Court Opinion

ID: 2961827
Source: CourtListenerOpinion
Date Created: 2015-09-21 20:48:32.657994+00
Date Added: 2024-06-11T15:01:54.597054
License: Public Domain

USCA1 Opinion

	

                            United States Court of Appeals                            United States Court of Appeals                                For the First Circuit                                For the First Circuit                                 ____________________        No. 92-2145                                   MUELLER COMPANY,                                Plaintiff, Appellant,                                          v.                                  SOUTH SHORE BANK,                                 Defendant, Appellee.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                     [Hon. William G. Young, U.S. District Judge]                                             ___________________                                 ____________________                                        Before                                Boudin, Circuit Judge,                                        _____________                            Aldrich, Senior Circuit Judge                                     ____________________                              and Stahl, Circuit Judge.                                         _____________                                 ____________________            David M.  Jones with whom James  E. Howard,  M. Katherine Willard,            _______________           ________________   ____________________        and Kirkpatrick & Lockhart were on brief for appellant.            ______________________            George W.  Mykulak with whom Gary  R. Greenberg,  Louis J. Scerra,            __________________           __________________   ________________        Jr., and Goldstein & Manello, P.C. were on brief for appellee.        ___      _________________________                                 ____________________                                    April 22, 1993                                 ____________________                      STAHL,  Circuit Judge.    In this  appeal, we  must                              _____________            determine whether defendant-appellee South Shore Bank ("South            Shore")  properly  refused plaintiff-appellant  Mueller Co.'s            ("Mueller")  request for  payment under  a letter  of credit.            Because the  documents accompanying Mueller's request did not            comply  with the  requirements  of the  letter of  credit, we            affirm  the district  court's  ruling that  the dishonor  was            proper.                                          I.                                          I.                                          __                       FACTUAL BACKGROUND AND PRIOR PROCEEDINGS                       FACTUAL BACKGROUND AND PRIOR PROCEEDINGS                       ________________________________________                      George  A.  Caldwell  Company  ("Caldwell")  was  a            family-owned gas  and water-works  supply company located  in            Stoughton, Massachusetts.1  Caldwell  purchased supplies on a            regular basis  from Mueller, a supplier  in Atlanta, Georgia.            By  early 1990, Caldwell could no longer meet its payments to            Mueller, and Mueller stopped shipping supplies.                        As  a   condition   to  Mueller's   resumption   of            shipments,  Caldwell arranged  for  South Shore  to issue  an            irrevocable  standby letter  of credit  in favor  of Mueller.            The  letter, dated  May  24,  1990,  and  in  the  amount  of            $500,000, provided  that if Caldwell failed  to make payments            for  goods ordered  and  shipped  after  May 24,  1990,  then            Mueller  could  present a  sight  draft  to South  Shore  for            payment.  The sight  draft was to be accompanied  by invoices                                            ____________________            1.  Caldwell is not a party to the controversy before us.                                         -2-                                          2            "clearly  evidencing  that   the  goods  described  in   said            invoice(s) represent goods ordered  and shipped after May 24,            1990."2   By  its  terms,  the letter  of  credit  was to  be            governed by the Uniform  Customs and Practice for Documentary            Credits (1983 Version) (hereinafter "UCP").                      With the assurance of the standby letter of credit,            Mueller resumed  shipments to Caldwell.   Again, Caldwell was            unable to meet its payments.  Mueller notified South Shore in            late October that it planned to draw on the letter of credit,            and sent South  Shore an  "aged trial  balance" which  listed            invoices that Mueller planned to present for payment.                                              ____________________            2.  The letter of credit stated in relevant part:                 [South Shore] hereby establish[es]  our irrevocable                 letter  of credit in [Mueller's] favor available by                 your  drafts  drawn  at  sight and  accompanied  by                 documents specified below:                 1.    A  statement  on the  letterhead  of  Mueller                 Company, addressed  as per this  letter of  credit,                 signed by  an individual or  individuals purporting                 to be  authorized,  stating:    "Payment  has  been                 demanded   of  George  A.  Caldwell,  213  Turnpike                 Street, Stoughton, Ma. 02072-0006, not received and                 is still outstanding for more than 60 days from the                 relative  invoice  date(s).    Our  demand  relates                 solely to  goods ordered and shipped  after May 24,                 1990."                   2.    