PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

BANCA DEL SEMPIONE,
Plaintiff-Appellant,

v.

PROVIDENT BANK OF MARYLAND,
Defendant-Appellee,

and

SURIEL FINANCE N.V.,
                                                                      No. 94-2276
Defendant,

JEANNE FARNAN,
Party in Interest.

UNITED STATES COUNCIL ON
INTERNATIONAL BANKING,
INCORPORATED,
Amicus Curiae.

Appeal from the United States District Court
for the District of Maryland, at Baltimore.
Walter E. Black, Jr., Senior District Judge.
(CA-91-3179-B)

Argued: June 9, 1995

Decided: February 14, 1996

Before LUTTIG and WILLIAMS, Circuit Judges, and BUTZNER,
Senior Circuit Judge.

_________________________________________________________________

Reversed and remanded by published opinion. Senior Judge Butzner
wrote the opinion, in which Judge Luttig and Judge Williams joined.
COUNSEL

ARGUED: Warren Lewis Dennis, PROSKAUER, ROSE, GOETZ &
MENDELSOHN, Washington, D.C., for Appellant. James Meriwea-
ther Smith, GEBHARDT & SMITH, Baltimore, Maryland, for Appel-
lee. ON BRIEF: Alec W. Farr, Thomas H. Brock, PROSKAUER,
ROSE, GOETZ & MENDELSOHN, Washington, D.C., for Appel-
lant. James T. Heidelbach, GEBHARDT & SMITH, Baltimore,
Maryland, for Appellee. Richard A. Lash, BUONASSISSI, HEN-
NING, CAMPBELL & MOFFETT, P.C., Fairfax, Virginia; Wil-
liam F. Connell, CONNELL & TAYLOR, New York, New York, for
Amicus Curiae.

_________________________________________________________________

OPINION

BUTZNER, Senior Circuit Judge:

Banca del Sempione (BDS) appeals a summary judgment entered
in favor of Provident Bank of Maryland in this diversity action. The
controversy between the parties arises out of the terms of a letter of
credit (LOC) that Provident issued. The district court held that BDS
lacked standing, and it identified additional reasons for its grant of
summary judgment. See Banca Del Sempione v. Suriel Finance, N.V.
and Provident Bank, 852 F. Supp. 417 (D. Md. 1994).

Because we conclude that BDS had standing and that the record
discloses genuine issues of material fact, we reverse the judgment of
the district court and remand the case for further proceedings.

For the purpose of this brief introduction, a bare bones outline of
the transaction will suffice. We will advert to details as we discuss the
issues.

Provident's customer, Rock Solid Investments, Ltd. (RSI), bor-
rowed funds from Suriel Finance, N.V. Their loan agreement required
RSI to obtain a LOC securing interest payments for seven years.

Provident issued a standby LOC naming Suriel beneficiary to
secure RSI's interest payments for one year.

                     2
Manufacturers Hanover Trust Co. confirmed the Provident LOC
for one year.

Suriel borrowed the funds needed for the RSI loan from BDS.

Provident wrote several letters to Suriel. A critical issue is whether
these letters amended the LOC to make it automatically renewable
annually for seven years, as BDS contends, or whether they simply
constituted a side agreement that did not amend the LOC, as Provi-
dent contends.

At the request of Suriel, Manufacturers transferred the Provident
LOC to BDS.

Manufacturers honored several drawings under the LOC, but at
Provident's direction, it dishonored a subsequent drawing that was in
excess of the amount confirmed.

After Provident refused to pay under its LOC, BDS brought this
action.

I

Appellate review of a summary judgment requires an examination
of the record before the district court to determine de novo that there
is no genuine issue of material fact and that the moving party is enti-
tled to judgment as a matter of law. Fed. R. Civ. P. 56(c); see Shaw
v. Stroud, 13 F.3d 791, 798 (4th Cir. 1994). The evidence and all rea-
sonable inferences from the evidence must be viewed in the light
most favorable to the nonmoving party. If a party fails to show an
essential element of the case for which that party has the burden of
proof, summary judgment is appropriate. See Celotex Corp. v. Catrett,
477 U.S. 317, 322-23 (1986).

