Sztejn v. J. Henry Schroder Banking Corp

In Sztejn v. J. Henry Schroder Banking Corp., 177 Misc 719, 31 N.Y.S.2d 631 (Sup Ct, NY Co. 1941), the plaintiff, Sztejn, contracted to purchase bristles from an Indian company, Transea. The plaintiff asked Schroder to issue a letter of credit to the benefit of Transea which then procured the correct documentation of the transaction and drew a draft to the order of Chartered Bank. Chartered Bank then presented the draft and documents to Schroder for payment. But Sztejn had received rubbish instead of bristles and sought to have the letter of credit and the draft declared void. In Sztejn the court decided to look past the fact that the documents used in the transaction conformed to the requirements of the letter of credit and examined the legitimacy of the underlying transaction. Finding the shipment of rubbish rather than bristles to be fraudulent, the court blocked payment on the Letter of Credit.