## Facts

- A sugar broker (De Bona) sought to buy 100–200 long tons of sugar through a San Francisco broker (Maldonado), conditioned on an “irrevocable letter of credit by wire.”
- Border National Bank (Texas), De Bona’s bank, sent a telegram stating it would “guarantee irrevocably payment” for 200 long tons of sugar at a stated price, payable on drafts with railroad bills of lading and/or warehouse receipts attached.
- Relying on Border Bank’s telegram, American National Bank (California) issued a letter of credit to support Maldonado’s purchase from Amsinck & Co., which supplied the sugar.
- Before shipment, De Bona attempted to cancel the purchase; Border Bank later notified American Bank it was revoking its obligation.
- The sugar was shipped, and American Bank honored its letter of credit, paying $96,310.11.
- American Bank later drew on Border Bank, which refused to pay; the sugar was sold at auction for $28,534.46, leaving a $72,368.84 deficiency.
- American Bank sued Border Bank and obtained judgment for $72,368.84; the trial court struck Border Bank’s special defenses (including accommodation/no consideration and ultra vires).

## Issues

1. Whether a national bank’s “irrevocable” payment guaranty tied to drafts with shipping documents is ultra vires and unenforceable.
2. Whether the telegram created an independent, irrevocable bank-credit obligation that could not be revoked after another bank relied by issuing and honoring a letter of credit.
3. Whether attempted cancellation or asserted changes in the underlying sales contract discharged the bank’s obligation.
4. Whether alleged lack of consideration or “accommodation” character defeated enforcement.

## Decision

- The Fifth Circuit affirmed judgment for American Bank.
- Border Bank’s undertaking was within national banking powers and was not ultra vires.
- The obligation was irrevocable and became binding once American Bank relied on it by issuing credit and paying against documents.
- Disputes or cancellation attempts in the underlying sales arrangement did not discharge Border Bank’s independent obligation.
- The pleaded “special defenses” were legally insufficient and were properly struck.

## Legal Principles

- A national bank may issue an irrevocable credit-type engagement to pay drafts accompanied by shipping documents in connection with a commercial sale; such an engagement is within the ordinary/incidental powers of national banking.
- An expressly irrevocable bank undertaking cannot be revoked after the beneficiary bank materially relies by issuing its own letter of credit and performing according to the documentary terms.
- Credit/letter-of-credit–type obligations are independent of underlying contract disputes between buyer and seller once payment is conditioned on presentation of specified documents.
- Consideration is satisfied where the promise induces reliance and performance (including issuance of credit and payment), even if the promisor characterizes the undertaking as an accommodation and claims no direct benefit.

## Conclusion

The court enforced a national bank’s “irrevocable” telegram guaranty as an independent bank-credit obligation, holding it within banking powers and not subject to revocation or discharge based on underlying contract disputes after another bank relied and paid under its own letter of credit.


Border Nat'l Bank of Eagle Pass v. Am. Nat'l Bank of S.F., 282 F. 73 (5th Cir. 1922)