Nutro Products Corp. v. NCNB Texas Nat. Bank

United States Court of Appeals,
Fifth Circuit.
Nos. 93-2596, 93-2635.
NUTRO PRODUCTS CORPORATION, Plaintiff-Appellant,
v.
NCNB TEXAS NATIONAL BANK, and Federal Deposit Insurance Corporation as Receiver for
First Republic Bank, Houston, N.A., Defendants-Appellees.
Oct. 17, 1994.
Appeals from the United States District Court for the Southern District of Texas.
Before WISDOM, DAVIS and DUHÉ, Circuit Judges.
DUHÉ, Circuit Judge:
We are asked to review the denial of a request for remand and to determine whether summary
judgment was properly entered against Plaintiff-Appellant Nutro Products. Nutro sued NCNB Texas
National Bank in state court alleging breach of contract because of NCNB's refusal to extend a
Standby Letter o f Credit. The FDIC-Receiver intervened and removed the case to federal court.
Nutro moved to remand. The court denied Nutro's motion and Nutro appeals. We find that removal
jurisdiction was present and affirm denial of remand.
The district court granted FDIC and NCNB summary judgment on the basis that NCNB had
no contractual duty to extend the Letter of Credit as requested by Nutro. On Nutro's appeal of the
summary judgment, we find no competent summary judgment evidence suggesting that Defendant-
Appellee NCNB was contractually committed to extend the expiration date of the Letter of Credit
at Nutro's request. Any understanding that NCNB was committed to extend the Letter of Credit is
not reflected in the bank's books and records and therefore cannot alter the written agreement. We
therefore affirm the summary judgment against Nutro.
I.
Plaintiff-Appellant Nutro Products contracted with the Oil and Natural Gas Commission of
India ("ONGC") to supply a product to enhance the viscosity of oil. This contract required Nutro
to provide a performance bond consisting of a bank guaranty for $700,000. To acquire the bank
guaranty, Nutro entered into an Application and Agreement for Standby Letter of Credit (sometimes
called the "Agreement") with a predecessor1 of Defendant-Appellee NCNB. Pursuant to the
Agreement, NCNB's predecessor issued the Letter of Credit in favor of United Commercial Bank of
Bombay, India ("UCO"), and UCO issued the bank guaranty to ONGC to expire September 30, 1988.
The UCO bank guaranty contained the controversial provision giving Nutro the right to extend.2 Still
awaiting delivery of some of the product in mid-September, ONGC demanded that Nutro have the
bank guaranty extended to December 31, 1988, "failing which ONGC [would] take recourse to the
Guarantee." 3 Rawle 578. Nutro requested that NCNB extend the Letter of Credit to December 31,
1988.
NCNB declined and stood by its obligation to provide the Letter of Credit only until the
expiration date provided in an amendment to the Letter of Credit (November 30). NCNB did not
consider itself bound by the terms of the UCO guaranty to ONGC. ONGC treated the failure to
extend as a breach by Nutro of the sales contract, terminated the sales contract, and collected under
the UCO bank guaranty. Nutro settled with ONGC on allegedly unfavorable terms and Nutro sued
NCNB.
II.
Nutro first challenges the district court's denial of its Motion for Remand or to Strike the
FDIC's Intervention and to Remand. Having reviewed the record and the arguments on appeal, we
1
Nutro originally dealt with InterFirst Bank. InterFirst's obligation on the letter of credit was
transferred when InterFirst merged into First RepublicBank Houston. Defendant-Appellee FDIC
was appointed receiver for First RepublicBank, and Defendant-Appellee NCNB acquired the
letter of credit obligations from FDIC-Receiver via a standard Purchase and Assumption
Agreement.
2
The UCO bank guaranty provides:
... [O]ur liability ... SHALL REMAIN in full force up to and including 60 days
after 30th September 1988 unless extended further from time to time, for such
period as may be instructed in writing by M/S Nutro International Inc. on whose
behalf this guarantee has been given.... If no ... claim has been received by us,
within the 60 days of the said date/extended date, [ONGC's] right under this
guaranty will cease.
