Van Zeeland Oil Co., Inc. v. Lawrence Agency, Inc.

Van Zeeland Oil Co. (Van Zeeland) (plaintiff) operated a petroleum-distribution business, while Lawrence Agency, Inc. (defendant) operated a gas station in Michigan. The parties entered an agreement for Lawrence Agency to purchase its gas from Van Zeeland for 10 years. Under the agreement, Lawrence Agency was required to provide Van Zeeland with a $50,000 letter of credit. Rudolph Lawrence, the president of Lawrence Agency, signed the agreement on behalf of Lawrence Agency. The Peoples State Bank of Munising (the bank) (defendant) issued a $50,000 letter of credit, which stated that Van Zeeland was the “Beneficiary,” and “Van Zeeland Oil Customer Daryl E. and Michele A. Lawrence” was the “Applicant.” Daryl was Rudolph’s son. For the bank to honor the letter of credit and pay up to $50,000, the terms of the letter of credit required Van Zeeland to certify that the “Applicant” had funds due and owing to Van Zeeland for purchases of products and services. Thereafter, Lawrence Agency purchased gasoline and breached its contract with Van Zeeland, accumulating over $113,000 in debt. A representative of Van Zeeland twice attempted to have the bank honor the letter of credit. The representative presented documents showing the amounts owed by Lawrence Agency and made the required certification. The bank responded that it would not honor the letter of credit because the “Applicant” in the letter was Daryl and Michele, not Lawrence Agency, and Van Zeeland had not shown that Daryl and Michele personally owed any amounts to Van Zeeland. Van Zeeland sued the bank and Lawrence Agency. On motions for summary judgment, Van Zeeland argued that the bank had breached its duty to honor the letter of credit.