Blonder & Co. v. Citibank, N.A.

OPINION OF THE COURT

Andrias, J.

A commercial letter of credit transaction involves three separate contractual relationships: the underlying contract for the purchase and sale of goods; the agreement between the issuer and its customer; and the letter of credit itself, in which the issuer undertakes to honor drafts or other demands for payment presented by the beneficiary or its transferee upon compliance with the terms and conditions specified in the letter of credit. The issuer’s obligation to pay is fixed upon presentation of the drafts and the documents specified in the letter of credit. It deals in documents and is not required to resolve disputes or questions of fact concerning the underlying transaction (see First Commercial Bank v Gotham Originals, 64 NY2d 287, 294-295 [1985]).

In this action, plaintiff claims, inter alia, that defendant, the issuer, improperly paid a $540,225 letter of credit covering a shipment of nickel scrap from Nicaragua to the Netherlands. Plaintiff claims that the goods, which it and a joint venturer, Moav International, contracted to purchase, were never received in Rotterdam; that the supporting documents were fake; and that defendant failed to examine the documents presented with reasonable care so as to ensure that they were in substantial compliance with the terms and conditions of the letter of credit.

As pertinent to this appeal, the motion court granted defendant’s motion to dismiss the complaint pursuant to CPLR 3211 (a) (1) on the basis of a defense founded upon documentary-evidence or, in the alternative, for summary judgment pursuant to CPLR 3212, to the extent of dismissing plaintiffs first cause of action for wrongful honor on the basis of the letter of credit itself and the supporting documents presented to defendant. Examining such evidence, the court found that the supporting documents presented to defendant substantially complied with the terms of the letter of credit, in accordance with the Uniform Customs and Practice for Documentary Credits (UCP), a set of universally accepted rules on documentary credits established by the International Chamber of Commerce. The UCI] which is intended to make it easier for companies in different countries to trade with each other, has been used worldwide for more than 60 years and, by the terms of the letter of credit, specifically governs the transaction.

In order to prevail on a CPLR 3211 (a) (1) motion, the documents relied on must definitively dispose of plaintiffs claim (Bronxville Knolls v Webster Town Ctr. Partnership, 221 AD2d 248 [1995]). In this case, the motion court properly relied upon the unambiguous terms of the letter of credit, as amended, which specifically provided that it was subject to the UCP and, as to matters not addressed by the UCI] it was to be governed by and construed in accordance with New York law and applicable federal law.

A letter of credit is governed by the same general principles of law applying to all other written contracts, and it is fundamental that courts enforce contracts, not rewrite them. “[W]here the intention of the parties is clearly and unambiguously set forth in the agreement itself effect must be given to the intent as indicated by the language used without regard to extrinsic evidence” (Schmidt v Magnetic Head Corp., 97 AD2d 151, 157 [1983] [citation omitted]) such as the opinion of plaintiffs expert.

Plaintiff does not question the motion court’s action in deciding defendant’s motion on the evidence before it, but contends that the court erred by substituting its own interpretation of what constitutes international standard banking practice for that of plaintiffs expert with 30 years’ experience in the field. It claims that while international standard banking practice cannot contradict the UCP, the UCP does not exclude those items of custom and practice in international banking that are consistent with the UCP but not specifically spelled out therein. Plaintiff relies, for this proposition of law, on the opinion of its document expert that, based upon “International Standard Banking Practice,” such discrepancies were material and should have alerted defendant not to make payment on the letter of credit without first seeking a waiver of discrepancies from plaintiff. However, just as a court cannot impose upon the parties to a letter of credit any conditions not contained in the letter, neither can plaintiff do so in the guise of expert testimony.

The conclusory affidavit of plaintiffs expert, that in his 30 years of experience in the field he had never seen a bill of lading without a named consignee and that the document at issue “does not constitute a ‘Bill of Lading’ as that term is used in the International Standard Banking Practice,” is insufficient to create an issue of fact as to whether such a usage of trade exists. The expert cited no authority, including the UCI] or any treatise, standard, article or other corroborating evidence to support his conclusory assertions (see Buchholz v Trump 767 Fifth Ave., LLC, 5 NY3d 1, 8-9 [2005]). While the existence and scope of such a usage ordinarily present factual issues, where such a usage is embodied in a trade code such as the UCP or other writing, “the interpretation of the writing is for the court” (UCC 1-205 [2]). Thus, any interpretation of the UCP was properly made by the motion court, which properly refused to allow the expert to usurp its function as the sole determiner of law (see Buchholz v Trump 767 Fifth Ave., 4 AD3d 178, 179 [2004], affd 5 NY3d 1 [2005]).

