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Cvd Equipment Corp v. Taiwan Glass Industrial Corp.

March 31, 2011

CVD EQUIPMENT CORP., PLAINTIFF,
v.
TAIWAN GLASS INDUSTRIAL CORP., ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: Richard J. Holwell, District Judge:

MEMORANDUM OPINION AND ORDER

This case arises from a commercial transaction gone wrong. Before the Court now are motions that have little do with the merits of that dispute. Instead, the motions are between the parties to the central transaction and between the banks that were supposed to assure payment. CVD Equipment Co. ("CVD"), an American equipment manufacturing company, contracted to produce specialized equipment for Taiwan Glass Inc. ("Taiwan Glass"), a Taiwanese glass manufacturing company. In order to assure prompt and smooth payment, the parties agreed that CVD would be paid through a commercial letter of credit ("l/c") issued by Mizuho Corporate Bank ("Mizuho"). Similarly, in the event that Taiwan Glass required a refund, it would obtain that refund through a standby l/c issued by Capital One, N.A. ("Capital One").

After a dispute arose over alleged delays in shipment, CVD and Taiwan Glass attempted to draw on the l/cs, and both were denied. CVD brought suit against Taiwan Glass and Mizuho. Taiwan Glass impleaded Capital One. Before the Court now are motions between CVD and Mizuho and between Taiwan Glass and Capital One regarding non-payment of the l/cs. Mizuho moved for summary judgment against CVD on July 28, 2010, and CVD cross-moved for summary judgment on August 31, 2010. Capital One moved to dismiss Taiwan Glass's third party complaint on January 28, 2011, and Taiwan Glass cross-moved for summary judgment on the same day. For the reasons below, the Court grants Mizuho's motion for summary judgment; denies CVD's cross-motion for summary judgment; denies Capital One's motion to dismiss; and denies Taiwan Glass's cross-motion for summary judgment.

BACKGROUND

The first l/c was issued in favor of CVD by Mizuho bank to insure payment for the machinery once it was shipped. (Huang Decl. July 26, 2010, Ex. A.) The l/c specified that in order to receive payment, CVD must make a presentation including, among other documents, "clean on board ocean bills of lading made out to order of Taiwan Glass . . . ." (Id.) The l/c also provided that the "documents must be presented within 20 days after the date of shipment but within l/c expiry date." (Id.) On December 4, 2009, CVD provided the documents to Capital One, which was acting as a nominating bank, and on December 7, 2009, Capital One forwarded the materials to Mizuho, the issuing bank. (Id., Ex. C.) The documents were received by Mizuho on December 10, 2009. (Id.)

The presentation included a bill of lading prepared by Emo Trans. (Id.) The bill of lading listed Emo Trans as a "forwarding agent," and specified that the goods were destined for a particular ocean vessel. (Id.) It further specified that the port of loading was to be New York, NY, and the port of discharge was to be Taichung, Taiwan. (Id.) The bill of lading contained a pre-printed statement as follows: "Received by the Carrier in apparent good order and condition unless otherwise indicated hereon [sic] the Container(s) and/or good hereinafter mentioned to be transported and/or otherwise forwarded from the Place of Receipt to the intended Delivery upon and subject to all the terms and conditions appearing on the face and back of this Bill of Lading." (Id.)

On December 17, 2009, Mizuho refused to honor the l/c. (Id., Ex. D.) As grounds for refusal, Mizuho listed, among other things, that the bill of lading was non-conforming because the bill of lading was a "received b/l [bill of lading] without on board notation." (Id.) On December 24, 2009, Capital One forwarded a new presentation to Mizuho with a revised bill of lading. (Id., Ex. I.) This bill of lading did contain an on board notation. (Id.) On December 29, 2009, Mizuho rejected this presentation because it was late. (Id., Ex. J.)

The second l/c was issued by Capital One in favor of Taiwan Glass. (Taiwan Glass Countercl. Ex. C.) This l/c in effect enabled Taiwan Glass to receive a refund if CVD did not meet its contractual obligations. The l/c specified that Taiwan Glass could only draw on the l/c between January 1, 2010 and January 21, 2010. (Id.) It also provided, "This letter of credit will be canceled upon the earliest of: . . . (II) copy of an original bill of lading submitted by CVD Equipment Corporation issued to the order of Taiwan Glass . . . dated not later than November 30, 2009 and indicating CVD Equipment Corporation as shipper." (Id.)

CVD sent a letter dated December 2, 2009 to Capital One attaching a bill of lading (the same bill of lading originally sent to Taiwan Glass) and requesting that Capital One cancel the l/c. (Maslo Decl. Jan. 28, 2011, Exs. 2-3.) On December 8, 2009, Capital One sent a notice to Mizuho as representative of Taiwan Glass, informing them that Capital One had canceled the l/c because it had received a bill of lading from CVD. (Tsai Decl. Jan. 28, 2011, Ex. 3.) Mizuho disputed the cancellation. (Id., Exs. 4, 6.) On January 4, 2010, Taiwan Glass requested payment on the l/c. (Id., Ex. 9.) Capital One refused to honor the l/c on January 6, 2010, providing as a reason, "L/c expired. Refer to our [message] dated 12/08/2009 acknowledged by you on 12/08/2009." (Id., Ex. 10.) Mizuho on behalf of Taiwan Glass disputed the dishonor on January 11, 2010. (Id., Ex. 11.) It argued that the original bill of lading was deficient because it did not contain an on board notation and that the second bill of lading was deficient because it argued that the shipping date stamped on the bill of lading did not match the vessel company's tracking records. (Id.)

Both letters of credit at issue by their terms are governed by the most recent version of the Uniform Customs and Practices ("UCP"). The UCP are a standard set of rules that govern most letters of credit. As the Second Circuit has recognized, the UCP, though not law, enjoy a unique, quasi-legal status. Id. They provide the commercial rules governing this transaction.

STANDARD OF REVIEW

Summary judgment is appropriate where there are no genuine issues of material fact. See Fed. R. Civ. P. 56(c). The burden to show the absence of a genuine factual dispute falls on the moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). A dispute regarding a fact is genuine if the evidence is such that a reasonable finder of fact could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is material when it "might affect the outcome of the suit under the governing law." Elec. Inspectors, Inc. v. Vill. of E. Hills, 320 F.3d 110, 117 (2d Cir. 2003). In evaluating a motion for summary judgment, the court is required to "view the evidence in the light most favorable to the party opposing summary judgment, to draw all reasonable inferences in favor of that party, and to eschew credibility assessments . . . ." Wevant v. Okst, 101 F.3d 845, 854 (2d Cir. 1996) (citations omitted).

DISCUSSION

Letters of credit provide a system of payment that is especially useful in international transactions. "The fundamental principle governing documentary letters of credit and the characteristic which gives them their international commercial utility and efficacy is that the obligation of the issuing bank to honor a draft on a credit when it is accompanied by documents which appear on their face to be in accordance with the terms and conditions of the credit is independent of the performance of the underlying contract for which the credit was issued." Alaska Textile Co. v. Chase Manhattan Bank, N.A., 982 F.2d 813, 815 (2d Cir. 1992). "Because the credit engagement is concerned only with documents, the terms and conditions of a letter of credit must be strictly adhered to. There is no room for documents which are almost the same, or which will do ...


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