Marine Midland Grace Trust Co. of New York v. Banco Del Pais, S.A.

Marine Midland Grace Trust Company of New York (Marine) (plaintiff) issued four letters of credit in favor of Ricardo Nevares Ocampo, Mexico (Ocampo). The letters obliged Marine to make payment if a requesting party presented designated documents regarding shipment from Mexico. Three of the letters of credit required the party requesting payment to submit onboard truckers bills of lading. Pursuant to the Uniform Customs and Practice for Commercial Documentary Credits fixed by the Thirteenth Congress of the International Chambers of Commerce (Thirteenth Congress Rules), the international agreement that governed the three letters, a bank that issued a letter of credit was entitled to a reasonable amount of time to examine the documents accompanying a payment request. If an issuing bank believed that the accompanying documents did not conform to the letter, the issuing bank had to notify the requesting party and specify the claimed defects. The issuing bank also had to advise the requesting party that the issuing bank was holding the documents at the requesting party’s disposal or was returning the documents to the requesting party. The international agreement governing the fourth letter of credit imposed similar requirements. Additionally, the Thirteenth Congress Rules provided that an onboard bill of lading could be evidenced by an initialed or signed notation on the carrier’s behalf. If the bill of lading was presented after the date specified in the letter, the notation had to be dated, and such date would be deemed as the date the cargo was loaded and shipped. Marine paid certain checks drawn by the Banco del Pais, S.A. (Banco) (defendant) on Banco’s account with Marine, which resulted in an overdraft in excess of $256,000. Marine sued Banco, seeking payment of the overdraft amount; Banco responded that Marine caused the overdraft by failing to credit Banco’s account with amounts due to Banco pursuant to the letters of credit that Marine initially issued in Ocampo’s favor. Banco also argued that Marine did not comply with its notice requirements. Marine countered that it was justified in dishonoring Banco’s payment requests because the documents Banco submitted in support of payment did not comply with the letters of credit because the truckers bills of lading did not include any notation by the carrier (whether signed, initialed, or stamped) stating that the cargo was on board. Banco retorted that it was not customary in Mexico for truckers bills of lading to state that cargo was on board and that the bills of lading that were submitted to Marine complied with Mexican custom. Banco further asserted that Marine took too long to examine the documents accompanying the payment requests and that Marine violated the Thirteenth Congress Rules’ procedures for notifying a requesting bank about claimed documentary defects. Both parties moved for summary judgment.