The opinion of the court was delivered by: LEONARD B. SAND
The material facts surrounding the transaction at issue in this lawsuit are undisputed. In October 1982, Ashford Laboratories, Inc. ("Ashford"), a New Jersey corporation, contracted to sell to a Nigerian importer, Mabson Pharmaceuticals, Ltd. ("Mabson"), cold capsules for $ 32,265. In order to effect payment, Mabson applied for an irrevocable letter of credit with defendant, a government owned bank, Savannah Bank of Nigeria (the "Bank"). On the reverse side of the Application are printed certain "General Terms & Conditions", including one which will be discussed in further detail below, which reads: "This Letter of Credit is subject to the usual terms and conditions operating in the center where the Credit be established." (Exh. A to Aff. of Jeffrey Nicholas, Sept. 24, 1992).
Subsequent to the submission of the Application to the Bank by Mabson, Bank America International ("Bank America") advised Ashford that a letter of credit known as L-82493 in the amount of $ 32,265, payable in New York, in United States dollars, had been established by the defendant in Ashford's favor. (Exh. A to Aff. of Frank Nicholas, Sept. 24, 1992). The Letter of Credit is a two-page document, and is dated November 1, 1982. (Exh. B to Aff. of Frank Nicholas, Sept. 24, 1992). The Letter of Credit provides that it is subject to the Uniform Customs and Practice for Documentary Credits, 1974 Revision, International Chamber of Commerce Publication No. 290 (the "UCP"). (Exh. C to Aff. of Frank Nicholas, Sept. 24, 1992).
After the Letter of Credit was established and in reliance thereon, Ashford shipped the pharmaceuticals to Mabson. Ashford presented conforming documents in strict compliance with the Letter of Credit on or about November 30, 1982. Each document specifically identified in the Letter of Credit was submitted by Ashford.
The Bank approved the Letter of Credit for payment on December 20, 1982. Both the Application and the Letter of Credit made clear that due to Nigeria's foreign exchange controls, a Form M would have to be filed by the importer, Mabson, through the defendant. A Form M is an application directed to the Central Bank to purchase foreign exchange. Defendant complied with this requirement on January 20, 1983, with the request that "the Foreign Currency should be paid to Bank of America, New York". The record suggests that Mabson also complied with related procedures regarding the Form M.
The Bank failed to pay on the Letter of Credit, claiming that it was unable to remit United States dollars to Bank America due to the failure of the Central Bank of Nigeria to provide foreign exchange. A June 8, 1983 cable from the Bank advised Bank America that it could negotiate the documents for the Letter of Credit but that Bank America would not be reimbursed by defendant until foreign exchange cover was made available. Similar cables were sent by defendant to Bank America on February 21, 1984, and January 15, 1985. Bank America, justifiably, has not negotiated the payment of the Letter of Credit. Significantly, the defendant has admitted that it would like to pay the Letter of Credit, and has offered to do so in Naira, the Nigerian currency. Plaintiff has rejected that offer.
Sometime subsequent to defendant's acceptance of the Letter of Credit, the Government of Nigeria engaged in a program to reschedule the payment of foreign debt, referred to as the "refinancing exercise". Defendant contends that as part of that refinancing exercise, Nigeria required, as a condition to payment on the Letter of Credit, that Ashford submit a claim form to Chase Manhattan Bank. Defendant further avers that at least as early as April 15, 1985, Ashford received a document entitled "The Central Bank of Nigeria - Circular dated 18th April, 1984", which gave notice that creditors must lodge claims with Chase Manhattan Bank to have debts paid by the Central Bank. Ashford never submitted any such claim form. Defendant asserts that due to Ashford's failure to submit the required document, the conditions of the Letter of Credit were not strictly complied with and the Bank is not required to honor the Letter of Credit.
Two other sets of facts should be noted at this point. In a letter to Mabson dated October 5, 1990, defendant acknowledged receipt of payment from Mabson for the Letter of Credit, and stated that "we have not been able to remit same to the exporters [i.e. Ashford] due to a non-provision of the required foreign exchange cover by the Central Bank of Nigeria." (Exh. H to Aff. of Frank Nicholas, August, 1992). This indicates both that refusal to release funds is not due to any withholding of the money by the bank's customer, and furthermore, that the reason for the refusal is non-provision of foreign exchange, as stated in the cables to Bank America, and not any failure on Ashford's part to strictly comply with the terms of the Letter of Credit.
Finally, we take note of the facts regarding the assignment of the proceeds of the Letter of Credit by Ashford to Optopics, the plaintiff in this action. Ashford assigned to the plaintiff the right to receive the proceeds payable under the Letter of Credit by a document executed in March, 1992, effective February 20, 1990, as part of a settlement of various disputes between Ashford and plaintiff. From 1983 until approximately March, 1992, Ashford and plaintiff were related parties under common control and ownership. This assignment is relevant to the defendant's argument that plaintiff lacks standing to pursue this claim.