Copy(ies)  of  invoice(s) issued  by  Mueller                 Company   purporting   to   represent   the   above                 transaction, marked "unpaid" and clearly evidencing                 that  the   goods  described  in   said  invoice(s)                 represent goods  ordered and shipped  after May 24,                 1990.                                         -3-                                          3                      On December  31, 1990,  the expiration date  of the            letter  of credit, Mueller  presented a sight  draft to South            Shore  in  the   amount  of  $221,996.11.     The  draft  was            accompanied by  163 invoices  purporting  to represent  goods            ordered  and shipped  after  May 24,  1990.   A  considerable            number of the invoices, however, listed order dates  prior to            May 24, 1990.   South Shore sent  a timely letter to  Mueller            refusing  to  honor  the  draft  on  the   grounds  that  the            "[i]nvoices presented  do  not clearly  evidence  that  goods            described represent  goods ordered and shipped  after May 24,            1990 as per . . . the letter of credit."                       Mueller  thereafter  filed  a diversity  action  in            district   court,  alleging   that  South   Shore  wrongfully            dishonored the  draft, arguing, inter alia,  that South Shore                                            _____ ____            knew or should have known that the invoices represented goods            ordered  and shipped  after May  24, 1990.   Upon  motion for            summary judgment by South Shore, the district court dismissed            Mueller's cause  of action on  the grounds that  the invoices            submitted by Mueller  did not  comply with the  terms of  the            letter of credit.  For the reasons that follow, we affirm.                                         II.                                         II.                                         ___                                      DISCUSSION                                      DISCUSSION                                      __________            A.  Dishonor of the Draft            _________________________                      Under  the provisions  of  the UCP,  "[b]anks  must            examine all documents with  reasonable care to ascertain that                                         -4-                                          4            they  appear, on  their face,  to be  in accordance  with the            terms   and  conditions  of  the  credit."    UCP,  Art.  15.            Moreover,   letters  of   credit   "by  their   nature,   are            transactions separate from the  sales or other contract(s) on            which they may  be based, and banks  are in no  way concerned            with or bound  by such contract(s)."  UCP, Art.  3.  See also                                                                 ___ ____            Ground  Air Transfer,  Inc. v.  Westates Airlines,  Inc., 899            ___________________________     ________________________            F.2d  1269, 1272  (1st Cir.  1990) ("[C]ourts  have typically            considered  the  letter of  credit  as  `independent' of  the            contract.").     Thus,  in  determining   their  rights   and            obligations  under  a  letter  of credit,  "parties  are  not                                                                      ___            required to look beyond the face of the documents presented."            Auto  Servicio  San  Ignacio,   S.R.L.  v.  Compania  Anonima            ______________________________________      _________________            Venezolana de Navegacion, 765 F.2d 1306, 1310 (5th Cir. 1985)            ________________________            (emphasis in original).  See also UCP, Art. 4 ("[A]ll parties                                     ___ ____            concerned deal  in documents,  not in goods,  services and/or            other performances to which the documents may relate.").  I n            this case, the letter of credit required that the sight draft            be  accompanied  by  invoices "clearly  evidencing"  that the            goods  were  "ordered  and  shipped  after  May  24,  1990."3                                            ____________________            3.  Mueller argues  that the  qualifying term "after  May 24,            1990"  applies  only  to  "shipped," and  not  to  "ordered."            Obviously, goods  would not be shipped  without being ordered            at some date, and if the phrase were read as meaning that the            date  was of no  consequence, there would be  no point to the            word  "ordered" being present at all.   Accordingly, we agree            with  the district court that  the term "after  May 24, 1990"            unambiguously modifies both "shipped" and "ordered."                                         -5-                                          5            Surely,  an invoice with an order  date prior to May 24, 1990                                                    _____            does  not "clearly evidence" an order placed after that date.            Rather, such an invoice directly contradicts the terms of the            letter  of credit.4  In  contending that South  Shore knew or            should have known that  these invoices represented goods that            had been  reordered and shipped  subsequent to May  24, 1990,                      _________            Mueller is  essentially urging  that South Shore  should have            looked  beyond  the  face   of  invoices  to  the  underlying            transaction.   As  we have  stated, however, South  Shore was            under no such obligation.  See, e.g., Auto Servicio, 765 F.2d                                       ___  _____ _____________            at 1310;  UCP, Art. 4.   Because the invoices failed  to meet            the  requirements  of the  letter  of  credit, we  find  that            dishonor was proper.            B.  Additional Arguments            ________________________                                            ____________________            4.  