Wells Fargo Asia Ltd. v. CITIBANK, NA
| Decision Date | 22 April 1988 |
| Docket Number | No. 84 Civ. 996 (WK).,84 Civ. 996 (WK). |
| Citation | 695 F. Supp. 1450 |
| Parties | WELLS FARGO ASIA LIMITED, Plaintiff, v. CITIBANK, N.A., Defendant. |
| Court | U.S. District Court — Southern District of New York |
Edwin E. McAmis, Skadden, Arps, Slate, Meagher & Flom, New York City (Mitchell C. Sockett, of counsel), Darryl Snider, Brobeck, Phleger & Harrison, San Francisco, Cal. (Duncan E. Haynes, Jessica M. Hoover, Susan E. Samuels, of counsel), for plaintiff.
John E. Hoffman, Jr., Shearman & Sterling, New York City (Henry Weisburg, Jennifer Freeman, Robert S. Fischler, Melissa Samet, of counsel), for defendant.
On March 25, 1988 the Court of Appeals 847 F.2d 837 (2nd Cir.1988) (hereinafter "The Court") remanded this action, finding it unclear whether our opinion disposing of this case had found that the parties had agreed that the deposits were collectible only at Citibank's Manila branch or whether we had held that Philippine law governed this action. In point of fact, we made no decision on either of these questions although they had been extensively argued. Before attempting to answer them, we shall—by way of background—briefly explain our earlier decision to avoid such determinations.
Ever since this lawsuit began, the parties have vigorously contested the issues underlying both these questions. On plaintiff's motion for summary judgment, it contended that the contract made the deposits payable in New York, and that MAAB 47 did not purport to prohibit repayment of the deposits in New York with Citibank's general assets. Citibank, on the other hand, contended that discovery would reveal an understanding in the banking community that foreign branch deposits are payable only in the country where the branch is located, and subject to the host country's laws. Throughout the trial, Wells Fargo maintained the position that New York law applied, and Citibank continued to insist that the case was governed by the law of the Philippines, including MAAB 47, which was claimed to have excused repayment of plaintiff's deposits.
After the trial had been completed, it turned out—as noted in Citibank's brief to the Court (at 15-16)—that the complete extent of the evidence concerning Philippine law consisted of "two affidavits by Philippine lawyers" totalling "less than fourteen pages."1 Upon that state of the record, Wells Fargo, while reiterating its earlier positions, also submitted that it would prevail even if we were to assume that Philippine law governed. We accepted this invitation to decide the case under Philippine law, on the further assumption (which seemed to us reasonable) that Citibank had put its best foot forward in presenting its views as to that law.
It turned out, however, that Citibank was by no means so satisfied, and presented the Court with a wealth of material on Philippine law which it had never brought to our attention. Had Citibank made a motion before us to reconsider our decision on the basis of this additional authority, we certainly would have granted such a motion and would then have proceeded to decide all the issues of fact and questions of law which had been presented to us,2 declining what would then have appeared to be an ill-considered invitation by Wells Fargo. It is on that basis that we shall now answer the specific questions posed by the Court.
At the outset, it appears to us that repayment and collection describe two distinct concepts. Repayment refers to the location where the wire transfers effectuating repayment at maturity were to occur. Collection refers to the place or places where plaintiff was entitled to look for satisfaction of its deposits in the event that Citibank should fail to make the required wire transfers at the place of repayment.
Of course, the contract itself is the first place we must look to determine the parties' agreement.
Neither party disputes the formation of a binding deposit contract, nor is it disputed that the placements were initially arranged over the telephone by the parties' traders with the assistance of an Asian money-broker, Astley & Pearce. No evidence was introduced as to what the traders said, or even whether they spoke to each other directly or conducted their negotiations entirely through the broker. The only clue we have on this subject is the report prepared by the broker for the parties. The document sent by Astley & Pearce, states (Pl.Ex. 10):3
A telex sent by Astley & Pearce to Wells Fargo (Pl.Ex. 12) similarly states:
We confirm having arranged the following
for your account and risk—
Principal: US 1,000,000
Rate: 10
From: 14/06/83 To: 9/12/83
14/06/83 12/12/83
Instructions
Settlement—Citibank NA NYC Ac
Manila
Repayment—Wells Fargo Bk Intl
NYC
Ac Wells Fargo Asia Ltd Sgp No
XXX-XXXXXX
Subsequently, Wells Fargo and Citibank exchanged written confirmations (Pl.Ex. 4-9). Wells Fargo's confirmation slips state (Pl.Ex. 8, 9):
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.
The telexes from Citibank's Manila office to Wells Fargo in Singapore state (Pl.Ex. 4-7):
Please remit US Dlr 1,000,000 to our account with Citibank New York. At maturity we remit US Dlr 1,049,444.44 to your account with Wells Fargo Bank Intl Corp NY through Citibank New York.
These various confirmations reflect that the interbank placements were accomplished through a series of wire transfers by the parties' correspondent banks in New York, and that, at maturity, the deposits were to be repaid by Citibank, N.A. (Citibank's New York correspondent bank) to Wells Fargo Bank International (Wells Fargo's New York correspondent bank) for the account of Wells Fargo's Singapore office. Thus, the confirmations establish an agreement that repayment was to occur in New York.
As to the second component of the Court's question, whether the parties agreed that the deposits were collectible only in Manila, the confirmation slips are silent. At trial, both sides offered evidence aimed at establishing that an agreement concerning the place of collection could be implied from custom and usage in the international banking field. This evidence consisted of testimony from various bankers about their interbank placement practices and their understanding of sovereign risk. In addition, each party's expert testified on these topics. In particular, each expert analyzed the relevant interest rates which were claimed to support his own opinion or defeat the view of the opposing party's expert. Citibank, for example, sought to demonstrate an understanding that the depositor could collect only in the country where the deposit was placed, i.e., the Philippines, on the theory that "sovereign risk" accounted for the fact that interest rates in Manila were higher than those in New York. Wells Fargo, on the other hand, introduced evidence aimed at showing an understanding within the Eurodollar market that the depositor could look to the head office for repayment. Wells Fargo's witnesses stressed the identity of the interest rates in Manila and in concededly less risky locations such as London.4 In our prior opinion (J.A. 596; 660 F.Supp. 946, at 950) we observed that neither party succeeded in establishing any universal understanding amounting to custom or practice within the banking community which would imply a collection term into the contract. We believe that observation to have been correct, and now so find.
In summary, since the deposit contracts do not reflect any agreement on the issue of where the deposits could be collected, and since no term can be implied based on custom or usage in the Eurodollar market, we find that the parties failed to come to an agreement on this question.
The only agreement relating to collection or repayment was that repayment would occur in New York.
We know of no such provision of Philippine law.
Much of the confusion which has transformed this case from a simple breach of contract action into one which—it is claimed—threatens the foundations of the international monetary system stems, in our view, from the fact that the parties have never been able to agree as to exactly what they are fighting about. In Citibank's view, the real dispute in this case is whether MAAB 47 provided a legally valid reason for Citibank to avoid payment of plaintiff's deposits, which are conceded to be due. Citibank argued as follows: the deposits are payable only in Manila subject to Philippine law; MAAB 47 prevents repayment in Manila; therefore, Citibank has a legally recognized reason to avoid payment. Wells Fargo, however, never seriously contested the proposition that MAAB 47 prevented Citibank from using the assets booked at its Manila branch toward repayment of plaintiff's deposits.5 Rather, the portion of Citibank's syllogism that Wells Fargo challenges is the contention that Citibank's obligation to satisfy the deposits is limited to the assets booked at Citibank's Manila branch. Wells Fargo contends that under...
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