## Facts

- Van Zeeland Oil Co., Inc. (Van Zeeland) operated a petroleum distribution business.
- Lawrence Agency, Inc. (Lawrence Agency) operated a gas station in Michigan.
- Van Zeeland and Lawrence Agency entered a ten-year “Detailed Dealer Motor Fuel Agreement” (June 27, 2008 to June 27, 2018) requiring Lawrence Agency to buy all its gasoline from Van Zeeland.
- The fuel agreement required Lawrence Agency to provide Van Zeeland with a $50,000 letter of credit as security.
- Rudolph Lawrence, Lawrence Agency’s president, signed the fuel agreement for Lawrence Agency.
- Peoples State Bancorp, Inc., doing business as Peoples State Bank of Munising (the Bank), issued an irrevocable standby letter of credit for $50,000 naming Van Zeeland as “Beneficiary.”
- The letter of credit identified the “Applicant” as “Van Zeeland Oil Customer Daryl E. and Michele A. Lawrence.” Daryl Lawrence was Rudolph’s son.
- Under the letter of credit, the Bank would pay against a sight draft and Van Zeeland’s signed certification that the draft amount represented funds “due and owing” to Van Zeeland “by the Applicant” for the Applicant’s purchases of products and services from Van Zeeland (under terms set by Van Zeeland from time to time or under agreements executed by Van Zeeland and the Applicant).
- Lawrence Agency later breached the supply relationship and, according to Van Zeeland, accumulated more than $113,000 in debt.
- Van Zeeland attempted to draw on the letter of credit twice, presenting a sight draft and certification, plus documentation reflecting amounts Van Zeeland claimed were owed by Lawrence Agency.
- The Bank refused both demands, stating that the letter of credit required a showing that the named Applicants (Daryl and Michele Lawrence) owed the debt, and the presentments instead reflected a debt of Lawrence Agency.
- Van Zeeland sued Lawrence Agency and the Bank, asserting claims including breach based on wrongful dishonor, reformation, and unjust enrichment.
- The court entered default judgment against Lawrence Agency, leaving the dispute between Van Zeeland and the Bank for resolution on cross-motions for summary judgment.

## Issues

1. Whether Van Zeeland’s presentments strictly complied with the letter of credit’s requirement that the amount demanded be “due and owing” by the named Applicant (Daryl and Michele Lawrence), such that the Bank was required to honor the draw.
2. Whether Van Zeeland could obtain reformation of the letter of credit to replace the named Applicants with Lawrence Agency based on mistake and the parties’ alleged intent.
3. Whether the Bank could be liable to Van Zeeland for unjust enrichment even if the Bank properly refused payment under the letter of credit’s terms.

## Decision

- The court granted the Bank’s motion for summary judgment and denied Van Zeeland’s motion.
- The court held the Bank properly refused payment because Van Zeeland’s documents did not satisfy the letter of credit’s express condition that the funds be owed “by the Applicant,” and the Applicant named in the credit was Daryl and Michele Lawrence, not Lawrence Agency.
- The court rejected Van Zeeland’s effort to tie the letter of credit to the underlying fuel agreement to expand the Bank’s payment duty beyond the credit’s stated terms.
- The court denied reformation because Van Zeeland did not meet the demanding standard for equitable reformation of a written instrument to change the identity of the Applicant.
- The court rejected unjust enrichment because the Bank did not wrongfully retain a benefit at Van Zeeland’s expense by refusing a nonconforming draw.

## Legal Principles

- A letter of credit is a documentary payment device: the issuer’s duty turns on whether the beneficiary’s presentment matches the credit’s stated requirements on its face, not on the merits of the underlying business dispute.
- The issuer may insist on strict compliance with the letter of credit’s documentary conditions; if the credit requires a certification that a specified “Applicant” owes the amount demanded, the documents must show that obligation by the named Applicant.
- References in a letter of credit to other agreements do not, by themselves, rewrite the issuer’s undertaking or make the issuer responsible for performance disputes under those agreements.
- Reformation is an equitable remedy requiring strong proof (commonly clear and convincing evidence) of a qualifying mistake; it is not a tool to rework a credit to match the beneficiary’s expectations when the written terms identify a different applicant.
- Unjust enrichment requires an inequitable retention of a benefit; an issuer that refuses payment based on nonconforming documents is not unjustly enriched merely because the beneficiary remains unpaid.

## Conclusion

The court held that Peoples State Bank of Munising had no duty to honor Van Zeeland’s $50,000 draw because the letter of credit required proof that the named Applicants—Daryl E. and Michele A. Lawrence—owed the amounts demanded, and Van Zeeland’s presentments instead reflected debt attributed to Lawrence Agency; without strict compliance, Van Zeeland could not recover from the Bank through breach, reformation, or unjust enrichment.


Van Zeeland Oil Co., Inc. v. Lawrence Agency, Inc., 704 F. Supp. 2d 711 (2010)