VISHIPCO LINE AND OTHERS v. THE CHASE MANHATTAN BANK

N.A.
United States Court of Appeals Second Circuit
No. 1015, Docket 81-7052
660 F.2d 854; 32 Fed. R. Serv. 2d (Callaghan) 982; 62 A.L.R. Fed. 501

See also VISHIPCO LINE AND OTHERS v. THE CHASE MANHATTAN BANK 2

Circuit Judge MANSFIELD:
Plaintiffs appeal from a judgment of the United States District Court for the Southern District of New York entered after a non-jury trial by Judge Robert L. Carter on December 5, 1980, dismissing their claims against Chase Manhattan Bank, N.A. (“Chase”), for breach of contract. The ten corporate plaintiffs Vishipco Line, Ha Nam Cong Ty, Dai Nam Hang Hai C.T., Rang Dong Hang Hai C.T., Mekong Ship Co. Sarl, Vishipco Sarl, Thai Binh C.T., VN Tau Bien C.T., Van An Hang Hai C.T., and Cong Ty U Tau Sao Mai are Vietnamese corporations which maintained piastre demand deposit accounts at Chase’s Saigon branch in 1975. Invoking diversity jurisdiction, they claim that Chase breached its deposit contracts with them when it closed the doors of its Saigon branch on April 24, 1975, to escape from the Communist insurgents and subsequently refused to make payment in New York of the amount owed. The individual plaintiff Ms. Nguyen Thi Cham is a Vietnamese citizen who purchased a six-month two hundred million piastre certificate of deposit (“CD”) from Chase’s Saigon branch on November 27, 1974, and claims that Chase is in breach for refusing to cash the CD in dollars in New York.

We reverse. Chase was clearly obligated to pay plaintiffs the amounts it owed them. None of the affirmative defenses raised by Chase to its conceded obligations to plaintiffs can be sustained. Under Rule 44.1, plaintiffs’ failure to introduce evidence of their right to recovery under Vietnamese law governing deposit obligations is not a ground for dismissal of their claims. The evidence was sufficient to give Tran Dinh Truong standing to represent the corporate plaintiffs in this lawsuit. The record does not support Chase’s claim that the new Vietnamese government became the successor in interest to the corporate plaintiffs or that the individual plaintiff Ms. Nguyen Thi Cham is disqualified from bringing her action because the funds used to buy her CD may not have been her own. Chase’s defenses of impossibility and force majeure fail because it remained liable to discharge obligations incurred through its branch, which were never assumed by the new Vietnamese government. The present worthlessness of the South Vietnamese piastre is no barrier to recovery. Under New York law which governs, the dollar value of Chase’s obligation to the corporate plaintiffs must be determined as of the date when it closed its branch without giving them the opportunity to withdraw sums owed them rather than the date of judgment. The individual plaintiff, Ms. Cham, is entitled to recover the value in dollars of her CD on its due date.

From 1966 until April 24, 1975, Chase operated a branch office in Saigon. Among its depositors were the ten corporate plaintiffs, which were principally engaged at that time in providing shipping services to the U.S. Government in Southeast Asia, and the individual plaintiff, who owned a 200 million piastre CD issued by Chase’s Saigon branch. Chase’s operations in Saigon came to an end at noon on April 24, 1975, after Chase officials in New York determined that Saigon would soon fall to the Communists. After closing the branch without any prior notice to depositors, local Chase officials balanced the day’s books, shut the vaults and the building itself, and delivered keys and financial records needed to operate the branch to personnel at the French Embassy in Saigon. Saigon fell on April 30th, and on May 1st the new government issued a communique which read as follows:

All public offices, public organs, barracks, industrial, agricultural and commercial establishments, banks, communication and transport, cultural, educational and health establishments, warehouses, and so forth together with documents, files, property and technical means of U.S. imperialism and the Saigon administration will be confiscated and, from now on, managed by the revolutionary administration.

Shortly thereafter, the French embassy turned over records from the Chase branch to the new government.

Tran Dinh Truong, who is a major shareholder of most, if not all, of the ten corporate plaintiffs and who represents them here, fled South Vietnam just prior to the Communist takeover, as did Nguyen Thi Cham, the individual plaintiff. After arriving in the United States, Truong and Cham demanded that Chase repay the piastre deposits made in Saigon, but Chase refused to do so. Invoking diversity jurisdiction Truong, acting under his powers of attorney, subsequently caused the plaintiffs to bring this action against Chase for breach of contract, seeking recovery of the dollar value of the piastre deposits held by its Saigon branch for them at the time it was closed, as well as the value of the certificate of deposit owned by Cham.

Chase, admitting that plaintiffs had made the alleged deposits in its Saigon branch, interposed a series of affirmative defenses as grounds for denial of recovery including claims that 1) the seizure of Chase’s former branch in South Vietnam by the dominant authorities in North Vietnam relieved Chase of any liability to plaintiffs, 2) Chase could not be held liable since the piastre accounts for which plaintiffs sought recovery were payable only in piastres at its Saigon branch, 3) plaintiffs lacked standing to assert their claims, and 4) payment of the claims would be illegal and is barred by Foreign Asset Control Regulations. With respect to the individual claim asserted by Nguyen Thi Cham, Chase added as a defense that the obligation of its Saigon branch had been assumed by the Government of Vietnam.

