Citibank v. Wells Fargo Asia

Eurodollars were deposits of United States dollars held in banks outside the United States that the banks agreed to repay in United States dollars. Interbank trading involving Eurodollar accounts occurred by wire transfer involving New York-based correspondent banks. In June 1983, Wells Fargo Asia Ltd. (WFAL) (plaintiff) made two $1 million deposits with the Manila branch (Citibank Manila) of Citibank, N.A. (Citibank) (defendant), to be repaid in December 1983. Citibank Manila’s telex confirming the bank’s oral agreement stated that repayment would occur through Citibank New York. Between June and December 1983, the Philippine government limited payments of foreign currency to foreign banks, barring Citibank Manila from repaying WFAL’s deposits in December using its assets in the Philippines. WFAL sued Citibank in United States district court, claiming that Citibank had to repay WFAL using worldwide assets. The district court ruled that Citibank must pay under Philippine law. The first appellate court remanded the case to the district court to clarify whether the parties had agreed where deposits would be collected or repaid. On remand, the district court distinguished collection, involving identification of the assets to be used, from repayment, involving identification of the site where the debt would be discharged. The court found that the parties had agreed that repayment would occur in New York but had reached no agreement as to collection. The parties agreed that Citibank bore the risk if Citibank Manila could not repay due to an act of God or insolvency. Citibank’s expert testified that United States-dollar deposits earned higher interest in non-United States banks than in the United States, showing that bankers expected non-United States banks to operate under different rules and levels of risk and did not expect the home bank to pay if a foreign sovereign barred payment by a foreign branch (sovereign risk). WFAL’s expert testified that Eurodollar deposits in London and Manila had different sovereign risk but earned the same interest, showing that bankers would expect the home branch to bear sovereign risk. The court found that no agreement could be implied from industry custom and ruled that Citibank must repay the deposit under New York law. The appellate court affirmed on grounds that the parties had agreed that repayment was to occur in New York.