Source: https://case-law.vlex.com/vid/762-f-2d-1005-596322938
Timestamp: 2019-04-23 19:52:28+00:00

Document:
Party Name: BANCO CONTINENTAL, PLAINTIFF-APPELLEE, v. FIRST NATIONAL BANK OF GATLINBURG DEFENDANT-APPELLANT AND DOUGLAS HEINSOHN, INTERVENOR-APPELLANT.
FIRST NATIONAL BANK OF GATLINBURG DEFENDANT-APPELLANT AND DOUGLAS HEINSOHN, INTERVENOR-APPELLANT.
Before: MERRITT, KENNEDY and WELLFORD, Circuit Judges.
This is an action for payment under a letter of credit. Defendant issuer bank, First National, at the instruction of intervening defendant customer Heinsohn, refused to honor a letter of credit presented to it by the bank of the beneficiary of the letter of credit. The beneficiary was Gallo Nunez, an Ecuadorian citizen doing business as Stella Maris; Nunez is not a party to this suit. Plaintiff, Banco Continental, is the beneficiary's bank in Ecuador.
The United States District Court for the Eastern District of Tennessee, having diversity jurisdiction under 28 U.S.C. § 1332(a)(2), held that (1) under Tenn. Code Ann. § 47-5-114(1), the issuer bank was obligated to honor the letter of credit provided only that the documents required by the letter of credit conformed to terms; and (2) that plaintiff, Banco Continental, was a holder in due course of the documents which entitled Nunez to payment under the letter of credit. The bank, therefore, took free of any of the defenses allowed in Tenn. Code Ann. § 47-5-114(2) against one who is not a holder in due course.
Judgment was awarded for the plaintiff in the amount of $195,597.50, for the principal of the three drafts presented for payment; $25,687.50 as interest provided by Tenn. Code Ann. § 47-14-103(3); and $6,650.00 incidental damages for telephone, telex, banking and travel expenses under Tenn. Code Ann. § 47-5-115(1). Defendant's motion for a new trial was denied and this appeal ensued.
Heinsohn is a Gatlinburg doctor who decided to invest in the shrimp exporting business in 1980. He travelled to Ecuador to investigate the field and entered into a partnership arrangement with Nunez. They built a shrimp processing plant in Ecuador and began producing and exporting shrimp from Ecuador to the United States.
To facilitate the international financing of the partnership operation, in October 1982, Heinsohn arranged for the First National Bank of Gatlinburg to issue irrevocable letters of credit to Banco Continental. The letters of credit named Nunez as the beneficiary.

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