Bank of Cochin, Ltd. v. Manufacturers Hanover Trust Co.

A customer of the Bank of Cochin, Ltd. (Cochin) (plaintiff) asked Cochin to issue a letter of credit to pay for a customer’s purchase from St. Lucia Enterprises, Ltd. (St. Lucia) (defendant). Manufacturers Hanover Trust Company (MHT) (defendant) was the confirming bank (i.e., the bank that would pay St. Lucia). Cochin issued the letter of credit pursuant to the Uniform Customs and Practice for Documentary Credits, Publication No. 290 (UCP). The letter of credit required St. Lucia to present certain documents to MHT to obtain payment, including a maritime insurance policy, with covering note 429711. St. Lucia allegedly shipped the goods on May 29, 1980. On June 3, St. Lucia presented MHT with documents purportedly complying with the letter of credit, which included a letter and certification on the letterhead of St. Lucia Enterprises (without the word “Ltd.”) and an insurance policy with cover note 4291. On June 13, MHT paid St. Lucia and mailed St. Lucia’s documents to Cochin. Cochin received the documents on June 21. St. Lucia never shipped the goods, and the documents it submitted were forgeries. On June 21, Cochin advised MHT that there were discrepancies with St. Lucia’s papers and instructed MHT not to pay St. Lucia. Cochin and MHT proceeded to exchange correspondence regarding the matter. Among other things, Cochin noted that St. Lucia’s papers used the wrong entity name and the wrong cover-note number. These errors tracked MHT’s prior advice to St. Lucia, which Cochin received. But Cochin never returned St. Lucia’s documents to MHT or notified MHT that Cochin was holding them at MHT’s disposal. Cochin eventually sued MHT for wrongfully honoring the letter of credit.