Strozzo v. Sea Island Bank

• Decision Date: 29 July 1999
• Docket Number: No. A99A1329., No. A99A1328, No. A99A1197
• Citation: 240 Ga. App. 183,521 S.E.2d 392
• Parties: STROZZO v. SEA ISLAND BANK et al. (Three Cases).
• Court: Georgia Court of Appeals

521 S.E.2d 392

240 Ga. App. 183

STROZZO v. SEA ISLAND BANK et al. (Three Cases).

Nos. A99A1197, A99A1328, A99A1329.

Court of Appeals of Georgia.

July 29, 1999.

Reconsideration Denied September 29, 1999.

Robert S. Reeves, Swainsboro, for appellant.

Brown & Livingston, Charles H. Brown, Statesboro, for appellees.

ELDRIDGE, Judge.

The Supreme Court ordered this case transferred to this Court for determination.

On September 23, 1997, Hampton County Warehouse, Inc. ("Hampton"), which operated a licensed bonded warehouse in Estill, South Carolina, had Sea Island Bank issue an irrevocable letter of credit, no. 339, in the amount of $262,500 to the South Carolina Department of Agriculture, Warehouse Division, to satisfy the statutory requirement under South Carolina law for obtaining a South Carolina warehouseman's license to handle agricultural products.

At the same time, Statesboro Warehouse, Inc. ("Statesboro") had Sea Island Bank issue a similar letter of credit for $150,000 to Thomas T. Irvin, Commissioner, Georgia Department of Agriculture, to obtain a warehouseman's license for handling agricultural commodities in Georgia.

The South Carolina letter of credit read in part:

The funds under this Letter of Credit [were] available against sight draft(s) by the beneficiary. Each such draft, except as provided below, shall be accompanied by an affidavit from the Director of the Warehouse Division of the beneficiary stating that the customer, [Hampton], has failed to perform the duties and obligations of a licensed state warehouseman in conformity with the provisions of the South Carolina State System Law Section 39-22-10, et seq. [and the rules and regulations prescribed thereunder]. The affidavit shall state the amounts payable by the principal to the beneficiary due to the licensed warehouseman's failure to carry out his obligations under the law and regulations.

Statesboro's trust agreement stated:

The principal shall well and truly perform and fulfill all the duties as a public warehouseman, qualified under the Georgia State Warehouse Act, codified at OCGA § 10-4-2, et seq., and as a grain dealer, where applicable, under the Grain Dealer's Act, codified at OCGA § 2-9-30, et seq., and the rules and regulations promulgated thereunder, and all of its obligations under any warehouse agreement or any modifications thereof that may hereafter be made, notification of which modifications being hereby waived, with respect to commodities stored for [Any] person, firm, association, or corporation, or stored or handled by grain dealers, or held by Commodity Credit Corporation or others, the aforesaid commodity owned by Commodity Credit Corporation or other persons who have purchased such aforesaid named commodities from Commodity Credit Corporation or others and producers who have redeemed such commodities from Commodity Credit Corporation or others, then the obligations of the Principal shall become null and void; otherwise said obligation shall remain in full force and effect. The terms were: (a) Any person damaged by failure of the principal to comply with any condition of this agreement, in a transaction occurring on or after the effective date of this agreement and before the termination date of this agreement in accord with its provisions, may recover under this agreement in accord with and subject to its provisions. Acts, omissions, or failures of authorized agents or representatives of the principal or persons whom the principal shall knowingly permit to represent themselves as acting for the principal shall be taken and construed to be acts, omissions, or failures of the principal and to be within the protection of this agreement to the same extent and in the same manner as if they were the personal acts of the principal. (b) The trustee shall not be liable to pay any claim for recovery under this agreement if[:] it does not meet applicable statutory requirements or absent any statutory requirements; it is not in writing and received by the trustee within 120 days from the date of the transaction on which the claim is based. The trustee shall after receiving such a claim notify the principal at the earliest practicable date. (c) The trustee, upon determination that funds are due to a claimant, shall draw funds pursuant to a letter of credit obtained under this agreement, as necessary to pay what is due to the claimant, up to the amount of such letter, and pay such funds to the claimant, except as otherwise provided hereinafter.

Hampton's and Statesboro's sole stockholder, officer, and manager, David Prosser, executed notes to Sea Island Bank in the amounts of $262,500 and $150,000 as security for the letters of credit. Dominic Strozzo, plaintiff-appellant, executed a guaranty of each note.

On July 17, 1998, the South Carolina Department of Agriculture forwarded a sight draft to Sea Island Bank demanding payment of $262,500. The accompanying affidavit and supporting documents set forth the factual basis, which Strozzo contends is inadequate to call the letter of credit. The facts show that Hampton and Statesboro, through Prosser, received cotton from over 50 farmers for storage in Georgia and South Carolina, but issued them no warehouse receipts. Prosser electronically transferred the electronic warehouse receipts ("EWR") to his trading company, Sea Island Cotton Trading Company; through it, sold the EWRs to mills and transferred EWRs to them; never obtained permission from the owners to transfer the EWRs or to sell the cotton; and never paid the farmers. Now Hampton, Sea Island Cotton Trading Company, Statesboro, and Prosser are in bankruptcy.

