HERBERT MENNEN, ET AL., RESPONDENTS, v. J. P. MORGAN & CO. INCORPORATED,
DEFENDANT, AND MORGAN GUARANTY TRUST COMPANY OF NEW YORK, APPELLANT.
91 N.Y.2d 13, 689 N.E.2d 869, 666 N.Y.S.2d 975 (1997).
December 2, 1997
4 No. 225
(97 NY Int. 0210)
Decided December 2, 1997
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This opinion is uncorrected and subject to revision before publication
in the New York Reports.
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Howard B. Levi, for appellant.
Marilyn A. Hochfield, for respondents.
BELLACOSA, J.:
This financial dispute occurs as the aftermath of payments made in
precise compliance with letters of credit. Morgan Guaranty Trust Co.,
the defendant issuing bank, seeks to recover for alleged overpayments
to the plaintiffs who are the beneficiaries of the subject letters of
credit. Morgan hadhonored the drafts from the beneficiaries holding
the irrevocable standby letters of credit, upon their presentation of
conforming documentation. Months later, Morgan alleged some falsity in
that respect.
Plaintiffs commenced this action seeking a declaration (1) that their
beneficial draws on the subject letters of credit were correct in
amount, and (2) that defendant Morgan may not assert claims against
plaintiffs by reaching beyond the letters of credit themselves.
Supreme Court granted part of defendant Morgan's motion for summary
judgment as to its counterclaims. The Appellate Division modified by
denying Morgan's motion; instead, it granted plaintiffs' cross motion
for summary judgment, dismissed Morgan's first five counterclaims and
declared that Morgan has no claim against plaintiffs concerning the
draws upon the letters of credit. This Court granted defendant Morgan
leave to appeal. We affirm for reasons different from those expressed
by the Appellate Division.
SNIPPETS:
DEFENDANT, AND MORGAN GUARANTY TRUST COMPANY OF NEW YORK, APPELLANT.
This financial dispute occurs as the aftermath of payments made in precise compliance with
Morgan Guaranty Trust Co., the defendant issuing bank, seeks to recover for alleged
Morgan hadhonored the drafts from the beneficiaries holding the irrevocable standby letters
Plaintiffs sold their shares to a group of investors including an entity named Odyssey
To secure the notes for payment to bought out shareholders, Mennen obtained standby
The letters of credit provide for payment within 10 days after presentation of a draft
Under the defeasance device, Morgan, in exchange for an up front, lump sum payment, released
On this appeal, appellant Morgan argues that it should be entitled to recover overpayments
"The purpose of a letter of credit is to substitute for, and therefore support, an engagement
64 NY2d 287, 294; see, Dolan, The Law of Letters of Credit: Commercial and Standby Credits,
"By issuing a letter of credit, the issuer
Therefore, the issuer's initial, timely payment sufficiently satifies the independence
From the Uniform Commercial Code, we note a "limited exception" to the independence principle
Rather, "hat warranty relates to the conditions of the credit, not to the conditions of the
Morgan's various counterclaims, however, were properly dismissed because direct recourse is
That statement, however, merely emphasizes what is plain from the language of the cited Code
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