Dulien Steel Products, Inc. of Wash. v. Bankers Trust Co.

• Decision Date: 19 January 1962
• Docket Number: Docket 26831.,No. 69,69
• Citation: 298 F.2d 836
• Parties: DULIEN STEEL PRODUCTS, INC., OF WASHINGTON, Plaintiff-Appellant, v. BANKERS TRUST COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

298 F.2d 836 (1962)

DULIEN STEEL PRODUCTS, INC., OF WASHINGTON, Plaintiff-Appellant, v. BANKERS TRUST COMPANY, Defendant-Appellee.

No. 69, Docket 26831.

United States Court of Appeals Second Circuit.

Argued December 4, 1961.

Decided January 19, 1962.

Ira M. Millstein, New York City (Weil, Gotshal & Manges, New York City, on the brief, Michael A. Schuchat, Washington, D. C., Marshall C. Berger, New York City, and Geiger, Harmel & Schuchat, Washington, D. C., of counsel), for plaintiff-appellant.

Orison S. Marden, New York City (White & Case, New York City, on the brief, William D. Conwell, George P. Vlassis, New York City, of counsel), for defendant-appellee.

Before WATERMAN, SMITH and MARSHALL, Circuit Judges.

MARSHALL, Circuit Judge.

Plaintiff appeals from a judgment of the United States District Court for the Southern District of New York, Bryan, J., denying plaintiff's motion for summary judgment and granting defendant's cross-motion for summary judgment. This action arises out of the payment by defendant, Bankers Trust Company (Bankers), of the face value of a letter of credit in the amount of $60,500 to the named beneficiary, Richard Sica (Sica), designated by plaintiff, Dulien Steel Products Inc. (Dulien), in a letter of credit issued on its instructions and confirmed by defendant. Dulien seeks to recover from Bankers the amount so paid. Dulien is a Washington corporation; Bankers a New York corporation. Jurisdiction is based on diversity of citizenship, 28 U.S.C. § 1332.

Dulien makes two claims. The first is that since Bankers repeatedly requested instructions it should not have paid Sica in disregard of instructions not to pay. The alternative claim is that Bankers was negligent in failing to give notice that it would disregard these instructions and pay Sica. Involved in this latter claim is an assertion of some form of estoppel against Bankers in that the requests for instructions led Dulien to believe Bankers would not pay Sica.

Dulien moved for summary judgment pursuant to Rule 56 F.R.Civ.P, 28 U.S. C.A., on its first claim only. Bankers cross-moved for summary judgment on both claims. The district court denied plaintiff's motion and granted defendant's motion. We affirm.

The motions were submitted on affidavits supplemented by depositions. With one exception, there is no dispute as to the facts. Sometime in early 1956 Dulien entered into a contract to sell scrap steel through the Office Commun des Consummateurs de Ferraillie (O. C. C. F.), the purchasing authority for the European Iron & Steel Community. Payment to Dulien in an amount in excess of $3,000,000 was to be accomplished through several letters of credit established in its favor. An organization known as Marco Polo Group Projects, Ltd., Tangiers (Marco Polo), was apparently entitled to a commission from Dulien for having arranged the transaction. Payment to Marco Polo was to be made through two letters of credit, only one of which is involved here.

On June 29, 1956, Seattle-First National Bank (Seattle), Seattle, Washington, sent its irrevocable letter of credit to Bankers Trust Company in the amount of $60,500. The letter of credit was addressed to Richard Sica and authorized him to value on Bankers for the account of Dulien to the extent of $60,500. It provided that this money would be available to him on his "simple receipt" reading as follows:

"`Received from The Bankers Trust Co. of New York the sum of Sixty Thousand Five Hundred Dollars U. S. Currency, for services rendered through the Marco Polo Group Projects Ltd. of Tangier\' * * *"

And upon the following condition:

"* * * and a written notification from The Seattle First National Bank of Seattle, Washington, * * * and/or an official telegraph advice from The Seattle First National Bank at Seattle to The Bankers Trust Company, Foreign Department, New York City, wherein such written notification &/or telegraphic advice indicates, reveals &/or confirms that the Dulien Steel Products Inc. of Washington, Seattle, Washington, has negotiated official documents for payment against any of the Letters of Credits established to the name of Dulien Steel Products Inc. of Washington, Seattle, Washington, which Letters of Credits cover Contract No. 28/Namc as issued to the name of Dulien Steel Products Inc. of Washington, Seattle, Washington, by the O. C. C. F., at 36 Rue Ravenstein, Bruxelles, Belgium —"

The letter of credit also provided:

"Payment in full as outlined herein shall be made without question * * * Drafts to be negotiated not later than September 30, 1956."

It further provided:

"Except as expressly stated negotiations under this credit are subject to the uniform customs and practice for commercial documentary credits fixed by the Thirteenth Congress of the International Chamber of Commerce."