The South Carolina affidavit stated that three farmers' losses had been verified, but their claims affidavits were not attached to the demand.

On July 31, 1998, after the South Carolina sight draft was presented to Sea Island Bank, Strozzo filed action 1B98CV245 in the Superior Court of Bulloch County to block the payment by injunction. Strozzo contended that it was not Hampton who sold the cotton without permission, but Prosser, and that the farmers' affidavits had not been filed. The South Carolina Department of Agriculture petitioned to intervene, which petition was granted. The intervener moved to dismiss the equity action for injunction. After a hearing on August 28, 1998, the trial court dismissed the action. Strozzo filed his notice of appeal.

On October 28, 1998, Strozzo filed action 1B98CV336T in Bulloch Superior Court, which was identical to the above action. On December 3, 1998, the trial court dismissed this action as well. Strozzo appealed.

On November 5, 1998, Strozzo brought action 1B98CV342m to enjoin Sea Island Bank from paying the letter of credit to the Georgia Commissioner of Agriculture on the grounds that Prosser's acts were not the acts of Statesboro. On December 11, 1998, the trial court dismissed the action and ordered that $150,000 be paid to the State of Georgia, Department of Agriculture. Strozzo appealed.

Case No. A99A1197

1. Strozzo contends that the trial court erred in dismissing his complaint for injunction. We do not agree.

An injunction is distinctly an equitable remedy. Howard v. Warren, 206 Ga. 838, 839(2), 59 S.E.2d 503 (1950). There is no equity jurisdiction where there exists an adequate remedy at law. See Cantrell v. Henry County, 250 Ga. 822, 824-825(1), 301 S.E.2d 870 (1983); Sherrer v. Hale, 248 Ga. 793, 797-798(2), 285 S.E.2d 714 (1982); Morton v. Gardner, 242 Ga. 852, 856-857, 252 S.E.2d 413 (1979); Chadwick v. Dolinoff, 207 Ga. 702, 703(2), 64 S.E.2d 76 (1951).

The universal test of the jurisdiction of a court of equity to issue injunctions is the absence of a legal remedy by which the complainant might obtain the full relief to which the facts and circumstances entitle him, and this is likewise the test of its power to restrain breaches of a contract.

(Citations omitted.) Id. Thus, where the relief sought can be obtained in a manner provided by law, a suit in equity will not lie. See OCGA §§ 23-1-3; 23-1-4; Housing Auth. v. MMT Enterprises, 267 Ga. 129(1), 475 S.E.2d 642 (1996); Cantrell v. Henry County, supra at 826(1), 301 S.E.2d 870; Blackmon v. Scoven, 231 Ga. 307, 310-311(4), 201 S.E.2d 474 (1973); Allen v. Hub Cap Heaven, 225 Ga.App. 533, 540-541(8), 484 S.E.2d 259 (1997).

Strozzo has a defense to any action on the guaranty. However, he seeks to assert it as a grounds for injunction and seeks to prevent both the transfer of the letter of credit and a subsequent suit against him on the guaranty. Thus, he seeks to use his legal defense in equity to avoid a suit in law. This he cannot do. There is no equity jurisdiction where there is an adequate legal remedy, i.e., a legal defense to a suit in law. See generally OCGA § 9-5-1; Morton v. Gardner, supra; Provident Life &c. Ins. Co. v. United Family Life Ins. Co., 233 Ga. 540, 541(2), 212 S.E.2d 326 (1975); Stein Steel &c. Co. v. Briggs Mfg. Co., 219 Ga. 779, 135 S.E.2d 862 (1964); Peavy v. Gen. Securities Corp., 208 Ga. 82, 65 S.E.2d 149 (1951). Thus, Strozzo cannot enjoin the bank from committing what he contends is an anticipatory breach of contract, i.e., paying the sight draft in violation of the terms of the letter of credit because, he contends, the failure to file the three affidavit claims of the certified farmers with the sight draft did not satisfy the terms of the letter of credit, and also because the actions of Prosser in selling the cotton were not a violation by Hampton within the terms of the letter of credit. See Allsouth Sprinkler Co. v. Network Bldg. Systems, 238 Ga. 372, 233 S.E.2d 174 (1977).

In regard to compliance with the terms of the letter of credit Georgia does not adhere to the standard of "strict compliance," but adheres to the standard of "substantial compliance," in keeping with its standards of statutory construction. OCGA § 1-3-1(c); Jurisco, Inc. v. Bank South, N.A., 228 Ga. App. 799,...