*3 C.J., ment, CORNELIUS, awarded Before GRANT ROSS, It is from fees. JJ. appeals.2 now
this order that Eastman OPINION Facts Background
Opinion by Justice ROSS. Software, Inc., 8,1997, May Texas Commerce issued Eastman a Massachu- On standby of credit No. corporation, setts sued Commerce irrevocable D-470231, Bank, as follows: provides National Association1 which (Texas Bank) Commerce APPLICANT: L.
RONALD JENSEN 2121PRECINCT LINE ROAD HURST, TEXAS 76054 Beneficiary: SOFTWARE, 750,000.00 EASTMAN INC. AMOUNT: USD (SEVEN FIFTY HUNDRED PARK DRIVE TECHNOLOGY BILLERICA, AND UNITED MA 01821 THOUSAND °%oo DOLLARS) STATES SUCZYNSKI, ATTENTION: MR. DIRECTOR JOHN
GENTLEMEN: Texas, appears It any other so entitled. Bank of N.A. document 1. Now known as Chase treated the trial court’s that the have actually 2. The order directs Texas Commerce will judgment, and we order as its final last a new based on to submit final do so as well. However, the record does not contain order. WE HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CRED- D-470231, FAVOR, IT NO. IN YOUR FOR THE ACCOUNT OF ABOVE-NAMED APPLICANT, FOR SUM OR SUMS NOT EXCEEDING THE ABOVE-MEN- AMOUNT, TIONED EXPIRING ON MARCH P.M. 4:00 CENTRAL STAN- TIME, COUNTERS, DARD AT OUR AVAILABLE FOR PAYMENT AGAINST DRAFT(S) SIGHT, YOUR ON AT U.S. MARKED: “DRAWN UNDER TEXAS COMMERCE BANK NATIONAL ASSOCIATION IRREVOCABLE STANDBY LET- D-470231, 8, 1997”, TER OF CREDIT NO. DATED MAY ACCOMPANIED BY: 1. BENEFICIARY’S MANUALLY SIGNED STATEMENT ON ITS LETTERHEAD
READING EXACTLY AS FOLLOWS: “I, UNDERSIGNED, THE AN AUTHORIZED REPRESENTATIVE OF EAST- SOFTWARE, INC., MAN HEREBY CERTIFY THAT WHETSTONE TECHNOL- *4 OGIES, LLC, HAS FAILED MAKE THE TO PAYMENT DUE ON THE _DAY OF_, 19_, $250,000.00, THE IN AMOUNT OF AND THAT REQUESTED PAYMENT HAS BEEN AND NOT BY RECEIVED EASTMAN SOFTWARE, INC.” PARTIAL DRAWINGS ARE ALLOWED. IT A CONDITION IF IS THAT LETTER THIS OF CREDIT NOT IS DRAWN DATES, ON
AGAINST THE THE FOLLOWING LETTER OF CREDIT AMOUNT SHALL BE AUTOMATICALLY IN DECREASED WITH THE ACCORDANCE FOLLOWING SCHEDULE: (DATE) ON AMOUNT OF DECREASE 5,1997 $250,000.00 SEPTEMBER 24,1997 $250,000.00 DECEMBER THIS LETTER AT OF CREDIT EXPIRES OUR COUNTERS ON MARCH ALL BANKING CHARGES THAN ARE OTHER OURS THE FOR APPLICANT’S ACCOUNT. THE ORIGINAL SUBSEQUENT OF THIS LETTER CREDIT AND OF AMEND- MENTS, ANY, IF MUST ALL ACCOMPANY DRAWINGS. DRAFT(S) WE HEREBY ENGAGE WITH YOU THAT ALL AND PRE- DRAWN SENTED IN WITH ACCORDANCE THE OF TERMS THIS LETTER OF CREDIT WILL BE HONORED ON DUE AND PRESENTATION DELIVERY OF DOCU- MENT®) US, DIVISION, TO ATTENTION: DOCUMENTARY SERVICES 717 TRA- VIS, HOUSTON,TEXAS 77002. HEREIN, UNLESS OTHERWISE EXPRESSLY STATED THIS LETTER OF CREDIT IS THE SUBJECT TO UNIFORM AND CUSTOMS PRACTICE FOR (1993 REVISION), DOCUMENTARY CREDITS INTERNATIONAL CHAMBER OF COMMERCE NO. 500. BROCHURE (713) (713) PLEASE AT CONTACT U.S. 216-5665 OR IF 216-4739 YOU HAVE ANY QUESTIONS CONCERNING THIS LETTER OF CREDIT. 3) following material facts concerning presentation Eastman made a for dispute: credit are not $250,000.00 payment of under the letter of credit which Commerce honored 1) Texas Commerce issued the letter in 15,1997; paid on Eastman;
