Granite Enterprises Limited v. Virgoz Oils & Fats Pte Ltd et al - Document 44
OPINION re: (37 in 1:09-cv-04534-RWS) MOTION to Vacate Attachment Orders as to ADM INTERNATIONAL SARL filed by INTERESTED NON PARTY ADM INTERNATIONAL SARL. For the reasons set forth within, the Citibank Restraint isvacated, and those funds are ordered to be released immediately. (Signed by Judge Robert W. Sweet on 9/6/2011) (ab)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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GRANITE ENTERPRISES LIMITED,
09 Civ. 4534
VIRGOZ OILS & FATS PTE. LTD. and
PT PERMATA HIJAU SAWIT,
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LILITH TRADING INC.,
09 Civ. 4750
VIRGOZ OILS & FATS PTE. LTD. and
PT PERMATA HIJAU SAWIT,
PEARL HOLDINGS S.A.,
09 Civ. 4751
VIRGOZ OILS & FATS PTE. LTD. And
PT PERMATA HIJAU SAWIT,
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ADM International Sarl
("ADM")t which is neither
plaintiff nor defendant in this matter, has moved to vacate a
portion of the maritime attachment issued pursuant to
Supplemental Rule B of the Federal Rules of Civil Procedure.
For the reasons set forth below, ADM's motion is
The facts and disposition of this case as set forth in
the Court/s Order of February 11, 2010 are repeated in part
below as relevant to the present motion.
Plaintiffs Granite Enterprises Limited ("Granite"),
Lilith Trading ("Lilith")
and Pearl Holdings ("Pearl")
(collectively, "Plaintiffs ll )
commenced this action in 2009
against Defendants Virgoz Oil & Fats and PT Permata Hijau Sawit
"Defendants" or "Virgoz") seeking security for
claims pending before or resolved in London-based arbitrations.
On May 18 (in
___--",~_s_e_s L_i_m_J._·t_e_d_____-=l.._ _ _ _ _ _ _ _~_a_l_.
and May 22 (in Lilith Trading Inc. v.Virgoz Oils et al. and
Pearl Holdings B.A. v. Virgoz Oils et al.) of 2009, the Court
issued orders (the "Attachment Orders
pursuant to Rule B,
authorizing the attachment of certain property, including
electronic fund transfers ("EFTslI)
in or passing through this
Following service of the Attachment Orders on several
garnishee banks in the district, a number of EFTs originating
with and for the benefit of Defendants were restrained.
One particular transaction was restrained at Citibank
(the "Citibank Restraint"), in the amount of $341,775, which
described "Virgoz Oils and Fats Pte Ltd
as the "drawer."
instant motion relates to the attachment of these particular
As the Circuit has explained:
EFT is nothing other than an instruction to transfer funds
from one account to another. When the originator and the
beneficiary each have accounts in the same bank that bank simply
debits the originator's account and credits the beneficiary's
account. When the originator and beneficiary have accounts in
different banks, the method for transferring funds depends on
whether the banks are members of the same wire transfer
If the banks are in the same consortium,
originator's bank debits the originator's account and sends
instructions directly to the beneficiary's bank upon which the
beneficiary's bank credits the beneficiary's account. If the
banks are not in the same consortium-as is often true in
Shiping C(Jrp of India Ltd. v. Jaldhi Overseas Pte Ltd., 585 F.3d 58, 61
n.1 (paraphrasing United States v. Daccarette, 6 F.3d 37, 43 44 (2d
On October 2, 2009, the parties entered into a
stipulation directing garnishee bank HSBC to release $408,532.45
Virgoz's funds under attachment to Granite in satisfaction of
two outstanding arbitration awards.
On November 12, 2009, Defendants requested by letter
that the Court issue an order to show cause as to why the
attachment should not be vacated in light of the Second
Circuit's decision in Shipping Corporation of India Ltd. v.
Jaldhi Overseas Pte Ltd., 585 F.3d 58 (2d Cir. 2009).
letter was treated as a motion and heard on November 24, 2009.
