Banco Nacional De Mexico v. Societe Generale
Appellate Division of the Supreme Court of New York
820 N.Y.S.2d 588 (2006)
Societe Generale (SG) (defendant) issued a letter of credit in favor of a Mexican electricity commission (CFE) as part of a construction contract, naming Banco Nacional De Mexico (plaintiff) as the confirming bank under terms governed by New York law and the Uniform Customs and Practice for Documentary Credits. CFE made a compliant presentment, Banco Nacional paid CFE and sought reimbursement from SG, but SG refused after the letter-of-credit applicant obtained Mexican court orders staying payment based on a dispute under the underlying construction contract. Banco Nacional sued for reimbursement, and the motion court denied summary judgment on comity grounds; Banco Nacional appealed.
Whether an issuing bank must reimburse a confirming bank for honoring a letter of credit when the beneficiary's presentment strictly complies with the letter's terms, despite a dispute under the underlying sales contract.