inter alia, the existence of a contract).
At oral argument, plaintiff conceded that the letter of credit was issued by Kazvneshbank but argued that Vnesheconombank is responsible for Kazvneshbank's obligations either because Kazvneshbank was a branch of Vnesheconombank or because Vnesheconombank somehow took over Kazvneshbank's assets and liabilities. These allegations do not appear anywhere in the Complaint, and it "is axiomatic that [a] complaint cannot be amended by the briefs in opposition to a motion to dismiss." O'Brien v. National Property Analysts Partners, 719 F. Supp. 222, 229 (S.D.N.Y. 1989). Plaintiffs' contract claims against Vnesheconombank must, therefore, be dismissed at this juncture; however, if plaintiffs can assure themselves of the factual and legal predicate for their theories of liability, I grant them leave to amend their Complaint to add the allegations sufficient to sustain the contract claim against Vnesheconombank.
B. The Negligence Claim
The absence of any contractual relationship between Vnesheconombank and the plaintiffs also mandates dismissal of plaintiffs' negligence claims. To state a claim of negligence, a plaintiff must establish that the defendant owed it a duty of care, that the defendant failed to exercise such duty of care, and that such lack of care caused the plaintiff injury. See e.g., Stratton Group, Ltd. v. Sprayregen, 466 F. Supp. 1180, 1184 (S.D.N.Y. 1979). Because Vnesheconombank was not the issuing bank, it owed no duty to plaintiffs to pay against conforming documents. Thus, it had no duty to review documents presented by Reed for payment under the credit.
In their opposition papers, plaintiffs allege that Kazvneshbank was a "branch" of Vnesheconombank, such that the negligence of Kazvneshbank may be imputed to Vnesheconombank. No such allegation appears in the Complaint. However, as with their contract claim, if plaintiffs can assure themselves of the factual and legal predicate for their derivative theory of liability, I grant plaintiffs leave to amend their complaint to add the factual allegations sufficient to sustain this claim against Vnesheconombank.
C. The Conversion Claim
Plaintiffs' conversion claim against Vnesheconombank and Donau is based on Donau's transfer to Vnesheconombank of certain funds Donau held in a cover account established by Kazvneshbank in connection with the letter of credit transaction. This claim must be dismissed because those transferred funds did not represent the proceeds of the letter of credit but only security posted between the issuing bank and Donau, the confirming bank, for obligations Donau was undertaking for the issuing bank.
In a letter of credit transaction, the issuing bank substitutes its credit for that of its customer, in this case Alink, and the confirming bank substitutes its credit for that of the issuing bank. Hence, the customer's insolvency has no bearing on the issuing bank's duty to pay under the letter of credit, and the issuing bank's insolvency has no bearing on the confirming bank obligation to pay the beneficiary upon presentment of documents conforming to the letter of credit. It is clear then that funds used by the issuing bank and the confirming bank to secure the contract between them are not necessary to pay the beneficiary. The confirming bank is obligated to pay the letter of credit to the beneficiary regardless of how it has chosen to secure its obligation.
In this regard, letter of credit financing is markedly different from the special account financing scheme at issue in HBL Indus. v. The Chase Manhattan Bank, N.A., 45 Bankr. 865 (S.D.N.Y. 1985). In that special account financing scheme, the actual funds placed in the account were "earmarked for payment of debts like those owed to" the plaintiff, a creditor of the party which opened the account. Id. at 868. For this reason, had all steps necessary to designate the plaintiff in HBL as "a specific recipient" of the special account fund been taken, the plaintiff would have had a sufficient possessory interest in the account.
The separate and independent nature of the various engagements involved in a letter of credit transaction, however, precludes any possessory interest on the part of the beneficiary in funds securing the obligation between the issuing and confirming banks. The beneficiary is secured by the creditworthiness of the confirming bank and does not own any interest in any particular account at the bank. Plaintiffs' conversion claims against Donau and Vnesheconombank, therefore, as to the funds in the cover account which Donau transferred to Vnesheconombank upon the expiration of the credit must, therefore, be dismissed.
As for plaintiffs' conversion claim against Vnesheconombank based on the unreturned documents presented for payment, the Complaint fails to allege that Vnesheconombank exercised any dominion and control over the documents, since the Complaint nowhere states that Vnesheconombank ever received or handled the documents. Consequently, this part of plaintiffs' conversion claim against Vnesheconombank must also be dismissed.
D. The Unjust Enrichment Claim
To plead a claim for unjust enrichment, a plaintiff must show "that the defendant was enriched, that such enrichment was at plaintiff's expense, and that the circumstances were such that in equity and good conscience the defendant should return the money or property to plaintiff." Dolmetta v. Uintah Nat'l Corp., 712 F.2d 15, 19 (2d Cir. 1983). Since plaintiffs can not maintain an unjust enrichment claim for the return of funds in which they had no possessory interest, their unjust enrichment claims against Vnesheconombank and Donau must also be dismissed.
For the reasons stated above, the Clerk of the Court is directed to enter judgment dismissing the Second Amended Complaint in its entirety against Vnesheconombank and dismissing that portion of Count III and Count IV of the Complaint against Donau that seeks damages for the funds allegedly converted by Donau or by which Donau was unjustly enriched. Plaintiffs are granted leave to amend the Complaint and rep lead the contract and negligence claims if they can, in good faith, assert the additional allegations they claim exist.
Dated: New York, New York
September 30, 1994