Appeal from the Circuit Court of Cook County; the Hon. Arthur
L. Dunne, Judge, presiding.
JUSTICE WHITE DELIVERED THE OPINION OF THE COURT:
Rehearing denied February 28, 1984.
Plaintiff, Mount Prospect State Bank (Mount Prospect), brought this declaratory judgment action in the circuit court of Cook County against defendants, Marine Midland Bank (Marine Midland) and Magic Automotive Products of Illinois, Inc. (MAP of Illinois), seeking a declaration of the rights of the parties under a letter of credit issued by Mount Prospect in the amount of $50,000. John C. Fitzpatrick was granted leave to intervene as a party defendant. The circuit court entered summary judgment in favor of Mount Prospect and MAP of Illinois and held that Mount Prospect was not liable to Marine Midland, the purported assignee of the beneficiary of the letter of credit. Marine Midland now appeals from the order granting summary judgment.
The relevant facts follow. On May 15, 1979, Mount Prospect issued an irrevocable documentary letter of credit in the amount of $50,000 at the request of its customer, MAP of Illinois. The beneficiary of the letter of credit was Magic Automotive Products, Inc., located in Buffalo, New York (MAP of New York). The letter of credit expressly provided: that it was "subject to `The Uniform Customs and Practice for Documentary Credits' (1974 Revision), the International Chamber of Commerce Brochure No. 290"; that sight drafts drawn under the letter of credit must be drawn and negotiated not prior to November 15, 1979, nor later than November 30, 1979; and that the sight drafts were to be accompanied by "Invoices [and] Bills of Lading * * * from Magic Automotive Products of Illinois, Inc." On June 14, 1979, the terms of the letter of credit were amended to require that sight drafts drawn under the letter of credit must be accompanied by "Invoices [and] Bills of Lading * * * to Magic Automotive Products of Illinois, Inc."
On or about June 21, 1979, MAP of New York, the beneficiary, purported to assign all of its rights to draw under the letter of credit to Marine Midland. The purported assignment occurred in a letter dated June 21, 1979, from MAP of New York to Mount Prospect. It should be noted that neither the original letter of credit nor the amendment thereto provided that the letter of credit was transferable or assignable.
On June 27, 1979, the letter of credit was further amended to require that sight drafts drawn under the letter of credit must be accompanied by "Invoices [and] Bills of Lading * * * to Magic Automotive Products of Illinois, Inc., covering shipments to various Magic Automotive Products of Illinois locations in the United States." The amendment also stated: "This Amendment will become effective upon receipt of the beneficiary's written consent." Despite the aforementioned purported assignment, the beneficiary's consent to the second amendment was given by Philip DiCarlo, the president of MAP of New York, not by Marine Midland. Thereafter, on July 5, 1979, Mount Prospect wrote a letter to Marine Midland acknowledging receipt of the June 21 letter. On July 9, 1979, Marine Midland sent a letter to MAP of Illinois which stated that the letter of credit had been assigned to Marine Midland. This letter was acknowledged by MAP of Illinois.
On or about November 15, 1979, Marine Midland attempted to draw on the letter of credit in the amount of $49,982.50. In so doing, Marine Midland presented to Mount Prospect two collection letters, two sight drafts, the original letter of credit and the amendments thereto, Mount Prospect's letter of July 5, 1979, and certain invoices and bills of lading. Copies of the invoices and bills of lading are contained in the record on appeal. There are 38 invoices and 34 bills of lading. Only three of the invoices reflect, on their faces, that they relate to shipments to MAP of Illinois locations in the United States. The remaining 35 invoices concern: (1) shipments made to entities and persons other than MAP of Illinois, such as MAP of Maryland, Sy Norman in Massachusetts, and Dan Huber in Wisconsin; (2) interest; (3) service charges; and (4) shipping charges. The bills of lading are consistent with the invoices in that the vast majority of them concern shipments to entities other than MAP of Illinois.
Mount Prospect refused to honor the drafts drawn under the letter of credit, and on November 30, 1979, Mount Prospect filed its complaint for declaratory relief. The circuit court entered summary judgment in favor of Mount Prospect and MAP of Illinois, holding that Mount Prospect was not liable to Marine Midland under the letter of credit. The court found that the letter of credit was "nontransferable and nonassignable under any circumstances irrespective of any consent on the part of the parties and because said letter is subject to the UCPDC [Uniform Customs and Practice for Documentary Credits]." The court further found that "[t]his was a commercial transaction and not a transmittal of proceeds."
