Edelmann v. Chase Manhattan Bank, N.A.

Decision Date10 March 1988
Docket NumberNo. 87-1885,87-1885
Citation861 F.2d 1291
PartiesAna Maria EDELMANN, et al., Plaintiffs, Appellants, v. The CHASE MANHATTAN BANK, N.A., Defendant, Appellee. . Heard
CourtU.S. Court of Appeals — First Circuit

Guy L. Heinemann, New York City, with whom Edelmiro Salas Garcia, Santurce, P.R., was on brief, for plaintiffs, appellants.

Jay A. Garcia Gregory with whom Fiddler, Gonzalez & Rodriguez, San Juan, P.R., was on brief, for defendant, appellee.

Before BOWNES and BREYER, Circuit Judges, and WISDOM, * Senior Circuit Judge.

WISDOM, Senior Circuit Judge.

This case involves the liability of a multinational New York bank for deposits in a foreign branch expropriated by the country The plaintiffs in this case originally lived in Cuba. In December 1958, on the eve of Fidel Castro's final military victory over Fulgencio Batista, the plaintiffs, concerned about the revolution's threat to their property, expressed their fears to the officials of a Cuban branch bank of Chase Manhattan. They purchased from branch banks of Chase Manhattan Bank in Cuba ten "fixed term" bearer certificates of deposit amounting to 250,000 Cuban pesos, the equivalent of $250,000. Eight certificates were payable on "demand" (the plaintiffs' translation) or on "presentation" (the defendants' translation) on June 29, 1959 and two certificates on June 30, 1959. According to the plaintiffs, officers of the bank pointed out that Chase was an American bank with its head office in New York and assured them that the certificates were "like American money", constituted a "guaranteed investment" of their funds, and that United States dollars would be paid to them upon demand and surrender of the certificates to any branch of Chase throughout the world. Allegedly, Chase guaranteed its operations in Cuba with the "capital of the whole bank" and used logos including the map of the United States and the globe. Chase's officers made similar representations to other wealthy Cubans. 1

in which the branch was located, when the expectation of the parties was that the certificates of deposit were guaranteed by the bank as a whole and would be paid in dollars at any branch of the bank anywhere in the world. In the circumstances of this case, we hold that New York law applies and that the district court erred in granting the bank's motion to dismiss.

Chase Manhattan now sings a different tune: the certificates are not "like American money". Indeed, Chase says, the certificates are not even certificates of deposit as we know them in the United States. Chase moved for judgment on the pleadings on the ground that the claim had prescribed. The district court decided that under the "dominant contacts" doctrine Cuban law was applicable. 2 It then agreed with Chase that under Cuban law, as under Puerto Rican law, the certificates were "a variant of a promissory note", subject to prescription of 15 years 3 from their "maturity"; that is, June 29/30, 1959. Because we conclude that the certificates are governed by New York law and are certificates of deposit as defined in the Uniform Commercial Code, we reverse the judgment of the district court and remand the case for further proceedings consistent with this opinion.

I.

Ana Maria Edelmann and her husband, Joseph Saif, bought a total of ten certificates, eight from Chase's main branch in Havana, and two from a smaller branch in Marianao. They paid for the certificates in Cuban pesos. The peso was then pegged to the dollar, interchangeable with the dollar, and the certificates were redeemable, as Chase officials promised, in U.S. dollars at the parent bank in New York or at any Chase branch in the world. 4 At some point Edelmann and Saif lost one of their ten certificates.

The language on the face of the nine existing certificates is identical, except that the "fixed term" is June 29, 1959, on seven of the certificates and June 30, 1959, on the two others. 5 The parties disagree about how best to translate certain language in

the certificates, 6 but the following assertions are indisputably made on each certificate:

1) that the certificate is a certificate of deposit;

2) that a deposit of $25,000 has been made with Chase to be held in favor of the bearer of the certificate;

3) that the certificate is issued under authority given to Chase by Cuban law;

4) that Chase will pay $25,000 to the bearer of the certificate, with interest at 3-1/2 percent on June 29/30, 1959, upon presentation of the certificate; and

5) that the deposit represented by the certificate can be transferred by transfer of the certificate itself.