The parties agree that Maryland law governs this case. In accor-
dance with Md. Code Ann. Com. Law § 5-103(4) (1992), Article 5
must be read in conjunction with Article 1 of the General Provisions
of the Maryland Uniform Commercial Code. As § 1-102(3) permits,
Provident made its LOC, and Manufacturers made its confirmation,

                     3
subject to the Uniform Customs and Practices for Documentary Cred-
its (1983 Revision International Chamber of Commerce Publication
400) (UCP). The UCP is not law. Nor does it have the force of law.
Henry Harfield, Letters of Credit 3-4 (1979). As its name implies, the
UCP is a code or compilation of the usage of trade pertaining to let-
ters of credit. It stands "as a record of normal expectations." Id. at 4.
Its use and interpretation are governed by Md. Code Ann. Com. Law
§ 1-205(2), which provides: "The existence and scope of [the] usage
[of trade] are to be proved as facts." If the usage is "embodied in a
written trade code or similar writing the interpretation of the writing
is for the court." Like any fact, the meaning of the UCP and the usage
of the trade can be proved by any person qualified to address the sub-
ject, including an expert witness.

The official comment to Md. Code Ann. Com. Law § 1-205 cau-
tions against the "lay-dictionary" and the"conveyancer's" reading of
a commercial document. Instead, the meaning of a document must be
determined by the language the parties used and their actions in the
context of commercial practices.

II

As the primary ground for granting summary judgment, the district
court found that BDS did not have standing to allege wrongful dis-
honor or anticipatory repudiation. See 852 F. Supp. at 429-30.

In order to establish standing, BDS must prove an injury in fact,
a causal connection between the injury and Provident's acts, and a
likelihood that a favorable decision would redress the injury. Lujan
v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). Section 5-115,
Md. Code Ann. Com. Law, aids BDS by recognizing that improper
dishonor and anticipatory repudiation are injurious and by providing
a monetary remedy.

The first inquiry in reviewing summary judgment on the issue of
standing is whether BDS failed to establish that Provident amended
its LOC to provide a credit for seven years. Resolution of this ques-
tion depends on ascertaining the intent of the parties.

                     4
The loan agreement between RSI and Suriel required RSI to obtain
a standby LOC for $750,000 as security for the annual interest on the
loan. The agreement, dated July 6, 1989, provided that the LOC must
be irrevocable and transferable, in an amount not less than $750,000,
"annually renewable automatically" as security for interest payments.
One can draw a reasonable inference that Samuel Henry, a vice-
president of Provident, knew the requirements of the LOC stipulated
in the Suriel-RSI loan agreement. This inference is based primarily on
Henry's letter of August 30, 1989, in which he refers to the loan
agreement. Suriel's loan agreement with BDS required Suriel to
obtain a similar LOC to secure Suriel's interest payments.

On July 21, 1989, Henry sent a commitment letter to RSI for a
LOC naming Suriel as beneficiary and requiring RSI to maintain
$800,000 on deposit at Provident as collateral. The attached draft of
the LOC was for $750,000 "to be automatically renewed annually" for
seven years.

In August, Provident arranged for Manufacturers Hanover Trust to
be the confirming bank of the LOC.

On August 30, 1989, Henry sent Suriel a letter which provided in
paragraph 2:

          In the event Suriel must draw against the Standby Letter of
          Credit No. 99205 (L/C) issued by this Bank and confirmed
          by Manufacturers Hanover Trust Company of New York,
          this Bank will immediately amend the L/C to the original
          $750,000 credit available level without equivocation, upon
          receipt of the cash collateral restoring the reserve fund to
          $800,000.00, as specified in our letter dated July 21, 1989.

The district court's opinion quotes the August 30 letter. 852 F. Supp.
at 421 n.2.

On September 11, Provident issued its transferable, irrevocable
LOC No. 99205 in the amount of $750,000. The LOC did not men-
tion the provisions of paragraph 2 of Provident's letter of August 30,
1989. It provided that the LOC would expire on September 15, 1996.

                    5
On September 14, Manufacturers added its confirmation, number
U169123, to the LOC for a period of one year to expire on Septem-
ber 15, 1990. Manufacturers' advice of confirmation stated:

          Notwithstanding anything to the contrary hereinbefore
          stated, if this letter of credit is in existence after the expira-
          tion of Manufacturers Hanover Trust Company's confirma-
          tion of this letter of credit, then this letter of credit is
          available with Provident Bank of Maryland by payment
          against presentation of the documents detailed herein
          accompanied by your drafts at sight drawn on Provident
          Bank of Maryland. No mention of Manufacturers Hanover
          Trust Company's advice number U169123 need be made in
          the documents detailed herein.

