T.C. Ziraat Bankasi, Appellant, v. Standard Chartered Bank, Respondent
84 N.Y.2d 480, 644 N.E.2d 272, 619 N.Y.S.2d 690 (1994).
December 1, 1994
1 No. 189 (1994 NY Int. 190) Decided December 1, 1994
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This opinion is uncorrected and subject to revision before publication
in the New York Reports. Michael T. Sullivan, for appellant.
Stanley L. Lane, Jr., for respondent.
KAYE, CHIEF JUDGE:
UCC 7-507 provides that the transferor of a document of title warrants
the genuineness of the document except as provided in UCC 7-508, which
exempts from this duty a mere "intermediary." Defendant bank, which
unknowingly accepted a fraudulent bill of lading as security for a
loan and, upon satisfaction of the loan, transferred the document to
plaintiff bank, claims that it was entitled to the exemption provided
by UCC 7-508. We agree with the Appellate Division that, in the
transaction at issue, defendant was an intermediary entitled to the
UCC 7-508 exemption and therefore affirm dismissal of the complaint.
In September 1991, defendant Standard Chartered Bank established a $5
million line of credit in favor of its customer, Red Rock Commodities,
Ltd., for use in purchasing steel billets for export to Israel. At Red
Rock's request, on December 19, 1991, Standard issued an irrevocable
letter of credit in the amount of $2,107,000 against Red Rock's
account in favor of Narahami, Inc., a Swiss steel merchant, for
purchase of the billets.
To obtain payment under the terms of the letter of credit, on January
6, 1992 Narahami presented Standard with a negotiable bill of lading
issued December 12, 1991 for the shipment of 10,520.4 metric tons of
steel billets "clean on board" the motor vessel Szombierki in
Szczecin, Poland bound for Ashdod, Israel. Standard made payment to
Narahami and debited Red Rock's account $2,107,000, apparently
intending to hold the bill of lading until redeemed by the purchaser,
Ram Metals and Building Industries, Inc., by payment in full upon
arrival of the shipment in Israel.
When several months later Ram Metals had not made payment to Standard,
Red Rock sought to free its line of credit. At Red Rock's urging, Ram
Metals borrowed $2.5 million from the Park Avenue Bank., N.A., to pay
the debt owed to Standard, in exchange for a promissory note payable
SNIPPETS:
UCC 7-507 provides that the transferor of a document of title warrants the genuineness of the
Defendant bank, which unknowingly accepted a fraudulent bill of lading as security for a loan
We agree with the Appellate Division that, in the transaction at issue, defendant was an
In September 1991, defendant Standard Chartered Bank established a $5 million line of credit
To obtain payment under the terms of the letter of credit, on January 6, 1992 Narahami
When several months later Ram Metals had not made payment to Standard, Red Rock sought to
That loan was backed by a standby letter of credit in the amount of $2.5 million issued by
By its terms, the standby letter of credit was payable on or after March 6, 1993 upon
On June 30, 1992, Park Avenue Bank transferred the proceeds of the loan to Standard in
The next day, at Red Rock's request, Standard endorsed and transferred the bill of lading to
Ziraat commenced this action against Standard for breach of warranty in transferring the
Where a person negotiates or transfers a document of title for value otherwise than as a mere
nd the goods it represents.
A collecting bank or other intermediary known to be entrusted with documents on behalf of
An "other intermediary" is necessarily broader but still, like a collecting bank, is
UCC 7-507 warranties are owed to the "immediate purchaser only" of the document of title,
This reading is supported as well by the history of the sections, which may be traced back to
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