Banco General Runinahui, S.A. v. Citibank International
97 F.3d 480 (1996)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under a letter of credit governed by the Uniform Customs and Practices for Documentary Credits (UCP), conforming documents must be presented by the specific presentment deadline, not merely the credit's expiry date; a bank's single prior acceptance of discrepant documents under a different letter of credit does not constitute a waiver for future transactions; and a bank's notice of discrepancies within a reasonable time, even if after the presentment deadline, does not create estoppel.
Facts:
- Ribadalgo Agro Consultores CIA Ltd. (Ribadalgo) contracted with Wade for an irrigation system, agreeing to use a commercial letter of credit governed by UCP 400 for financing.
- Banco General Runinahui, S.A. (Banco) issued a first irrevocable letter of credit in favor of Wade, which Citibank International (Citibank) confirmed.
- Under the first letter of credit, Wade shipped goods and presented documents with numerous discrepancies, but Citibank nevertheless honored the payment request.
- Banco subsequently issued a second irrevocable letter of credit for $400,000 in favor of Wade, which Citibank also confirmed. This credit required document presentment no later than 15 days after shipment, but within the credit's expiry date.
- Wade shipped a portion of goods under the second letter of credit on July 7, 1992, and submitted initial documents to Citibank on July 21, 1992, one day before the 15-day document presentment deadline (July 22, 1992).
- Two days after Wade's initial submission, on July 23, 1992, and one day after the document presentment deadline, Citibank notified Wade that the documents contained numerous discrepancies, which Wade conceded were nonconforming.
- Wade forwarded amended documents that cured the discrepancies to Citibank on July 24 and July 27, 1992, but Citibank rejected them as untimely because they were not received within the 15-day presentment window.
Procedural Posture:
- Wade (Third-Party Defendant-Counter-Claimant) filed a counterclaim against Citibank (Defendant-Third-Party Plaintiff) and Banco (Plaintiff-Counter-Defendant) in the United States District Court for the Southern District of Florida.
- The district court granted summary judgment in favor of Wade as to the first presentment under the second letter of credit.
- Citibank (Defendant-Third-Party Plaintiff-Appellant) and Banco (Plaintiff-Counter-Defendant-Appellant) appealed the district court's entry of summary judgment in favor of R.M. Wade & Co. (Third-Party Defendant-Counter-Claimant-Appellee) to the United States Court of Appeals for the Eleventh Circuit.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Did the district court err in finding Citibank barred from dishonoring nonconforming documents presented by Wade under a letter of credit by improperly concluding Citibank waived its right to strict compliance or was estopped from dishonoring due to its reasonable review timeline?
Opinions:
Majority - Black, Circuit Judge
No, the district court erred in finding Citibank barred from dishonoring Wade's nonconforming presentment under the second letter of credit. The court applied the 'strict compliance' standard, requiring documents to precisely meet the credit's terms. It rejected Wade's argument that the phrase 'no later than 15 days after shipment, but within the validity of the credit' created an unrestricted 'cure period' between the document presentment deadline and the credit's expiry date. Such an interpretation would render the presentment deadline meaningless and subvert strict compliance; conforming documents must be submitted by the deadline. The court further held that Citibank's single prior acceptance of discrepant documents under the first letter of credit did not constitute a waiver of its right to strict compliance for the second letter of credit, citing that the UCP does not support such common law equitable doctrines and that a single past waiver does not bind future transactions. Finally, the court found the district court erred in estopping Citibank. Under UCP 400 Article 16, a bank is allowed a 'reasonable time' to examine documents and must give notice 'without delay' if refusing them. The district court improperly interpreted 'reasonable time' as 'early enough to allow the beneficiary to cure and represent before the presentment deadline.' This interpretation conflicts with Article 16(c). Given that Citibank reviewed the documents and notified Wade of discrepancies within two days, which is considered a reasonable time, Citibank was not estopped from dishonoring the nonconforming presentment.
Analysis:
This case significantly reinforces the strict compliance standard in letter of credit transactions, clarifying that specific document presentment deadlines are paramount and beneficiaries do not have an implied right to cure discrepancies after such deadlines, even if before the credit's ultimate expiry date. It also limits the applicability of common law equitable doctrines like waiver and estoppel in UCP-governed letters of credit, establishing that a bank's past leniency does not obligate it to accept future non-conforming documents. The ruling provides critical protection for banks by affirming their 'reasonable time' for document examination, ensuring it is not shortened by a beneficiary's need to re-present documents before a specific deadline, thereby upholding the efficiency and certainty vital for international commerce.
