Citibank v. Wells Fargo Asia Limited

• Decision Date: 29 May 1990
• Docket Number: No. 88-1260,88-1260
• Citation: 109 L.Ed.2d 677,495 U.S. 660,110 S.Ct. 2034
• Parties: CITIBANK, N.A., Petitioner v. WELLS FARGO ASIA LIMITED
• Court: U.S. Supreme Court

495 U.S. 660

110 S.Ct. 2034

109 L.Ed.2d 677

CITIBANK, N.A., Petitioner

v WELLS FARGO ASIA LIMITED.

No. 88-1260.

Argued March 19, 1990.

Decided May 29, 1990.

Syllabus

Respondent Wells Fargo Asia Limited (WFAL), a Singapore-chartered bank wholly owned by a United States-chartered bank, agreed to make two time deposits in Eurodollars—i.e., United States dollars that have been deposited with a banking institution located outside the country, with a corresponding obligation on the part of that institution to repay the deposits in United States dollars—with Citibank/Manila, a branch of petitioner Citibank, N.A. (Citibank), which is chartered in the United States. The parties received telexes detailing the deposits' terms from the money broker who had arranged them. The parties also exchanged slips confirming the deposits and stating that repayment was to occur in New York. Citibank/Manila refused to repay the deposits when they matured because a Philippine government decree prevented it from repaying them with its Philippine assets. WFAL commenced suit in the District Court, claiming that Citibank in New York was liable for the funds deposited with Citibank/Manila. Finding that there was a distinction between "repayment," which refers to the physical location for transacting discharge of the debt, and "collection," which refers to the location where assets may be taken to satisfy the debt, the court determined that the parties' confirmation slips established an agreement to repay the deposits in New York, but that there was neither an express agreement nor one that could be implied from custom or usage in the Eurodollar market on the issue of where the deposits could be collected; that no provision of Philippine law barred an agreement making WFAL's deposits collectible outside Manila; that, in the absence of such an agreement, New York law, rather than Philippine law, applied and required that Citibank be found liable for WFAL's deposits with Citibank/Manila; and that WFAL could look to Citibank's worldwide assets for satisfaction of its deposits. The Court of Appeals affirmed on different grounds. It concluded that the District Court's finding that the parties had agreed to repay WFAL's deposits in New York was not clearly erroneous under Federal Rule of Civil Procedure 52(a) and reasoned that, under general banking law principles, if parties agree that repayment of a foreign bank deposit may occur at another location, they authorize demand and collection of the deposit at that location. Thus, it held that WFAL was entitled to collect its deposits out of Citibank's New York assets.

Held:

1. The Court of Appeals' factual premise that the parties agreed to permit collection from Citibank's New York assets contradicts the District Court's factual determinations, which are not clearly erroneous. Pp. 668-672.

(a) The District Court distinguished an agreement on "repayment" from one respecting "collection" and, in quite specific terms, found that the only agreement the parties made referred to repayment. However, while saying that this finding was not clearly erroneous, the Court of Appeals appears to have viewed repayment and collection as interchangeable concepts, not divisible ones. In responding to an argument that a bank's home office should not bear the risk of foreign restrictions on the payment of assets from the foreign branch where a deposit has been placed, unless it has an express agreement to do so, the Court of Appeals stated that its affirmance of the District Court's order was based on just such an agreement. Furthermore, to support its holding, the court relied on authorities that all turned upon the existence, or nonexistence, of an agreement for collection. Pp. 668-670.

(b) The District Court's findings—that the parties agreed on repayment, but not collection—were not clearly erroneous. While the confirmation slips are explicit that repayment would take place in New York, they do not indicate an agreement that WFAL could collect its deposits from Citibank's New York assets. In fact, their language seems to negate such an agreement's existence. The money broker's telexes also speak in terms of repayment and do not indicate any agreement about where WFAL could collect its deposits if Citibank/Manila failed to remit repayment. Moreover, a fair reading of the contradictory testimony at trial supports the conclusion that the parties failed to establish a relevant custom or practice in the international banking community from which it could be inferred that they had a tacit understanding on this point. Pp. 670-672.

2. The case is remanded for the Court of Appeals to determine whether, in the absence of an agreement, collection is permitted by rights and duties implied by law. On remand, the court must determine which law applies and the content of that law. It is not a fair or necessary construction of the Court of Appeals' opinion to say that it relies on state law. Alternatively, if the Court of Appeals is of the view that the controlling rule is supplied by Philippine law or by the federal common-law rule respecting bank deposits, it should make that determination, subject to further review deemed appropriate by this Court. Thus, it is premature to consider the parties' other contentions respecting the necessity for any rule of federal common law or the pre-emptive effect of federal statutes and regulations on bank deposits and reserves. Pp. 672-674.

