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05/15/89 Pioneer Bank and Trust v. Seiko Sporting Goods

May 15, 1989





of Chicago, Defendant-Appellant)

540 N.E.2d 808, 184 Ill. App. 3d 783, 132 Ill. Dec. 886 1989.IL.729

Appeal from the Circuit Court of Cook County; the Hon. Leonard L. Levin, Judge, presiding.


JUSTICE CAMPBELL delivered the opinion of the court. MANNING, P.J., and BUCKLEY, J., concur.


Defendant, Continental Illinois National Bank and Trust Company of Chicago, appeals from a judgment entered by the circuit court of Cook County against Continental and in favor of plaintiff, Pioneer Bank and Trust Company, as a result of the court's finding that Continental had improperly made payments under a letter of credit and had wrongfully charged Pioneer's account for the amount of those payments. On appeal, Continental contends that: (1) Pioneer waived its right to object to Continental's payment of the drafts; (2) Pioneer failed to mitigate its damages; (3) Pioneer's damages were not caused by Continental; and (4) Continental met its burden of proof to establish that Pioneer had authorized payment of the drafts presented under the letter of credit. For the following reasons, we affirm the judgment of the circuit court.

The record sets forth the following facts relevant to this appeal. In March 1982, Seiko Sporting Goods, U.S.A. Company, an importer and distributor of sporting goods, requested a commercial letter of credit from Pioneer to guarantee payment of its purchase of tennis rackets from Li Mao Sports Company, Inc., located in Taiwan. Because Pioneer did not issue international letters of credit on its own, but only as a correspondent bank, Pioneer contacted Continental. As a result, Pioneer and Seiko, as coapplicants, applied for an irrevocable letter of credit from Continental and Pioneer opened an account at Continental on behalf of Seiko from which the drafts on the letter of credit would be paid. Seiko, in turn, signed a note with Pioneer to secure the account Pioneer had opened at Continental on Seiko's behalf.

On March 30, 1982, Continental issued its irrevocable letter of credit with an expiration date of April 27, 1982. The expiration date was subsequently amended twice in writing to May 8, 1982, and then to June 10, 1982. The letter of credit contained, inter alia, the following terms:

(1) The goods were to be shipped to Chicago via Sealand Inland America Vessel Mariner-18 leaving on April 23, 1982;

(2) the goods were to be shipped FOB vessel from Keelung, Taiwan;

(3) the first negotiating bank was to send one original of each document directly by airmail to: C. Skierkiewicz, 3113 N. Central, Chicago, Illinois 60634.

On June 18, 1982, Chris Stoller, one of the owners of Seiko, telephoned Continental and informed Gary Muller, a letter of credit negotiator, that there were some documents coming in which contained discrepancies and Continental was not to pay them until it heard further from Seiko. At that time, Muller informed Stoller that because Pioneer, not Seiko, was Continental's customer, authorization as to payment of any drafts with discrepancies would have to be given by Pioneer. As a result of this conversation, Muller called Mike Meyer of Pioneer a few days later and told him that the first set of documents had arrived and there were discrepancies on them. One of the drafts was timely presented, but contained a discrepancy as to the name of the shipping vessel. The other two drafts were not presented until after the letter of credit's expiration date of June 10, 1982. Timeliness of presentment was determined by the date on which documents were delivered to the first negotiating bank in Taiwan.

Muller also told Meyer about his conversation with Chris Stoller. Meyer then told Muller that he would contact Stoller to find out how the matter was to be resolved and to temporarily keep the documents on hold. Several days later, Muller called Meyer again to find out how things were going. Meyer told him that the matter had not been resolved and it should be kept on hold. When Muller left for vacation on June 25, he still had not heard from Meyer. Muller left the file for Matt Quebbeman with a note stating that the matter was to remain on hold until Pioneer contacted them.

Subsequently, on either June 28 or June 30, *fn1 Quebbeman called Terry Blaida, vice-president of commercial lending at Pioneer, and asked what Pioneer wanted Continental to do with the documents. Blaida told Quebbeman that he was in contact with Seiko and would get back to him. Quebbeman testified that when he called Blaida again to ask him about the discrepancies, Blaida told him that he did not foresee any problems paying the drafts and that he would get back to him later that day. Blaida did not tell Quebbeman to pay the drafts, nor did he tell him not to pay them. When Quebbeman did not hear anything further from Blaida, Quebbeman put the drafts through for payment on June 30. On cross-examination, Quebbeman stated that even though the original bills of lading were shipped directly to Seiko, if the documents received by Continental did not conform to the letter of credit terms, pursuant to standard policy, Continental ...

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