The opinion of the court was delivered by: SNYDER
This is a diversity contract action brought by Chase Manhattan Bank (Chase) to recover $108,000 allegedly due on a Letter of Credit issued by Equibank for the account of Air-North Associates (Associates), the general partner of Pitt-Bethel Associates, Inc. (Pitt-Bethel). Equibank denies a proper demand within the credit period, and Associates counterclaims for money said to be on deposit with Chase. Presently before the Court are Motions for Summary Judgment filed by all the parties on the Principal Claim and the Counterclaim. The Court, at this time, can grant Summary Judgment in favor of the Defendants, Associates and Pitt-Bethel on the Plaintiff's Claim and also on their Counterclaim.
Early in 1970, Pitt-Bethel succeeded to by Associates,
engaged James W. Rouse and Company (Rouse) to obtain financing for a Sheraton Motor Inn to be constructed near the Greater Pittsburgh International Airport. Rouse contacted Chase and obtained a commitment for financing in the amount of $3,600,000, to be secured by a first mortgage; Pitt-Bethel was to obtain construction financing based upon Chase's commitment to provide the permanent financing. Chase's obligation was contingent on the completion of the project.
Thereafter, construction was begun but delays were encountered so that the original deadline for completion of October, 1972, could not be met. By letter of December 27, 1972, Chase agreed to extend the deadline for closing to February 22, 1973,
but required and received an extension on Equibank's Letter of Credit to March 30, 1973. Subsequently, a further extension was granted to Associates to close the Chase Loan from February 22, 1973 to March 31, 1973, and the Letter of Credit was extended to April 30, 1973. This last extension will be commented on more particularly herein with respect to the grant of the extension by use of telex.
During the middle of March, Equibank's Real Estate Counsel forwarded various closing documents for Chase's approval and as the time for closing drew near, Robert O'Brien of Chase telephoned Joseph Gallegher of Equibank and Robert Carey of Rouse to inquire whether the Chase Loan would close. O'Brien was informed that although both Equibank and Associates were anxious for the Chase Loan to close, it did not appear likely that the closing could take place by March 30, 1973.
In order to protect Chase's rights, O'Brien then concluded that Chase should call the Letter of Credit, and on March 27, 1973 he telephoned Equibank and spoke with a Bonnie Anderson about doing so. He was advised that he should address a demand to Equibank requesting payment under the Letter and setting forth the date and number of the Letter. On the same day, O'Brien caused a telex to be sent by Chase to Equibank requesting payment, which was replied to on March 28, 1973 by telex from Equibank stating that the Letter of Credit was extended to April 13, 1973. This telex concluded "airmailing confirmation", and during the first week in April an officer of Chase again asked about the prospects for closing the Loan by April 13, 1973. The following week Chase received a document dated April 11, 1973, further extending the expiration date of the Letter of Credit as noted above to April 30, 1973.
Finally, after many communications between Equibank and Chase concerning the details of the loan papers, a closing was agreed to for April 27, 1973 at the law offices of Chase's attorney. Neither representatives of Equibank nor Associates appeared at the scheduled time and place. Equibank was contacted and Chase was informed that the closing could not be held because of inadequate cooperation from Associates and its counsel, but that Associates desired to meet with Chase on the following Tuesday, May 1st, to discuss the renegotiation of the Chase Loan. On the same day, however, one of the principals of Associates called Chase and blamed the closing delay on Equibank, but also asked for the meeting on May 1, 1973.
Again, Chase determined to act on the Letter of Credit, and on April 27, 1973, Robert Lambert of Chase sent a telex to Equibank, identical to that which had been sent on March 27th, demanding payment on the Letter of Credit.
When nothing was heard from Equibank, the testimony shows that on April 30, 1973, Lambert again called Anderson to inquire as to Equibank's receipt of the telex and Anderson said that it had been received and was being given attention. Later in the day, another officer of Equibank requested that Chase send a formal draft and letter of default to Equibank. Lambert stated that Chase would comply and said he would have the necessary documents forwarded to Equibank in due course through its Domestic Collections Department. There is substantial dispute as to whether or not Equibank agreed to this procedure.
On May 7, 1973, Chase issued a formal sight draft and collection letter to which Equibank replied on May 17, 1973, by dishonoring the Letter of Credit for: "Late presentation of documents. (Expiration date was April 30, 1973. Documents received May 10, 1973) Draft does not indicate our Letter of Credit number as required in the original credit."
When payment was further denied, Chase brought this action in which it contends that all of the conditions precedent to payment under the Letter of Credit have been performed. Chase also contends that Equibank waived technical compliance with the terms of the Letter of Credit by not so informing it in response to the telex and telephone calls.