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

Facts

Petitioner, in order to make a payment of $310,000 to Claudio Goidanich Kraemer, (Kraemer), initiated an electronic funds transfer by issuing a payment order to its bank, Banco de Credito Nacional, (BCN). BCN was to debit the amount from Petitioner’s account and then issue a payment order to Respondent, with whom BCN had an account. Respondent was to debit BCN’s account and credit that amount to the account that Banque du Credit et Investissement Ltd. (BCIL) maintained with Respondent. BCIL then would transfer the amount to Banco Extrader, S.A., (Extrader) who was then to credit the account maintained at that bank by Kraemer. Respondent debited BCN’s account and credited BCIL’s account. BCIL and Extrader suspended payments. BCIL’s banking license was revoked and began closing its offices. Extrader, too, became insolvent. At Petitioner’s request, BCN contacted Respondent requesting return of the funds. Respondent sought authorization from BCIL to debit the amount that had been credited to its account but was unable to make contact. Respondent then determined that BCIL had exceeded its credit limitations and refused to post further debits to its account. Petitioner argues that Respondent improperly used the funds to offset BCIL’s indebtedness to it and prevented BCIL from withdrawing the funds to complete the transfer. Petitioner brought suit relying on the “money-back guarantee” of U.C.C. Section:4-A-402(4).