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Agricola v. Continental Illinois National Bank and Trust Co.

decided: October 4, 1988.


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 81 C 1934--Milton I. Shadur, Judge.

Wood, Jr., Flaum, and Ripple, Circuit Judges.

Author: Wood

WOOD, JR., Circuit Judge.

In this diversity action the plaintiff-appellant Indeca asks us to hold that Illinois would recognize a purchaser's cause of action for the tort of negligent misrepresentation against a bank that negligently confirmed that the seller's documents complied with a letter of credit issued by the purchaser's bank. Following from this and its assertion that a proper jury request had been made, Indeca also asks that we uphold an advisory jury's finding that the defendant-appellant Continental was negligent and thereby disregard the district court's finding to the contrary. Illinois has not indicated that negligent misrepresentation extends to the letter of credit situation, and Article 5 of the Uniform Commercial Code, adopted in Illinois and supplemented with letter of credit decisions rooted in the policies underlying Article 5, does not indicate otherwise. Illinois Article 5 governs the transaction here, and thus it is immaterial whether a jury or the court decided the issue under a cause of action not recognized in this context. In addition, in what was filed as a separate appeal, and is now consolidated with Indeca's appeal, cross-appellant Deborah Bell challenges the district court's holdings that she was liable to cross-appellee Indeca for breach of contract and fraud and that Bell's actions resulted in damages of $5 million to Indeca. We affirm.


Instituto Nacional De Comercializacion Agricola (Indeca), the plaintiff-appellant and cross-appellee, is a purchaser of food products for the people and the country of Guatemala. Indeca contracted with Rumex to purchase 6,000 metric tons of black beans; the purchase price was $5 million. To facilitate the transaction Indeca had its bank, the Banco de Guatemala, issue a letter of credit in favor of Rumex, cross-appellant Deborah Bell (who owned Rumex), and Bell's attorney, Robert Tucker. These three were the beneficiaries of the letter of credit. The letter named the defendant-appellee Continental Illinois National Bank and Trust Company (Continental) as the confirming bank. Under the terms of the letter of credit, Continental would pay Rumex for the beans upon receipt of documents that showed the beans had been loaded on board ship in Hong Kong and were on their way to Guatemala. The beneficiaries presented documentation to Continental's letter of credit department in the early afternoon on Friday, September 5, 1980. Ms. Barta, a Continental employee, examined the documents and concluded that in several ways these documents did not comply with the requirements of the letter of credit: the certificate of origin was not legalized, a draft was missing, the insurance certificate was not satisfactory, and the bill of lading misidentified the shipper.

Several of the items were returned to Bell, who resubmitted a new certificate of origin. Apparently Bell submitted the revised document on September 5, but the document was dated September 2. Bell also resubmitted a new certificate of origin, which the plaintiffs assert was typed on a different machine and contained a signature different from that on the original certificate. Indeca claimed Barta failed to notice the alleged discrepancies in the resubmitted documents.

The following Monday Barta met with several other Continental employees, Mr. Benzan and Mr. Mrazek, and they decided to contact the steamship company listed as the carrier for the beans. This proved unsuccessful. They also decided to seek a tested Telex and a confirmation in writing that indeed the merchandise was to be loaded in Hong Kong. Neither was ever received. Continental confirmed the transaction on Tuesday and paid on the letter of credit. Continental subsequently sent the documents to Banco de Guatemala.

As it turned out the documents were forged, and Indeca never received the black beans. Bell and Tucker, along with Michael Bell, who had also aided the scheme, were convicted of wire fraud (18 U.S.C. § 1343) and of submitting false statements to a federally insured bank (18 U.S.C. § 1014). This court has reviewed and upheld these convictions twice. United States v. Tucker, 836 F.2d 334 (7th Cir. 1988), petition for cert. filed, 57 U.S.L.W. 3146 (U.S. July 29, 1988) (No. 88-206); United States v. Tucker, 773 F.2d 136 (7th Cir. 1985), cert. denied, 478 U.S. 1021 & 478 U.S. 1022 (1986).

Indeca filed this civil action in 1981, alleging breach of contract and fraud against several defendants, including Bell and Continental, and negligence against Continental. In 1983 the district court granted partial summary judgment against Bell and Rumex, finding them liable for breach of contract and fraud. The district court held as it did because Indeca offered sufficient proof of breach and fraud and because Bell offered nothing, beyond her pleadings, to rebut this evidence. Judge Shadur expressly held that this liability finding was not a final judgment because damages remained to be determined. In 1987 Indeca filed a motion for summary judgment against Bell and Rumex; it sought damages in excess of $5 million. Bell filed a motion seeking additional time to respond to Indeca's motion, and this was denied. Bell never did respond to the merits of the motion for damages, and the district court found Rumex and Bell liable for the full amount sought by Indeca.

Neither Indeca nor Continental requested a jury trial, but the beneficiaries did make a general jury demand. In 1985 the district court conducted a Rule 42(b)*fn1 hearing regarding Continental's liability on the fraud and negligence counts, which the parties agreed would be heard by a jury (apparently in the belief that the beneficiaries' general request preserved the jury trial right for them, as well as for the beneficiaries). Continental later protested, seeking a bench trial instead, and the court took the matter under advisement while still allowing the jury to sit, deliberate, and render a decision. The jury determined that Continental had acted negligently. However, the district court subsequently decided that Indeca had no right to a jury trial; therefore, the jury's determination would be treated as advisory only. The district court itself then went on to decide that Indeca had not shown that Continental acted fraudulently, recklessly, or negligently. Furthermore, even if negligence had been shown, the court decided that a claim for negligent misrepresentation did not lie against Continental because it was not in the business of providing information, and it owed no duty to Indeca.


The several issues that Indeca raises regarding Continental collapse into only one issue that we need reach in order to decide Continental's liability--whether or not the cause of action for negligent misrepresentation extends to the type of situation we have here. Because we believe that such a claim does not lie in this context, we need not decide whether Indeca was entitled to a jury decision. Even if we assumed, arguendo, that Indeca is correct when it claims it had properly preserved its right to a jury trial, our finding that Illinois does not recognize the tort of negligent misrepresentation in a case such as this makes the jury finding regarding negligence moot. And because Indeca focuses its argument on upholding the jury's finding of negligence and does little to argue fraud and recklessness, we likewise are not concerned with the jury's findings regarding ...

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