Court Opinion

ID: 9562896
Source: CourtListenerOpinion
Date Created: 2023-08-21 18:34:50.007993+00
Date Added: 2024-06-11T09:17:35.494093
License: Public Domain

CARDINE, Justice,
dissenting, with whom ROSE, Justice, Retired, joins.
After trial to the court, appellee, Basin Petroleum Services, Inc., was awarded judgment against Security State Bank of Basin upon its letter of credit in the amount of $100,000 plus interest, damages, *1173and costs. The bank appeals from the judgment contending that it is not liable because there was not strict compliance with requirements and terms of the letter of credit.
The letter of credit, dated November 18, 1982, was provided at Basin’s request. The letter guaranteed payment for hay machines manufactured by Basin and sold to Round Bale Rail, Inc. (RBRI), a corporation, which at the time was obtaining financing from the bank. RBRI was a recently formed corporation. Basin required this irrevocable letter of credit to insure payment for the machines sold to RBRI.
As stated by the trial court in its decision letter:
“The Letter of Credit, by its terms, required that a copy of any purchase order must be supplied to the Defendant prior to Plaintiffs commencing any production and that the purchase order should carry its own number and refer to the Letter of Credit. The testimony revealed that there were five separate purchase orders, that Defendant maintained that it received copies of only the first two prior to production and did not receive a copy of the fifth one * * * until June 30, 1983
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The trial court found from the testimony that appellee had supplied the bank with an invoice and purchase order for the 25 hay balers involved in this case (the fifth purchase) which, in the judgment of the court, “satisfied this requirement [sales price] of the Letter of Credit.”
There were five separate purchases of machinery by RBRI from appellee. The bank admits that there was substantial compliance with the requirements of the letter of credit with respect to the first two purchases. The bank, its customer RBRI, and appellee were in personal contact with respect to the next two purchases, and the bank was aware of the purchases, the amount that would be invoiced for them, had loaned money to its customer RBRI, and did not require more of appellee in their dealings. The bank knew all there was to know about the transactions and would have been in no better position if it had insisted upon strict compliance with the terms of the letter of credit. Accordingly, the bank did not insist upon strict compliance.
The fifth purchase, the one involved in this case, was pursuant to a purchase order and invoice, both of which were delivered to the bank on June 30,1983. The next day the bank gave notice of revocation of the letter of credit.
It is clear from the facts, and the court found after trial, that initially there was compliance with the terms of the letter of credit; that the parties continued doing business and the bank did not thereafter require compliance with respect to the next two purchases of machines; that, with respect to the fifth purchase, there was compliance with the letter of credit; and that the bank then attempted revocation. The trial court held:
“The Defendant in this instance is likewise estopped to rely on any failure to strictly comply with the terms of the Letter of Credit. A purchase order was submitted to Defendant prior to the cancelation of the Letter of Credit and the Plaintiff otherwise substantially complied with the terms of the Letter.”
In support of its decision, the trial court quoted Schweibish v. Pontckartrain State Bank, La.App., 389 So.2d 731, 737 (1980):
“It is well settled * * * that when a party with full knowledge of the facts has acted or conducted himself in a particular manner, he cannot afterward assume a position inconsistent with his previous behavior to the prejudice of one who has acted in reliance on such conduct.
“The defendant bank was well acquainted with the legal and commercial practice applicable to letters of credit, and it was entitled to demand strict compliance with the conditions stated in the letters of credit issued to plaintiff. Nevertheless it chose not to require strict compliance with these conditions so long as mere substantial [compliance] did not conflict with the bank’s own interest. *1174However, after completing two or three transactions involving issuance of credits for International Metals to fund a sale from plaintiff, the bank assumed a position totally inconsistent with its prior actions by insisting on strict compliance with the conditions of the credit. Whether defendant received no consideration or anticipated receiving no consideration, its previous course of action in demanding only substantial [compliance] with conditions of earlier letters of credit caused plaintiff to act in reliance on the anticipation that the bank would not suddently insist on exact and precise requirements with the conditions of the credit. While the bank can impose conditions in the credit and demand complete compliance with them, it cannot, in a series of dealings based upon credits, arbitrarily select those credits which must conform to the requirements therein stated and those which may be paid without complete compliance. If it chooses to demand complete compliance with the stated conditions at a later date, its future intent should and must be conveyed in time for the beneficiary to comply therewith.” (Footnote omitted.)
In this case the bank, with full knowledge of the facts and the requirements of its letter of credit, conducted business over a period of time with its customer and with appellee engaging in a course of conduct that was acted upon by appellee; and the bank cannot now assume a position inconsistent with its previous behavior to the prejudice of appellee. I agree with the trial court, who listened to the testimony and observed the witnesses, that the bank is estopped by its course of conduct from now demanding strict compliance with the terms of the letter of credit. I also agree with the trial court that there was substantial compliance and that judgment should be awarded to appellee.
This court, in its majority opinion, recites all of the elements necessary to estoppel when it states:
“The record further demonstrates that appellant was fully aware of the purchases made by RBRI from appellee and, in fact, independently extended credit to RBRI to facilitate payment for those purchases, and that despite this knowledge and involvement, appellant raised no objection to the fact that it did not receive copies of each purchase order.”
This court then states that appellee does not meet the requirements of estoppel because “[a]ppellee was not without knowledge of the facts.” On the contrary, appel-lee did not have knowledge of the fact that the bank, with full knowledge of the purchases, transactions, and financial condition of RBRI, would engage in a course of conduct in its doing business with appellee which indicated that strict compliance with the terms of its letter of credit was not required, that the bank would then suddenly, without notice or warning, adopt a totally inconsistent position, demand strict compliance, and attempt to revoke the irrevocable letter of credit. No one claims that appellee was aware of the fact that the bank would act in this manner. This is the reason that estoppel ought to properly apply in this case.
I would affirm the decision of the trial court.