Court Opinion

ID: 9479942
Source: CourtListenerOpinion
Date Created: 2023-08-05 07:33:23.874508+00
Date Added: 2024-06-11T17:47:23.026869
License: Public Domain

JOHN R. BROWN, Senior Circuit Judge,
dissenting:
The result of this case is startling, not only in terms of its practical consequences, but equally in terms of the legal pronouncements it makes which, until the Supreme Court of Florida pronounces a decision, are binding on Eleventh Circuit federal litigants and is theoretically persuasive on non-Eleventh circuit litigants.
After holding in effect that the only significant time Republic extended credit was at the moment it issued the irrevocable letter of credit on February 14, 1983, the court, on the basis of the physical possession condition of the Banker’s Blanket Bond1 (which concededly it did not have at the moment the letter of credit was issued) went on to deliver this surprising statement for all time, for all persons, and all hopeful assureds:
In fact, since a beneficiary will always present the bills of lading after the bank already has irrevocably committed itself to extend credit to its customer and to honor the letter of credit presented by the beneficiary, the condition precedent contained in the banker’s blanket bond will always preclude a bank from recovering for a loss arising out of its misplaced reliance on the documents of title presented by the beneficiary of that letter of credit transaction.
(Emphasis by the court.)
Since the court’s declaration would eliminate coverage for, say, a forged corporate guarantee, this is almost saying to a bank paying substantial premiums for supposed coverage, “thanks so much, but you have bought a pig in a poke.” See (E)(l)(f)(i).
Perhaps reflecting some doubt about the universal correctness of this sweeping declaration, the court goes on to hold that Republic’s claim is meritless “for another, more fundamental reason.” See ante at page 1263. It then proceeds to develop that reason: failure to prove reliance “on the forged bills of lading.” (Emphasis added.) This leads the court to announce the proposition — which must be dubious in a world of commerce dependent on the reasonable, if not always legally enforceable, expectation of good faith performance— that in a letter of credit situation the issuing bank “has no guarantee that these [the *1265documented bills of lading] will be genuine, nor is it entitled to one.” Ante at page 1263. Engaging then perhaps in a sort of Casino (not Lexis) search, the court expresses the legal view that such reliance “is no more than a bet on the role of the dice.” See ante at page 1263 & n. 9.
Emphasizing the temporal scope of the reliance, the court then concludes that with no possible reliance on bills of lading incapable then of being in its possession: “When Republic agreed to finance Colombian’s request for a letter of credit, the bank did so in reliance on Colombian’s credit and Du-que’s guarantee of that credit.”
Whatever soundness these there might be in these statements, they dramatically highlight that the court is missing the whole point of this insurance controversy: “The tender of, and reliance on, forged bills of lading at the time the demand is made for performance (payment) by the bank under its letter of credit promise to pay.”
The court’s emphasis, on the contrary, is on the moment the agreement to issue the letter of credit is made. It is at that time, so the court holds, that reliance by the bank must be solely on the creditworthiness of the customer (requester) and not on any expectation of bills of lading later on. But this ignores what took place, not at the time of the issuance of the letter of credit, but at the time of demand for performance of the bank’s promise to pay.
There is no dispute about the facts. Indeed, I embrace fully this court’s findings which may be pieced together in a single composite quotation:
On February 15, Bautista sought to draw on the letter of credit.... The letter was written on the stationery of Duque Industries and was accompanied by the required original invoices and bills of lad-ing_ In accordance with this arrangement, Bautista presented on February 17 three original invoices and bills of lading to Republic pursuant to the terms of the letter of credit. The bills of lading identified 6,000 sacks of coffee received on board from Limitada on February 2. Either not noticing or ignoring these anomalies [invoice dated February 4, shipment to be made on February 9, invoice references to a letter of credit to be issued on 2/14/83] in the proffered invoices and bills of lading, Republic issued a cashier’s check in the amount of $1,239,000 to the order of Limitada.... On that same day, Republic wrote to Colombian advising it that Limitada had drawn on the letter of credit and that Colombian owed a payment fee of $3,097.50 for this service.
It is uncontradicted that at the time the bank issued its certified check in compliance with the letter of credit, it was in possession of the documented bills of lading and invoices. Whatever may have been the situation at the time the letter of credit was issued, it is undisputed that the bank received and acted upon the bills of lading as called for in the letter of credit. Indeed, despite disclaiming, in its letter requesting payment of its service fee, responsibility for the genuineness of the bills of lading,2 Republic, after Duque’s fraud was publicly disclosed, continued its reliance on the bills of lading. Republic, so the court states, “conducted an investigation to locate the coffee described in the bills of lading. This investigation revealed that the bills of lading were forged and that the coffee represented by the bills of lading in fact did not exist.” See ante at page 1261.
This brought the whole thing explicitly within the coverage of (E)(l)(b)(i). The bank, pursuant to (E)(1), gave “value [$1,239,000] ... on the faith of, or ... acted upon [an] original (b) Document of Title [bills of lading] which were (i) a Forgery.
The District Judge was right. On the literal words of the Banker’s Blanket Bond and the facts found by him and articulated by us, it was a classic case of coverage for the consequences of acting upon forged *1266bills of lading which were then in the bank’s possession.
I must therefore respectfully dissent.

. The bond provides that:
Actual, physical possession of the items listed in ¶¶ (a) through (g) above by the Insured, its correspondent bank or other authorized representative, is a condition precedent to the Insureds having relied on the faith of, or otherwise acted upon, such items.

. Republic's letter to Colombian requesting payment of $3,097.50 also stated that the bank "assumed no responsibility for the genuineness of the documents or for the quantity or quality of the merchandise represented hereby or for its arrival.” See ante at page 1261.