We   disagree  with  Mueller's  characterization  of  the            improper  order dates as  "technical inconsistencies."   See,                                                                     ___            e.g., Exotic Traders Far East Buying Office v. Exotic Trading            ____  _____________________________________    ______________            U.S.A., Inc.,  717 F. Supp. 14,  17 (D. Mass. 1989).   Unlike            ____________            the  documents in  Exotic  Traders which  the district  court                               _______________            found "could not have misled anyone," id., the non-conforming                                                  ___            order dates in the  instant case signaled that the  goods had            been ordered prior to May 24, 1990.  By its terms, the letter                         _____            of credit did not bind South Shore to honor such invoices.                 Moreover, we reject Mueller's  argument that South Shore            could or  should have relied  on the "invoice"  dates, rather            than the  "order" dates, in determining  whether the invoices            complied  with the letter of  credit.  While  it appears that            most  or all of the invoices had  invoice dates after May 24,            1990,  the  nonconforming  order  dates  were  sufficient  to            justify dishonor.  See,  e.g., UCP, Art. 15  ("Documents that                               ___   ____            appear, on  their face, to  be inconsistent with  one another            will  be considered as not appearing, on their face, to be in            accordance with the terms of the letter of credit.").                                         -6-                                          6                      Our  ruling  that  dishonor  was   proper,  as  the            district court properly pointed  out below, is dispositive of            Mueller's additional arguments.                       We  reject Mueller's  contention that  the invoices            with  valid  order  dates  constituted  separate  or  partial            drawings on the letter of credit.  While the letter of credit            did allow partial  drawings, Mueller chose  to draw upon  the            letter  of  credit  only  once  with  a  single  sight  draft            presented on  the letter's expiration date.   Mueller directs            us to no authority, nor have we located any, which stands for            the proposition that an issuing bank  must pay a portion of a                                                             _______            documentary  sight draft  on  the grounds  that  some of  the                                                             ____            documents comply.  Because the "valid" invoices presented did            not meet the  amount of  the sight draft,  the bank  properly            declined to honor the entire draft.                      Finally, we  find nothing in the  record to support            Mueller's contention that the  dishonor amounted to bad faith            or an  unfair business practice.5                                             ____________________            5.  In arguing that South Shore's dishonor  was in bad faith,            Mueller relies  almost exclusively on the  fact that Caldwell            expressed an  initial  willingness to  waive the  documentary            discrepancies between the invoices  and the letter of credit.            This argument is based on  a misunderstanding of the doctrine            of  waiver as it  applies to  letter of  credit transactions.            While  Caldwell may waive its  own right to  insist on strict                                           ___            compliance, it  may not  waive South  Shore's  right in  this            respect.    See  e.g.,  Cooperative  Agricole  Groupement  de                        ___  ____   _____________________________________            Producteurs Bovins de L'Ouest  v. Banesto Banking Corp., 1989            _____________________________     _____________________            WL  82454, *23 (S.D.N.Y. July  19, 1989) ("Any  waiver by the            [customer] merely  effects the contract between  the bank and            the  [customer].   Any  other  interpretation  of the  waiver                                         -7-                                          7                                         III.                                         III.                                         ____                                      CONCLUSION                                      CONCLUSION                                      __________                      Because Mueller  has presented no  genuine issue as            to  any material fact, the entry of summary judgment in favor            of South Shore was proper as  a matter of law.   Accordingly,            the order of the district court is                      Affirmed.                      ________                                            ____________________            doctrine would emasculate the UCP requirements for amending a            letter of  credit.").    Accordingly,  we find  no  merit  in            Mueller's  argument  that  Caldwell's  willingness  to  waive            indicates that South Shore proceeded in bad faith.                   Equally  unavailing  is  Mueller's   estoppel  argument.            Mueller's late October letter, which included the "aged trial            balance," and  which stated that Mueller intended  to draw on            the letter  of credit, did  not include any  actual invoices.            Thus,  South  Shore's  failure   to  object  to  the  October            notification letter did not estop it from later rejecting the            draft due to nonconforming invoices.                 To  the  extent that  Mueller  makes  other waiver,  bad            faith, or estoppel claims, we find them to be without merit.                                         -8-                                          8