On February 11, 2010, the Court upheld the attachment
with respect to the $341,775 Citibank restraint (the Citibank
Restraint at issue here) as well as the $408,532.45 addressed in
the October 2, 2009 Stipulation.
The Court vacated the
attachment with respect to the remaining EFTs (those restrained
at intermediary banks) under Jaldhi, 585 F.3d 58.
On April 13, 2011, interested non-party ADM moved to
vacate the Citibank Restraint.
This motion was marked fully
submitted on May 18, 2011.
ADM has moved to vacate the Citibank Restraint on the
grounds that under the reasoning of the Second Circuit's
decision in Jaldhi, 585 F.3d 58, there is no lawful basis for
In its February 11, 2010 Opinion, this Court upheld
Citibank Restraint on the grounds that Citibank served as the
originating bank, rather than an intermediate bank, with respect
to the EFT, and " [b]ecause Jaldhi dealt only with the restraint
of EFTs passing through intermediary banks located in this
district, this EFT falls outside the scope of Jaldhi's holding."
(Slip Op. 2-3)
ing Jaldhi, 585 F.3d at 61).
In those proceedings, however, no question of the
identity of the owner of the Citibank Funds was raised.
regard to the Citibank Restraint, Plaintiffs argued that the
transfer was not an EFT (and so not subject to Jaldhi's holding)
and that as a transaction restrained at an originating bank, it
fell outside of Jaldhi, which they described as "address [ing]
only one very specif
type of property - an ephemeral EFT in
the hands of an intermediary bank."
in Opp'n 2-3, 5-6.)
(Docket No. 27, PIs. Mem.
Plaintiffs did not question whether Virgoz
had an attachable interest in the Funds.
Virgoz argued only
that attachments of all EFTs must be vacated under Jaldhi and
opposed Plaintiff's contention that the Citibank transaction was
not in fact an EFT.
(Docket No. 30, Defs. Mem. 2-4.)
Accordingly, the only issues before the Court with regard to the
Citibank Restraint were whether that transaction was an EFT, and
if so, if the holding of Jaldhi required vacature insofar as it
addressed the validity of attachments of EFTs at intermediary
In the instant motion, ADM contends that the funds
subject to the Citibank Restraint originated with ADM, the
transferor, and were payment for ADM's purchase of 500 MT of
crude palm kernel oil from Virgoz on September 9, 2009.
supports this assertion with an affidavit from Leona Tout,
General Manager Oil Trading and Energy for ADM.
contends that following Virgoz's shipment of the oil, ADM
requested that its bank t Citibank t pay virgoz for the shipment
by way of an EFT to Virgozts bank, ING Singapore.
assertion is supported by the sales contract between ADM and
Vigoz t dated September 10, 2009 for 500MT of crude palm kernel
oil (Tout Aff. Ex. A)
as well as an email confirming the same
trade, dated September lOt 2009 (Tout Aff. Ex. B).
Plaintiffs do not contest that that Citibank was the
originating bank, ADM the originating transferor, and Virgoz the
Moreover, the evidence
conclusively establishes these facts,
as the SWIFT instructions
denote ADM as the originator and Virgoz as the beneficiary.
(Mihalik aff. Ex. 1.)
By affidavit, Mary Mihalik ("Mihalik")
attests that the field designations used in SWIFT messages are
not created anew by banks for each EFT, but instead are fixed.
(Mihalik aff. ~ 4.)
the EFT -
eld "SOK:" identifies the originator
in this case, ADM.
Mihalik further attests
that "Field 70: is the universally used field that contains
remittance information from the originating party to the
beneficiary about the reason for the payment" and "the use of
the word 'drawer' in Field 70: did not make Virgoz the
originator of the EFT."
Accordingly, the evidence
establishes that ADM was the originator of the Funds.
maintains that following the restraint of the Funds at Citibank,
it paid Virgoz a second time
such a manner as to avoid
(ADM Reply Mem. 4-S.)