favor 4) presentation Eastman made a for 2) presentation Eastman made a for $250,000.00 payment of $250,000.00 under the letter of payment of under the letter of credit on credit which December which Texas Texas Commerce honored 3,1997; paid July on Commerce dishonored on December previous automatic de- “Drawing because of following reason: of credit in the of the letter after date.” crease amount received the scheduled 5,1997. on occurring undisputed It the let- is further on em- ter Bank Third, even if Texas Commerce following the back ployees endorsed on arguing from a new reason precluded letter of credit: dishonor, summary it is not entitled to still newly stat- judgment. Texas 7/3/97 errone- ed for dishonor relies reason Drawing in the paid interpretation of the legal ous interpret credit that asks Court Balance Remaining Letter of Credit manner that an automatic such a Sep- occurred on decrease _s_ legal proper Under the tember Risicato, President Connie Vice letter, no such auto- interpretation of Associ- Commerce Bank National occurred, because it is un- matic decrease ation disputed that Texas Commerce honored payment 09/16/97 paid presentation *5 3, July under the letter on in Drawing the of paid Remaining Letter of Credit Balance Fourth, le- Texas Commerce’s erroneous gal interpretation of the letter of credit _s_ requires the conclude that there Court nondocumentary of was an occurrence a Teresa Dever—International Officer for automatic the condition decrease Commerce Texas Bank National Associ- amount of the letter of credit. Pursuant to ation law, which is in- controlling expressly the corporated the terms of the letter of into Eastman’s Contentions credit, should nondocumentary conditions five appeal. Eastman raises issues on ignored. disregarded be and First, by express of the terms the Fifth, enti- even if Texas Commerce was credit, of there is no date for scheduled judgment, the court summary tled trial receipt presenta- of a attorney’s awarding fees to Texas erred tion, and thus Eastman was entitled to successfully that de- Commerce. bank summary wrongful dishonor judgment claim for breach of contract or fends a and not Texas Commerce was entitled of credit is wrongful dishonor a letter of summary judgment. attorney’s fees.3 not entitled to Second, rejected having pre- it sentation for the sole reason that was Summary Judgment date,” after the scheduled “received case, parties both moved for this arguing from later precluded Commerce court, in trial summary judgment. The Therefore, any other reason dishonor. order, granted final Texas Commerce’s was not entitled to sum- motion and Eastman’s. denied judgment ground mary grants summary court a of under the letter trial balance available funds When 16, losing party appeals, and judgment, of zero credit was after submission, argument on which Texas Commerce relied Tex- The Act Prior oral 5.111(e) (Vernon § advised Court that it was Commerce & (Tex. Ann. Bus. Com.Code i.e., agreed conceding point, it was it yet Supp.2000)) become effective at had not entitled to fees under stat- in this case. the time of relevant events effect this letter of credit. ute in at time of 84
an appellate court finds reversible error
indicating
tation
that the issuer’s customer
judgment,
the appellate court’s
defaulted on
underlying
has
contract.
normal action is to
reverse
trial Republic Nat’l Bank
Dallas v. North
judgment
remand
cause
Worth,
Nat’l
west
Bank
Fort
578 S.W.2d
to the trial court. An exception may
109,
(Tex.1978);
113-14
C.J.S.
10
Bills and
occur
when both
for sum-
moved
(1995).
§
*6
proper presentment of the letter.
issuer,
2)
The
and
the
the documents which
drafting of
letter
generally
a
of credit
in
accompany any
must
for payment.
