1

 The parties’ joint motion to hold in abeyance the requirements of the preliminary

scheduling order (doc. 28) is MOOT. 

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

U.S. BANK NATIONAL ASSOCIATION, )

a national banking association, )

)

Plaintiff, )

)

vs. ) CIVIL ACTION NO. 09-0784-KD-B

)

BANKPLUS, a Mississippi Bank, )

)

Defendant. )

ORDER

This action is before the Court on the motion for summary judgment filed by plaintiff

U.S. Bank National Association (US Bank), the response filed by defendant BankPlus, and US

Bank’s reply (docs. 29, 30, 35, 42). Upon consideration, and for the reasons set forth herein,

U.S. Bank’s motion for summary judgment is GRANTED.1

I. Background

On May 10, 2005, Charles Steven Wood, Sr., and Alecia P. Wood entered into a purchase

and escrow agreement to buy condominium Unit C-1807 at Turquoise Place, Phase II at Orange

Beach, Alabama, for approximately $1.4 million. (doc. 26, Exhibit A, Declaration of George

Gordon, City President for BankPlus, and exhibits). At that time an irrevocable Letter of Credit

(LOC) in the amount of $277,180.00 was issued by BankPlus at the request of the Woods for use

as an earnest money deposit (Id.) The LOC named US Bank, the escrow agent for Turquoise

Place, as the “Beneficiary”, identified the Woods as the “Borrower”, and BankPlus as the

“Lender” (Id.) On November 1, 2008, the Woods obtained a replacement irrevocable LOC which

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 The LOC calls for application of Mississippi law to the extent not preempted by federal

law. The parties do not dispute that the law of Mississippi is applicable. 

2

by its terms would expire November 1, 20092

 (Id.; doc. 1-1, p. 2-3). 

As part of the Application and Agreement for Irrevocable Letter of Credit, the Woods

agreed to repay BankPlus and executed a promissory note in the amount of $277,189.00 whereby

payment by BankPlus on Sight Draft on the LOC would be an advance under the note (doc. 26,

Exhibit A, at ¶ 9). The Woods also executed a deed of trust which granted BankPlus a mortgage

on their property in Waynesboro, Mississippi (Id. at ¶ 10). On September 16, 2009, the Woods

filed a voluntary Chapter 13 bankruptcy petition and proposed Chapter 13 Plan in the U.S.

Bankruptcy Court for the Southern District of Mississippi, Southern Division (Case No. 09-

52037-NPO). 

On October 27, 2009, US Bank presented a Sight Draft to BankPlus in the amount of

$207,885.00 and Statement of Beneficiary indicating that the Woods defaulted on the terms of

the purchase and escrow agreement with Turquoise (doc. 1-2, p. 2-3). Instead of paying US

Bank, BankPlus initiated an Adversary Proceeding in the bankruptcy action on October 30,

2009, against the Woods, U.S. Bank, and the Chapter 13 Trustee J. C. Bell, to determine the

status of the LOC and the parties’ respective underlying agreements (Adversary Proceeding Case

No. 09-05078-NPO). On December 2, 2009, US Bank filed a motion to dismiss the Adversary

Proceeding which was granted (Id. at document 38). 

Also on December 2, 2009, US Bank filed its complaint against BankPlus in this court

wherein US Bank alleges that BankPlus wrongfully dishonored US Bank’s demand for payment

under the terms of the LOC (doc. 1). US Bank brings its First Cause of Action for breach of

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contract, its Second Cause of Action for violation of International Standby Practices, and its

Third Cause of Action for violation of Uniform Commercial Code (Id.). BankPlus answered and

set forth its affirmative defenses to the complaint (doc. 23). As of the filing of the motion for

summary judgment, the Sight Draft had not been honored (see doc. 14-1, Affidavit of David W.

Morrison, Vice President of US Bank). 

II. Standard of Review

Summary judgment should be granted only if “there is no genuine issue as to any

material

fact and [ ] the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). The

party seeking summary judgment bears “the initial burden to show the district court, by reference

to materials on file, that there are no genuine issues of material fact that should be decided at

trial.” Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). The party seeking

summary judgment always bears the “initial responsibility of informing the district court of the

basis for its motion, and identifying those portions of ‘the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits, if any,’ which it believes

demonstrate the absence of a genuine issue of material fact.” Id. (quoting Celotex Corp. v.

