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INSTITUTO NACIONAL v. CONTINENTAL ILL. NAT. BANK

December 1, 1983

INSTITUTO NACIONAL DE COMERCIALIZACION AGRICOLA (INDECA), PLAINTIFF,
v.
CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Shadur, District Judge.

  MEMORANDUM OPINION AND ORDER

Instituto Nacional de Comercializacion Agricola ("Indeca"), a quasi-national corporation organized under Guatemalan law, has as part of its responsibility the purchase of foodstuffs and agricultural staples for the Guatemalan people on international markets. It sues a group of defendants for an allegedly fraudulent scheme in which Indeca was bilked of over $5 million in its attempted purchase of 6,000 metric tons of black beans that proved to be non-existent.*fn1

Continental Illinois National Bank and Trust Company of Chicago ("Continental') has filed an amended answer, in part asserting 12 arguments labeled "affirmative defenses." Indeca now moves to strike all those defenses as insufficiently pleaded or insufficient as a matter of law. For the reasons stated in this memorandum opinion and order, Indeca's motion is granted in part and denied in part.

Indeca's Claimed Facts*fn2

Indeca sought to purchase 6,000 metric tons of black beans from Rumex International, Inc. ("Rumex"). To facilitate that purchase Indeca negotiated with Banco de Guatemala ("Banco") for the issuance of a letter of credit (the "Letter"). Under the provisions of the Letter (like all letters of credit), Banco as issuing bank was required to render payment when presented with documents in complete conformity with the Letter's requirements. Because the seller of the beans was located in the United States, Banco engaged Continental's services to confirm the Letter.

On September 5, 1980 several Rumex principals appeared at Continental and presented various documents as being in claimed conformity with the Letter's requirements. Upon review, Continental employees observed some of the documents were nonconforming. After changes were made in the documents, on September 9 Continental determined a complete set of documents in full conformance with the Letter's requirements had now been submitted. Continental honored the Rumex draft and transferred the appropriate sum into the Rumex account. Continental then debited Banco's account for the sum paid to Rumex plus Continental's fee and forwarded the documents to Banco.

Banco in turn transmitted the documents to Indeca, which received them September 24. On September 30 Indeca signed a statement confirming that the documents conformed to the Letter's requirements and authorizing payment to Rumex.

Time passed, and the beans (already overdue by September 30) never arrived in Guatemala. In February 1981 Indeca's attorneys communicated with Continental's attorneys and stated orally the documents negotiated by Continental and then approved by Banco and Indeca had not in fact conformed to the Letter.

Indeca brought suit against several defendants, including Continental, to recover the money paid for the nonexistent beans. Indeca charges Continental with (1) fraudulent conduct in knowingly assisting Rumex in the fraudulent procurement of payment of the Letter (Complaint Count IV) and (2) negligence in accepting nonconforming documents (Complaint Count III).

Pleading Affirmative Defenses

Fed.R.Civ.P. ("Rule") 8(c) requires that some defenses be pleaded affirmatively. Its list of 19 specific items is not exhaustive: In addition, a party must set forth "any other matter constituting an avoidance or affirmative defense." What the Rule terms "an avoidance" — what the common law used to term a "confession and avoidance" or "shift and avoidance" — is a more restrictive concept than loose practice would have it. See Black's Law Dictionary 55, 125 (5th ed. 1979).

This Court has discussed that problem at some length in Bobbitt v. Victorian House, Inc., 532 F. Supp. 734, 736-37 (N.D.Ill. 1982). Because there may sometimes be difficulty in deciding whether a particular matter would be put in issue by a general denial, the pleader is usually given the benefit of the doubt when setting forth a purported affirmative defense. But the basic concept of an affirmative defense is an admission of the facts alleged in the complaint, coupled with the assertion of some other reason defendant is not liable. Id. at 736. Affirmative defenses are of course also subject to the general pleading requirements of Rules 8(a), 8(e) and 9(b), generally requiring only a short and plain statement of the facts but demanding particularity as to the circumstances constituting fraud and mistake. Id. at 737; 5 Wright & Miller, Federal Practice & Procedure: Civil § 1274.

Accordingly this Court must determine as to each of Continental's "affirmative defenses" (for convenience, cited ...


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