On July 10, 1956, Bankers confirmed the obligation by advising Sica that "We Bankers confirm the credit for its present validity of September 30, 1956 and for its present amount of $60,500.00 and thereby undertake that all drafts drawn and presented as specified in the credit will be duly honored." Bankers' confirmation charge for undertaking this obligation to make payment of $60,500 to Sica, the beneficiary, was $15.13.

On September 27, 1956, Sica's attorney delivered to Bankers, along with a letter, a simple receipt signed by Sica which admittedly satisfied the description of the receipt required in the letter of credit. He also enclosed a draft, the original letter of credit and Bankers' confirmation. He requested Bankers to request telegraphic advice from Seattle when the documents were negotiated as required by the letter of credit.

On October 1, 1956, Bankers wired Seattle as follows:

"REFER YOUR CREDIT 14718 OUR REFERENCE 75632 SIMPLE RECEIPT FOR $60,500.00 CALLED FOR IN CREDIT HAS BEEN PRESENTED TO US WITH REQUEST TO NOTIFY YOU IMMEDIATELY BY WIRE AND RECEIVE YOUR AUTHENTICATED WIRE INSTRUCTIONS TO EITHER HONOR OR DISHONOR THE PRESENTATION. PLEASE WIRE MAY WE PAY AGAINST SIMPLE RECEIPT."

On October 1, 1956, Seattle replied as follows:

"REUR BANKWIRE TODAY REGARDING YOUR REF. NO. 75632 OUR CREDIT 14718 DRAWING FOR $60,500.00. OUR ANSWER IS YOU MAY NOT PAY. NO DOCUMENTS HAVE BEEN NEGOTIATED AGAINST ANY OF THE LETTERS OF CREDITS ESTABLISHED TO THE NAME OF DULIEN STEEL PRODUCTS INC. OF WASHINGTON, SEATTLE, WASHINGTON, LETTERS OF CREDIT COVER CONTRACT NO. 28/NAMC AS ISSUED TO THE NAME OF DULIEN STEEL PRODUCTS INC. OF WASHINGTON,

SEATTLE, WASHINGTON, BY THE O. C. C. F. AT 36 RUE RAVENSTEIN, BRUXELLES, BELGIUM. WE UNDERSTAND LETTER OF CREDIT 14718 WILL BE AMENDED SHOWING EXPIRY OCTOBER 31, 1956. SEATTLE FIRST NATL BANK SEATTLE 1121A FOREIGN DEPT."

Prior to October 1, however, completely unknown to Bankers, Dulien had completed negotiations with Marco Polo looking toward, among other things, a modification of earlier understandings between them.

These negotiations culminated in a letter from Marco Polo dated August 29, 1960 agreeing to substantial amendments to the terms and conditions of the outstanding letter of credit. Under the proposed amendments the face amount was to be reduced from $60,500 to $35,500 and payment of this reduced amount was to await full payment to Dulien by "O. C. C. F."

Seattle received the Marco Polo letter of modifications through Dulien with its approval about September 10, 1956. On September 11, Seattle wrote Dulien suggesting changes in the proposed modifications which are not significant here, and also stating:

"It would be preferable to issue an entirely new letter of credit * * * but if this is not possible the foregoing amendments undoubtedly would serve the same purpose. * * *

"If you approve, please sign and return the enclosed copy or advise us of any objections you may have."

Neither Dulien nor Seattle advised Bankers as to these communications, nor sent copies to Bankers at this time, and Bankers was wholly unaware of them until October.

On October 2, 1956, the day after the Seattle Bank had advised Bankers that Dulien had not negotiated the documents, but that it understood that the credit in favor of Sica would be extended, it wrote Bankers at Dulien's request that the credit to Sica had been extended to October 31 and that "all other terms and conditions remain unchanged." The extension was authorized by a Vice-President of Dulien upon a request by Marco Polo. At the time, the officers of Dulien familiar with the transactions in question were absent from Seattle, and Marco Polo took advantage of the Vice-President's ignorance of the new arrangements. Bankers thereupon made the corresponding change in its credit and confirmed the credit as thus extended to Sica's attorney. Thus, the original letter of credit was extended at Dulien's own request for another month without modification.

Had this extension not been requested by Dulien the present controversy would never have arisen. The original letter of credit could not have been paid and Sica would not have been in a position to force payment.

On October 8, 1956, Bankers again wired Seattle Bank for advice as to whether Dulien had negotiated the documents under the O. C. C. F. credits and asked "may we pay?" The next day, October 9, the Seattle Bank replied that Dulien had negotiated the designated documents. Thus, at this point the conditions of the letter had been met and Bankers Trust was required to honor drafts of Sica against the original letter of credit as extended without modification.

In the October 9 wire, however, Seattle Bank, although it had been aware of the proposed modifications since September 10, for the first time notified Bankers that "Dulien * * * has requested that payment be deferred * * * because of arrangements between them and the Marco Polo Group Projects, Ltd. * * *." It listed the proposed amendments and concluded with a request that Bankers "contact" Sica for "acceptance of the proposal and amendments * * *."

In response to Bankers'...