Banco Espanol de Credito v. State Street Bank and Trust Co.

Robert Lawrence, Inc. (Lawrence), a U.S. clothing company, sought to finance the purchase of clothing from two Spanish companies, Alcides and Longuer. Lawrence obtained two letters of credit from State Street Bank and Trust Co. (State Street) (defendant). The letters of credit designated Banco Espanol de Credito (Banco Espanol) as the correspondent bank and Alcides and Longuer as the beneficiaries. The letters of credit required the presentation of inspection certificates that represented that “the goods are in conformity with the order” before the letters would be accepted and paid. Banco Espanol paid on both letters of credit upon receipt of inspection certificates issued by Lawrence’s inspecting agent that stated that Alcides and Longuer provided samples of the clothing and represented before a public notary that the samples corresponded with those previously approved by Lawrence’s representative in Spain. In issuing the inspection certificates, the inspecting agent relied on language in the orders that stated the clothing was “to be as the sample inspected in Spain.” State Street refused to reimburse Banco Espanol, claiming that the inspection certificates did not comply with the requirements of the letters of credit. State Street contended that the certificates only indicated the samples conformed to samples Lawrence previously approved, rather than certifying that the goods conformed with the orders. Banco Espanol sued State Street in district court for wrongful refusal to accept the letters of credit. The district court ruled in favor of State Street, holding that the inspection certificates were required to strictly conform with the letter-of-credit requirements. Banco Espanol appealed.