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ALGEMENE BANK v. SOYSEN TARIM URUNLERI

October 9, 1990

ALGEMENE BANK NEDERLAND, N.V., PLAINTIFF,
v.
SOYSEN TARIM URUNLERI DIS TICARET VE SANAYI, A.S., EGEBANK A.S. IZMIR BRANCH, BARROW LANE AND BALLARD LTD. AND HTC COMMODITY CORP., DEFENDANTS.



The opinion of the court was delivered by: Leval, District Judge.

  OPINION AND ORDER

This is an action for interpleader pursuant to 28 U.S.C. § 1335. Algemene Bank Nederland N.V. ("Algemene"), the issuer of a letter of credit, has paid the proceeds into court, serving notice on various contesting parties, and moves for an order of discharge and release from liability under 28 U.S.C. § 2361.

The defendants fall into two camps: Defendant Soysen Tarim Urunleri Dis Ticaret Ve Sanayi A.S. ("Soysen") is the specified beneficiary of the letter of credit. Soysen drew a draft on the credit in favor of Soysen's creditor, defendant Egebank A.S., Izmir Branch ("Egebank"). Soysen and Egebank move for summary judgment directing payment of the proceeds to Egebank.

The other camp consists of defendants Barrow Lane and Ballard Ltd. ("Barrow"), the account party at whose instance the letter of credit was issued by Algemene, and Barrow's parent, HTC Commodity Corp. ("HTC"), which levied against the proceeds in an effort to enforce a judgment in its favor against Soysen. Barrow and HTC crossmove for summary judgment in favor of HTC.

The facts are as follows: Algemene issued an irrevocable documentary letter of credit for $40,481.25, at Barrow's request and with Soysen as the designated beneficiary (the "Letter of Credit"). The Letter of Credit was procured by Barrow as the means of payment to Soysen for its shipment of Turkish apricots to Barrow.*fn1 The Letter of Credit was payable by "sight draft," in favor of Soysen upon its presentation of documents evidencing the shipment's arrival in New York and its successful passage through U.S.F.D.A. inspection. Payment was to be made within 15 business days of the vessel's arrival. On September 23, 1989, Soysen prepared a draft on the letter of credit in favor of Egebank, its "negotiating bank," presumably to secure a borrowing.

On October 25, 1989, Soysen presented the specified documents to Algemene, together with the draft dated September 23, 1989 directing Algemene to pay the face amount of the Letter of Credit to Egebank. The vessel had arrived in New York on October 24, 1989; Algemene was thus required to make payment before November 10, 1989.

On November 1, 1989, before Algemene had paid the draft, it was served with a sheriff's levy and order of execution asserting a claim by HTC to a substantial portion of the proceeds. The levy was based on a judgment previously obtained by HTC against Soysen in New York State Supreme Court, confirming an arbitration award in HTC's favor after a dispute over goods shipped to HTC in 1988, and awarding HTC $34,679.86.

In light of these two competing claims to payment of the proceeds, fearing litigation and the risk of double liability if it paid either claimant, Algemene commenced this interpleader action on November 6, 1989 and deposited the face amount of the Letter of Credit into the court registry.

Discussion

A. Algemene's Motion for Discharge

Algemene moves for an order pursuant to 28 U.S.C. § 2361,*fn2 permitting it to be discharged from this action and protecting it against further liability. Algemene argues that a discharge is justified because it has complied fully with the requirements of 28 U.S.C. § 1335,*fn3 and because it asserts no right to the disputed moneys and no claim against any of the defendants other than this interpleader.

Soysen and Egebank oppose Algemene's motion for discharge. They argue that Egebank is entitled to the proceeds based on the draft delivered to Algemene on October 25, and that the interpleader was therefore wrongfully commenced. They assert that Soysen, the beneficiary, had assigned the proceeds to Egebank September 23, 1989, to secure Egebank's advance of funds. They argue that once Algemene was notified of the assignment, the proceeds of the Letter of Credit ceased to be the property of Soysen and became the property of Egebank, and Algemene was obligated to turn them over to Egebank regardless of the later-served sheriff's levy attempting to attach assets of Soysen. This obligation was so certain, they contend, that Algemene's commencement of an interpleader action constituted frivolous litigation, and Algemene should not be entitled to be discharged until Egebank has been paid.*fn4

These arguments are not persuasive. Regardless of whether Egebank may ultimately prevail in collecting on the Letter of Credit, Algemene was faced with multiple claims and a significant risk of litigation if it favored one claimant over another. HTC's competing claim was not patently invalid. The purpose of the federal interpleader statute, 28 U.S.C. ยง 1335, is to allow a party in such a situation to avoid the risk of double liability and litigation if it chooses one claimant over the other. Algemene was fully justified in invoking interpleader. Having done so, and having complied ...


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