Opinion ID: 1359301
Heading Depth: 1
Heading Rank: 5

Heading: summary judgment was improper in this case because a material issue of fact remains as to whether bank is estopped from demanding strict compliance.

Text: Diamond Plastics's pleads that Bank is estopped from requiring strict compliance with the terms of the letters of credit because Bank had previously allowed nonconforming presentment. Although Article 5 of the UCC does not specifically provide for estopped in letter of credit practice, such rules of law are not prohibited by it. Indeed, § 5-102 provides: (3) This Article deals with some but not all of the rules and concepts of letters of credit as such rules or concepts have developed prior to this act or may hereafter develop. The fact that this Article states a rule does not by itself require, imply or negate application of the same or a converse rule to a situation not provided for or to a person not specified by this Article. 12A O.S. 1981, § 5-102. Therefore, common law doctrines such as estoppel may be applied to cases involving letters of credit, and many courts have utilized estoppel in determining how to resolve issues in wrongful dishonor cases. See also W.R. Grimshaw Co. v. First Nat'l Bank & Trust Co. of Tulsa, 563 P.2d 117 (Okla. 1977) (Estoppel is incorporated into the UCC as a supplemental principle of law [under § 1-103 of the UCC].). Diamond Plastics alleges Bank honored drafts on earlier letters of credit issued to Diamond Plastics even though Diamond Plastics had failed to strictly comply with the terms of those letters of credit. The letters contained similar language and requirements as the ones at bar yet the Bank honored drafts on those letters even though Diamond Plastics did not present negotiable bills of lading and consular invoices with the drafts. Some courts have held that an issuing bank may be estopped from demanding strict compliance where it has honored nonconforming presentment of documents in past dealings with the beneficiary. Seattle-First, supra ; Schweibish v. Pontchartrain State Bank, 389 So.2d 731 (La. App. 1980). Estoppel is generally understood to prevent one party from taking a legal position which is inconsistent with an earlier action that places the other party at a disadvantage. Penny v. Ginffrida, 897 F.2d 1543 (10th Cir.1990). This Court has explained the doctrine of equitable estoppel as follows: Equitable estoppel is the result of the voluntary conduct of a party whereby he is absolutely precluded from asserting rights which might have otherwise existed as against a person who, in good faith, relied on such conduct and has been thereby led to change his position to his detriment, and who has acquired some corresponding right. It holds a person to a representation made, or a position assumed, where otherwise inequitable consequences would result to another, who, having a right to do so under the circumstances, has in good faith, relied thereon. Whether the doctrine of equitable estoppel is applicable depends on the facts and circumstances of each case. Apex Siding & Roof Co. v. First Fed. Sav. & Loan Ass'n of Shawnee, 301 P.2d 352, 355 (Okla. 1956). The doctrine was originally developed to protect a person from loss which, but for the estoppel, he could not avoid. Cleveland Trust Co. v. State ex rel. Hunt, 555 P.2d 594 (Okla. 1976). Estoppel is used to prevent injustice and promote justice and should not be used to work a positive gain to a party. Id. Diamond Plastics claims that because Bank honored previous drafts which failed to conform to the letter of credit in the same way that the draft in the case at bar did, Bank should be estopped from asserting its right to demand strict compliance. The court in Schweibish, supra, noted that where the bank assumed a position totally inconsistent with its prior actions by demanding strict compliance on one draft when it had previously honored nonconforming drafts. The court stated that if the bank was going to demand strict compliance on the subject draft it needed to give notice of such to the beneficiary which had relied on the banks previous action to its detriment. Likewise, Diamond Plastics was entitled to notice that strict compliance was required on its final draft after detrimentally relying on Bank's honor of nonconforming drafts in the past if such actually occurred. Therefore, material issues of fact remain to be addressed in this action, to wit, whether Bank honored previous nonconforming drafts and whether Diamond Plastics detrimentally relied on Bank's previous conduct. The resulting question as to whether Bank is estopped from demanding strict compliance in Diamond Plastic's latest draft is the crux of the cause of action. This matter must be remanded for resolution of these issues. Hence, it was error for the district court to grant summary judgment to Bank on the issue of wrongful dishonor. We do not here decide whether Diamond Plastics is entitled to judgment as a matter of law. Rather, we remand this case for further proceedings.