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Grain Traders, Inc. v. Citibank, N.A.

United States District Court for the Southern District of New York
960 F. Supp. 784 (1997)


Grain Traders, Inc. (Grain Traders) (plaintiff) issued a payment order to its bank, Banco de Credito Nacional (BCN), authorizing an electronic funds transfer. The payment order authorized (1) BCN to debit Grain Traders’ account by $310,000 and transfer the funds from a BCN account at Citibank, N.A. (Citibank) (defendant) to a Banque Du Credit Et Investissement (BCI) account at Citibank, (2) BCI to transfer the funds to Banco Extrader (Extrader), and (3) Extrader to credit Claudio Kraemer’s bank account at Extrader with $310,000. The BCN account at Citibank was debited, and the BCI account at Citibank was credited. However, Citibank also froze BCI’s Citibank account, which was overdrawn by over $12,000,000. BCI therefore could not make any withdrawals from the account or complete BCI’s portion of the funds transfer. Shortly thereafter, Grain Traders sued Citibank for a refund of the $310,000, arguing that Citibank should have rejected Grain Traders’ payment order because Citibank knew or should have known about BCI’s financial problems, and that Citibank had improperly used its received funds to set off a debt that BCI owed to Citibank. Both Grain Traders and Citibank moved for summary judgment.

Rule of Law


Holding and Reasoning (Chin, J.)

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