Wichita Eagle & Beacon Publishing Co. v. Pacific National Bank of San Francisco

Wichita Eagle and Beacon Publishing Company, Inc. (Wichita Eagle) (plaintiff) was the lessee of real property (the property) in Wichita, Kansas. After acquiring another publishing company, Wichita Eagle chose to move its operations to another location while it was still leasing the property. Marcellus M. Murdock, other owners of the property, and Wichita Eagle (collectively, the lessors) agreed with Circular Ramp Garages, Inc. (Circular Ramp) that Circular Ramp would sublet the property and develop a parking garage on it. Circular Ramp obtained a letter from Pacific National Bank of San Francisco (the bank) (defendant) that purportedly served as a letter of credit, with the lessors as beneficiaries of $250,000, to be paid if Circular Ramp failed to fulfill its obligations. More specifically, the letter included three conditions that, if met, would result in payment to the beneficiaries: 1) Circular Ramp failed to perform as agreed, 2) the lessors sent written notice to Circular Ramp of its failure to perform and thereafter sent an affidavit to the bank stating that the notice had been given, and 3) Circular Ramp failed to cure the failure within 30 days. The letter was titled “Letter of Credit No. 17084.” The bank charged its usual fee for issuing a letter of credit, and the letter was drafted by Circular Ramp’s attorney and approved by Wichita Eagle and the bank. Circular Ramp failed to perform due diligence in the development of the parking garage and subsequently failed to develop the parking garage. The notice and failure-to-cure conditions described above were then fulfilled, and Wichita Eagle presented a draft to the bank, but the bank refused payment. Wichita Eagle sued to demand payment. The parties argued over whether the written instrument was legally a letter of credit.