Manufacturers' advice of confirmation quoted the Provident LOC.
The text of the advice of confirmation, including the LOC, is repro-
duced in the district court's opinion. 852 F. Supp. at 421-23. Manu-
facturers sent a copy of its advice of confirmation, including the LOC,
to Suriel and to BDS, which was Suriel's advising bank.

After receiving from Suriel Provident's letter of August 30 and the
terms of the LOC quoted in Manufacturers' advice of confirmation,
BDS objected to paragraph 2 of the August 30 letter, which made
recollaterization a condition precedent to the LOC revolving annually
in the full amount. BDS also objected to the failure of the LOC to
provide unequivocally for automatic annual renewal of the LOC in
the full amount for seven years. BDS stated these objections to Suriel,
which passed them on to Provident.

In response to BDS's objections, which Suriel voiced, Henry wrote
a letter on September 19 to Suriel, which stated:"If you should draw
on us your interest draft as set forth the amount of $750,000 shall be
reavailable to you upon your receipt of our tested telex or amendment
provided this Letter of Credit shall not have terminated." The letter
also deleted paragraph 2 of the August 30 letter, thereby eliminating
the provision that made recollaterization a condition precedent to the
LOC revolving in the full amount.

On September 20, BDS informed Suriel that it objected to Provi-
dent's September 19 letter and that the amendment should expressly

                     6
state Provident's engagement to make the $750,000 renewable upon
receipt of a tested telex or amendment which Provident uncondition-
ally would send each year provided the LOC had not terminated.

On September 21, Henry responded to Suriel's request as follows:

          RE: Side Letter Dated August 30, 1989
          Amendment Dated September 19, 1989

          Provident Bank of Maryland stands by its original commit-
          ment dated July 21, 1989. Therefore we were not, and
          remain not concerned about the side letter amendment that
          you requested through Rock Solid Investments dated Sep-
          tember 19, 1989. We committed to that language and we
          sent you the change immediately.

          We understand that you are not asking for an amendment to
          the Letter of Credit. However, our letters are just as binding
          to us as our paper. In view of the ambiguous language of
          your last requested change which could be construed to
          change the transaction terms from those already agreed to,
          or is redundant or similar to the letter which I issued upon
          your request dated September 19, 1989, we cannot comply.
          We have remained faithful to our original commitment
          which bears the language that your company requested.

(emphasis in original).

Nevertheless, on September 26, Henry wrote Suriel:

          RE: Standby Letter of Credit No. 99205

          Provident Bank of Maryland hereby agrees as follows with
          regard to our obligations under Standby Letter of Credit No.
          99205 and in conformity with our commitment dated
          July 21, 1989:

          "If you should draw on us your interest draft as set
          forth, the amount of $750,000 shall be automati-

                    7
          cally reavailable to you upon your receipt of our
          tested telex or amendment provided this Letter of
          Credit shall not have terminated."

          Paragraph two (2) of our letter dated August 30, 1989 is
          hereby deleted and omitted. This letter supercedes and
          replaces the letter from me dated September 19, 1989.

On September 27, 1989, BDS sent a request to Suriel for "a confir-
mation that `automatically renewable' means that it will be renewed
yearly for its amount without being subordinated to any events or
actions."

On September 29, Provident sent a letter to Suriel referencing
"Standby Letter of Credit No. 99205," and stating:

          Provident Bank of Maryland hereby warrants that the under-
          takings set forth in our Letter of Credit No. 99205, and our
          August 30, 1989 and September 26 Agreements are not sub-
          ject to any new conditions except the final maturity and
          expiration and shall be honored accordingly by the Provi-
          dent Bank of Maryland.

Roberto Franchi, the BDS banker who was involved with the accep-
tance of the LOC, testified that he was satisfied that this language was
the equivalent of the change he had requested because it confirmed
that there were no other conditions on the renewal of the LOC. Also,
Franchi, having investigated Provident's financial standing, decided
to accept Provident's LOC even if Manufacturers did not extend its
confirmation.

On September 26, Suriel requested Manufacturers to transfer all of
its rights as beneficiary to BDS. On October 11, Manufacturers issued
its advice of transfer.

On October 19, BDS, which had become the beneficiary, disbursed
the proceeds of the BDS-Suriel loan to Suriel. Thereafter, Suriel
released funds to RSI pursuant to their loan agreement. On October
27, 1989, Henry advised Manufacturers that RSI had received the pro-

                    8
ceeds of the Suriel-RSI loan. Manufacturers then issued Amendment
No. 502, which permitted drawings under the LOC. The amendment
named BDS as the beneficiary.