Catrett, 477 U.S. 317, 323 (1986)). If the nonmoving party fails to make “a sufficient showing

on an essential element of her case with respect to which she has the burden of proof,” the

moving party is entitled to summary judgment. Celotex, 477 U.S. at 323. “In reviewing whether

the nonmoving party has met its burden, the court must stop short of weighing the evidence and

making credibility determinations of the truth of the matter. Instead, the evidence of the

non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.” Tipton

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v. Bergrohr GMBH-Siegen, 965 F.2d 994, 998-999 (11th Cir. 1992), cert. den., 507 U.S. 911

(1993) (internal citations and quotations omitted). The mere existence of any factual dispute will

not automatically necessitate denial of a motion for summary judgment; rather, only factual

disputes that are material preclude entry of summary judgment. Lofton v. Sec’y of the Dep’t of

Children & Family Serv., 358 F.3d 804, 809 (11th Cir. 2004), cert. den., 534 U.S. 1081 (2005). 

III. Statement of the law

The parties do not dispute that the LOC was issued in the State of Mississippi. Further,

there is no dispute that the LOC is governed by the Uniform Commercial Practices of the

International Chamber of Commerce (UCP), ICC Publication No. 600, and by the laws of the

State of Mississippi, to the extent not preempted by federal law or inconsistent with the UCP, as

incorporated into the LOC (doc. 1-1, p. 2). Revised Article 5 of the Mississippi Uniform

Commercial Code addresses letters of credit. Miss. Code Ann. § 75-5-101 et seq. 

In general, a LOC is a 

. . . payment device often used in international trade which permits a buyer in a

transaction to substitute its financial integrity with that of a stable credit source,

usually a bank. Alaska Textile Co., Inc. v. Chase Manhattan Bank, N.A., 982 F.2d

813, 815 (2d Cir. 1992). As described by the Second Circuit: 

In its classic form, the letter of credit is only one of three distinct

relationships between three different parties: (1) the underlying

contract for the purchase and sale of goods between the buyer

(“account party”) and the seller (“beneficiary”), with payment to

be made through a letter of credit to be issued by the buyer's bank

in favor of the seller; (2) the application agreement between the

[issuing] bank and the buyer, describing the terms the issuer must

incorporate into the credit and establishing how the bank is to be

reimbursed when it pays the seller under the letter of credit; and

(3) the actual letter of credit which is the bank's irrevocable

promise to pay the seller-beneficiary when the latter presents

certain documents (e.g., documents of title, transport and insurance

documents, and commercial invoices) that conform with the terms

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of the credit.

Id. 

. . . 

The key to the commercial vitality of the letter of credit is its independence: it is

wholly separate and distinct from the underlying contract. When the beneficiary

submits documents to the issuing/confirming bank, the bank's only duty is to

examine the documents and determine whether they are in accordance with the

terms and conditions of the credit. Dibrell Bros. Int'l, S.A. v. Banca Nazionale

Del Lavoro, 38 F.3d 1571, 1579 (11th Cir. 1994). If the bank finds the

documents to be conforming, it is then obligated to honor a draft on the credit,

independent of the performance of the underlying contract for which the credit

was issued. Marino Indus. Corp. v. Chase Manhattan Bank, N.A., 686 F.2d 112,

115 (2d Cir. 1982) (“It is the complete separation between the underlying

commercial transaction and the letter of credit that gives the letter its utility in

financing transactions.”); Pro-Fab, Inc. v. Vipa, Inc., 772 F.2d 847, 852-53 (11th

Cir. 1985) (“The bank is obligated to look only to the requirements of the letter of

credit, not to any other activity between the parties.”) 

The Uniform Customs and Practices for Documentary Credits (UCP), first issued

in 1930 by the International Chamber of Commerce and revised approximately

every ten years since, is a compilation of internationally accepted commercial

practices which may be incorporated into the private law of a contract between

parties. Alaska Textile, 982 F.2d at 816. Although it is not the law, the UCP

applies to most letters of credit because issuers typically incorporate it into their

credits. Id.

Banco General Runinahui, S.A. v. Citibank Intern., 97 F.3d 480, 482 (11th Cir. 1996). 

