Sheerbonnet, Ltd. v. American Express Bank, Ltd.
951 F. Supp. 403 · District Court, S.D. New York · 1995
Facts
Sheerbonnet contracted to sell troop carriers, with payment to be made via a $12.4 million funds transfer to its account at BCCI in London through American Express Bank (AEB) in New York. On the day of the transfer, BCCI's assets were seized worldwide, including in New York. AEB, aware of the freeze, credited the funds to BCCI's account at AEB and then claimed them as a set-off against BCCI's debts, preventing Sheerbonnet from receiving payment.
Issue
The court addressed whether New York UCC Article 4-A provides the exclusive remedy for funds transfer disputes, thereby precluding Sheerbonnet's common law tort and equity claims. It also considered if the claims were barred by a prior liquidation court's turnover order or if the Superintendent of Banks was an indispensable party.
Holding
The court denied American Express Bank's motion to dismiss on all grounds. It held that Article 4-A is not the exclusive remedy for all funds transfer disputes, Sheerbonnet's common law claims are legally cognizable and not inconsistent with Article 4-A, the prior liquidation order does not bar the action, and the Superintendent of Banks is not an indispensable party.
Rule
New York UCC Article 4-A is not an exclusive remedy for all funds transfer disputes; common law and equitable principles may apply where Article 4-A's specific provisions do not directly cover the situation and are not inconsistent with the Article's policy goals. A prior liquidation order's discharge of liability only applies to funds turned over and claims to those specific funds, not to separate tort claims against a bank's conduct.
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