REPUBLIC OF CHINA v. MERCH. F. ASSUR. AG, N.Y

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Docket Number

No. 5527.

Attorney(S)

W.Y. Char and H.D. Rodger, both of Shanghai, China, and Cullinan Hickey and Eustace Cullinan, all of San Francisco, Cal., for appellant.

Judges

Frank H. Rudkin

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Smart Summary

Factual and Procedural Background

The Republic of China sued to recover a fire loss under an insurance policy issued to the Chinese Government Telephone Administration, a department of the Republic of China. After the policy was issued and the loss occurred, the National Government captured Wuchang and assumed custody of the insured property and policy. [1]

The insurer appeared specially and filed a plea in abatement, arguing that the plaintiff was an unrecognized revolutionary organization without legal capacity to sue. The United States Court for China sustained the plea and dismissed the action. The Republic appealed. [2][3][1]

Legal Issues Presented

Whether the National Government of China had legal capacity to sue in United States courts after recognition by the Executive Department of the United States. [1][4][5]
Whether the plaintiff was entitled to judgment on the merits or only to reversal and remand for further proceedings. [6][7]

Arguments of the Parties

Defendants' Argument

The insurer argued that the plaintiff was not the Republic of China but an unrecognized revolutionary organization known as the National Government of China, and therefore lacked legal capacity to sue. [1]

Appellant's Argument

The Republic argued that it was entitled not only to reversal but also to judgment in its favor. [6]

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Jones v. United States, 137 U.S. 202, 11 S. Ct. 80, 34 L. Ed. 691	The court must take judicial notice of a material change in relevant circumstances occurring after trial. [4]	The court took judicial notice of the United States Executive Department's subsequent recognition of the National Government of China. [4][5]

Court's Reasoning and Analysis

The court recognized the general rule that United States courts cannot recognize a government originating in revolution or revolt until recognition by the political department of the United States Government. Because no such recognition existed when the lower court tried the case, dismissal was initially supportable. [4]

After the trial, however, circumstances materially changed. The United States Executive Department entered into a treaty of commerce with the National Government of China and its accredited representative, and the Secretary of State advised the court that the government's minister had been officially received. [5]

The court concluded that these actions constituted sufficient recognition. It further noted that recognition may be implied through negotiations, diplomatic exchanges, official reception of diplomatic agents, consular relations, or other conventional relations. [5]

Because recognition resolved the capacity issue, the judgment of dismissal had to be reversed. The court declined to enter judgment for the Republic because the plea in abatement had been sustained at the threshold and the defendant had never been required to answer the merits. [6]

The same disposition was ordered in the related action against the Great American Insurance Company because it involved the same question and record. [7][8]

Holding and Implications

REVERSED AND REMANDED. The court held that subsequent recognition by the Executive Department established the National Government of China’s legal capacity to sue, but the case had to return to the lower court for further proceedings rather than result in immediate judgment for the Republic. [5][6][7]

The reversal was without costs to either party because the basis for reversal arose after the lower-court trial. The related Great American Insurance Company action received the same disposition. No broader implication was discussed, and the decision did not enter judgment on the insurance claims' merits. [7][8]

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REPUBLIC OF CHINA v. MERCHANTS' FIRE ASSUR. CORPORATION OF NEW YORK. SAME

RUDKIN, Circuit Judge.

The Republic of China commenced an action in the United States Court for China to recover a fire loss under a policy issued by the Merchants' Fire Assurance Corporation of New York to the Chinese Government Telephone Administration at Wuchang, a department of the Republic of China, covering a building occupied by the Telephone Administration. After the policy issued and after the fire loss occurred, the military forces of the national government captured the city of Wuchang and became the custodian of the policy and the property covered thereby. At the time of the commencement of this action, the National Government was in control in 15 of the 18 provinces of China, comprising about three-fourths of its total area, but had not as yet been recognized by the United States. The insurance company appeared specially in the court below, and filed a plea in abatement on the ground that the plaintiff was not the Republic of China, but was a revolutionary organization known as the National Government of China, unrecognized by the government of the United States of America, and was without legal capacity to sue. The plea in abatement was sustained, and from the judgment of dismissal this appeal is prosecuted.

The courts of this country cannot recognize the existence of a government which originates in revolution or revolt, until it has first been recognized by the political department of the government, and inasmuch as there had been no such recognition of the National Government of China at the time of the trial in the court below, it would seem to follow that that government had no existence in contemplation of law and no legal capacity to sue in the courts of this country. But since the trial below, there has been a material change in the situation, and of this change we must take judicial notice. Jones v. United States, 137 U.S. 202, 11 S. Ct. 80, 34 L. Ed. 691.

On July 25, 1928, the Envoy Extraordinary and Minister Plenipotentiary to China, appointed by the President of the United States, and the Minister of Finance, appointed by the National Government of the Republic of China, entered into a treaty of commerce; and while this treaty has not as yet been ratified by the Senate, it contains a clear recognition by the Executive Department of this government of both the National Government of the Republic of China and of its accredited representative. This recognition by the Executive Department would seem to satisfy the requirements of the law; but, if this is not enough, we have been advised by a telegram from the Secretary of State that the Minister Plenipotentiary and Envoy Extraordinary of the National Government of China has been officially received by this government, so that the recognition of the former is now settled beyond question. "Recognition is not necessarily express; it may be implied, as when a state enters into negotiations with the new state, sends its diplomatic agents, receives such agents officially, gives exequaturs to its consuls, forms with it conventional relations." Moore's Digest of International Law, p. 73.

The judgment of the court below must therefore be reversed. The appellant contends that it is entitled to a reversal and to a judgment in its favor; but with this latter contention we are unable to agree. The plea in abatement was sustained at the threshold, and the defendant was never called upon to answer to the merits.

The judgment will therefore be reversed, and the cause remanded for further proceedings. Inasmuch as the cause of reversal arose since the trial in the court below, the reversal will be without costs to either party.

A similar order will be made in Republic of China v. Great American Insurance Company, involving the same question and submitted on the same record.