Citigroup v Brigade Capital Management: Difference between revisions

Citigroup v Brigade Capital Management (view source)

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 {{quote|A creditor of another or one having a lien on another’s property who has received from a third person any benefit in discharge of the debt or lien, is under no duty to make restitution therefor, although the discharge was given by mistake of the transferor as to his interests or duties, if the transferee made no misrepresentation and did not have notice of the transferor’s mistake.}}
-One might take the court to task for being a little too literal there. Nor does the court seem to have considered what “in discharge of the debt” means, but assumes it means that, mathematically, “has the effect of discharging the debt”. One could apply a ''reductio ad absurdam'' here: any payment made by a debtor to a creditor would have the effect of retiring debt. It also seems to ram the letter box of ordinary contract: If I have a contract and, for good consideration, have borrowed money for eight years, my accidental ''factual'' repayment of it early, without legal obligation to do so — worse, my dopey ''agent’s — surely cannot unilaterally [[amend]] that [[contract]].
+One might take the court to task for being a little too literal there. Nor does the court seem to have considered what “in discharge of the debt” means, but assumes it means that, mathematically, “has the effect of discharging the debt”. One could apply a ''reductio ad absurdam'' here: ''any'' payment made by a debtor to a creditor, apropos anything, would have the effect of retiring debt.  If I have a contract and, for good consideration, have borrowed money for eight years, my accidental ''factual'' repayment of it early, without legal obligation to do so — worse, my dopey ''agent’s'' — surely ''cannot'' unilaterally [[amend]] that [[contract]].
+The finding that it can, n the JC’s (literally) unqualified view, rather mounts the pavements — ''sidewalks'', sorry — and runs down peaceable pedestrians perambulating the [[common law]] of [[contract]]. This is something which the law of [[restitution]], being really no more than a life-hack to cover the parts of commercial life that [[tort]] and [[contract]] somehow contrive to miss — really ought not to be able to do.
+Surely a contract, being an explicit, detailed, construction of rights and obligations between consenting parties must displace general [[common law]] principles like those of [[tort]] and [[restitution]] that the law has developed to mediate relationships between strangers. The contract ''must'' prevail. It ''cannot'' be right that an action that was neither requested, supported by consideration nor accompanied by any representation, let alone one on which the beneficiary has relied to its detriment, can unilaterally amend a contract. Nor, to our reading, does the ''Restatement'' require it to. The ''Restatement'' is silent on the matter.
+This litigation may be causing sleepless nights at Citi, but it is to be appealed, and it is hard to see how the appeal could fail.
 ==Redux: Citi and Revlon==
-This all leaves things rather delicately poised between Citi and Revlon. Forgetting for a moment that Revlon might not be able to pay Citi back, does it ''have'' to? A rather odd artefact of agency law comes into play here.
+This all leaves things rather delicately poised between Citi and Revlon. Forgetting for a moment that Revlon might not be ''able'' to pay Citi back, does it ''have'' to? A rather odd artefact of [[agency]] law comes into play here.
-As against a third party without notice, an [[agent]] with the [[ostensible authority]] to bind a principal, in fact, ''does'' so: this is part of the legal case for the lenders. Here Citi had been explicitly appointed by Revlon as [[agent]] and, for all the lenders knew or cared (let’s park [[constructive knowledge]] for now) is acting on instructions, within the scope of authority, and binds the principal. Hence the debt is discharged. To the rest of the world, Citi was an agent.
+As against a third party without notice, an [[agent]] with the [[ostensible authority]] to bind a principal, in fact, ''does'' so: this is part of the legal case for the lenders. Here Citi had been explicitly appointed by Revlon as [[agent]] and, for all the lenders knew or cared (let’s park [[constructive knowledge]] for now) is acting on instructions, within the scope of authority, and binds the principal. Hence — ''if'' such a payment would operate to automatically discharge the debt, and the court concluded it ''did'' — the debt is discharged. To the rest of the world, Citi was an agent.
-To Revlon, in making that payment, Citi was ''not'' an agent. Revlon might say, “I did not ask you to make that payment. I did not want my debt discharged. I was rather enjoying ''not'' having to discharge it for the time being. So this one, Citi, is on you.” This might, indeed seem fair, if Citi can then proceed against the lenders in an action for [[money had and received]]. ''But it can’t''. Citi is in a [[paradox]]ical position: as regards the lenders it ''is'' an agent; as against the principal, it is ''not''.
+But to Revlon, in making that payment, Citi was ''not'' an agent. It was acting in excess of its mandate. Revlon might say, “I did not ask you to make that payment. I did not want my debt discharged. I was rather enjoying ''not'' having to discharge it for the time being. So this one, Citi, is on you.” This might, indeed seem fair, if Citi can then proceed against the lenders in an action for [[money had and received]], as it would be able to under English law. ''But, as long as this judgment remains the law, it can’t''. Citi is in a [[paradox]]ical position: as regards the lenders it ''is'' an agent; as against the principal, it is ''not''. This is one more reason that Justice Furman’s decision seems to be wrong. Citi is left without a remedy.
 We might suppose that Citi has somehow assumed the lenders’ claims, then. But has it? This does not seem to be what it has done at all. It has ''repaid'' those loans, unasked, on Revlon’s behalf. Revlon neither agreed to it doing this, nor provided any [[consideration]] for it.