852 F.2d 657, vacated and remanded.

KENNEDY, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and BRENNAN, WHITE, MARSHALL, BLACKMUN, O'CONNOR, and SCALIA, JJ., joined. REHNQUIST, C.J., filed a concurring opinion, post, p. 674. STEVENS, J., filed a dissenting opinion, post, p. 674.

Robert H. Bork, Washington, D.C., for petitioner.

Thomas W. Merrill, Washington, D.C., for the U.S., as amicus curiae, supporting petitioner, by special leave of Court.

Darryl Snider, for respondent.

Justice KENNEDY delivered the opinion of the Court.

At issue here is whether the home office of a United States bank is obligated to use its general assets to repay a Eurodollar deposit made at one of its foreign branches, after the foreign country's government has prohibited the branch from making repayment out of its own assets.

I

The case arises from a transaction in what is known in the banking and financial communities as the Eurodollar market. As the District Court defined the term, Eurodollars are United States dollars that have been deposited with a banking institution located outside the United States, with a corresponding obligation on the part of the banking institution to repay the deposit in United States dollars. See App. to Pet. for Cert. 42a; P. Oppenheim, International Banking 243 (5th ed. 1987). The banking institution receiving the deposit can be either a foreign branch of a United States bank or a foreign bank.

A major component of the Eurodollar market is interbank trading. In a typical interbank transaction in the Eurodollar market, the depositing bank (Bank A) agrees by telephone or telex, or through a broker, to place a deposit denominated in United States dollars with a second bank (Bank X). For the deposit to be a Eurodollar deposit, Bank X must be either a foreign branch of a United States bank or a foreign bank; Bank A, however, can be any bank, including one located in the United States. To complete the transactions, most banks that participate in the interbank trading market utilize correspondent banks in New York City, with whom they maintain, directly or indirectly, accounts denominated in United States dollars. In this example, the depositor bank, Bank A, orders its correspondent bank in New York (Bank B) to transfer United States dollars from Bank A's account to Bank X's account with Bank X's New York correspondent bank (Bank Y). The transfer of funds from Bank B to Bank Y is accomplished by means of a wire transfer through a clearing mechanism located in New York City and known as the Clearing House Interbank Payments System, or "CHIPS." See Scanlon, Definitions and Mechanics of Eurodollar Transactions, in The Eurodollar 16, 24-25 (H. Prochnow ed. 1970); Brief for New York Clearing House Association et al. as Amici Curiae 4. Repayment of the funds at the end of the deposit term is accomplished by having Bank Y transfer funds from Bank X's account to Bank B, through the CHIPS system, for credit to Bank A's account.

The transaction at issue here follows this pattern. Respondent Wells Fargo Asia Limited (WFAL) is a Singapore-chartered bank wholly owned by Wells Fargo Bank, N.A., a bank chartered by the United States. Petitioner Citibank, N.A. (Citibank), also a United States-chartered bank, operates a branch office in Manila, Philippines (Citibank/Manila). On June 10, 1983, WFAL agreed to make two $1 million time deposits with Citibank/Manila. The rate at which the deposits would earn interest was set at 10%, and the parties agreed that the deposits would be repaid on December 9 and 10, 1983. The deposits were arranged by oral agreement through the assistance of an Asian money broker, which made a written report to the parties that stated, inter alia:

" 'Pay: Citibank, N.A. New York Account Manila

" 'Repay: Wells Fargo International, New York Account Wells Fargo Asia Ltd., Singapore Account # 003-023645.' " 852 F.2d 657, 658-659 (CA2 1988).

The broker also sent WFAL a telex containing the following " '[i]nstructions' ":

" 'Settlement—Citibank NA NYC AC Manila

" 'Repayment—Wells Fargo Bk Intl NYC Ac Wells Fargo Asia Ltd Sgp No 003-023645,' " id., at 659.

That same day, the parties exchanged telexes confirming each of the two deposits. WFAL's telexes to Citibank/Manila read:

" 'We shall instruct Wells Fargo Bk Int'l New York our correspondent please pay to our a/c with Wells Fargo Bk Int'l New York to pay to Citibank NA customer's correspondent USD 1,000,000.' " Ibid.

The telexes from Citibank/Manila to...