§ 4-A-402, Official Comment 2 (emphasis added).
Subsection (5) may not be precisely applicable here because it applies to a situation where an intermediary bank suspends payments and it is unclear from the record when BCI suspended payments. Nonetheless, the reasoning of subsection (5) supports the conclusion that in the present case Grain Traders must bear the risk of loss, for it was Grain Traders that chose BCI and Extrader to carry out the funds transfer. Grain Traders thus may not turn to Citibank to recover the loss suffered as a result of Grain Traders's choice of BCI and Extrader to complete the transfer.
iv) Creation of explicit cause of action by originator against intermediary bank
Finally, Citibank's argument that it owes no refund to Grain Traders finds support from the wording of § 4-A-305. Section 4-A-305(2) provides that a "receiving bank" is liable to the "originator" for interest and expenses under certain circumstances. § 4-A-305(2). Grain Traders points to this section as proof that all intermediary-receiving banks are liable directly to the originator for a refund. However, this section shows just the opposite. Section 4-A-305(2), which has no relationship to the refund provisions of § 4-A-402,
demonstrates that when the drafters of Article 4-A wanted to give the originator the right to bring a cause of action against any bank in the funds transfer chain, they knew how to make that clear. Thus, had the drafters of Article 4-A intended to allow the originator to seek a refund from any bank in the funds transfer chain, they could have made that clear also.
Accordingly, I hold that Grain Traders may not, as a matter of law, assert a claim against Citibank under § 4-A-402 and hence summary judgment is granted in favor of Citibank on Grain Traders's first claim for relief.
2. §§ 4-A-209 and 4-A-301
Grain Traders's second claim for relief is premised on § 4-A-209 and § 4-A-301, which govern "acceptance" and "execution" of a payment order, respectively. Grain Traders alleges that because Citibank intended to use the $ 310,000 as a set-off to the debt owed to Citibank by BCI, Citibank did not intend to carry out the payment order received from BCN. Grain Traders argues that because of Citibank's misplaced intent, the payment order issued by Citibank to BCI did not constitute the "execution" or "acceptance" of BCN's payment order under § 4-A-209 or § 4-A-301. See § 4-A-301 ("A payment order is 'executed' by the receiving bank when it issues a payment order intended to carry out the payment order received by the bank.") (emphasis added). Grain Traders thus concludes that Citibank is liable for its failure to properly execute BCN's payment order. I disagree.
As a threshold matter, the record shows unequivocally that Citibank properly executed the payment order that it received. It debited BCN's account $ 310,000; it credited BCI's account $ 310,000; and it forwarded instructions to BCI to instruct Extrader to credit Kraemer with $ 310,000. That was all that it was required to do. As § 4-A-302 makes clear, an intermediary bank that accepts a payment order "is obliged to issue . . . a payment order complying with the sender's order and follow the sender's instructions concerning . . . any intermediary bank . . . ." Here, Citibank accepted a payment order from BCN that instructed it to instruct BCI to instruct Extrader to credit $ 310,000 to Kraemer. Citibank followed these instructions, thereby meeting its obligations, as it relayed the appropriate instructions to the next intermediary bank, BCI.
Moreover, even if Grain Traders were able to prove that Citibank failed to execute or accept BCN's payment order, it would nevertheless not be entitled to prevail on its second claim for relief. This is because neither § 4-A-209 nor § 4-A-301 provides a remedy for the failure to carry out a payment order. Rather, these two sections simply define the terms "acceptance" and "execution" as those terms are used in the rest of Article 4-A. If a funds transfer is not completed because one of the parties involved in the funds transfer fails to either "accept" or "execute" a payment order, the only remedy to which the originator is entitled is a refund -- pursuant to § 4-A-402 -- of any payment it made.
Thus, Grain Traders's second claim for relief simply leads us back to the same place as its first claim -- i.e., a claim for a refund under the "money back guarantee" of § 4-A-402. Accordingly, Grain Traders's second claim for relief is dismissed for the same reasons as its first claim for relief.
C. U.C.C. § 1-203
In its third claim for relief, Grain Traders asserts that Citibank's actions violated § 1-203. Section 1-203 imposes an obligation of good faith and fair dealing on a party's performance or enforcement of any contract or duty within the ambit of the Uniform Commercial Code. N.Y.U.C.C. § 1-203. Grain Traders alleges that it is entitled to damages because Citibank violated this section. For two reasons, I disagree.
