Strozzo v. Sea Island Bank Et Al. (Three Cases)., 240 Ga. App. 183, 521 S.E.2d 392 (1999)
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Judgment affirmed. Pope, P. J., concurs. Smith, J., concurs in judgment only.
Summary
Judgment affirmed. Pope, P. J., concurs. Smith, J., concurs in judgment only.
Text
Robert S. Reeves, for appellant.
The Supreme Court ordered this case transferred to this Court for determination.
On September 28, 1997, Hampton County Warehouse, Inc. ("Hampton"), which operated a licensed bonded warehouse in Estill, South Carolina, had Sea Island Bank issue an irrevocable letter of' credit, no. 339, in the amount of $262,500 to the South Carolina Department of Agriculture, Warehouse Division, to satisfy the statutory requirement under South Carolina law for obtaining a South Carolina warehouseman's license to handle agricultural products.
At the same time, Statesboro Warehouse, Inc. ("Statesboro") had Sea Island Bank issue a similar letter of credit for $150,000 to Thomas T. Irvin, Commissioner, Georgia Department of Agriculture, to obtain a warehouseman's license for handling agricultural commodities in Georgia.
The South Carolina letter of credit read in part:
The funds under this Letter of Credit [were] available against sight draft(s) by the beneficiary. Each such draft, except as provided below, shall be accompanied by an affidavit from the Director of the Warehouse Division of the beneficiary stating that the customer, [Hampton], has failed to perform the duties and obligations of a licensed state warehouseman in conformity with the provisions of the South Carolina State System Law Section 39-22-10, et seq. [and the rules and regulations prescribed thereunder]. The affidavit shall state the amounts payable by the principal to the beneficiary due to the licensed warehouseman's failure to carry out his obligations under the law and regulations.
Hampton's and Statesboro's sole stockholder, officer, and manager, David Prosser, executed notes to Sea Island Bank in the amounts of $262,500 and $150,000 as security for the letters of credit. Dominic Strozzo, plaintiff-appellant, executed a guaranty of each note.
On July 17, 1998, the South Carolina Department of Agriculture forwarded a sight draft to Sea Island Bank demanding payment of $262,500. The accompanying affidavit and supporting documents set forth the factual basis, which Strozzo contends is inadequate to call the letter of credit. The facts show that Hampton and Statesboro, through Prosser; received cotton from over 50 farmers for storage in Georgia and South Carolina, but issued them no warehouse receipts. Prosser electronically transferred the electronic warehouse receipts ("EWR") to his trading company, Sea Island Cotton Trading Company; through it, sold the EWRs to mills and transferred EWRs to them; never obtained permission from the owners to transfer the EWRs or to sell the cotton; and never paid the farmers. Now Hampton, Sea Island Cotton Trading Company, Statesboro, and Prosser are in bankruptcy
The South Carolina affidavit stated that three farmers' losses had been verified, but their claims affidavits were not attached to the demand.
On July 31, 1998, after the South Carolina sight draft was presented to Sea Island Bank, Strozzo filed action 1B98CV245 in the Superior Court of Bulloch County to block the payment by injunction. Strozzo contended that it was not Hampton who sold the cotton without permission, but Prosser, and that the farmers' affidavits had not been filed. The South Carolina Department of Agriculture petitioned to intervene, which petition was granted. The intervener moved to dismiss the equity action for injunction. After a hearing on August 28, 1998, the trial court dismissed the action. Strozzo filed his notice of appeal.
On October 28, 1998, Strozzo filed action 1B98CV336T in Bulloch Superior Court, which was identical to the above action. On December 3, 1998, the trial court dismissed this action as well. Strozzo appealed.
Case No. A99A1197
1. Strozzo contends that the trial court erred in dismissing his complaint for injunction. We do not agree.
An injunction is distinctly an equitable remedy. Howard v. Warren,
The universal test of the jurisdiction of a court of equity to issue injunctions is the absence of a legal remedy by which the complainant might obtain the full relief to which the facts and circumstances entitle him, and this is likewise the test of its power to restrain breaches of a contract.