When the first interest payment came due, RSI was unable to make
the payment. At RSI's request, Henry released part of the RSI collat-
eral so that RSI could make its first interest payment. On subsequent
occasions, Henry again released collateral to enable RSI to make
interest payments. Henry did not advise BDS or Suriel that Provident
was releasing the collateral, and RSI never replenished it.

Ultimately, RSI was unable to meet its interest obligations. When
RSI defaulted on its interest payments, Suriel also failed to make its
interest payments due under the BDS-Suriel loan. BDS accordingly
submitted three drafts to Manufacturers under the LOC. Manufactur-
ers paid these drafts in full: $197,624.99 on April 25, 1990;
$205,000.00 on July 19, 1990; and $230,312.49 on October 16, 1990;
for a total of $632,937.48. On January 16, 1991, BDS submitted
another draft to Manufacturers for $230,312.50. At the direction of
Mr. Thomas A. Crossland, a vice-president at Provident, Manufactur-
ers refused payment in full. Eventually Provident fired Henry.

III

The parties disagree about the nature of Henry's letters. Provident
contends that the letters did not amend the LOC and that they consti-
tuted a side agreement. The district court granted summary judgment
to Provident on this issue. See 852 F. Supp. at 431. In support of the
summary judgment, Provident asserts that the September letters
related to the August 30 letter and not to the LOC. It calls attention
to Henry's reference in his September 21 letter to the August 30 letter
as a side letter, and it describes the September 19 letter as a side letter
amendment. It emphasizes that in his September 21 letter, Henry
wrote to Suriel: "We understand that you are not asking for an amend-
ment to the Letter of Credit." In this connection, Provident points out
that Henry's October 27 letter, which noted that RSI had received the
loan proceeds, was admittedly an amendment. Provident sent this let-
ter, unlike the September letters, to Manufacturers.

BDS contends that whether Henry's letters amended the LOC
depends on the intent of the parties. As evidence showing that the let-

                     9
ters were amendments, it highlights Henry's reference in the Septem-
ber 26 and 29 letters, "RE: Standby Letter of Credit No. 99205." BDS
also points out that the October 27 letter, which Provident admits was
an amendment, also referred to Provident's LOC 99205. Henry's let-
ters also mirror the October 27 letter in their format: the operative
paragraph of the letters was set forth in block style separate from the
rest of the text.

Franchi testified that BDS was concerned with paragraph 2 of the
August 30 letter because it made the LOC conditioned on the renewal
of RSI's deposit. This was a condition that BDS would not accept.
BDS would not have made the loan to Suriel if this condition
remained. Franchi pointed out that Provident expressly "deleted and
omitted" this requirement in its letter of September 26. In this respect
he was reassured by Provident's letter of September 29, which
although referring to the August 30 letter, also referred to the Septem-
ber 26 letter that had deleted the objectionable paragraph 2. Franchi
refers to the provisions in Henry's letter of September 26 as an
amendment to the LOC.

Franchi viewed Henry's letters as irrevocably committing Provi-
dent to issue the tested telex on a yearly basis because the Septem-
ber 26 letter made $750,000 "automatically reavailable."

BDS and Provident also differ about the meaning of the word "au-
tomatically" in the context of this transaction. BDS asserts that it is
synonymous with "unconditional" and that Provident lacked discre-
tion to refuse to send a tested telex except upon the expiration of the
LOC in 1996. Provident contends that "automatically" preserves the
condition of RSI's annual replenishment of collateral. Since no tested
telex was ever sent, Provident asserts that its liability is limited to
$750,000.

BDS is supported by Professor James E. Byrne, chairman of the
joint ABA/U.S. Council on International Banking Task Force on the
Revision of Article 5 of the U.C.C., whom the court accepted as an
expert. Byrne averred that the letters of September 26 and 29 consti-
tuted amendments to the LOC. He expressed the opinion that the
phrase "automatically reavailable" in the September 26 letter changed
the sending of a tested telex "from a precondition to the reavailability

                    10
of the credit subject to Provident's discretion to an action which must
be done `automatically.'"

In sharp conflict with Byrne's and Franchi's testimony, Henry tes-
tified that the September 26 letter said "basically the same thing" as
paragraph 2 of the August 30 letter.

Eric Lee Douglass, an officer of RSI, contradicted Henry's asser-
tion that renewal of the collateral survived as a condition of the LOC.
In his deposition, Douglass testified that in the beginning Provident
required the collateral to be replenished. He also testified that the
requirement to renew the collateral eventually was nullified. Provi-
dent claims, however, that Douglass was talking about a proposed
transaction with Signet Bank. For the purpose of summary judgment,
one must draw an inference from the context of Douglass's deposition
that he was referring to the Provident LOC.

