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Banco Para El Comercio Exterior De Cuba v. First National City Bank

August 4, 1981; June 27, 1984.

BANCO PARA EL COMERCIO EXTERIOR DE CUBA, PLAINTIFF-APPELLANT,
v.
FIRST NATIONAL CITY BANK, DEFENDANT-APPELLEE



On remand from the United States Supreme Court, 462 U.S. 611, 103 S. Ct. 2591, 77 L. Ed. 2d 46 (1983), reversing the judgment of this Court, 658 F.2d 913 (1981), which had reversed a judgment of the United States District Court for the Southern District of New York, Charles L, Brieant, Jr., Judge, dismissing complaint of Cuban state-owned bank on the ground that the amount claimed was exceeded by the amount of defendant's validly asserted counterclaim for losses due to Cuban expropriation of assets. On remand, the judgment of the district court is affirmed.

Lumbard, Van Graafeiland, and Kearse, Circuit Judges.

Author: Kearse

KEARSE, Circuit Judge

This case, in which Banco Para el Comercio Exterior de Cuba ("Bancec"), a former agency of the Cuban government, seeks to recover on a letter of credit issued by defendant First National City Bank ("Citibank"), and Citibank seeks to offset its losses from the expropriation of its Cuban branches by the Cuban government, returns to us on remand from the United States Supreme Court. In First National City Bank v. Banco Para el Comercio Exterior de Cuba, 462 U.S. 611, 103 S. Ct. 2591, 77 L. Ed. 2d 46 (1983), the Supreme Court reversed our decision, reported at 658 F.2d 913 (1981), which reversed on the basis of the act of state doctrine a judgment of the United States District Court for the Southern District of New York, Charles L. Brieant, Jr., Judge, dismissing the complaint. In an opinion reported sub nom. Banco Nacional de Cuba v. Chase Manhattan Bank, 505 F. Supp. 412 (S.D.N.Y. 1980),*fn1 Judge Brieant dismissed Bancec's complaint on the ground that the amount it claimed was exceeded by the amount of Citibank's uncompensated losses resulting from the expropriation. The question now before us is the correctness of the court's determination as to the amount of Citibank's uncompensated losses. Bancec asserts that the court erred in accepting several of Citibank's claims of loss. We disagree and affirm the judgment.

I. BACKGROUND

The history of the litigation and the events leading to it are set out in the opinions cited above, familiarity with which is assumed. It is now undisputed that the amount of Bancec's claim is $193,280. If Citibank suffered uncompensated losses totaling at least $193,280, its counterclaim offsets Bancec's claim. The district court found that Citibank had recovered $6,064,930 as compensation for the seizure of its Cuban properties. Bancec's claim was therefore properly dismissed if the value of Citibank's expropriated property exceeded $6,258,210, i.e., the sum of Bancec's claim and Citibank's prior recoveries.

Judge Brieant determined that the value of the expropriated property exceeded $6,258,210, although he did not purport to determine the precise total value of the property. His principal finding was that the net asset value of Citibank's Cuban branches was $5,961,037:

The August 23, 1960 statement of Citibank showed the net asset value of the Cuban branches to be $5,961,037.41. To this Citibank sought to add a write-up for the increase of market value over book value of land, building and contents, amounting to $1,700,000.

Based on a review of the entire trial record, the Court is convinced that the books and records of Citibank's Cuban operations, regulated by authorities both American and Cuban, were, like those of Chase, regularly kept in a manner that was substantially correct and in accordance with law. Those books reflected the operations of the Cuban branches in accordance with generally accepted accounting principles consistently applied. The Court is also certain that there was some significant unrealized appreciation in excess of historical depreciated cost with respect to the real estate. The Court believes also that these branches had a good will value in excess of the total value of the assets necessarily devoted thereto. If Citibank's damages were to be computed in the same manner and on the same or similar theories of valuation, as the Court has computed the damages for Chase, the total net result of such a mathematical exercise would considerably exceed six million dollars.

On the total record here, it would appear sufficient to make that finding.

505 F. Supp. at 466.

The court found that, in addition, Citibank had suffered a loss of $809,641 with respect to letters of credit issued by Citibank's New York office on behalf of customers of the Cuban branches (hereinafter "head office liabilities"). The expropriation left in the hands of the Cuban government the accounts payable on the letters of credit already paid. The court concluded that this amount was properly included in Citibank's counterclaim. See id. at 465.

Aggregating the $5,961,037 and the $809,641 (which total $6,770,678) and certain other smaller claims of loss, the court concluded that the value of the Citibank expropriated property exceeded $6,258,210. Accordingly, it dismissed Bancec's claim.

On appeal, Bancec contends principally that the court erred in its calculation of Citibank's losses because (1) the court considered the going concern value of the branches an allowable item of loss, (2) the net asset value figure improperly included a claimed loss of $772,331 for loans made to United States corporations which Citibank could have collected notwithstanding the expropriation; and (3) Citibank's claim of $809,641 for head office liabilities was ...


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