First, § 1-203 only imposes an obligation of good faith and fair dealing on the performance of a "contract or duty." Id. In this case, Grain Traders has not alleged that any contract existed between Citibank and itself. Thus, Grain Traders must be relying on a statutory duty as the predicate for its third claim for relief. The only statutory duty that applies in this case, however, is Article 4-A and, for the reasons I have already discussed, Grain Traders has failed to state a claim under that Article. Thus, there is no contract or statutory duty to which Grain Traders can argue that its good faith claim under § 1-203 applies.
Second, to the extent that Grain Traders is asserting that a violation of § 1-203 gives rise to an independent cause of action, its assertion is without merit, for § 1-203 does not give rise to an independent cause of action. See, e.g., Super Glue Corp. v. Avis Rent a Car System, Inc., 132 A.D.2d 604, 517 N.Y.S.2d 764, 766 (2d Dep't 1987) ("the Code does not permit recovery of money damages for not acting in good faith where no other basis of recovery is present"). The Official Comment to § 1-203 supports this conclusion:
This section does not support an independent cause of action for failure to perform or enforce in good faith. . . . The doctrine of good faith merely directs a court towards interpreting contracts within the commercial context in which they are created, performed, and enforced, and does not create a separate duty of fairness and reasonableness which can be independently breached.
§ 1-203, Official Comment, at Supp. p. 13. Accordingly, Grain Traders's third claim for relief is dismissed.
D. Common Law Claims
Grain Traders's fourth claim for relief relies on the common law torts of "conversion" and "money had and received." Grain Traders's tort claims, however, must be dismissed because Grain Traders has failed to present evidence to support either of those claims.
To prevail on either of its common law claims, Grain Traders must prove that at the time it alleges Citibank improperly kept the $ 310,000, Grain Traders still had a possessory interest in the funds. Lind v. Vanguard Offset Printers, Inc., 857 F. Supp. 1060, 1066 (S.D.N.Y. 1994) (under New York law, conversion "requires a showing . . . that the plaintiff had an ownership interest or an 'immediate superior right to possession of property'"); Aaron Ferer & Sons Ltd. v. Chase Manhattan Bank, 731 F.2d 112, 125 (2d Cir. 1984) (to state a claim for money had and received under New York Law, the plaintiff must show that "defendant received money belonging to plaintiff") (emphasis added). Grain Traders, however, did not have possession of the funds at the time Citibank credited them to BCI's account. This is because a depositor loses title to money deposited in a general account at the moment those funds are deposited. Peoples Westchester Savings Bank v. FDIC, 961 F.2d 327, 330, 332 (2d Cir. 1992); Swan Brewery Co. Ltd. v. United States Trust Co., 832 F. Supp. 714, 718 (S.D.N.Y. 1993). Moreover, the cases cited by Grain Traders in support of its fourth claim for relief are inapposite. See, e.g., Raymond Concrete Pile Co. v. Federation Bank & Trust Co., 288 N.Y. 452, 43 N.E.2d 486 (1942) (dealing with a trust account rather than a general deposit account); Daly v. Atlantic Bank, 201 A.D.2d 128, 614 N.Y.S.2d 418 (1st Dep't 1994) (dealing with funds held by an agent as fiduciary for third parties); Manufacturers Hanover Trust Co. v. Chemical Bank, 160 A.D.2d 113, 559 N.Y.S.2d 704 (1st Dep't 1990) (dealing with case where bank deposited funds in wrong account and then seized funds).
Citibank did not convert any funds, nor, in fact, did it receive any funds. Rather, it debited one account $ 310,000 and credited another account $ 310,000, and it forwarded the appropriate payment instructions. That was all it was required to do. BCI should have carried out those instructions, but it was unwilling or unable to do so.
For the foregoing reasons, Grain Traders's motion for summary judgment is denied and Citibank's cross-motion for summary judgment is granted. Accordingly, the Clerk of the Court shall enter judgment in favor of Citibank dismissing the complaint with prejudice and without costs.
Dated: New York, New York
April 14, 1997
United States District Judge