Also, for the purpose of summary judgment, one can conclude that
Douglass's testimony is corroborated by Henry's actions. In his letter
of September 26, Henry "deleted and omitted" the provision in para-
graph 2 about renewal of the collateral. In addition, Henry disbursed
large sums of the collateral without replenishment several times.

Ronald H. Carback, an officer of Provident Bank, testified in his
deposition that Provident would not permit the LOC to be in excess
of the collateral. With respect to Henry's letters, he testified:

          I can only say to you that basically the letters in question
          are trying to clarify the situation as to whether this Letter of
          Credit remained at seven hundred and fifty thousand dollars
          or whether, in the true sense of the Letter of Credit as it was
          originally written, it would be decreased by the amount
          drawn. I also must say that I'm not sure whether it's accom-
          plished that. I don't understand, looking from the letters,
          you know, what has been clarified by this. I know that it was
          our intent to allow them, or to allow the Letter of Credit to
          remain at seven hundred and fifty thousand dollars provided
          that certain conditions on our part were met or that the, you
          know, the collateral that we had was not diminished below
          the eight hundred thousand dollars. This, if anything, makes

                    11
          it even muddier than it was before. I'm not sure what this
          is saying.

The LOC is ambiguous when read in the light of Henry's letters,
which may, or may not, constitute amendments. Moreover, this
ambiguity cannot be resolved by extrinsic evidence. Henry's insis-
tence that his letter of September 26 imposes the same conditions as
paragraph 2 of his letter of August 30 is contradicted by his deletion
of this paragraph, by his release of collateral, and by Douglass's testi-
mony. Carback's deposition demonstrates that Provident recognized
that Henry's letters did not clarify the ambiguity of the LOC. His tes-
timony that the transaction was "even muddier than it was before" is
an apt description of ambiguity.

An ambiguous contract that cannot be resolved by credible, unam-
biguous, extrinsic evidence discloses genuine issues of material fact.
In this event, summary judgment is inappropriate. See World-Wide
Rights Ltd. Partnership v. Combe, Inc., 955 F.2d 242, 245 (4th Cir.
1992).

Application of these principles in the context of letters of credit is
illustrated by Banque Paribas v. Hamilton Industries Int'l, Inc., 767
F.2d 380 (7th Cir. 1985), and Timber Falling Consultants, Inc. v.
General Bank, 751 F. Supp. 179 (D. Or. 1990). In Banque Paribas,
the Seventh Circuit reversed a summary judgment that was based on
an ambiguous guarantee and a letter of credit that was ambiguous
about inclusion of the guarantee. In Timber Falling Consultants, the
district court held that summary judgment was inappropriate when
evidence was ambiguous concerning whether a letter of credit pro-
vided for automatic revolution at stated times or conditional revolu-
tion.

Summary judgment is inappropriate because Henry's letters and
acts, together with testimony of Franchi, Byrne, Douglass, and Car-
back, disclose genuine issues of material fact making Provident's
LOC ambiguous.

IV

The district court, relying on Article 10(d) of the UCP and giving
it the force of law, also held that, as a matter of law, Henry's Septem-

                     12
ber letters could not be considered effective amendments of the UCP
because Manufacturers had not consented to any amendments. See
852 F. Supp. at 431-32.

Article 10(d) must be read in the context of pertinent parts of Arti-
cle 10 as follows:

          a. An irrevocable credit constitutes a definite undertaking
          of the issuing bank, provided that the stipulated documents
          are presented and that the terms and conditions of the credit
          are complied with . . .

          b. When an issuing bank authorizes or requests another
          bank to confirm its irrevocable credit and the latter has
          added its confirmation, such confirmation constitutes a defi-
          nite undertaking of such bank (the confirming bank), in
          addition to that of the issuing bank . . . .

***

          d. Such undertakings can neither be amended nor canceled
          without the agreement of the issuing bank, the confirming
          bank (if any), and the beneficiary.

Paragraph b. explains that confirmation is an "undertaking." Para-
graph d. explains that "such undertakings" cannot be amended with-
out the agreement of the confirming bank. Manufacturers'
undertaking was a one-year confirmation. BDS does not claim that
Henry's letters amended Manufacturers' undertaking, and, conse-
quently, there was no amendment for Manufacturers to either accept
or reject. Its obligation was not affected by paragraph d.

