Sewchez International Limited v. the Cit group/commercial Service ( 2009 )

FILED
NOT FOR PUBLICATION NOV 13 2009
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
SEWCHEZ INTERNATIONAL No. 08-56121
LIMITED, a Taiwanese corporation,
D.C. No. 2:07-cv-01211-SVW-
Plaintiff - Appellant, JWJ
v.
MEMORANDUM *
THE CIT GROUP/COMMERCIAL
SERVICES, INC., a New York
Corporation; JPMORGAN CHASE
BANK, N. A., a national banking
association,
Defendants - Appellees.
SEWCHEZ INTERNATIONAL No. 08-56459
LIMITED, a Taiwanese corporation,
D.C. No. 2:07-cv-01211-SVW-
Plaintiff - Appellant, JWJ
v.
THE CIT GROUP/COMMERCIAL
SERVICES, INC., a New York
Corporation; JPMORGAN CHASE
BANK, N. A., a national banking
association,
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Defendants - Appellees.
Appeal from the United States District Court
for the Central District of California
Stephen V. Wilson, District Judge, Presiding
Argued and Submitted November 2, 2009
Pasadena, California
Before: SCHROEDER, SILER,** and IKUTA, Circuit Judges.
SewChez’s claims against CIT for fraud and breach of contract are premised
on the theory that CIT’s prior waivers of its right to demand strict compliance with
the terms of the letters of credit formed an implied contract between SewChez and
CIT. This theory fails because the letters of credit expressly provide that past
waivers of discrepancies create no obligation to waive discrepancies in the future.
See also Cal. Com. Code § 5108, comment 7 UCC (“Waiver of discrepancies by an
issuer or an applicant in one or more presentations does not waive similar
discrepancies in a future presentation.”). This principle applies to SewChez’s
dispute with CIT because it is undisputed that CIT meets the definition of
“applicant” under the California Commercial Code, see Cal. Com. Code §
5102(a)(2), and SewChez cannot claim that the terms of the contract between CIT
**
The Honorable Eugene E. Siler, Jr., Senior United States Circuit
Judge for the Sixth Circuit, sitting by designation.
and JPMorgan alter CIT’s status as an applicant because SewChez was not a party
to the contract. Because there was no implied contract between SewChez and CIT,
SewChez’s breach of contract claim fails.
Moreover, SewChez’s fraudulent concealment claim likewise fails. Because
SewChez and CIT had no contractual relationship, CIT had no duty to disclose its
intention to cease waiving discrepancies. See Linear Tech. Corp. v. Applied
Materials, Inc., 61 Cal. Rptr. 3d 221, 235 (Cal. Ct. App. 2007). The out-of-circuit
cases cited by SewChez suggesting that a party could be bound by a transaction-
specific waiver are inapplicable here because SewChez did not establish that CIT
waived discrepancies as to the specific transactions at issue. See Timber Falling
Consultants, Inc. v. Gen. Bank, 751 F. Supp. 179, 182–83 (D. Or. 1990); U.S.
Indus., Inc. v. Second New Haven Bank, 462 F. Supp. 662, 666 (D. Conn. 1978).
SewChez’s claim against CIT for unjust enrichment also fails. Because CIT
was entitled to refuse to waive discrepancies and exercise its rights as a secured
creditor, SewChez failed to allege facts showing CIT’s “receipt of a benefit and the
unjust retention of the benefit at the expense of another.” See Peterson v. Cellco
P’ship, 80 Cal. Rptr. 3d 316, 323 (Cal. Ct. App. 2008) (quotation marks,
alterations, and citation omitted).
SewChez’s claim against JPMorgan for breach of the covenant of good faith
fails for the same reason as SewChez’s claim against CIT for breach of contract,
namely, because JPMorgan’s past waivers did not obligate it to continue waiving
discrepancies. See Cal. Com. Code § 5108, comment 7 UCC. Moreover,
SewChez’s exclusive remedy for the wrongful withholding of payment is a claim
for wrongful dishonor. Cal. Com. Code. § 5111(b).
SewChez failed to raise a genuine issue of material fact that each of its
invoices was a separate presentment. The uncontested affidavits by JPMorgan’s
experts establish that the words “drafts at . . . at sight” in Field 42C of the letter of
credit mean that a sight draft must be presented to obtain payment under the letter
of credit. Because a draft is required, the presentation of a single draft and
multiple invoices constitutes a single presentment, which must be honored or
dishonored as a whole. See Mueller Co. v. S. Shore Bank, 991 F.2d 14, 17 (1st Cir.
1993); see also Cal. Com. Code § 5108(a). Because two of the five invoices
SewChez submitted under a single draft were discrepant, JPMorgan’s rejection of
this entire presentment was not wrongful.
AFFIRMED.