The opinion of the court was delivered by: LEVAL
PIERRE N. LEVAL, U.S.D.J.
Al-Haddad Bros. Enterprises, Inc., a Tennessee Corporation, moves to vacate the attachment of its interest as beneficiary of an irrevocable letter of credit served on the confirming bank. Morgan Guaranty Trust Company of New York, the garnishee, joins in the motion.
On February 15, 1984, Diakan Love, S.A. filed a verified petition in this court naming Al-Haddad as respondent seeking confirmation of an arbitration award for breach of a charter party. The amount of the award was $247,602.98. The petition was not served on the respondent, Al-Haddad, but instead it was accompanied by an affidavit that Al-Haddad could not be found within the district and included a prayer for issuance of process of attachment and garnishment of goods, chattels, credits and effects belonging to Al-Haddad.
Al-Haddad has offices in Nashville in the business of exporting grain and other commodities to middle eastern customers. Before this action was commenced, in transactions apparently unrelated to its dispute with Diakan, it was furnished with two irrevocable letters of credit naming it as beneficiary in connection with contracts to sell yellow corn to a purchaser in Baghdad. See Kennedy Aff. Exhs. B, D. The letters of credit were issued by Rafidain Bank, Baghdad, subject to the Uniform Customs and Practice for Documentary Credits ("UCP") at the instance of Rafidain's customer, the purchaser of the corn. Each required the presentation of specified documents as a condition of payment of drafts drawn on it. See N.Y.U.C.C. § 5-107(1).
As to the first letter, No. 9087, for $29,568,000, issued December 29, 1983, Morgan Guaranty served as advising bank. Accordingly Morgan had no contractual obligation to honor drafts drawn on it. See N.Y.U.C.C. § 5-107(1).
As to the second letter, No. 9249, for $7,832,000, issued Jan. 5, 1984, it was confirmed by Morgan Guaranty, which accordingly was contractually committed to honor drafts which conformed to the letter's requirements. See N.Y.U.C.C. § 5-107(2).
On February 15, Diakan served Morgan Guaranty with Process of Maritime Attachment and Garnishment pursuant to Rule B of the Supplemental Rules for Certain Admiralty and Maritime claims. As of that date Al-Haddad had not sought to collect payment under either letter of credit .
Al-Haddad's attorney states he learned of the garnishment from an attorney for Morgan Guaranty on February 17. On February 21, Al-Haddad made a general appearance in this action and asked that the attachment be vacated as it was not necessary to obtain jurisdiction. Diakan opposed. The parties discussed but did not reach accommodation.
On February 22, Al-Haddad presented drafts and conforming documents under the confirmed letter of credit to Morgan Guaranty. (The record does not indicate when Al-Haddad had come into possession of the conforming documents.) The bank withheld from its payment to Al-Haddad the amount specified in the attachment. Al-Haddad then moved to vacate the attachment. Morgan Guaranty joins in the application.
The motion poses the question whether Diakan's service of the writ on Morgan Guaranty constituted an effective attachment of property of Al-Haddad. This turns on whether Al-Haddad's interest as beneficiary in an executory letter of credit constituted either attachable property of Al-Haddad in the hands of Morgan or a debt owed to Al-Haddad by Morgan. I rule that it did not and accordingly vacate the attachment.
In the first place, it would be stretching the conventional meaning of credit as either its property in the hands of the bank or a debt owed to it by the bank.This is absolutely clear as to the first letter on which Morgan's role was solely that of advising bank. Upon Al-Haddad's presentation of documents conforming to the letter Morgan would have had no obligation to pay; it would have been free at ...