This commonsense reading of pertinent parts of Article 10 is
reflected in the usage of the trade. An example is found in Manufac-
turers' advice of confirmation, which provided in part that if the LOC
is in existence after Manufacturers' confirmation expires, credit is
available from Provident under its LOC No. 99205 without mention-
ing Manufacturers advice No. U169123. See Part II of this opinion
quoting the pertinent paragraph of Manufacturers' advice. Speaking

                    13
of this provision in Manufacturers' advice, Henry explained its pur-
poses as follows:

          A. My recollection of the reason for that statement was
          the fact that the actual confirmation of the letter of credit
          was for a specific period of time which ran under the full
          period of time of the letter of credit that we issued. So that
          was just to cover in the event that for whatever reason Man-
          ufacturers Hanover ended up not confirming the letter of
          credit at some point in the future, that it didn't continue to
          specify Manufacturers Hanover as being its counters[sic,
          probably "confirmer"] during the entire time of the letter of
          credit.

          Q. So that Provident's obligation under 99205 for what-
          ever period of time that it existed, was separate from Manu-
          facturers obligation under its confirmation, is that correct?

          A. That's correct.

In his deposition, Henry also explained that he did not send his
August and September letters to Manufacturers because he knew that
Manufacturers would not confirm "automatic reavailability."

The UCP is a formulation of standard international banking prac-
tice. In interpreting the UCP, courts must strive to ascertain the actual
banking practice that the Customs embody. In this case, we are aided
in our understanding of UCP Article 10 by expert testimony. For an
example of a court's use of such testimony, see Alaska Textile Co. v.
Chase Manhattan Bank, N.A., 982 F.2d 813, 819-20, 822 (2d Cir.
1992).

Professor Byrne gave his opinion on custom and practice in the let-
ter of credit industry. He explained that an amendment consented to
and advised by the issuer binds the issuer regardless of the confir-
mer's lack of consent. The United States Council on International
Banking agrees with Byrne's views, stating: "[T]he understanding of
the international banking operations community [is] that under the
UCP an issuer is bound by any amendment it communicates to the

                     14
beneficiary independent of whether the confirmer (if any) has con-
sented to that amendment." Amicus brief at 6.

Centennial Industries v. Union Trust Co., 75 Md. App. 202, 212,
540 A.2d 1169, 1174 (Md. Ct. Spec. App. 1988), upon which Provi-
dent and the district court rely, is not contrary to the interpretation of
the UCP which we believe to be correct. That case did not involve a
confirming bank. In its decision, the Maryland Court of Special
Appeals held that a customer, for whom a bank had issued an LOC,
could not compel the nonconsenting issuing bank to amend the LOC
even if the beneficiary agreed with the customer. It was in this context
that the court cited the 1974 version of the UCP, which, like the 1983
version, required the consent of all parties. The Maryland court had
no occasion to address the question in the case before us.

We conclude that because the alleged amendments did not affect
Manufacturers' one-year confirmation, their validity does not depend
on Manufacturers' consent to them.

To reiterate, a confirming bank's undertaking is affected only by
amendments to which it consents. An issuer's undertaking is affected
by amendments that it issues. The issuer's independent undertaking
is not affected by the confirming bank's lack of consent to the issuer's
amendments that do not change the confirming bank's undertaking.
Judgment in favor of Provident because Manufacturers did not con-
sent to the alleged amendments is inappropriate. Because this issue
depends on the interpretation of the UCP in the context of trade
usage, its resolution is committed to the court and not to the trier of
fact. Md. Code Ann., Com. Law § 1-205(2) (1992).

V

The district court held that judgment also was compelled as a mat-
ter of law because Manufacturers, in its role as the transferring bank,
transferred from Suriel to BDS only Suriel's right to draw up to
$750,000 under the Provident LOC. The district court reasoned that
even if Henry's letters were amendments, and even if Manufacturers
had the power to transfer all of Suriel's rights, Manufacturers' terms
of advice limited the transfer to $750,000. See 852 F. Supp. at 429-30.

                     15
A LOC is transferable only when it is expressly designated as such.
Md. Code Ann., Com. Law § 5-116(1); UCP Art. 54(b). The Provi-
dent LOC satisfied this requirement, providing:"[t]his Letter of
Credit is transferable in its entirety." Article 54(a) of the UCP states
that the beneficiary of a transferable credit has the "right" to have the
credit transferred. Article 54(c) provides that the transferring bank is
under no obligation to effect transfer "except to the extent and in the
manner expressly consented to by such [transferring] bank." We must
examine both Suriel's request for transfer and Manufacturers' advice
of transfer to determine the extent of BDS's rights under the LOC.