Rule B permits attachment of "the defendant's tangible
or intangible personal property."
Fed. R. Civ. P. Supp. R.
Crucially, the property in question must be the
As the Second Circuit has explained, "[f]or
maritime attachments under Rule B .
ownership is critical.
. the question of
As a remedy quasi in rem, the validity
of a Rule B attachment depends entirely on the determination
that the res at issue is the property of the defendant at the
moment the res is attached."
Jaldhi, 585 F.3d at 69 (citing
Terrestres S.A. de C.V. v. Fairmout
Transp. N.V., 572 F.3d 96, 108 (2d Cir. 2009)).
Having found no guidance in federal maritime law,
Jaldhi looked to state law in order to determine the underlying
contours of property rights relative to EFTs, and accordingly
whether the EFTs in question were the "defendant's" for Rule B
Id. at 70.
In its explication of state law, the
Court explained that New York permits attachment by a creditor
of a beneficiary of EFTs at the beneficiary's bank.
Likewise, the Court noted that "[a]s for those interested in
obtaining the originator's funds, New York law is clear" that
'" [a] creditor of the originator can levy on the account of the
originator in the originator's bank before the funds transfer is
The creditor of the originator cannot reach
any other funds because no property of the originator is being
Id. at 70-71 (quoting N.Y. U.C.C.
(emphasis in original) .
Relying on "an authoritative comment accompanying the
New York Uniform Commercial Code," the Court concluded that the
beneficiary of an EFT has no property interest in the EFT until
the transfer is complete:
[A] beneficiary has no property interest in an
completed by acceptance by the beneficiary's bank
of a payment order for the benefit of the
the beneficiary has no property
Id. at 71 (quoting N.Y. U.C.C.
4-A-502 cmt. 4)
This finding was an essential predicate to the
Court's holding that that for Rule B purposes, "EFTs are neither
the property of the originator nor the beneficiary while briefly
in the possession of an intermediary bank," id., and therefore
ETFs passing through intermediary banks may not be attached
The question before the Court today is whether an EFT
that originates from a party that is not subject to a Rule B
order may be attached at the originating bank, prior to the
completion of the funds transfer to the target beneficiary's
Put another way, were the Citibank Funds "defendant's"
for purposes of Rule B?
In this respect, Plaintiffs contend that the record
casts doubt on the contention that ftVirgoz has no attachable
interest in the funds."
s. Mem. 6.)
Plaintiffs point out
that it was Virgoz that initially moved for vacature of the
Citibank Restraint and that
tibank attached the funds after
ADM "instructed the bank to segregate the funds and transmit the
funds to Virgoz."
(PIs. Mem 6 7).
Plaintiffs argue that
"[t]hese facts collectively establish that Virgoz maintains an
attachable property interest in the $341,775 at issue.
(PIs. Mem. 7.)
Plaintiff's contention, however is foreclosed by
the Circuit's analysis in Jaldhi, which affirmed reliance on New
York property rules regarding EFTs and could not have been more
clear that under New York law, a defendant beneficiary such as
Virgoz, "has no property interest in an EFT" "'until the funds
transfer is completed.'" Jaldhi, 585 F.3d at 71
4-A-502 cmt. 4).
As the Funds were frozen at Citibank and the transfer
was never completed, Virgoz has no attachable property interest
in the Funds, and so the attachment must be vacated.
Plaintiffs additionally seek an order staying the present motion in
order to conduct discovery into "[ADM's) delayed challenge, the second
payment, and why Virgoz - not ADM - initially moved for vacature."
Mem. 4, 7 9). However, Plaintiffs do not contest, and the evidence
establishes, that ADM was the originator of the funds, Citibank was the
For the foregoing reasons, the Citibank Restraint is
vacated, and those funds are ordered to be released immediately.
It is so ordered.
New York, NY
September ~ , 2011
ROBERT W. SWEET
originating bank, and Virgoz was the beneficiary.
additional discovery would not alter the result.
Given these facts,