As the motion court noted in its opinion, “[although plaintiff and its expert capitalize ‘International Standard Banking Practice,’ as if it were a separate document or agreement, it is not.” The UCP requires that banks must examine documents “with reasonable care” in order to determine whether the documents “on their face” appear to comply with the letter of credit. As correctly found by the motion court,

“[t]hat determination must be made in accordance with ‘international standard banking practice as reflected in these Articles’ (emphasis added by the motion court). Plaintiff’s omission of that last phrase, its capitalization of the term, and plaintiffs insistence that the Bank ‘fail[ed] to meet its initial burden’ on its motion . . . because it did not submit evidence concerning ‘International Standard Banking Practice,’ demonstrate that plaintiffs argument is completely without merit.”

In addition, opinions issued by the International Chamber of Commerce Banking Commission, the body that promulgated the UCR reject the notion that all of the documents should be exactly consistent in their wording. They state that a commonsense, case-by-case approach would permit minor deviations of a typographical nature because such a letter-for-letter correspondence between the letter of credit and the presentation documents is virtually impossible. The Banking Commission has also stated that “consistency,” as that term is used in the UCR means that the “whole of the documents must obviously relate to the same transaction, that is to say, that each should bear a relation (link) with the others on its face” (International Chamber of Commerce Banking Commission Publication No. 371, Decisions [1975-1979] of the ICC Banking Commission R. 12 [1980]). Moreover, as previously noted, and correctly found by the motion court, an issuing bank is not required to ascertain whether the documents are false or whether the goods were delivered, only that the documents substantially comply with the letter of credit on their face.

Obviously recognizing that defendant’s examination was limited to the face of the documents presented, plaintiff, which claimed many other discrepancies in the documents at nisi prius, limits its appeal to claims that the required bill of lading was incomplete because it failed to name any consignee, that there was a discrepancy between the typed date on the bill of lading (January 11, 2000) and the “Clean on Board” stamp on the same document (January 11, 2001), and that there are two different ports of loading on the required inspection certificate.

Despite plaintiffs expert’s opinion that the bill of lading was incomplete because it failed to name the consignee, there was no such requirement in the letter of credit, which merely required “1 copy of the bill of lading evidencing freight prepaid and shipment from Corinto Port, Nicaragua to Rotterdam, Netherlands.” The motion court aptly noted that

“[w]hether a consignee is named or not goes only to the issue of whether the bill of lading is negotiable or not, and the failure of a bill of lading to name a consignee does not, as plaintiff’s expert suggests, make the bill of lading so defective that it is no longer even a bill of lading.”

Likewise, as found by the motion court, the claimed discrepancy between the dates on the bill of lading ignores the “Clean On Board 11 ENE 2001” stamp on the bill of lading (ENE being the Spanish abbreviation for January). The typed date of “January 11, 2000” on the document, which is an understandably common mistake at the beginning of a new year, not only predates the issuance of the letter of credit by more than 10 months but, as noted by defendant, loading on board may be indicated pursuant to UCP article 23 (a) (ii) by preprinted wording on the bill of lading or by a notation of the date on which the goods have been loaded on board. The “Clean on Board 11 ENE 2001” stamp clearly meets the UCP requirement.

Finally, on the second page of the preprinted inspection certificate, in the only place in the four-page document calling for the “Port of Loading,” “Corinto Port, Nicaragua” is specifically so designated, as required by the terms of the letter of credit. Whether the “Location” referred to on the first page of the document as “Almacén General de Occidente S.A. Zona Franca, Carretera Leon, Nicaragua” reflects the name and address of the local company inspecting the goods or some other information is unclear and unexplained by the parties; nevertheless, there is no basis for any conjecture that it designates a different port of loading. As the motion court correctly found, the documents presented by the beneficiary substantially complied with the terms and conditions of the letter of credit.

Accordingly, the order of the Supreme Court, New York County (Richard B. Lowe, III, J.), entered December 17, 2002, which, inter alia, granted defendant’s motion to dismiss plaintiffs first cause of action for wrongful honor, should be affirmed, without costs. The appeal from the order, same court and Justice, entered January 14, 2004, which denied plaintiffs motion for reargument and renewal for plaintiffs nonappearance, should be dismissed, without costs, as having been taken from a nonappealable order entered on default.