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TRANSAMERICA DELAVAL INC. v. CITIBANK

July 23, 1982

TRANSAMERICA DELAVAL INC., Plaintiff,
v.
CITIBANK, N.A., Defendant



The opinion of the court was delivered by: WERKER

MEMORANDUM DECISION

 HENRY F. WERKER, D.J.

 Plaintiff, Transamerica Delaval Inc. ("Delaval"), commenced this action to recover from defendant, Citibank, N.A. ("Citibank"), $2,809,333.00 deducted from its account to cover a payment by Citibank pursuant to the letter of credit *fn1" agreement between the parties entitled Clean Sight Credit Application and Agreement (the "Credit Agreement"). The parties have cross-moved for summary judgment pursuant to Fed. R. Civ. P. 56. For the reasons that follow, plaintiff's motion is denied and defendant's motion is granted.

 While differing as to their legal significance, the parties are in essential agreement as to the salient facts, which may be stated briefly as follows. On December 9, 1975 Delaval entered into a contract (the "Contract") with Electrical Work and Maintenance ("EWM") for the sale of diesel-powered electrical generators to be constructed by Delaval. In order to secure Delaval's performance, the contract provided that Delaval would establish with Citibank's Saudi Arabian Branch in Jeddah ("FNCB Jeddah") an irrevocable letter of guarantee for $2,809,833.00 in favor of EWM payable through Banque du Caire.

 In accordance with the Credit Agreement between the parties, Citibank's predecessor, First National City Bank, on November 13, 1975 issued a letter of credit in favor of FNCB Jeddah to support the letter of guarantee issued by FNCB Jeddah. Thereafter, Saudi American Bank ("Samba"), succeeded to the rights and liabilities of FNCB Jeddah under the letter of credit and letter of guarantee. The letter of credit, in relevant part, provided:

 
EFFECTIVE IMMEDIATELY EXPIRING YOUR OFFICE JULY 31, 1978 UNDER WHICH CASE NEED YOU MAY DRAW ON US MENTIONING OUR CREDIT NO. K-312184 ACCOMPANYING YOUR DRAWING WITH YOUR STATEMENT THAT YOU WERE REQUIRED TO DISBURSE THE AMOUNT THEREOF UNDER YOUR UNDERTAKING.

 The letter of credit and the letter of guarantee were later extended. The letter of credit was extended with Delaval's consent to September 30, 1981 and accordingly has since expired. *fn2" The letter of guarantee was extended with Delaval's consent to August 31, 1981, and apparently by Samba to August 31, 1982 without Delaval's consent.

 A dispute between Delaval and EWM arose respecting Delaval's performance under the Contract. On or about July 21, 1981, EWM wrote to Banque du Caire stating that Delaval had failed to fulfill its contractual obligations and instructed Banque du Caire to obtain an extension of the letter of guarantee up to August 31, 1982. On September 1, 1981 Samba sent to Citibank the third in a series of similar telexes requesting either an extension of the guarantee or payment of the full value of the guarantee. Samba's September 1, 1981 telex in part stated:

 
BENE [EWM] HAS REFUSED REFUSED TO ACCEPT GTEE EXTENSION OF 6 MONTHS STP THEY HAVE GIVEN US TILL THURSDAY I.E. SEPT. 03.81 EITHER TO EXTEND GTEE TO ONE YEAR OR PAY THEM USDLR 2,809,333.00 STP WE WILL AWAIT YOUR INSTRUCTIONS TILL THEN IF WE DO NOT HEAR FROM YOU FUNDS WILL BE PAID THEREFORE EITHER ARRANGE EXTENSION OR CREDIT OUR ACCOUNT FOR VALUE OF UR LC STP ANY DELAY FROM SEPT 03.81 ONWARD WILL BE PAID WITH INTEREST STP HOPE TO RECEIVE A POSITIVE REPLY STP

 Upon being informed by Delaval that it would not consent to an extension of the letter of guarantee, on September 2, 1982 Citibank honored Samba's demand for payment under the letter of credit and accordingly paid to Samba $2,809,333.00. *fn3"

 After being informed that the funds in Delaval's Citibank account were insufficient to cover the amount paid by Citibank to Samba under the letter of credit, Delaval transferred to its Citibank account $2,500,000.00 on September 2, 1981. Citibank obtained full reimbursement of its payment to Samba by debiting this deposit accordingly. Apparently, Samba is currently in possession of the funds paid by Citibank under the letter of credit.

 DISCUSSION

 I am mindful that in passing upon a motion for summary judgment, "the court cannot try issues of fact; it can only determine whether there are issues to be tried." American Manufacturers Mutual Insurance Co. v. American Broadcasting-Paramount Theatres, Inc., 388 F.2d 272 (2d Cir. 1967), and that the affidavits and exhibits submitted by the parties "must be viewed in the light most favorable to the party opposing the motion." Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 444-45 (2d Cir. 1980).

 However, although summary judgment is never lightly granted, it has been recognized that letter of credit disputes are frequently appropriate for final adjudication upon submission of papers and affidavits. Data General Corp. v. Citizens National Bank of Fairfield, 502 F. Supp. 776, 779 (D. Conn. 1980). This is so undoubtedly because these disputes usually present legal issues relating to an exchange of documents rather than questions of fact. Id. Thus, in view of the fact that the parties here merely "dispute the significance of the events." Data General Corp. v. Citizens National Bank of Fairfield, supra, ...


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