3 Rawle 465-64 (emphasis added).
find no abuse of discretion in the district court's denial of the request to strike the FDIC-Receiver
intervention nor error in the court's refusal to remand. First, Nutro's argum ent that the FDIC-
Receiver has no substantial interest in the litigation does not address the proper issue: whether it is
a proper party. See Pernie Bailey Drilling Co. v. FDIC, 905 F.2d 78, 79-80 (5th Cir.1990)
(recognizing FDIC as proper party in case involving claims for damages against failed bank even after
assignment of bank's assets via P & A Agreement); see also Pl.'s 1st Am.Orig.Pet., 5 Rawle 17, 15-14
(asserting claim based in part on a course of dealing between Plaintiff and InterFirst (NCNB's
predecessor) and its successors). Additionally, the court did not lose its removal jurisdiction upon
the subsequent amendment to Nutro's complaint. See 12 U.S.C. § 1819(b)(2)(B) (recognizing FDIC's
right to remove state court case to federal court); Brown v. Southwestern Bell Tel. Co., 901 F.2d
1250, 1254 (5th Cir.1990) (determining existence of removal jurisdiction by looking at the complaint
at the time of the removal); Mot. Leave to File Am.Compl., 5 Rawle 55, 54-53 (explaining how
amendment aimed to eliminate any claim affecting the FDIC-Receiver so that the intervention might
be stricken and the case remanded).
III.
The dispositive issue on the summary judgment motion is whether any evidence suggested
that NCNB was contractually committed to extend its Letter of Credit upon Nutro's request. The
initial question we must answer is from what sources we ascertain NCNB's contractual obligations.
The district court considered the Letter of Credit and its amendment only and did not consider
the provisions of the Agreement or UCO's guaranty pertaining to extension of the term. Nutro argues
that the obligation to extend derives not only from NCNB's Letter of Credit, but also from the
Application and Agreement and the bank guaranty referenced in that Agreement. NCNB contends,
however, that a provision of the Uniform Customs and Practice for Documentary Credits ("UCP")
precludes our consideration of any separate agreements even if the Letter of Credit refers to such
contracts.
NCNB's reliance on the UCP is ill founded. Article 3 of the UCP, providing that banks are
not bound by contracts on which letters of credit are based, would refer in this case to the underlying
sales contract or purchase order between Nutro and ONGC to supply the product. Article 3 is
irrelevant to the Application and Agreement for the Letter of Credit, which was executed by NCNB's
predecessor and Nutro on the same date the Letter of Credit issued.
We will therefore consider both the Application and Agreement as well as the Letter of Credit
itself in determining NCNB's obligations. See Calpetco, 1981 v. Marshal Exploration, Inc., 989 F.2d
1408, 1412 (5th Cir.1993) (construing together two written instruments executed at the same time
for the same purpose). This does not mean, however, that every provision in each instrument applies
equally to the other instrument being considered. Richland Plantation Co. v. Justiss-Mears Oil Co.,
671 F.2d 154, 156 (5th Cir.1982). NCNB does not seriously contest that it is bound by the terms of
the Agreement. The Letter of Credit merely implements the Agreement; the Agreement is the very
contract under which Nutro owed reimbursement to NCNB in the event the Letter of Credit was
called. The real point of contention is the interpretation of the Agreement, especially its references
to the attached bank guaranty. Specifically we are asked whether the right to extend the expiration
date in the bank guaranty was incorporated by the Agreement into NCNB's obligations under the
Letter of Credit.
The Agreement between Plaintiff and NCNB provided that a Letter of Credit was to be issued
to UCO in Bombay as follows: R. 493.
We interpret the typed paragraphs of the Agreement as contemplating two documents in two
separate formats: 1) a performance bond to ONGC to be in the precise form given in the attachment,
and 2) a Letter of Credit in favor of the bank issuing such bond3 to be in NCNB's "standard format."
Nutro argues that the form's printed paragraph incorporating "attached supplements" as part
of the "terms and conditions" requires the Letter of Credit to be coterminous with the performance
bond, also called the bank guaranty. We hold that this Agreement does not require t at the two
h
documents have coextensive terms. The Agreement plainly contemplates that the Letter of Credit
3
In context, the request in the first paragraph to "issue a performance bond" is not a request
that Interfirst itself issue the bond. Interfirst is to provide the letter of credit as described in the
second paragraph to the issuing bank, UCO, so that UCO will issue the performance bond as per
the attachment. We disagree with Nutro's suggestion that the Application and Agreement
required Interfirst to issue the bond.
will expire on September 30, 1988 in Bombay and 60 days thereafter in Houston. This date especially
typewritten onto the Agreement for this particular contract more clearly evidences the parties'
intention than does the fine print on the standard form. See Southland Royalty Co. v. Pan Am.
Petroleum Corp., 378 S.W.2d 50, 57 (Tex.1964) (recognizing that in contract interpretation, writing
or typewriting prevails over printed provisions). The bank guaranty, according to the attachment,
is to expire 60 days after September 30 and is to include the issuing bank's obligation to extend the
expiration of the guaranty upon Nutro's written request. See 3 Rawle 489-88 & supra note 3. The
Agreement therefore did not contractually bind NCNB to issue a Letter of Credit conforming to the
terms of the guaranty.