The certificates, as we read them, obligate the bank to pay interest only until the due date ("fixed term") June 29 or 30, 1959. 7

Edelmann and Saif did not present their certificates to Chase for payment on June 29 and 30, 1959. Early in September of that year, they fled from Cuba, taking their certificates with them. On September 17, 1960, the Castro regime, through the National Bank of Cuba, expropriated all the deposits and assets of Chase's branch banks in Cuba. 8

On April 3, 1985, the plaintiffs presented the certificates to a Chase branch bank in Santurce, Puerto Rico, and demanded repayment of their principal plus accrued interest. 9 Chase refused to honor the certificates. Edelmann and Saif then brought this suit in the federal district court in Puerto Rico in May 1985. At this point, it is worth noting that title to a deposit covered by a certificate of deposit passes to the bank and the funds are commingled with the bank's other funds. 10 Speaking generally, but here by explicit agreement, the bearer's presentation and surrender of the bearer certificate to the bank is an express condition to the bank's obligation to pay the principal and accrued interest due on the certificate. 11

II.

Both parties to this appeal acknowledge, as they must, that a limitations term, prescription in the civil law, begins to run from the time the cause of action has been established. 12 The central question here is: When did Edelmann and Saif first acquire a cause of action against Chase for recovery of their deposits? Chase answers that it was June 29/30, 1959, the first day that Edelmann and Saif could have collected their money under the terms of the certificates. Edelmann and Saif insist that they had no cause of action against Chase until April 3, 1985, the day they presented the certificates for payment to the branch bank in Santurce and were denied payment.

There are several approaches to the resolution of this case. The approach we take in resolving this dispute depends on the law that governs the interpretation of the certificates. There are three possibilities that merit discussion: Cuban law, Puerto Rican law, and New York law. 13 In making our choice, we are guided by conflict of law principles that are themselves a matter of federal common law. This is so, as the district court correctly determined, because our jurisdiction in this case is based on the presence of a federal question. 14

The district court stated that to establish which law is to be applied in a 12 U.S.C. sec. 632 case "we need to consider the (a) nature of the transaction; (b) intention of the parties to the contract as to whether any particular law is to be applied; (c) place where the contract was entered into, and (d) place where it may reasonably be expected to be performed. The court must weigh all the criteria to determine the forum that has the dominant contacts with the transaction." 15 This is a fair formulation of most of the pertinent considerations in determining the law to be applied in this case. Unfortunately, the court did not consider criteria (b) and (d). Instead, the district court, after referring to the fact that at the time the certificates were issued the Edelmanns resided in Cuba, concluded, without more, that the law of the state with "most contacts with the contract governs"; that the "law closest to the dominant contacts of the transaction was Cuban law". We disagree.

(a) The nature of the transaction depends on what law applies. Under New York law, or American law generally, the instrument was a negotiable certificate of deposit. The language of the instrument is that of an American certificate of deposit, not that of a promissory note. Conceivably, for purposes of giving effect to the contract in a civil law jurisdiction, the transaction could be treated as an obligation of the bank, perhaps resembling in some respects a promissory note, to pay the amount evidenced by the certificates on their surrender by the bearer.

(b) The intention of the parties is clear. The certificates were to be presented at any branch of Chase in any part of the world except Cuba. As the Bank's manager told the plaintiff, the certificates were like American dollars presumably subject to American law.

(c) The residence of the plaintiffs in Cuba, where the contract was entered into, loses significance when the purpose of the agreement is to have the most crucial provision, payment, performed in another country by the promissor or debtor headquartered in New York. The plaintiffs (d) The place where the contract may reasonably be expected to be performed was a branch bank not in Cuba. Because a branch bank, unlike a subsidiary corporation, is an agent of its principal, the ultimate place of performance was, in all likelihood, in Chase's main office in New York. 16

unquestionably intended to leave Cuba, and they did, shortly after converting part of their wealth into what appeared to be the equivalent of United States dollars.

For a refinement of the choice of law analysis, we turn to the Restatement (Second) of Conflict of Laws. According to the Restatement, in the absence of guidance from Congress, the factors we must consider in choosing the applicable rule of law in this case include:

(a) the needs of...

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