Asociacion De Az. De Gua. v. United States Nat. Bank of Ore.
| Decision Date | 18 February 1970 |
| Docket Number | No. 22693.,22693. |
| Citation | 423 F.2d 638 |
| Parties | ASOCIACION DE AZUCAREROS DE GUATEMALA 4a. Av. 14-53(1) Guatemala City, Guatemala, Plaintiff-Appellee, v. UNITED STATES NATIONAL BANK OF OREGON, PORTLAND, OREGON, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Howard M. Feuerstein (argued), Clarence R. Wicks, Robert D. Geddes, of Davies, Biggs, Strayer, Stoel & Boley, Portland, Or., for appellant.
Clifford Carlsen (argued), of King, Miller, Anderson, Nash & Yerke, Portland, Or., William D. Rogers, of Arnold & Porter, Washington, D. C., for appellee.
Before MERRILL and DUNIWAY, Circuit Judges, and BURKE, District Judge.*
By this diversity action appellee Association seeks recovery of sums allegedly due under an irrevocable letter of credit issued by appellant Bank. From judgment in favor of the Association the Bank has taken this appeal.
On June 7, 1966, the Bank issued an Irrevocable Commercial Letter of Credit to the Association. The letter related to a shipment of sugar sold by the Association to one Greenberg and consigned to him. By the letter the Bank agreed to pay 90 per cent1 of the invoice value of the sugar upon presentation of documents evidencing August shipment of "5,000 Long Tons * * * more or less, Guatemalan Bulk Raw Centrifugal Sugar of the 1965/66 Crop, F.O.B. Stowed Guatemalan port/ports, basis 96 degrees minimum polarization."2
On August 15, 1966, the Association shipped the sugar on the S. S. Gardenia and immediately dispatched the shipping documents to the Bank. The documents evidenced shipment in accordance with the requirements of the letter of credit.
Greenberg had arranged for resale of the sugar and a back-to-back letter of credit had been issued in his favor (with the Bank acting on his behalf) by J. Henry Schroder Banking Corp., acting for the ultimate purchaser. Accordingly when the Bank received the shipping documents from the Association it forwarded them to Schroder Corp. On August 26th it received payment in full from Schroder on the back-to-back letter of credit.
The sugar arrived and was unloaded at Gramercy, Louisiana, on August 24th.
On August 26th Greenberg advised the Bank that the sugar on testing failed to meet contract standards; that he had so advised the Association and that the Association had agreed to modify the letter of credit to provide payment of 75 per cent rather than 90 per cent of the invoice value. Greenberg asked the Bank to cable the Association's representative to the effect that polarization was "below credit requirements" and to ask authorization to modify the letter of credit. The Bank accepted Greenberg's representations without verification and cabled the Association as requested. The Association read the cable as a representation that the sugar polarized below 94 degrees. In fact, the shipment's polarization averaged out at 95.176358 degrees, well within the trade's definitional standard.
Upon receipt of the Bank's cable the Association agreed to reduce the letter of credit from 90 per cent to 75 per cent. The Bank paid the Association the reduced amount out of the Schroder payment. It retained $75,000 to apply against debts of Greenberg to the Bank. The balance was turned over to Greenberg, who subsequently dissipated most of it.
The District Court found that the Bank's cable was a false statement upon which the Association relied in agreeing to modification of the letter of credit; that this misrepresentation entitled the Association to rescission of its agreement to reduce the letter of credit from 90 per cent to 75 per cent and accordingly that the Bank remained obligated in accordance with the terms of the original letter.
The court granted judgment in favor of the Association for the difference between 75 per cent and 90 per cent of the invoice value — $55,866.38 plus interest.3
The Bank contends that the delivery of sugar "basis 96 degrees minimum polarization" was a credit requirement and since the sugar polarized at less than 96 degrees, the cable was not false. The Bank further asserts that there was no proof that it was familiar with trade usage or the New York Coffee & Sugar Exchange By-Laws with reference to the use of 96 degrees as a bench-mark for the assessment of premiums and penalties for sugar polarizing between 94 degrees and 98 degrees.
We agree with the District Court's decision that the use of the word "minimum" was a superfluity. As explained earlier (f.n. 2), "raw sugar" is defined as sugar polarizing between 94 degrees and 98 degrees. The letter of credit itself specified the delivery of "raw sugar." Moreover, neither the underlying contract nor the back-to-back letter of credit used the term minimum, but only referred to raw sugar, basis 96 degrees polarization. If the letter of credit is to be read as the Bank suggests — that it covered only sugar polarizing above 96 degrees — it would have been a radical departure from trade practice and inconsistent with the underlying contract and the Schroder letter. Inasmuch as the Bank was dealing with rather large sums of money in this transaction, it is not onerous to hold that it, as writer of the letter, should have known (if necessary, by making inquiries as to the meaning of its letter of credit) that sugar polarizing at 95 degrees was "raw sugar" within the meaning of its letter.4 The Bank therefore should have known that the Association would reasonably take its statement that the sugar was polarizing below credit requirement to mean that the sugar was polarizing below 94 degrees. Since the sugar was in fact polarizing well above that figure, the cable misrepresented the truth. See: Restatement of Contracts, § 470 (1932).
We find no error in the court's finding of misrepresentation.
The present suit was brought by the Association against both the Bank and Greenberg. Its claims against the latter were not confined to the Gardenia shipment but included claims on other unrelated transactions. Greenberg counterclaimed for a variety of matters, mostly unrelated to the Gardenia shipment.
The Association proposed that its claim against the Bank be tried first, feeling that recovery against the Bank might eliminate the need for dealing with the remaining issues in light of Greenberg's shaky financial condition. The Bank had no objection and the case proceeded in that fashion. The Bank entered into a stipulation with Greenberg for entry of judgment against him for the amount of any judgment obtained by the Association against the Bank.
The court's opinion granting judgment...
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