Suriel's transfer evidenced a clear intent to transfer all of its rights
associated with the LOC. On September 26, 1989, Suriel sent Manu-
facturers, the designated transferring bank, a standard form, furnished
by Manufacturers, entitled "Form XXX203 for Full Transfer." The
document was addressed to Manufacturers and bore its advice number
U169123 as the credit that it had confirmed. Suriel's authorized offi-
cer signed it. The transfer stated:

          For value received, the undersigned beneficiary hereby
          irrevocably transfers to: Banca Del Sempione [address] all
          rights of the undersigned beneficiary to draw under the
          above Letter of credit in its entirety.

          By this transfer, all rights of the undersigned beneficiary
          in such Letter of Credit are transferred to the transferee and
          the transferee shall have the sole rights as beneficiary
          thereof, including sole rights relating to any amendments
          whether increases or extensions or other amendments and
          whether now existing or hereafter made. All amendments
          are to be advised direct to the transferee without necessity
          of any consent of or notice to the undersigned beneficiary.

          The advice of such Letter of Credit is returned herewith,
          and we ask you to endorse the transfer on the reverse hereof,
          and forward it direct to the transferee with your customary
          notice of transfer.

Manufacturers' form, which Suriel used, bore the notation:
"(Transferred in its entirety--all amendments, including increases and

                     16
extensions, applicable to transferee)." The usage of the trade, as
exemplified by Article 54(a), authorized Suriel to request this trans-
fer.

On October 11, 1989, Manufacturers sent the following letter to
BDS:

          RE: Letter of Credit No. 99205 Issued by Provident Bank
          of Maryland
          Manufacturers Hanover Trust Co. Advice No.
          U169123

          Gentlemen:

          At the request of Suriel Finance N.V. [address] the bene-
          ficiary of the above letter of credit, we wish to advise you
          that we have received notice that all rights of the beneficiary
          to draw up to but not exceeding a sum of $750,000.00 under
          the above described letter of credit has been transferred to
          you by transfer dated September 26, 1989 under and subject
          to the terms and conditions of such transfer.

          For your information there are enclosed:

          A. Copy of such transfer [that is, a copy of Suriel's trans-
          fer dated September 26].

          B. True and correct copy of Advice No. U169123 of such
          letter of credit bearing notation thereon of notice of
          transfer.

Manufacturers also notified Provident that BDS was now the benefi-
ciary of the LOC.

In evaluating the advice of transfer sent by Manufacturers, we need
to distinguish between Manufacturers' role as the confirming bank
and Manufacturers' role as transferring bank. When Manufacturers
confirmed the LOC on September 14, 1989, the LOC was for
$750,000. At that time, the LOC was not revolving. Manufacturers

                    17
was not privy to Henry's September letters reflecting the subsequent
negotiations that occurred between Provident and Suriel about the
revolving nature of the LOC and the deletion of the $800,000 require-
ment of collateral. Accordingly, Manufacturers' reference to
$750,000 in its advice of transfer must be viewed in light of its under-
standing that $750,000 constituted the full amount of the LOC that it
had confirmed.

Manufacturers' advice of transfer stated that it was"under and sub-
ject to the terms and conditions of such transfer." It identified the
transfer as the document Suriel executed on September 26, and it
enclosed a copy with its advice. Suriel's transfer and Manufacturers'
form, which Suriel used, both transferred in their entirety all of Sur-
iel's rights in Provident's LOC, including all amendments "now exist-
ing or hereafter made" and all "extensions . .. applicable to
transferee."

By requiring Suriel to request a transfer on a form that provided for
the transfer of the LOC and all amendments, and by sending BDS a
copy of Suriel's transfer, which encompassed all Suriel's rights per-
taining to amendments, Manufacturers effectively advised BDS of the
scope of the transfer. The transfer gave BDS the right in the first year
to draw up to $750,000 under Manufacturers' confirmation and to
have the benefit of all existing and future amendments to Provident's
LOC.

Professor Byrne, the only expert to give an opinion on letters of
credit and the usage of the trade, stated in his affidavit that the trans-
fer actually took place on October 11, 1989, when Manufacturers
issued its advice of transfer. By that time, Provident had issued its let-
ters of September 26 and 29, which BDS contends amended the LOC.
Byrne expressed the opinion that inasmuch as Provident had elected
to send its letters containing the disputed amendments directly to Sur-
iel, BDS's rights as transferee included Suriel's rights in the entire
LOC, as amended, even though the amendments were not sent to
Manufacturers.