The “independence principal” has been codified in Mississippi law and explained as

follows: 

. . . A letter of credit is an engagement by an issuer, usually a bank, made at the

request of a customer (or applicant) for a fee, to honor a beneficiary's drafts or

other demands for payment upon satisfaction of the conditions set forth in the

letter of credit. Miss. Code Ann. § 75-5-102. At common law, the issuer of a

letter of credit had a direct obligation to pay independent of the underlying

contract between the customer and the beneficiary as long as the documents

presented satisfied the terms of the letter of credit. See, e.g., Pringle-Associated

Mortgage Corp. v. S. Nat'l Bank, 571 F.2d 871, 874 (5th Cir.1978). This feature

of a letter of credit is known as the “independence principle” and has been

described as the “most unique and mysterious part of the letter of credit

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 US Bank claims breach of contract, violation of International Standby Practices, and

violation of Uniform Commercial Code. However, all counts rest upon a finding of whether

BankPlus wrongfully dishonored the draft on the LOC.

6

transaction.” 3 James J. White & Robert S. Summers, Uniform Commercial Code

§ 26-2 (5th ed.2007). In Mississippi, the independence principle is codified in

Miss. Code Ann. § 75-5-103(d), which states:

Rights and obligations of an issuer to a beneficiary or a nominated

person under a letter of credit are independent of the existence,

performance or nonperformance of a contract or arrangement out

of which the letter of credit arises or which underlies it, including

contracts or arrangements between the issuer and the applicant and

between the applicant and the beneficiary.

Id.

In re B.C. Rogers Poultry, Inc., 2009 WL 3856428, *8, (Bankr. S.D. Miss. November 16, 2009)

(footnotes omitted). 

In order to prevail on a claim that the issuer has wrongfully dishonored a request for

payment pursuant to a LOC, the beneficiary must show the issuance of a LOC, timely

presentation of the document required in the LOC to effectuate a demand for payment, and a

failure to pay on the part of the issuer. Voest-Alpine Trading USA Corp. v. Bank of China, 142

F.3d 887, 892 (5th Cir. 1998). 

IV. Analysis

A. Wrongful dishonor3

On motion for summary judgment, US Bank argues that on October 27, 2009, it timely

presented the Sight Draft and Statement of Beneficiary to BankPlus for payment of a partial

draw of $207,885.00. US Bank states that BankPlus then had seven days to honor the

presentation, or until November 3, 2009, two days after the LOC was set to expire on November

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1, 2009. US Bank argues that BankPlus acknowledged receipt but has not yet paid, and

therefore, wrongfully dishonored its request for payment. US Bank argues that the LOC is

independent of the underlying contracts between the Woods and Turquoise or BankPlus and the

Woods, and therefore filing the Adversary Proceeding in the Woods’ bankruptcy action does not

excuse BankPlus from the wrongful dishonor. 

BankPlus responds that it did not honor the Sight Draft because of the Woods’ pending

bankruptcy. BankPlus argues that it initiated the Adversary Proceeding to interplead the funds

because it was faced with conflicting and competing claims regarding the validity of the LOC

and entitlement to payment or retention of the proceeds. BankPlus argues that the competing

claims could subject it to inconsistent adjudications leading to double or multiple liability. 

BankPlus concedes that the Bankruptcy Court has dismissed its Adversary Proceeding, and

therefore, the primary reasons for initiating the Adversary Proceeding instead of paying the Sight

Draft, no longer exist. 

BankPlus does not dispute that the LOC was properly issued, that the presentation of the

Sight Draft and Statement of Beneficiary complied with the terms of the LOC, or the timeliness

of the presentation. The LOC explained that Sight Drafts were to be marked “DRAWN UNDER

BankPlus IRREVOCABLE LETTER OF CREDIT NO. 150005558000 DATED 11-1-2008",

that “the amount of each draft shall be marked on the draft”, that only the Beneficiary could

make a draw, that the original LOC must accompany the draw, and that partial draws were

permitted (doc. 1-1). The Sight Draft was presented on October 27, 2009 and the LOC did not

expire until November 1, 2009. BankPlus does not dispute that it has not paid US Bank. Thus

US Bank has met its burden of establishing the elements of a claim for wrongful dishonor.

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Voest-Alpine Trading USA Corp., 142 F.3d at 892. 

BankPlus argues that it did not pay because it filed an Adversary Proceeding in the

Woods Bankruptcy proceeding and sought to interplead the funds into bankruptcy. However, the

Fifth Circuit Court of Appeals has held that “[i]t is well-established in this circuit that letters of

credit and the proceeds therefrom are not property of the debtor’s bankruptcy estate.” In re

Stonebridge Technologies, Inc., 430 F. 3d 260, 269 (5th Cir. 2005). “Insofar as letters of credit

embody obligations between the issuer and beneficiary, such contractual rights and duties are

entirely separate from the debtor's estate: 

[A]n issuer's obligation to the letter of credit's beneficiary is independent from

any obligation between the beneficiary and the issuer's customer. All a

beneficiary has to do to receive payment under a letter of credit is to show that it

has performed all the duties required by the letter of credit.

