## Facts

- Sun-Herald Corporation arranged for National Park Bank of New York to issue a confirmed, irrevocable letter of credit in favor of Ronconi & Millar for newsprint paper shipments.
- The credit was for $224,853.30 covering 1,322 2/3 tons of newsprint paper, with stated roll widths and testing/weight specifications, for delivery in December 1920 and January 1921.
- The credit required sight drafts drawn on the bank and accompanied by: (1) commercial invoice in triplicate, (2) weight returns, and (3) a negotiable dock delivery order conveying control of the goods.
- Ronconi & Millar presented three sight drafts (Dec. 17, 1920; Jan. 7, 1921; Jan. 13, 1921) with documents purporting to match the credit’s requirements.
- The bank refused to honor the drafts based on information suggesting the paper did not meet the buyer’s expected quality/strength requirements, and sought proof of conformity beyond the stated document conditions.
- Ronconi & Millar assigned their claim to Maurice O’Meara Co., which sued the bank for damages caused by the refusal to pay.
- At Special Term, plaintiff’s motion for summary judgment was denied; the Appellate Division affirmed and certified whether summary judgment should have been granted.

## Issues

1. Whether an issuing bank under a confirmed, irrevocable letter of credit may refuse to honor drafts supported by the documents specified in the credit based on alleged defects in the underlying goods.
2. Whether, given documentary compliance and a goods-quality-based refusal, the beneficiary (or assignee) was entitled to summary judgment.

## Decision

- The Court of Appeals reversed the Appellate Division and answered the certified question in the affirmative.
- The bank’s undertaking required payment upon presentation of the specified documents that conformed on their face.
- The bank could not withhold payment based on doubts about the goods’ quality or strength when the credit did not require proof of such matters.
- Because the defense rested on the underlying goods dispute rather than a documentary discrepancy, summary judgment for the plaintiff should have been granted.

## Legal Principles

- A confirmed, irrevocable letter of credit creates an obligation running from the bank to the beneficiary that is independent of the underlying sales contract.
- The issuing bank “deals in documents, not in goods”; it must determine compliance by examining required documents, not by investigating or testing the merchandise.
- The bank may not impose additional documentary conditions not stated in the letter of credit as a prerequisite to honor.
- Disputes over performance or quality under the underlying contract between buyer and seller do not excuse dishonor when the beneficiary tenders facially conforming documents.

## Conclusion

The court held that an issuing bank under an irrevocable letter of credit must honor sight drafts when the beneficiary presents the documents required by the credit in conforming form, and may not refuse payment based on alleged nonconformity of the goods; therefore, the plaintiff was entitled to summary judgment.


Maurice O’Meara Co. v. Nat’l Park Bank of N.Y., 239 N.Y. 386, 146 N.E. 636 (N.Y. 1925)