Article

Factual Summary: In order to secure the amounts outstanding under its bail bond obligations pursuant to Georgia law, the applicant, a bonding company, caused the issuance of a standby letter of credit in favor of the Sheriff of Hall County Georgia. According to the opinion, the LC required that the beneficiary "present a signed statement on or before 18 April 1994, certifying that the invoice(s) had been presented to [the applicant] for payment but remained unpaid for 30 days after presentation." It also provided that "claims made thereunder ' must be presented on or before 4/18/94, but subject to a claim made accuring [sic] prior to that date unless the Letter of Credit is canceled by the [Beneficiary].' "

The beneficiary demanded payment in connection with judgments secured by delinquent bail bonds on 7 April 1994. On the expiration day, he made demand on the LC, stating that "the attached invoices have been presented to [applicants] for payment and payment has been refused." The issuer refused the beneficiary's demand on the ground that it was not worded in accordance with the terms of the credit. Subsequently, the beneficiary made a representation after the expiration of the 30-day period but after the credit had expired and, on that ground, the issuer refused to honor the representation.

After the representation was refused, the beneficiary brought an action for wrongful dishonor against the issuer as well as an action against the applicant. The issuer cross-claimed against the applicant and its guarantors, and moved for summary judgment. The trial court granted the issuer's motion for summary judgment on the ground that the beneficiary's failure to comply with the terms of the credit required dishonor. The beneficiary appealed. On appeal, affirmed.

Legal Analysis:

On appeal, the beneficiary contended that the trial court erred by incorrectly interpreting the terms of the credit. It argued that the terms of the credit were ambiguous and that the court must look to parol evidence to ascertain the parties' intent.

1. Interpretation: The beneficiary claimed that the misspelling or mistyping of the word "accuring" in the credit created ambiguity. The credit provided that demand "must be presented on or before, 4/18/94, but subject to a claim made accuring [sic] prior to that date..." According to the beneficiary, the parties intended to allow for claims accruing, but not fully maturing, before April 18, 1994. The court noted that the beneficiary was responsible for drafting the language creating the claimed ambiguity, that the beneficiary had refused the issuer's standards form, and that it failed to produce any evidence that the parties intended the credit to be paid after the date of expiry.

The trial court found that the phrase containing the word "accuring" was ambiguous, but that the credit was clear and unambiguous in all other respects. Applying the rule of construction that, in the event of a conflict, clear language prevails over later ambiguous language contained in a contract, the trial court found that the unambiguous terms of the credit controlled. Regarding its expiration and that the issuer was entitled to summary judgment as a matter of law, the appellate court concluded that this approach was not erroneous.

2. Interpretation: Impossible Condition (Dissent): The dissent interpreted the credit's 30- day waiting period to be superfluous. The dissent further noted that the beneficiary's failure to certify that the amount demanded was "still unpaid 30 days after such presentation [to the applicant]" was not a material discrepancy. According to the dissent, if the 30-day requirement is strictly interpreted it would render compliance impossible during the last 30-days S.E.2d 193 (Ga. Ct. App.); of the credit, thereby defeating the credit's purpose. The dissent suggested that the 30-day requirement, although a condition precedent, is an implied premise that may be confirmed by amendment to the beneficiary's presentation. That is, the beneficiary's presentation should not have been dishonored because it could have been amended to comply with the credit's requirements. The dissent discussed case law providing that language included in a letter of credit that is not required "must be read out." Home Indemnity Co. v. Battey Machinery Co., 136 Wooten v. G.M.H. Auto Sales,370 S.E.2d 165 (Ga. Ct. App.). It suggested that the 30-day requirement could be read out of the credit. The dissent concluded that, in its judgment, the beneficiary's presentation was in substantial compliance with the terms of the credit and that it could have been amended to show that the amount demanded from the applicant was, 30 days thereafter, still unpaid. Therefore, the dissent would not have affirmed summary judgment in favor of the issuer.

Conclusion: Because the court found that the beneficiary's presentation did not comply with the terms of the credit, it affirmed summary judgment in favor of the issuer. The dissent urged that a strict interpretation of the credit defeated its purpose. The dissent further suggested that the beneficiary's presentation substantially complied with the terms of the credit, and that its demand could have been subsequently amended to certify that the amount demanded from the applicant was still unpaid after 30 days.

Comment:

Those knowledgeable in LCs shutter when a count resorts to general rules of contract construction. Here the majority did so with little harm. It concluded that a clear expiration date must control over an ambitious phrase inserted at the demand of the beneficiary. The court could have arrived at the same result by considering the role and function of an expiration date.

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