demand
volves an
party,
beneficiary,
account
a
and Vest,
respectively. The seller does not wish to governed by Letters of credit are rely solely the buyer, credit of the and ordinary the con construction rules of therefore a letter of credit may be used to Dallas, Republic tracts. Nat’l Bank substitute the issuer’s credit for that of the of 115; Vest, 578 at S.W.2d S.W.2d at 15. 996 buyer. Usually, the of credit in Courts must letter of construe the credit in related, volves functionally legal three but with of language accordance the the con 1) ly agreements: separate, agreement tract. So are long as the terms free from buyer/account between the party and the law, and with 2) ambiguity do not conflict the seller/beneficiary; between the account 3) parties’ rights those terms establish issuer; the party and the and letter of the Vest, credit, under the contract. 996 S.W.2d at between issuer and the benefi ambiguity If of contract is ciary. Exploration, Westwind Inc. v. case, Ass’n, pled, present then the ques Homestate Sav. 696 S.W.2d 381 (Tex.1985). tion of whether one of strictly commonly issuer is a bank, with complied the letter of credit is a party usually buyer the account is a question of of law to goods, beneficiary normally and the for the court decide. a Inc., goods. Exploration, seller of 10 Westwind 696 S.W.2d at C.J.S. Bills and Notes (1995). § “standby” 342 A review “guaranty” legal or We the trial letter of is one de credit under which the conclusions novo. Telecommuni MCI Co., issuer honor payment Corp. must demands for v. Elec. cations Texas Utils. 995 (Tex.1999). only if beneficiary presents documen S.W.2d 651
85 apparent of into clauses of the letter credit Analysis conflict. In our of the trial de novo review provisions of a con When the case, we note court’s determination this they to be appear tract conflict should a initially that the letter of credit contains in harmonized, possible, if to reflect specific expiration, date of March Generally, parties. par tention of the letter, which date forth twice in the is set every to a contract intend clause ties requires specified documentation be court will not have some effect COUNTER,” “AT presented OUR “FOR any the contract portion strike down of OR SUMS NOT SUM EXCEEDING” unless there is an irreconcilable conflict. $750,000.00. rule, in a general As a Bank, 662 Ogden v. Dickinson State containing expi- specific a date (Tex.1983). 332 When S.W.2d l-ation, by presentment liability is fixed a provisions appear contract to be bank, together a with all draft re conflict, con the court should examine and documentation, quired prior the expira writing, seeking har sider the entire Corpus tion date. First State Bank of conflicting provi monize reconcile the Mills, Inc., Christi v. Shuford possible. In greatest sions to the extent (Tex.App.-Corpus Christi achieving objective, should n.r.e.); writ ref'd v. Cypress Bank South ef interpretation gives such an favor Co., Bell western Tel. S.W.2d so provisions, fect to all of contract’s (Tex.Civ.App.-Houston [1st Dist.] meaningless that none will be rendered n.r.e.). writ ref'd be primary purpose and the contract’s will is delivery “Presentation” defined as the Ford, v. effectuated. Mamo proper documentation the issuer for 673, 676 (Tex.App.-Houston [14th Dist.] giving honor or a value under writ).4 1987,no credit. Tex. Bus. & Ann. Com.Code Texas, writing generally is (Vernon 5.102(a)(12) § Supp.2000). There strictly most author against construed is question no this ease in a manner as reach reasonable proper presentation; no ques- there also apparent result consistent with the intent tion in this that the presentation case *7 two parties. possible If there are accomplished prior to the stated date of constructions, rendering the construction expiration of the letter of credit. There is possible performance will be contract of that, question further no to the date of its rendering its preferred perfor to one 1997, 26, presentment on December Texas meaningless. or A impossible mance paid Commerce had under the of out is most letter of credit construed bank’s $500,000.00, $250,000.00 credit below the strictly the bank because that is against Yet, limit of its contractual obligation. Temple-Eastex, it. Inc. v. who drafted the of of interpretation under the condition (Tex. Bank, 672 Addison 798 Commerce, by the on credit relied Texas 1984). court, and by followed the trial the amount payable con interpretation, under the letter of credit automat- reasonable $250,000.00 ically by language with the of the letter of reduced on December sistent 24, 1997, issue, at all already and since Eastman had credit that would harmonize $500,000.00 date, the on that the letter is one that makes condition provisions drawn 24, 1997, effectively on for automatic decrease of the expired providing December obligation and on not March 1998. Under this amount of Texas Commerce’s construction, expiration only drawings if no had been applicable the stated date be- $750,000.00 against meaningless. brings This these two made the as of the comes Exploration, Sav. general principles Inc. v. Homestate These contractual have Westwind Ass'n, (Tex.1985). applicable letters been held of credit. See words, specified. court, dates In other Texas of in ment the trial and accord with obligation Ford, Inc., under the authority our as stated in Casa would drop credit from 876-77, judgment 951 S.W.2d at render in $500,000.00 if the letter of was not credit $250,- in favor of Eastman the amount of against” 5,1997, September “drawn and 000.00, together prejudgment with interest $250,000.00, drop would further if not percent per at rate of six annum from against” “drawn on December (the January day thirtieth after obligations Its under the letter of credit date sum principal on which was 25, 1998, expire would on March as stated. payable) and September due instance, In this since Eastman made (the date of final judgm proper presentation drawing and a ent),5 fees in 5, 1997, prior $85,000.00,6 court, post- all costs of condition would never occur and there judgment at per interest the rate ten be no would automatic reduction. per judgment cent annum from the date of interpretation paid, This is consistent with the until may for all which execution letter, in language used harmonizes issue. expiration
