The Northern Trust Company v. Community Bank

The plaintiff in this action is the beneficiary of a letter of credit issued by West Coast Bank, a bank which was put into FDIC receivership before the expiration of the letter of credit. After the FDIC refused to honor West Coast Bank’s obligations on the letter, the plaintiff filed this action against the bank that had confirmed the letter of credit, defendant Community Bank.

A question of first impression in this case arises under the provisions of the Uniform Commercial Code and the International Chamber of Commerce’s Uniform Customs and Practices for Documentary Credits (UCP) concerning the roles of issuing and confirming banks and the obligations of the banks and the beneficiaries. The question is whether those provisions mean as a matter of law that the confirming bank must honor the letter of credit only if the beneficiary makes a presentment to the confirming bank, in addition to the issuing bank, before the expiration date of the letter of credit. The district court held that those provisions impose no such duty on the beneficiary. We affirm.

The background facts are as follows: On December 10, 1981, the Northern Trust Company received an irrevocable standby letter of…