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Sea Trade Company Ltd. v. Fleetboston Financial Corp.

May 1, 2007


The opinion of the court was delivered by: John F. Keenan, United States District Judge


Before the Court is Defendant's motion for summary judgment on its counterclaim for breach of contract. For the reasons that follow, the motion is denied.


The following facts are undisputed, unless otherwise noted.

Plaintiff Nani Shipping Corp. ("Nani") was formed in January 1991 by BankBoston International, the private international banking division of BankBoston Corporation ("BankBoston", or the "Bank"). BankBoston was the predecessor-in-interest of Defendant FleetBoston Financial Corp. ("FleetBoston"). The sole principals of Nani were Ricardo Cazou ("Cazou") and his brother, Gerardo Cazou. On September 19, 1991, the Cazou brothers opened a checking account with BankBoston on behalf of Nani, during a meeting with Ricardo Carrasco ("Carrasco"), a loan officer for BankBoston who had been dealing with Cazou for some time. Nani asserts, and the Bank does not contest, that Cazou opened the Nani account with the expectation of incurring overdrafts to fund Plaintiff Adrogue Chico, S.A. ("Adrogue Chico"), an Argentinean real estate development project. According to Cazou's affidavit, prior to Nani's opening its account, Cazou and Carrasco had several discussions regarding the Adrogue Chico project, during which Cazou informed Carrasco that Nani would not be able to repay overdrafts on its checking account "until such time as the [Adrogue Chico] project was completed and the land could be sold." (Affidavit of Ricardo Gaston Cazou ("Cazou Aff.") ¶ 4). According to Cazou, Carrasco "confirmed to Mr. Cazou that Nani Shipping would be allowed to overdraft the account up to $1.5 million and that these overdrafts would not be due until such time as the [Adrogue Chico] project was completed." (Id.) No document exists memorializing the oral representations that Carrasco allegedly made to Cazou.

In order to open the account with BankBoston, Cazou and Gerardo Cazou signed their names, as Nani's principals, on a signature card provided by Carrasco ("Signature Card"). Printed above the spaces in which the Cazou brothers signed their names was the following statement:

In consideration of BANK OF BOSTON accepting this account, I/we agree to be bound by the regulations governing the type of account indicated on the reverse, and the rules and standard service charges established by the Bank from time to time[.] (Decl. Of Samuel Koren ("Koren Decl."), Ex. C.).

Among the regulations and rules established by the Bank were the Terms and Conditions for International Private Banking ("Terms and Conditions"). The 1994 edition of the Terms and Conditions contained the following provision, under the heading "Overdrafts"::

We [BankBoston} have no obligation to allow an overdraft in any account. At our discretion or at your [the client's] request, we may allow you to overdraw your account. However, at any time we may require the payment of that overdraft plus interest at the rate designated by the Bank for overdrawn accounts. If, while obtaining repayment of an overdraft, we incur additional expenses, including attorney's fees, you will be responsible for those costs. (Id., Ex. F, at 27.) The 1998 edition of the Terms and Conditions contained an identical provision regarding overdrafts. (See id., Ex. E, at 25.) Both the 1994 and 1998 editions of the Terms and Conditions also stated that the Bank had the right to terminate an account if, among other things, the account was repeatedly overdrawn or if overdrafts were not repaid immediately upon the Bank's demand.

Although it was the Bank's policy to send the Terms and Conditions to all clients of its international private banking division, Nani claims that it never received the Terms and Conditions. According to the affidavits of Cazou and Gerardo Cazou, Carrasco did not mention the Terms and Conditions at the September 19, 1991 meeting. The Cazou brothers' affidavits also state that, during the time Nani's account was open, Nani was never made aware that the Terms and Conditions existed or that Nani's account was governed by the Terms and Conditions.

In 1998, Carrasco disappeared after BankBoston began to suspect that he had stolen millions of dollars from the Bank. In February of 1998, BankBoston froze all of the accounts for which Carrasco had served as the primary loan officer, including Nani's account. At the time Nani's account was frozen, on or about February 18, 1998, Nani had incurred outstanding overdrafts in the amount of $779,859.25. Nani's credit privileges were not secured by any collateral or personal guarantees.

After freezing the account, BankBoston contacted Cazou and requested that Nani submit a proposal for the repayment of the overdrafts and that the Bank be provided with financial information for Nani, Adrogue Chico, and Nani's principals in order to allow the Bank to determine whether it should continue its relationship with Nani and Cazou. Nani did not make any payments and the requested financial information was not provided. On June 22, 1998, BankBoston issued a charge-off recommendation for the entire overdraft balance of $779,859.25 and closed Nani's account. To date, the overdraft balance remains unpaid, a fact which Nani has conceded. (See id., Ex. B, March 26, 2006 Dep. of Ricardo Cazou, at 230.)

On December 29, 2003, Nani and Adrogue Chico commenced this action against FleetBoston,*fn1 asserting a claim for breach of contract on the ground that the Bank's suspension of Nani's overdraft privileges violated the oral agreement made between Carrasco, as the Bank's agent, and Nani. Nani and Adrogue Chico contended that the Bank's freezing of Nani's account resulted in the discontinuation of the Adrogue Chico project and resulting damages to the plaintiffs of approximately $7.2 million in lost real estate profits.

On September 27, 2006, after obtaining leave to file an amended answer and counterclaim, FleetBoston asserted a counterclaim for breach of contract, seeking to recover the $779,859.25 in outstanding overdrafts, plus interest and attorneys' fees and ...

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