the “condition” with the date (making significant, par- both dates ON OPINION REHEARING be), obviously ties intended them to is filed a Texas Commerce has mo with consistent the actions of Texas Com- rehearing. point, tion for its second it own employee merce’s who' noted opinion argues our in continuing obligation bank’s attorneys’ case awards fees without a $250,000.00 on return to the present- properly presented issue. ment, is consistent with Texas Commerce’s (in previous actions under the which record this case shows both presentations by it honored Eastman obvi- Eastman and Commerce moved for ously speci- made on the exact dates (This summary judgment. specifically was condition), fied in the is an interpretation by noted the trial court “strictly against construed” Texas Com- order.) signed In an order June (who letter), merce drafted con- 10, 1999, granted the trial sistent with the intent of the parties as summary judgment motion language shown other the letter of $250,000.00,plus amount of reasonable at- (i.e., that the credit drawn would be torneys’ expenses fees be deter- “to only in against by the event of default by mined later submission.” Com- Technologies on Whetstone one their filed merce a motion reconsider on or payments three scheduled August hearing 1999. A about *8 each, potential with Texas Commerce’s lia- 2, 1999, held which included bility declining by amount if Whet- such reconsider, argument oral on motion to did, fact, timely in payments stone to make attorneys’ that also on fees. At hear- Software). Eastman ing, orally the trial court announced that denying the court was the motion to recon-
We therefore conclude that Eastman then, taking sider. The court without for- summary for judgment was entitled evidence, mal the amount of at- and that Com discussed wrongful dishonor Texas summary torneys’ fees. for judg merce was not entitled to Counsel Eastman asked $108,000.00. discussion, Accordingly, judg we reverse the for After ment. some Republic parties agreed The and at 5. See Nat’l Bank v. North 6. their briefs oral Dallas Worth, west Nat’l Bank Fort argument that amount of fees is (Tex. 1978) (opinion reh’g), where on dispute. Court, Supreme another case, judgment reformed the to reflect prejudgment judgment. interest the date of trial of the court. original judgment that trial determined court objec- had they no such appropriate an amount. At that same Counsel indicated was estopped doing trial from hearing, They Commerce advised the are now tion. attorneys’ own fees were court so. $60,000.00. on tes- put Neither sworn side rehearing is overruled. The motion fees, attorneys’ nor
timony regarding attor- sought party’s the other examine amount claimed.
ney as Counsel argue did excessive, made was but no objection attempt or to examine
farther attorney regarding the trial $85,000.00
court’s determination that
court,
Septem-
appropriate.
trial
LABORATORIES
WYETH-AYERST
2, 1999,
judgment,
in the written final
ber
al.,
COMPANY,
Appellants,
et
Eastman,
judgment
which in-
awarded
v.
$85,000.00 attorneys’
cluded
award
fees,
judg-
along
with
MEDRANO, Appellee.
Emilia
then,
sponte,
ment. The trial court
sua
No. 06-99-00080-CV.
dated
with-
an order
original judgment
and awarded
drew
Texas,
Appeals
Court
Commerce,
summary judgment
to Texas
Texarkana.
$60,000.00.
attorneys’ fees of
plus
July
Submitted
Ford,
Co.,
Ford
Casa
Inc. v.
Motor
(Tex.App.-Texar
876-77
Aug.
Decided
denied),
held,
pet.
kana
we
citing
(Tex.
Strauss,
v.
Jones
1988), parties that when move for both court,
summary judgment trial in the with granted being
one motion and the other
denied, appellate court authorized to judgment trial and ren
reverse the
der such trial court rendered, including rendering
should have
judgment for other movant. objec-
We find the record contains no to the
tions raised determina- attorneys’ side’s fees. Both
tion either make opportunity had the objections present and to evi-
record
dence, including calling attorney justify, opposing side as a witness to oath,
under their claimed fees. Neither *9 chose to do so and cannot be heard to
side
complain appeal. first time on now argument
At the conclusion of oral be- Court, Com-
fore this counsel asked whether specifically
merce were objection
they any had
attorneys’ fees awarded to Eastman Notes 346 mary judgment and one such motion The obligation pay issuer’s granted, but the other denied. money sum of on a credit occurs appellate Then the court should deter- strictly when the beneficiary complies with questions presented, mine all may the terns of the letter credit. reverse the trial First judgment court Bank Rowlett v. Sav. judgment render such Paris and Loan as the Ass’n, rendered, should 756 S.W.2d including (Tex.App.-Dal have render- denied). ing las writ the other issuer will movant. honor drafts or pay other demands for Ford, Co., Casa Inc. v. Ford Motor on compliance ment with the conditions 876-77 (Tex.App.-Texarkana specified letter of credit. Bus. & denied), Tex. writ quoting Jones v. 5.102(a)(10) (Vernon § Strauss, (Tex.1988). Com.Code Ann. 745 S.W.2d Supp.2000); Vest v. Pilot Point Nat’l General Rules Applicable Lawof Bank, (Tex.App.-Fort to Letters Credit denied). pet. Worth The conditions A letter of credit is an instrument that ordinarily found in letters credit are obligates issuer pay money 1) a sum of express conditions regarding the time to the beneficiary on the beneficiary’s within which demands must be made on