Eastland Bank v. Massbank
Case Date: 10/19/1992
Docket No: 91-1697
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____________________ No. 91-1697 EASTLAND BANK, Plaintiff, Appellant, v. MASSBANK FOR SAVINGS, Defendant, Appellee. ____________________ APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND [Hon. Ronald R. Lagueux, U.S. District Judge] ____________________ Before Campbell and Torruella, Circuit Judges, and Pollak, Senior District Judge. ____________________ William R. Grimm with whom Michael J. McGovern and Hinckley, Allen, Snyder & Comen were on brief for appellant. Raymond J. Brassard with whom Brian A. Joyce and Rackemann, Sawyer & Brewster were on brief for appellee. ____________________ ____________________ Per Curiam. Substantially for the same reasons set out in the Memorandum and Order of the district court dated June 18, 1991, we affirm the judgment of that court. We add that we agree with the court and with MassBank, that letters of credit are to be liberally read, in a common sense manner consistent with their underlying purpose to provide the beneficiary with prompt access to promised funds. See Dovenmuehle v. East Bank of Colorado Springs, 38 Colo. App. 507, 563 P.2d 24 (1977), aff'd, 196 Colo. 422, 589 P.2d 1361 (1978). Mass. Gen. L. ch. 106, 5-114(2). Eastland, the issuer, would have us read the letter of credit in a way that would negate the purpose it was obviously provided to serve. Eastland suggests that the condition that "the amount of the accompanying draft represents the sum required to cure such default," limits payment of the draft to only "punch list" situations where the project is virtually complete, and the provided credit will be no more than enough to complete the project. Eastland recognizes that its construction might seem to render the instrument implausibly ineffective. It would require a default to occur at just the right moment and in just the right amount. To bolster its construction, Eastland argues that MassBank would have the means to reach the credit by using its own funds, after the borrower's default, to complete most of the project, leaving to be paid an amount no larger than the letter of credit. But if MassBank were to pay from its own pocket to complete most of the project, its action would not lessen the amount needed to "cure" (in the sense of fully pay off) Lane Homes' default. The borrower's default was to the lender, MassBank. MassBank would not lessen the size of the default to itself by completing the project on its own. The default would remain precisely what it was, leaving the letter of credit useless under Eastland's overall reading. Given the implausibility of Eastland's suggested interpretation, as well as the absence of any showing of a relevant factual basis therefor, there was no issue to be tried. The letter of credit was plainly meant to provide MassBank with a readily available cash offset against default up to the letter's face amount. The word "cure" clarified that the issuer's obligation would not exceed the amount of the default. That the letter of credit would cease to be available if the default exceeded the letter amount is a position so incongruous as to have escaped imagining. Affirmed. Costs to appellee. |