• 1 On appeal, Marine Midland contends that the circuit court's judgment was erroneous for three reasons. First, it argues that since all the parties to the letter of credit, Mount Prospect, MAP of New York and MAP of Illinois, consented to the transfer and assignment of the letter of credit and the proceeds thereof, the circuit court erred in finding that the letter of credit was nontransferable and nonassignable under provisions of the UCPDC. Secondly, it argues that the circuit court's rationale was erroneous because the proceeds of the letter of credit were transferable and assignable to Marine Midland under provisions of the UCPDC and article 5 of the Uniform Commercial Code (Ill. Rev. Stat. 1979, ch. 26, par. 5-101 et seq.). Lastly, it argues that the circuit court's finding that the letter of credit was nontransferable and nonassignable was erroneous, because all of the parties to the letter of credit consented to the transfer and assignment, and therefore, were estopped from asserting as a defense that it was nontransferable and nonassignable. We do not address these contentions because we are of the opinion that even if the right to draw under the letter of credit was properly transferred and assigned to Marine Midland, we would have to affirm the circuit court's entry of summary judgment because the invoices and bills of lading presented to Mount Prospect clearly did not comply with the terms of the letter of credit. In reaching this conclusion, we agree with the statement contained in the appellate brief of appellee Fitzpatrick that the assignability issue may be "extremely muddied and confused." Moreover, a reviewing court is not bound by the precise reasons given by the lower court in entering summary judgment, and we may sustain the entry of summary judgment if the decision is justified by any reason appearing in the record. (Erasmus v. Chicago Housing Authority (1980), 86 Ill. App.3d 142, 146, 407 N.E.2d 1031; Weber v. Woods (1975), 31 Ill. App.3d 122, 132, 334 N.E.2d 857; see In re Estate of Leichtenberg (1956), 7 Ill.2d 545, 549, 131 N.E.2d 487.) The issue of compliance was raised in the court below, and even though it was not the basis of the order from which this appeal is taken, in our opinion, it is dispositive of this appeal.
Section 5-103(1)(a) of the Uniform Commercial Code (Ill. Rev. Stat. 1979, ch. 26, par. 5-103(1)(a)) defines a letter of credit as "an engagement by a bank or other person made at the request of a customer * * * that the issuer will honor drafts or other demands for payment upon compliance with the conditions specified in the credit." Generally, three separate agreements are involved in a letter of credit transaction: the contract between the issuer and its customer whereby the issuer agrees to issue the letter of credit to the beneficiary of the letter of credit; the contract between the customer and the beneficiary which is the agreement underlying the letter of credit; and the letter of credit itself, whereby the bank agrees to pay the beneficiary the amount of the letter of credit, if the beneficiary complies with the terms of the credit. First Arlington National Bank v. Stathis (1980), 90 Ill. App.3d 802, 807, 413 N.E.2d 1288; see Stringer Construction Co. v. American Insurance Co. (1981), 102 Ill. App.3d 919, 922-23, 430 N.E.2d 1; Venizelos, S.A. v. Chase Manhattan Bank (2d Cir. 1970), 425 F.2d 461, 464-65.
• 2 The issue in the instant case is whether the invoices and bills of lading presented by Marine Midland to Mount Prospect complied with the terms of the letter of credit. Section 5-114(1) of the UCC (Ill. Rev. Stat. 1979, ch. 26, par. 5-114(1)) deals with an issuer's duty to honor a presentment which complies with the terms of a letter of credit. That section provides:
"An issuer must honor a draft or demand for payment which complies with the terms of the relevant credit regardless of whether the goods or documents conform to the underlying contract for sale or other contract between the customer and the beneficiary. * * *"
In construing this section our supreme court has stated:
"[S]section 5-114(1) of the Code [citation] makes it clear that the issuer of the credit has no right to refuse to honor a complying draft or demand. The obligation of the credit is without reference to the compliance of the buyer (customer) or the seller (beneficiary) with the underlying contract. The issuer deals only with documents which must comply with the terms of the credit. Once compliance is determined, the issuer is not concerned with the quality of the goods shipped or the accuracy of the ...