Okla. Stat. tit. 12A § 5-113
Okla. Stat. tit. 12A, § 5-113
Oklahoma Code Comment
Revised Section 5-113 allows transfers of letters of credit when accomplished under other law. When that law is the Bankruptcy Code, of course, state law must give way, but in other instances, such as merger, this provision provides clarity.
Revised sub section 5-113(a) allows a successor of a beneficiary, defined in sub section 5-102(a)(15) , to amend, sign and present documents, and receive payment in the name of the beneficiary, without disclosing its status as a successor. Revised sub section 5-113(b) also allows such actions by the successor in its own name, as the disclosed successor. It further states that unless otherwise provided, an issuer must recognize a disclosed successor of a beneficiary as a fully substituted beneficiary upon compliance with the requirements for recognition of a transfer of drawing rights by operation of law under the standard practice of financial institutions that regularly issue letters of credit, or in the absence of such standards, other reasonable procedures sufficient to protect the issuer.
Revised sub section 5-113(c) further protects the issuer by not obligating the issuer to determine whether a purported successor is, in fact, a successor of the beneficiary, or whether the signature of a purported successor is genuine or authorized.
Revised sub section 5-113(d) provides that honor of a purported successor's apparently complying presentation entitles the issuer to be reimbursed by the applicant if the issuer's right of reimbursement is covered under revised sub section 5-108(i) . If the issuer's right is not so covered under sub section 5-108(i) or a substantially similar law (for example, because the law of a foreign country is applicable), then the issuer may decline to recognize a presentation by a purported successor beneficiary under revised sub section 5- 113(e) .
Revised Section 5-113 has no counterpart in former Article 5 and will create new statutory law in Oklahoma. The Official Comments to this section indicate that it codifies existing case law, although both of the cases cited by the Official Comments arguably are distinguishable. In one case, Pastor v. National Republic Bank, 390 N.E.2d 894 (Ill.1979), the court addressed a situation where the original beneficiary of the credit had fully performed according to its terms, and only the right to recovery under the letter of credit had been transferred by operation of law. The court appeared to limit its decision to the specific fact situation. The other case involved a transfer to the FDIC in its corporate capacity, and the court's ruling arguably was based on federal law preempting the Colorado UCC, which otherwise would prohibit such a transfer (and, therefore, would not be applicable to all transfers by operation of law). See FDIC v. Bank of Boulder, 911 F.2d 1466 (10th Cir.1990).
Revised sub section 5-102(a)(15) defines the term "successor of a beneficiary" as a person who succeeds to substantially all of the rights of a beneficiary by operation of law, specifically including a corporation with or into which the beneficiary has been merged or consolidated, an administrator, executor, personal representative, successor in bankruptcy, debtor in possession, liquidator and receiver. The Official Comments make it clear that even though a successor beneficiary succeeds "by operation of law," certain voluntary actions of the beneficiary (such as a merger) also can occur "by operation of law."