OpenJurist

874 F2d 234 Exxon Company Usa Division of Exxon Corporation v. Banque De Paris et Des Pays-Bas

874 F.2d 234

8 UCC Rep.Serv.2d 1160

EXXON COMPANY, U.S.A., A DIVISION OF EXXON CORPORATION,
Plaintiff-Appellee, Cross-Appellant,
v.
BANQUE DE PARIS ET DES PAYS-BAS, Defendant-Appellant, Cross-Appellee.

No. 87-2007.

United States Court of Appeals,
Fifth Circuit.

May 16, 1989.

Stanley Godofsky, Donald F. Luke, Mary Lee Donahue, Rogers & Wells, New York City, Kenneth Lehr Miller, New York City, Hayden Burns, Constance Barnes, Butler & Binion, Houston, Tex., for defendant-appellant cross-appellee.

Michael F. Crotty, Associate Gen. Counsel, Am. Bankers Ass'n, Washington, D.C., for amicus-American Bankers Ass'n.

Rufus Wallingford, Tom A. Cunningham, Fulbright & Jaworski, Houston, Tex., Keith A. Jones, Fulbright & Jaworski, Washington, D.C., for plaintiff-appellee, cross-appellant.

Appeal from the United States District Court for the Southern District of Texas.

Before RUBIN, GARZA, and JOLLY, Circuit Judges.

ALVIN B. RUBIN, Circuit Judge:

CERTIFICATE FROM THE UNITED STATES

COURT OF APPEALS FOR THE FIFTH CIRCUIT

1

TO THE SUPREME COURT OF TEXAS, PURSUANT TO TEXAS

2

CONSTITUTION ART. 5 Sec. 3-c, and TEX.R.APP.P. 114

3

TO THE SUPREME COURT OF TEXAS AND THE HONORABLE JUSTICES THEREOF:

4

1. STYLE OF THE CASE.

5

The style of the case in which this certificate is made is Exxon Company, U.S.A., a division of Exxon Corporation, Plaintiff/Appellee/Cross-Appellant v. Banque de Paris et des Pays-Bas, Defendant/Appellant/Cross-Appellee, Case No. 87-2007, in the United States Court of Appeals for the Fifth Circuit, on appeal from the United States District Court for the Southern District of Texas. The United States Supreme Court vacated the judgment of the Fifth Circuit Court of Appeals rendered after an earlier hearing,1 and remanded the case,2 directing us to consider the decision of the Texas Court of Appeals in Kerr Construction Co. v. Plains National Bank.3

6

2. STATEMENT OF THE CASE.

7

In July, 1981, Exxon Company, U.S.A. entered into an oil exchange contract with Houston Oil & Refining, Inc. under which Exxon was to deliver 558,000 barrels of crude oil to Houston during July, 1981. The agreement required Houston to deliver an equal quantity of crude oil to Exxon during the period from September through December, 1981. The contract also required Houston to provide an irrevocable standby letter of credit. According to the contract, the letter of credit was to be payable to Exxon upon presentation of invoices or a statement by an officer of Exxon certifying that invoices were unpaid and ten or more days past due. See Appendix A.

8

Thereafter, Houston applied to Banque de Paris et des Pays-Bas for a letter of credit in the amount of $19,530,000. Because the issuance of the letter of credit was in effect an extension of credit by the Bank to Houston, the Bank required Houston to provide security sufficient to cover the amount of credit and blocked certain funds coming into Houston's account.

9

On July 16, 1981, the Bank issued the letter of credit using the language that had been supplied by Houston with respect to the documentary provisions and the expiry date. The letter provided for payment of $19,530,000 to Exxon upon Exxon's submission, inter alia, of a "[s]tatement signed by an authorized representative [of Exxon] certifying that Houston ... has failed to deliver to Exxon ... 558,000 barrels of [crude oil] ... between September and December, 1981." The letter further provided, in a subsequent clause, that this certificate "must be presented not later than October 31, 1981." (Because October 31, 1981, was a Saturday, Exxon could also present the documents on the next business day, Monday, November 2, 1981). The letter also stated that it was subject to the 1974 revision of the Uniform Customs and Practice for Documentary Credits, a set of rules promulgated by the International Chamber of Commerce. See Appendix B.

10

In July, 1981, the Bank sent a copy of the letter of credit to the attention of Don Meiers, the Exxon employee responsible for receiving and transmitting letters of credit and monitoring their expiration dates. Meiers received the letter of credit and transmitted it to the appropriate executives at Exxon, accompanied by a letter stating that it is "due to expire October 31, 1981." Meiers' transmittal letter also noted that the credit covered the delivery of crude oil by Exxon during July and "the return" of the crude by Houston "between September and December 1981." See Appendix C. No one at Exxon commented to the Bank thereafter about the terms of the letter of credit.

11

During November, 1981, the Bank released both the security it had held for its extension of credit to Houston and the funds it had blocked in Houston's account.

12

In early November, 1981, Exxon learned that Houston would default on its obligation to make the delivery of crude oil required by the contract. On November 30, and again on December 1, 1981, Exxon presented its certification of Houston's non-delivery to the Bank. The Bank refused payment each time on the ground that the presentation was untimely.

13

Exxon brought this action against the Bank to recover on the letter of credit in the 234th Judicial District Court of Harris County, Texas. Invoking federal diversity jurisdiction, the Bank removed it to the United States District Court for the Southern District of Texas. After extensive discovery, both sides moved for summary judgment. The district court granted summary judgment for Exxon. On appeal, the United States Court of Appeals for the Fifth Circuit reversed and directed the entry of judgment for the Bank.4 The United States Supreme Court thereafter vacated that judgment and remanded the case to the Fifth Circuit for further consideration in the light of Kerr Construction Co. v. Plains National Bank,5 which was published while the Exxon case was pending in the United States Supreme Court. Copies of the district court opinion, the original Fifth Circuit opinion, and the Supreme Court opinion are attached. Upon remand, a majority of the Fifth Circuit panel decided to certify the case to the Supreme Court of Texas, with Judge Reynaldo Garza dissenting from the need for certification. A copy of this opinion is also attached. Having decided to certify the controlling question of Texas law to the Texas Supreme Court, we will, of course, follow the decision of that court.

14

3. QUESTION CERTIFIED.

15

When a bank issues an irrevocable standby letter of credit that (i) contains a certification provision providing for payment to a beneficiary upon presentation of a signed statement certifying that the bank's customer did not perform an underlying obligation "between September and December, 1981," but (ii) also contains, in a subsequent paragraph, a presentation clause stating that such certification must be made "not later than October 31, 1981," when does the obligation of the issuing bank to honor its letter of credit terminate under Texas law?

16

We disclaim any intention or desire that the Supreme Court of the State of Texas confine its reply to the precise form or scope of the question certified.

APPENDIX A

17

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

18

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

TABLE

APPENDIX B

19

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

APPENDIX C

20

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

1

828 F.2d 1121 (5th Cir.1987)

2

--- U.S. ----, 109 S.Ct. 299, 102 L.Ed.2d 319 (1988)

3

753 S.W.2d 181 (Tex.App.--Amarillo 1987, writ denied)

4

828 F.2d 1121 (5th Cir.1987)

5

753 S.W.2d 181 (Tex.App.--Amarillo 1987, writ denied )