Brief Fact Summary. Banco de la Provincia, (Plaintiff) seeks declaratory judgment that on April 1995 it had the right to set-off against the funds in Banco Feigin’s account with Plaintiff and that this right was superior to any right BayBank Boston N.A., (Defendant) may have had as the bank maintaining an account of Banco Feigin to which Banco Feigin had requested its funds sent. Plaintiff moves for summary judgment.
Synopsis of Rule of Law. A bank may not exercise bad faith or abuse its discretion in deciding whether to accept or reject payment orders.
Conversion is defined under New York law as any act of dominion wrongfully exerted over another's personal property in denial of or inconsistent with his rights therein.View Full Point of Law
Whether Plaintiff properly rejected the payment order under U.C.C. 4-A-209.
Whether Defendant can sustain a cause of action for conversion.
Yes. Plaintiff’s rejection of the payment order was reasonable.
No. Defendant’s conversion claim fails because it had no ownership interest in the funds and Plaintiff did not intend to deprive Defendant of the property.
Discussion. Plaintiff’s rejection was neither an abuse of discretion nor bad in bad faith. At the time the Central Bank of Argentina had suspended Banco Feigin’s banking activities as part of an Intervention. Moreover, Banco Feigin’s debt to Plaintiff exceeded the balance in the account. Under those circumstances, it was not unreasonable for Plaintiff to refuse to wire the entire balance of the account to Defendant.
Defendant cannot sustain a conversion claim. Defendant failed to prove it had an ownership interest or an immediate superior right of possession to the funds. Therefore it has not established the element of ownership. Also, Plaintiff had no intent do deprive Defendant of the funds. The transfer was to Defendant as the beneficiary’s bank. Lastly, there is no precedent allowing the intended beneficiary of a funds transfer to recover from a receiving bank. Any claim Defendant has is against Banco Feigin, not Plaintiff.