Pursuant to Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is appropriate if the supporting evidence demonstrates that there are no genuine issues of material fact and that the movant is entitled to judgment as a matter of law. The Court does not resolve disputed issues of fact, but rather, resolving any ambiguities and drawing all reasonable inferences against the moving party, assesses whether genuine issues of material fact remain for the trier of fact. See, e.g. Knight v. United States Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986), cert. denied, 480 U.S. 932, 94 L. Ed. 2d 762, 107 S. Ct. 1570 (1987).
The Court heard oral argument on the defendant's motion for summary judgment on September 3, 1992. At that argument, and in the papers which defendant subsequently filed in opposition to plaintiff's later filed cross-motion for summary judgment, defendant appears to abandon certain of the arguments raised in its first moving papers. However, on the chance that defendant did not intend to concede these defenses, the most promising ones will be addressed.
A. Choice of Law/Standing:
Defendant argues that Nigerian law should be applied to this action, and that under Nigerian law, the assignment of the proceeds of the letter of credit is invalid and plaintiff therefore lacks standing to sue.
Defendant makes a number of different arguments concerning why Nigerian law should apply, but fails to convince the Court either that Nigerian law applies, or that there is actually a conflict between New York law and Nigerian law.
Defendant argues that because paragraph seven of the General Terms and Provisions on the Application for the Letter of Credit states that "this Letter of Credit is subject to the usual terms and conditions operating in the center where the Credit be established," the law of Nigeria applies to the Letter of Credit. As will be discussed more fully below, even if this were the correct interpretation of that provision, it would apply only to the Application, which is the contract between Mabson and defendant. It has no impact at all on the contract at issue in this suit, which is the Letter of Credit between plaintiff's assignor and the defendant.
The fact that a credit is not stated to be transferable shall not affect the beneficiary's rights to assign the proceeds of such credit in accordance with the provisions of the applicable law.
The UCP differentiates between transfer of a letter of credit, which would entail transferring the duty to deliver the documents to the bank, and merely assigning the proceeds of a letter of credit, without any concomitant obligation of performance. The assignment to plaintiff was clearly the latter, as defendant concedes that Ashford had already submitted all the documents expressly called for by the Letter of Credit, and the assignment took place some seven years afterwards.
In Algemene Bank Nederland, N.V. v. Soysen Tarim Urunleri Dis Ticaret Ve Sanayi, 748 F. Supp. 177, 182 (S.D.N.Y. 1990), a case interpreting the analogous provision in the 1983 revision of the UCP, the court ruled that the issuing bank did not have to "accept" an assignment of proceeds for such an assignment to be effective.
By extension, we find that under the UCP there is no need for prior notice to the issuing bank to effect an assignment of proceeds. This is logical, because an assignment of proceeds is merely an assignment of rights, and not of obligations; it should be irrelevant both to the issuing bank and to the purchaser who receives the proceeds, as long as the original beneficiary is still responsible for the delivery of the documents.
Returning to the choice of law question more generally, "New York has accepted a grouping of contacts approach which gives to the place having the most interest in the problems paramount control over the legal issues arising out of contracts." In re Allstate Insurance Company, 178 A.D.2d 899, 577 N.Y.S.2d 936, 938 (3d Dept. 1991). In this case, Ashford, a United States corporation, contracted for United States dollars to be paid on a letter of credit in New York. In similar situations, courts in New York have ruled that New York has the greatest interest in the litigation, and that New York law applies.
The case most closely on point is J. Zeevi and Sons, Ltd v. Grindlays Bank (Uganda) Limited, 37 N.Y.2d 220, 371 N.Y.S.2d 892, 333 N.E.2d 168, cert. denied, 423 U.S. 866, 46 L. Ed. 2d 95, 96 S. Ct. 126 (1975). In that case, a letter of credit was issued by a Ugandan bank in favor of an Israeli company, to be paid in United States dollars at a bank in New York. After the letter of credit was established, the Bank of Uganda, acting under authority derived from a Ugandan exchange control regulation, notified the defendant bank that foreign exchange allocations in favor of Israeli companies should not be paid. The defendant then informed the New York bank not to negotiate the letter of credit.
A lawsuit followed, and the defendant argued that under Ugandan law, the complaint should be dismissed. The court ruled that the facts established that the cause of action arose in New York, and that furthermore, New York had the greatest interest in the outcome of the case and its law would apply. The court stated, at pp. 898-899:
In this instance, New York was the locus of repudiation, whereas it should have been a site of payment. The provision respecting reimbursement in New York was an integral part of that for which the parties bargained, it was not a discrete obligation . . . The value to those in commerce of having a place at a financial capital where funds can be obtained on a simple letter of credit, away ...