## Facts

- Banco de la Provincia de Buenos Aires (BPBA) loaned Banco Feigin S.A. $250,000 on January 11, 1995, and credited the proceeds to Banco Feigin’s account at BPBA’s New York branch; the loan matured July 10, 1995.
- Banco Feigin experienced severe financial distress and, in March 1995, the Central Bank of Argentina began an intervention that suspended operations and later revoked Banco Feigin’s banking authorization.
- After Banco Feigin’s operations were suspended, BPBA placed an administrative freeze on Banco Feigin’s BPBA account.
- The frozen BPBA account held $245,529.55, consisting solely of remaining loan proceeds; Banco Feigin owed BPBA more than the account balance.
- Around March 24, 1995, Banco Feigin sent BPBA a wire-transfer request to send the full account balance to Banco Feigin’s account at BayBank Boston, N.A., intending to pay debts to BayBank.
- BPBA did not accept the payment order and did not transmit the funds, citing the freeze and a claimed statutory setoff right.
- On April 19, 1995, BPBA exercised setoff and applied the account funds to Banco Feigin’s debt to BPBA.
- BPBA sued for declaratory relief that its setoff right was valid and superior; BayBank counterclaimed for conversion, alleging BPBA wrongfully retained funds once it received the payment order.

## Issues

1. Whether BPBA properly rejected Banco Feigin’s wire-transfer payment order under U.C.C. § 4A-209, given the freeze and BPBA’s claimed setoff right.
2. Whether BayBank could prove conversion of the funds based on an alleged ownership or superior possessory interest arising from the unaccepted payment order.

## Decision

- The court granted BPBA’s motion for summary judgment.
- BPBA’s rejection of the payment order was permissible under U.C.C. Article 4A and was not in bad faith or an abuse of discretion.
- BayBank’s conversion counterclaim failed because BayBank did not have an ownership interest or immediate superior right to the funds, and BPBA did not act with intent to deprive BayBank of its property.
- BPBA’s setoff under N.Y. Debtor and Creditor Law § 151 was treated as effective after the Argentine intervention and was superior to BayBank’s asserted claim.

## Legal Principles

- Under U.C.C. Article 4A, a receiving bank may accept or reject a payment order; the decision must not be made in bad faith or as an abuse of discretion.
- A beneficiary’s bank does not acquire ownership of, or a superior right to, funds held by the originator’s bank merely because a payment order naming it as beneficiary’s bank is sent; rights tied to the transfer depend on acceptance under Article 4A.
- Under N.Y. Debtor and Creditor Law § 151, when an insolvency-type event triggers mutual-debt conditions, a creditor bank may set off funds held on deposit against the debtor’s obligation.
- Conversion requires (1) ownership or an immediate superior right of possession in identifiable property and (2) intentional dominion inconsistent with that right; an unaccepted payment order, without more, does not supply the beneficiary bank with the required property interest.

## Conclusion

The court held that BPBA lawfully rejected Banco Feigin’s wire-transfer request under Article 4A and could set off the frozen account funds under New York law after the Argentine intervention, defeating BayBank’s theory that it obtained rights in the funds and its conversion counterclaim.


Banco de la Provincia de Buenos Aires v. BayBank Boston, N.A., 985 F. Supp. 364 (S.D.N.Y. 1997)