Colorado National Bank of Denver v. Board of County Commissioners of Routt County, Colorado

The Woodmoor Corporation (Woodmoor) was planning a development in Routt County, Colorado (the county) (plaintiff). The county required Woodmoor to comply with certain regulations in the development, and the parties signed an agreement to that effect. In early 1973, Woodmoor secured three standby letters of credit from Colorado National Bank of Denver (the bank) (defendant) to secure Woodmoor’s performance. Two of the letters had an expiration of December 31, 1975, and the other had an expiration of December 31, 1976. Each letter of credit required a statement of Woodmoor’s noncompliance, in addition to a 15-day sight draft. Woodmoor never began construction on the development. On December 31, 1975, the county made demands on the two letters of credit expiring that day. The bank dishonored the demands because neither contained a sight draft. On December 22, 1976, the county made demand on the third letter of credit. The bank similarly dishonored this demand for lack of a sight draft. On December 29, 1976, the bank submitted a sight draft for this third letter. The bank still dishonored the demand. The county sued the bank to recover on the three letters of credit. The bank argued that because the county had spent nothing on the development, payment on the letters of credit would amount to a windfall. The county filed a motion in limine to exclude evidence of anything beyond the four corners of the letters of credit. The trial court granted the motion and ruled in the county’s favor. The court of appeals affirmed. The bank appealed.