The opinion of the court was delivered by: Cannella, District Judge:
After a bench trial on plaintiff's claims, the Court finds in
favor of defendant/third-party plaintiff.
This bifurcated action was tried by the Court without a jury.
Having heard and carefully considered all the evidence in this
matter, the Court makes the following findings of fact and
conclusions of law pursuant to Rule 52(a) of the Federal Rules
of Civil Procedure.
(1) Plaintiff Fasolino Foods Company, Inc. ["Fasolino Foods"]
is a New Jersey corporation engaged in the business of
importing and distributing food products from Italy.
(2) Defendant and third-party plaintiff Banca Nazionale del
Lavoro ["BNL" or the "Bank"] is a foreign corporation organized
and existing under the laws of Italy and does business in the
State of New York. BNL is a commercial bank licensed to engage
in all types of banking.
(3) Third-party defendant Antonio Fasolino ["Fasolino"] is
the president and sole shareholder of Fasolino Foods and a
resident of the State of New Jersey.
The Establishment of a Banking Relationship with BNL
(4) In November or December 1988, Fasolino met with Francesco
Ingargiola, an account officer at BNL, and Stephano Felicori,
the head of the commercial credit department at BNL, to
establish a credit facility for his importing business.
(5) Fasolino next met with Ingargiola and Felicori on January
9, 1989 to discuss Fasolino's request for a $4 million credit
facility that would be used by Fasolino Foods to purchase goods
from Italy for delivery in the United States to a wholly-owned
subsidiary of Kraft, Inc. ["Kraft"].
(6) Fasolino proposed that the requested $4 million line of
credit would be secured by a $4 million "back up" letter of
credit issued for the benefit of BNL by a suitable bank acting
on behalf of Kraft, the intended purchaser.
(7) At the January 9 meeting, Ingargiola and Felicori
informed Fasolino that additional financial information from
Fasolino and Fasolino Foods was needed in order to determine
the propriety of a $4 million line of credit.
(8) At the January 9 meeting, there were no discussions
between the parties concerning a $5 million credit facility
related to non-Kraft business.
(9) Thomas DeLuca, in-house counsel to Fasolino Foods, sent
a letter to Ingargiola on January 9, 1989 confirming Fasolino's
meeting earlier in the day with Ingargiola and Felicori. With
respect to the proposed $4 million credit facility for Fasolino
Foods' importation of olive oil from Italy for distribution to
Kraft, DeLuca states, "We have structured the transaction to be
risk free for all parties, especially the bank." Defendant's
Trial Exhibit ["Dx"] A, at 1.
(10) On January 14, 1989, Fasolino telecopied to BNL the
requested financial information, including his personal
guaranty, Fasolino Foods' corporate financial information
and Fasolino Foods' corporate resolution.
(11) The financial statements of Fasolino Foods received by
BNL were unaudited and, therefore, BNL requested that Fasolino
attest to the accuracy of the financial information. As part of
its investigation, BNL also ordered a Dun & Bradstreet report
reflecting the estimated financial strength of Fasolino Foods.
(12) Upon receipt of Fasolino Foods' letter of credit
agreement and Fasolino's personal guaranty, BNL notified
Fasolino that the Bank would extend Fasolino Foods a credit
facility for the opening of letters of credit in connection
with the Kraft transaction if certain conditions were
satisfied. See Dx H, I. As revised, the conditions included (i)
that the Kraft back up letter of credit comply with BNL's
lending guidelines, (ii) that BNL receive a copy of the sale
contract between Fasolino Foods and Kraft and (iii) that BNL's
New York branch Credit Committee approve the credit proposal.
See Dx H.
(13) Defendant's exhibits H and I do not constitute a formal
commitment by BNL to extend a credit facility to Fasolino
Foods. Rather, the letters indicate that the Bank would
undertake such a facility if the conditions listed therein were
The Letter of Credit Agreement
(14) On January 14, 1989, Fasolino executed and delivered to
BNL, on behalf of Fasolino Foods, a Letter of Credit Agreement
[the "LOC Agreement"].
(15) The LOC Agreement sets forth the terms and conditions
that govern all applications by Fasolino Foods to BNL for
letters of credit and all letters of credit issued by BNL to
(16) Section 4 of the LOC Agreement defines an event of
default to include, among other things, failure by Fasolino
Foods to perform any of its obligations to BNL under the terms
of the LOC Agreement and default by Fasolino Foods under any
evidence of indebtedness issued, assumed or guaranteed by
Fasolino Foods. Upon any event of default by Fasolino Foods,
all of Fasolino Foods' obligations "shall become due and
payable without presentment, demand, protest or other notice of
any kind, all of which we [Fasolino Foods] hereby expressly
waive." Dx O.
(17) On January 14, Fasolino also executed and delivered to
BNL a personal guaranty agreement [the "Guaranty"].
(18) Pursuant to the Guaranty, Fasolino guaranteed to BNL
"the payment of any and all such bills, notes, checks, drafts
and other debts or liabilities either made, endorsed, or
contracted by [Fasolino Foods]. . . ." Dx F.
(19) In addition, under the Guaranty Fasolino agreed to pay
"cost of protest and all expenses (including reasonable
attorney's fees) of or for collection or for realization upon
any underlying collateral or upon this guaranty." Id.
BNL Credit Facility Procedures
(20) BNL's New York branch Credit Committee had authority to
extend credit facilities for the issuance of letters of credit
up to a maximum amount of $1 million.
(21) BNL's Regional Credit Committee for the New York
geographical area had authority to extend credit facilities for
the issuance of letters of credit in excess of $1 million but
less than $5 million.
(22) BNL's international headquarters in Rome, Italy had sole
authority to extend credit facilities for the issuance of
letters of credit in excess of $5 million.
(23) The New York branch Credit Committee consisted of the
branch manager, Carlo Vecchi, and the head of the commercial
(24) Claudio Ciampi was the vice president of the BNL New
(25) Thomas Badolato was the manager of BNL's letter of
credit department. As such, he was responsible for the
technical or mechanical aspects in the issuance of letters of
credit. However, contrary to Fasolino's testimony, Badolato had
no authority to ...