime
--------
Cheng Kung $313,200.00 $138,110.72 $451,310.72
Chiao Jen $313,200.00 $138,553.75 $451,753.75
Hung Chang $313,200.00 $137,890.67 $451,090.67
Hai Hsuan $373,880.00 $165,737.29 $539,537.29
CMSN
Until September, 1948, the vessels were operated by an agency of the Nationalist Government. In that month the agency was reorganized into a limited stock company and was renamed "China Merchants Steam Navigation Company, Ltd." (CMSN). At all material times, CMSN was and is owned by the Government of the Republic of China (the Nationalist Government), and has functioned as an agency or organ of that government under the control and supervision of the Ministry of Communications. Shoreside personnel, as well as the masters, officers and crews of CMSN, are considered public functionaries under Chinese law.
Prior to May, 1949, the head office of CMSN was located at Shanghai. By government order, it was then transferred to Taipei, Taiwan. All CMSN employees knew of the transfer. W. H. T. Wei was General Manager of CMSN, and had his office in Taipei.
Until January 13, 1950, CMSN maintained a branch office in Hong Kong. Its marine superintendent also had his office there. The trading department of CMSN was located at Canton until October, 1948, when Tsao Sin-Tse, the head of the trading department, moved that office and most of his staff to Hong Kong.
In 1946 and 1947, when the vessels were acquired from the United States, they were registered at the Port of Shanghai. After the transfer of the head office of CMSN to Taipei, the port of registry of each of the vessels was transferred to a port in Taiwan. These transfers were made between July and November, 1949.
The insurer under all of the policies was National Union Fire Insurance Company of Pittsburgh. American International Underwriters, Ltd., and its associated and affiliated companies, referred to herein...
To continue reading
Request your trial
-
Pan American World Airways, Inc. v. Aetna Cas. & Sur. Co.
...Feeney & Meyers v. Empire State Insurance Co., 228 F.2d 770, 771 (10th Cir. 1955); Republic of China v. National Union Fire Ins. Co., 151 F.Supp. 211, 235, 237 (D. Md.1957) (Thomsen, C. J.), rev'd in part on grounds reinforcing this principle, 254 F.2d 177 (4th Cir.), cert. denied, 358 U.S.......
-
Bender Shipbuilding & Repair Co., Inc. v. Brasileiro
...in part, 673 F.2d 1314 (4th Cir.), cert. denied, 456 U.S. 945, 102 S.Ct. 2012, 72 L.Ed.2d 468 (1982); Republic of China v. National Union Fire Ins. Co., 151 F.Supp. 211, 231 (D.Md.1957), aff'd in part, rev'd in part, 254 F.2d 177 (4th Cir.), cert. denied, 358 U.S. 823, 79 S.Ct. 38, 3 L.Ed.2......
-
U.S. Fire Ins. Co. v. Cavanaugh
...cause, no recovery is possible when the direct cause of the loss was excluded by warranty. See, e.g., Republic of China v. National Union Fire Insurance Co., 151 F.Supp. 211 (D.Md.1957), aff'd, 254 F.2d 177 (4th Cir.), cert. denied, 358 U.S. 823, 79 S.Ct. 38, 3 L.Ed.2d 64 (1958); Nautilus V......
-
Reliance Ins. Co. v. McGrath
...Cir.1960); American Merchant Marine Ins. Co. v. Liberty Sand & Gravel Co., 282 F. 514, 522 (3rd Cir.1922); Republic of China v. National Union Fire Ins. Co., 151 F.Supp. 211, 238; 1957 A.M.C. 915 (D.Md.1957). 12. Defendant's failure, as admitted in his signed statement to Capt. Rabun, to pr......