Id. (quoting Kellogg v. Blue Quail Energy, Inc. (In re Compton Corp.), 831 F.2d 586, 590 (5th

Cir. 1987)). Also, the Eleventh Circuit Court of Appeals, in In re Air Conditioning, Inc. of

Stuart, 845 F. 2d 293 (11th Cir. 1988), found that neither a LOC nor its proceeds were property

of the debtor’s estate. Id. at 2906; cf. In re Builders Transport, Inc., 471 F.3d 1178 (11th Cir.

2006), cert. denied, 550 U.S. 904, 127 S. Ct. 2112 (2007) (explaining that the doctrine of

independence protects only the “distribution” of proceeds of a LOC and not the right to retain

those proceeds once received).

No genuine issue of material fact exists such that would preclude entry of summary

judgment in favor of US Bank on the claim for wrongful dishonor. Further, as a matter of law

BankPlus’s decision to file the Adversary Proceeding instead of paying on the Sight Draft is not

a valid defense to US Bank’s claim for wrongful dishonor. Accordingly, summary judgment is

granted in favor of US Bank as to all claims. 

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 US Bank determined the daily accruing rate of interest by determining the annual

interest rate on the principal and dividing that sum by 365 days per year (doc. 14, p.11). From

November 3, 2009, the date of dishonor until judgment, April 2, 2010, constitutes 150 days. 

150 days multiplied by $45.56 totals $6,834.00.

9

B. Damages

The Sight Draft indicates that US Bank sought a partial draw of $207,885.00. US Bank

also seeks pre-judgment interest accruing at the rate of 8%, see Miss. Code Ann. § 75-17-1, from

time of dishonor until judgment, or the amount of $16,630.80. BankPlus does not dispute the

interest accrual calculation or the principle amount of damages provided by plaintiff US Bank. 

Accordingly, US Bank is awarded damages in the sum of $207,885.00 plus $6,834.00, interest

accrued thereon at the rate of 8 % or $45.56 per diem4

 , for a total of $214,719.00.

C. Attorney fees and costs

US Bank also states that it will present finals costs and attorney fees after the order on

summary judgment “and before final judgment consistent with local rules and practice”. At the

time of summary judgment, US Bank sought attorney fees of $12,797.00 and costs of $350.00,

for a total of $13,147.00. US Bank argues that Miss. Code Ann. § 75-5-111(e) as well as UCC

Article 5-111(e) provide for attorneys fees and other expenses to the prevailing party. 

BankPlus argues that should this Court find it wrongfully dishonored the Sight Draft and

that US Bank is the prevailing party, US Bank is only entitled to reasonable fees and expenses

incurred directly in connection with this action only and not with the bankruptcy action. 

BankPlus also argues that US Bank has not met its burden because it has not submitted time

sheets or other evidence, and if the Court allows US Bank to submit evidence, BankPlus reserves

the right to respond. 

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Section 75-5-111(e) provides that “[r]easonable attorney’s fees and other expenses of

litigation must be awarded to the prevailing party in an action in which a remedy is sought under

this chapter.” Miss. Code Ann. § 75-5-111(e). US Bank brought its Third Cause of Action for

violation of the Uniform Commercial Code (doc. 1). Therefore, summary judgment having been

granted in favor of US Bank as to all claims, the Court finds that US Bank is the prevailing party

in this action. 

Accordingly, the Court will retain jurisdiction to address the issue of a reasonable

attorneys fee and other expenses. See Fed. R. Civ. P. Rule 54(d); Standing Order No. 13 and

Local Rule 54.1 and 54.3, Southern District of Alabama. Therefore, US Bank shall files it

application for attorneys fees and expenses, with evidentiary support, on or before April 19,

2010, and BankPlus shall file its response on or before May 3, 2010. The application and

response shall be taken under submission on May 4, 2010. 

V. Conclusion

For the reasons set forth herein, summary judgment is granted in favor of plaintiff U.S.

Bank as to all claims. Judgment consistent with the terms of this order shall be entered by

separate document as required in Rule 58 of the Federal Rules of Civil Procedure. 

DONE and ORDERED this April 2, 2010.

 s / Kristi K DuBose 

KRISTI K. DuBOSE

UNITED STATES DISTRICT JUDGE

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