U.S. v. Sun Bank of Miami, 79-2035

Decision Date14 January 1980
Docket NumberNo. 79-2035,79-2035
Citation609 F.2d 832
Parties28 UCC Rep.Serv. 155 UNITED STATES of America, Plaintiff-Appellant, v. SUN BANK OF MIAMI, Defendant-Appellee. Summary Calendar. *
CourtU.S. Court of Appeals — Fifth Circuit

M. Carr Ferguson, Asst. Atty. Gen., Gilbert E. Andrews, Robert A. Bernstein, Donald B. Susswein, Tax Div., U. S. Dept. of Justice, Washington, D. C., for plaintiff-appellant.

Fowler, White, Burnett, Hurley, Banick & Knight, Harold L. Ward, Atty., Miami, Fla., for defendant-appellee.

Appeal from the United States District Court for the Southern District of Florida.

Before AINSWORTH, FAY and RANDALL, Circuit Judges.

PER CURIAM:

In the District Court for the Southern District of Florida, the United States sued Sun Bank of Miami for wrongful dishonor of a $150,000 sight draft drawn pursuant to a letter of credit issued by the bank. From an adverse summary judgment, the United States appeals. Finding the dishonor wrongful, we reverse the judgment and remand with instruction to enter judgment for the United States.

In October, 1973, the predecessor of Sun Bank of Miami 1 issued to S. D. Brull & Associates, Inc., the following letter of credit:

"For consideration heretofore received, we hereby establish our Irrevocable Letter of Credit in your favor for a sum, or sums, not exceeding a total of ONE HUNDRED FIFTY THOUSAND DOLLARS, ($150,000.00). Funds may be drawn hereunder by your drafts on us at sight.

The aforementioned funds are to be used and disbursed by S. D. BRULL & ASSOCIATES as supplement funds to complete the Camino Real Condominium, 105 S.W. 8th Street, Miami, Florida, and/or Cutler Club Condominium, 110th Court at S.W. 196th Street, Miami, Florida, if necessary.

Our commitment under this Letter of Credit expires on October 31, 1974."

In August, 1974, an Internal Revenue Service agent presented to the bank a $150,000 draft drawn by S. D. Brull & Associates, Inc., and payable to the order of the United States Department of Treasury. Although the draft did not reveal how the funds were to be used, the government had accepted the draft as partial payment of delinquent unemployment and social security taxes incurred in constructing the projects named in the letter of credit. The bank refused to honor the draft, claiming that payment would contravene the designated purpose of the letter of credit. Suit by the United States resulted in summary judgment for the bank, the trial court having construed the letter's second paragraph to require any draft to indicate explicitly the proceeds' intended use.

Although the bank may have intended to limit use of the funds to the specified projects, it did not clearly require documentation of such use. Because we must resolve any ambiguity in a letter of credit against the drafter, we find reversible error in the trial court's implied documentary requirement. See East Girard Savings Ass'n v. Citizens National Bank and Trust Co. of Baytown, 593 F.2d 598, 602 (5th...

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17 cases
  • First State Bank v. Diamond Plastics Corp., 76571
    • United States
    • Oklahoma Supreme Court
    • March 14, 1995
    ...control over the underlying transaction or the choice of beneficiary. Arbest, supra; Colorado Nat'l Bank, supra; United States v. Sun Bank of Miami, 609 F.2d 832 (5th Cir.1980). The issuer merely writes a letter of credit pursuant to the instructions of its credit-worthy customer and pays o......
  • Colorado Nat. Bank of Denver v. Board of County Com'rs of Routt County
    • United States
    • Colorado Supreme Court
    • August 31, 1981
    ...the underlying contract has been called the key to the commercial vitality of the letter of credit. See, e. g. United States v. Sun Bank of Miami, 609 F.2d 832 (5th Cir. 1980); Pringle-Associated Mortgage Corp. v. Southern National Bank of Hattiesburg, 571 F.2d 871 (5th Cir. 1978). The bank......
  • Banque Worms v. Banque Commerciale Privee
    • United States
    • U.S. District Court — Southern District of New York
    • February 24, 1988
    ...principle, the independence principle, is fundamental to the commercial vitality of letters of credit. See United States v. Sun Bank of Miami, 609 F.2d 832, 833 (5th Cir.1980). The independence principle reduces the risk of nonpayment by substituting the reliability and solvency of a known ......
  • Bouzo v. Citibank, N.A., 493
    • United States
    • U.S. Court of Appeals — Second Circuit
    • September 18, 1996
    ...in letters of credit must be explicit...." Marino Indus. Corp. v. Chase Manhattan Bank, 686 F.2d 112, 115 (2d Cir.1982) (citing Sun Bank, 609 F.2d at 833). The requirement of explicitness is important both to the issuing bank and to the beneficiary of a letter of credit. A beneficiary is en......
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