(Citations omitted.) Id. Thus, where the relief sought can be obtained in a manner provided by law, a suit in equity will not lie. See OCGA
Strozzo has a defense to any action on the guaranty. However, he seeks to assert it as a grounds for injunction and seeks to prevent both the transfer of the letter of credit and a subsequent suit against him on the guaranty. Thus, he seeks to use his legal defense in equity to avoid a suit in law. This he cannot do. There is no equity jurisdiction where there is an adequate legal remedy, i.e., a legal defense to a suit in law. See generally OCGA
In regard to compliance with the terms of the letter of credit, Georgia does not adhere to the standard of "strict compliance," but adheres to the standard of "substantial compliance," in keeping with its standards of statutory construction. OCGA
Further, even if the hearing was treated as a final adjudication on the merits, as a matter of law -- not equity -- the letter of credit clearly and plainly required only the affidavit of the Director of the Warehouse Division of the South Carolina Department of Agriculture, which requirement was fully satisfied. Therefore, the three farmers' affidavits were not required under the letter of credit. Where the language of the contract is plain, unambiguous, and capable of only one reasonable interpretation, construction of the contract is not permitted, and the language of the contract is given effect. R. S. Helms, Inc. v. GST Dev. Co.,
Further, Hampton received the cotton in trust as bailee from the farmer-consignees, failed to issue warehouse receipts to them, and wrongfully issued the EWRs to Sea Island Cotton as a negotiable instrument without the consignees' consent. OCGA
Passage of the Uniform Commercial Code did not repeal or affect Georgia bailment law, and Hampton was liable in damages for failure to exercise ordinary diligence to protect the consigned cotton for the farmer-consignees. OCGA
While it is undisputed that Prosser and Sea Island Cotton converted the cotton, ultimately sold the cotton, and failed to pay the farmers for it, Hampton violated its bailment under bond by failing to deliver the negotiable EWRs to the rightful owners and transferring the EWRs to Sea Island Cotton, which violated the terms and conditions of the letter of credit through its acts and omissions, which were also the acts of its agent, Prosser. See Citizens Bank &c. Co. v. SLT Warehouse Co., 368 FSupp. 1042 (M.D. Ga. 1974), aff'd, 515 F2d 1382 (5th Cir. 1975). Under Georgia bailment law, while the acts of Prosser in converting the EWRs and cotton were his own and not imputable to Hampton as the acts of the employer, Hampton would not be liable for his imputed acts as respondeat superior under bailment law. See Gooden v. Day's Inn, supra at 327 (3); see also Merchants Nat. Bank &c. v. Guilmartin,
Therefore, OCGA
[T]he independence principle "states that the bank's obligation to the beneficiary is independent of the beneficiary's performance on the underlying contract. Put another way, the issuer must pay on a proper demand from the beneficiary even though the beneficiary may have breached the underlying contract with [Hampton]. (
Citations omitted; emphasis in original.) Jurisco, Inc. v. Bank South, N.A., supra at 803 (2). In this case, the South Carolina Department of Agriculture fully performed in determining that Hampton had breached the duties of a warehouseman and in filing a properly documented demand on the letter of credit, the only duties that it had under the contract for the letter of credit.
The sole issue before the trial court[,] and thus the sole issue on appeal, is whether the documents presented by [the South Carolina Department of Agriculture] to [Sea Island Bank] satisfied the prerequisites for payment on the letter of credit. We hold that they did and, therefore, the trial court did not err in ordering the money paid to [the South Carolina Department of Agriculture].
Id. at 804 (2).
Case No. A99A1328
2. This is an appeal from the dismissal of Strozzo's petition for injunction in action 1B98CV336T; such case was a refiling of the petition in action 1B98CV245 and is controlled by our decision in Division 1 as to Case No. A99A1197, which was the originally filed case.
Case No. A99A1329
3. This is an appeal in the separate case 1B98CV342M between Strozzo and Sea Island Bank, involving the Georgia Commissioner as intervener and the same legal issues. Therefore, Division 1 controls.
Brown & Livingston, Charles H. Brown, for appellees.
1999
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This document cites
- Supreme Court of Georgia - AMERICAN BONDING COMPANY v. HOUSING AUTHORITY et al., 267 Ga. 129, 475 S.E.2.d 642 (1996)
- Supreme Court of Georgia - CANTRELL et al. v. HENRY COUNTY., 250 Ga. 822, 301 S.E.2.d 870
- Supreme Court of Georgia - SHERRER et al. v. HALE et al., 248 Ga. 793, 285 S.E.2.d 714
- Supreme Court of Georgia - MORTON v. GARDNER et al., 242 Ga. 852, 252 S.E.2.d 413 (1978)
- Supreme Court of Georgia - ALLSOUTH SPRINKLER COMPANY v. NETWORK BUILDING SYSTEMS, INC. et al., 238 Ga. 372, 233 S.E.2.d 174 (1977)
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