On June 5, the same date as the Agreement, NCNB's predecessor transmitted via tested telex
the Letter of Credit to UCO along with a request that UCO issue a performance bond in favor of
ONGC to expire September 30 in Bombay and November 30 in Houston. 3 Rawle 675. The telex then
quoted in full the precise form for the bond or guaranty as requested by Nutro, taken from the
attachment to the Agreement. 3 Rawle 674-72. After the signature blocks for the guaranty and the word
"unquo te" signifying the end of that form, the telex continued with the provision for the Standby
Letter of Credit from NCNB to UCO: "We, Interfirst Bank Houston, N.A., hereby issue our
irrevocable standby credit No. 2046 in your favor for seven hundred thousand and no/100 U.S.
dollars (USD700,000.00)." 3 Rawle 671. Notwithstanding the Agreement that NCNB would issue a
Letter of Credit expiring on September 30 in Bombay, the Standby Letter of Credit as issued
contained no expiration date. Id. The only expiration date appeared in the first part of the telex, the
request that USO issue the letter of guaranty to ONGC.
The discrepancy between the Agreement (that the Letter of Credit is to expire September 30)
and the Letter itself (which contained no expiration date) is not at issue today. The Letter of Credit
was subsequently amended at UCO's request to include an expiration date: November 30, 1988, at
the counters of UCO in Bombay and December 15, 1988, at the counters of NCNB's predecessor in
Houston. 3 Rawle 474, 668. This amendment ("Operative Amendment 2") to the Letter of Credit was
telexed to UCO on June 9. Neither the request for amendment nor the amendment itself provided
Nutro the right to extend the expiration date.
On June 11, UCO executed its bank guaranty to ONGC using the form requested by Nutro
in the attachment to the Agreement and as quoted in the June 5 NCNB-to-UCO telex. The guaranty
thus was to expire 60 days after September 30 and gave Nutro the right to extend the guaranty by
written request ("as may be instructed in writing by" Nutro). 3 Rawle 465.
We find no contractual obligation of NCNB to extend the Letter of Credit upon Nutro's
request, explicit or implicit, in the Letter of Credit as amended or in the Application and Agreement
with attachments. The Agreement's reference to the attachment signifies the intention that the bank
guaranty follow the format and contain the terms—including the expiration date and obligation to
extend—set forth in the attachment. The bank guaranty did follow that format and contain those
terms. These documents manifest no intention that the Letter of Credit have a similar expiration date
or extension provision. Plaintiff's contention that the Letter of Credit and supporting documents
manifest the obligation of NCNB to extend the expiration date of the Letter of Credit is without
merit.
IV.
Nutro also alleges error in the court's failure to apply Texas rules of construction by
considering the surrounding circumstances in determining the "apparent intent" of the parties or in
determining whether the documents are ambiguous. Nutro offered affidavits attesting that some
individuals expected the bank to be bound or considered the bank bound by the term in UCO's
guaranty.4
The written documents, however, do not so bind the bank to that term. Regardless of Texas
law on the subject, under the D'Oench doctrine,5 all controlling agreements must be in the bank's
4
Nutro offered testimony of Nutro officers and Interfirst officers that under the terms of the
"contract documents" NCNB was obligated to extend the Letter of Credit upon Nutro's request,
that the terms of the bank guarantee were attached to the Agreement in order to make the
contractual obligation of Interfirst coextensive with the term of the UCO bank guaranty, and that
the guaranty and the Letter of Credit utilized coextensive terms because Interfirst was obligated
to reimburse UCO if UCO had to pay ONGC under the guaranty. 2 Rawle 809-07, 840-38.
5
D'Oench Duhme Co. v. FDIC, 315 U.S. 447, 62 S. Ct. 676, 86 L. Ed. 956 (1942).
books and records.
Nutro maintains that D'Oench does not apply because the obligation to extend the Letter of
Credit upon Nutro's request is included in the terms of the written documents. Yet we find no such
obligation reflected on the face of the documents available in the bank records. See Clay v. FDIC,
934 F.2d 69, 73 (5th Cir.1991). The written documents do not reflect that Nutro could unilaterally
extend the expiration date in NCNB's Letter of Credit. If such a right to extend the expiration date
was agreed, it was based only on some unwritten understanding that the terms of the Letter of Credit
would mirror the terms of the UCO bank guaranty. D'Oench therefore precludes our consideration
of the parties' unwritten understanding.
Finally, we find no exception to D'Oench applicable. E.g., Jackson v. FDIC, 981 F.2d 730,
733 (5th Cir.1992) (rejecting defense-versus-claim distinction and holding that D'Oench may bar
affirmative claim as well as defense); FDIC v. Payne, 973 F.2d 403, 407 (5th Cir.1992) (recognizing
that the "wholly innocent" party exception to D'Oench has been destroyed by the Supreme Court).
Plaintiff's remaining arguments are without merit.
The judgment of the district court is
AFFIRMED.