The evidence was undisputed that on April 24, 1975, the ten corporate plaintiffs held demand piastre deposits (or overdrafts) with Chase in the following sums:

Name of Account Balance

Vishipco Line VN $ 22,995,328
Ha Nam Cong Ty 9,053,016
Dai Nam Hang Hai C.T. 9,397,598
Rang Dong Hang Hai C.T. 8,974,556
Mekong Ship Co. Sarl 7,239,661
Vishipco Sarl (12,498,573)
Thai Binh C.T. 68,218
VN Tau Bien C.T. 5,925,249
Van An Hang Hai C.T. 87,439,199
Cong Ty U Tau Sao Mai 380,419

Chase also concedes that on November 27, 1974, it issued to Ms. Cham a CD in the sum of 200,000,000 Vietnamese piastres, payable on May 27, 1975, and that the CD bore interest at the rate of 23.5% per annum, payable at maturity.

The district court, after hearing the evidence without a jury, dismissed the action. It held that Vietnamese law controlled the disposition of the case, in light of the extensive contacts which the depository relationships had with Vietnam and its conclusion that “the real defendant in this case is not Chase in New York but Chase’s former branch bank in Saigon.”The court criticized plaintiffs for not presenting any evidence of Vietnamese law giving them a right to recover and noted that such a failure had properly been held to justify dismissal in the past. However, it reached the merits because Chase, in support of its affirmative defenses, had “shouldered plaintiffs’ burden”and put in some evidence of Vietnamese law relating to those defenses.

Chase first argued that Tran Dinh Truong lacked standing and capacity to bring this action in the name of the corporate plaintiffs. The court found, after hearing expert testimony on the subject, that under Vietnamese law only the manager or one holding a general power of attorney could sue on behalf of a Vietnamese corporation. Truong, as manager of Dai Nam Hang Hai C. T., had standing to sue on its behalf, but could only do so for the other nine plaintiff corporations if he could show that he held valid general powers of attorney from them. Plaintiffs did introduce into evidence two sets of powers of attorney, upon which they relied. The first set, involving four of the corporate plaintiffs (Ha Nam Cong Ty, Dai Nam Hang Hai C. T., Rang Dong Hang Hai, and Vishipco Sarl), was issued on October 22, 1970, in a letter to the Director of Chase’s Saigon branch, who had requested that the five corporations then entering into a credit agreement with Chase (one of which, Cuu Long Hang Hai C. T., is not a party here) authorize Mr. Truong to act on their behalf. This letter, signed by the corporate shareholders, contained the following language:

All those above-mentioned companies are founded (sic) 100% by our capital. We confirm that Mr. TRAN DINH TRUONG is designated as General Director of these Companies with unlimited general power to deal and borrow and lend monies. Signing contracts with your Bank MR. TRAN DINH TRUONG is fully empowered to sign alone without needing a second signature to use these accounts as well as to negotiate the credit provision for the above-mentioned companies.

The second set of powers of attorney, involving six of the corporate plaintiffs (Ha Nam Cong Ty, Rang Dong Hang Hai C. T., Mekong Ship Co. Sarl, Thai Binh C. T., VN Tau Bien C. T., and Van An Hang Hai C. T.), was executed and dated April 1, 1975, and each granted Mr. Truong authority “to act on behalf of the company, with full power, in the management and operation of the said company.”While we have been unable to locate in the record any power of attorney relating specifically to Vishipco Line, there is evidence in the October 22, 1970, letter to Chase that the Vishipco Line account was a global account owned collectively by the other corporate plaintiffs, and therefore could presumably be drawn upon by them acting jointly.

Despite these written powers of attorney the court found that Truong did not have authority to bring this action because he testified that his powers had not been published in the official gazette, as required by Vietnamese law. According to the court, the absence of publication made “Truong’s purported authority … subject to challenge by shareholder(s) of the corporation and the manager.”The court therefore held that Truong only had standing to sue on behalf of Dai Nam Hang Hai C.T. Even this possibility was eliminated, however, when the court went on to find that

the communist regime in Vietnam has taken over the maritime transport industry of which the plaintiff corporations were a part, and thus, the Vietnamese government is the successor in interest to plaintiff corporations (reference omitted). Indeed, the plaintiff corporations no longer have any legal existence since under current Vietnamese law private maritime corporations have been abolished.

Since Dai Nam Hang Hai C.T., in the district court’s view, had been abolished by the new regime, Judge Carter held that Truong could not bring suit on its behalf either. “The plaintiff corporations are no longer viable entities and have no standing to sue in this court.”

The court then addressed Chase’s defense of impossibility and force majeure, and found that under Vietnamese law a bank would not be held liable to a depositor for losses suffered because of events of the type which forced Chase to close the doors of its Saigon branch on April 24th. It further held that the corporate plaintiffs’ claims were flawed by their failure to show that a valid demand to withdraw funds had been made prior to April 24th. Moreover, according to the court, all property abandoned in Vietnam by those who fled in advance of the communists was confiscated by the new government, and the act of state doctrine put that confiscation beyond judicial examination.

As far as plaintiff Cham’s claim was concerned, the district court held that Chase could not refuse to pay merely because the original purchase was made by Cham with funds which were not her own. It went on to hold, however, that Chase was not required to pay Cham before April 24, 1975, since the CD did not mature until some weeks later, and that by the time it had matured Chase had been replaced as debtor by the state, which now had the sole authority to decide what if any part of her deposit Cham could claim. In the district court’s words: “The communist regime has appropriated the assets of Chase’s Saigon branch and confiscated Cham’s property. She has no claim against defendant.”

Author: international