BDS's position is consistent with the paragraph in Manufacturers'
advice of confirmation that provided for credit from Provident with-
out mentioning Manufacturers' advice if the LOC was in existence

                     18
after the expiration of Manufacturers' confirmation. This provision,
which, according to Henry's deposition, was contemplated by Provi-
dent, implicitly demonstrates that Manufacturers and other parties to
the transaction were aware that the beneficiary could receive rights
created by amendments to the LOC that survived the expiration of
Manufacturers' confirmation.

Provident's choice of sending the text of the amendments through
Suriel did not deprive BDS of standing as a matter of law. Assuming,
as did the district court, that Henry's letters amended the LOC, we
conclude as a matter of law that the transfer was effective to convey
to BDS Suriel's rights in the LOC as amended.

VI

BDS also alleged fraud and negligent misrepresentation causes of
action. BDS claimed that Henry's letters either intentionally or negli-
gently misled BDS into believing that $750,000 would be automati-
cally reavailable under the LOC each year for seven years. Provident
contends that there is no evidence that it made any intentional repre-
sentations to BDS and that there is no evidence that it had any rela-
tionship or dealings with BDS that gave rise to a duty of care.
Provident emphasizes that all of its dealings were with Suriel.

The district court granted summary judgment for Provident on the
fraud claim because BDS did not show by clear and convincing evi-
dence that Provident made misrepresentations to BDS in order to
defraud BDS. The court found that there was "[n]o evidence in the
record indicat[ing] that Provident knew or should have suspected that
BDS would at some time become a beneficiary of the Provident
LOC." 852 F. Supp. at 437. Provident's motion for summary judg-
ment and the court's analysis make clear that the motion was granted
because Provident dealt with Suriel and did not communicate with
BDS.

We believe that the Maryland courts would not require Provident
to have communicated with BDS in order to be held liable for fraud.
Though the Maryland courts have not directly addressed the issue, the
prevailing rule provides:

                    19
          The maker of a fraudulent misrepresentation is subject to
          liability for pecuniary loss to another who acts in justifiable
          reliance upon it if the misrepresentation, although not made
          directly to the other, is made to a third person and the maker
          intends or has reason to expect that its terms will be
          repeated or its substance communicated to the other, and
          that it will influence his conduct in the transaction or type
          of transaction involved.

Restatement (Second) of Torts § 533 (1977). Maryland courts "view
each act in its setting, considering the implications and prompting of
usage and fair dealing." L & P Converters, Inc. v. Alling & Cory Co.,
100 Md. App. 563, 572, 642 A.2d 264, 268-69 (Md. Ct. Spec. App.
1994) (quoting Glanzer v. Shepard, 233 N.Y. 236, 240-41, 135 N.E.
275, 276 (1922)).

The primary purpose of a letter of credit is to support an engage-
ment to pay money. Henry Harfield, Letters of Credit 1 (1979). The
LOC facilitates an independent contractual relationship by assuring
the beneficiary of payment. Since Provident and Suriel contracted for
transferability, the LOC was transferable. Md. Code Ann., Com. Law
§ 5-116(1); see also UCP Art. 54(b). By making its LOC transferable
in its entirety without provision to restrict the identity of the trans-
feree, Provident knew or should have known that Suriel had the right
to transfer the LOC to BDS even though Provident did not deal
directly with BDS. For the purpose of summary judgment, we can
draw the reasonable inference that BDS knew the content of Henry's
letters because Manufacturers' advice of September 14 listed BDS as
the advising bank. By October 11, or shortly thereafter, Provident
learned that Suriel had transferred all of its rights, including all
amendments, to BDS. Provident is liable for fraudulent misrepresen-
tation if upon remand the proof shows the elements of fraud and that
BDS justifiably relied on Henry's letters as amendments to the LOC
when it disbursed Suriel's loan for the use of Provident's customer,
RSI. See Restatement (Second) Torts § 531 and comment (d);
Michael v. Shiley, Inc., 46 F.3d 1316, 1334-35 (3d Cir. 1995).
Restatement (Second) Torts § 532 (1977) provides further support for
Provident's potential liability:

          One who embodies a fraudulent misrepresentation in an arti-
          cle of commerce, a muniment of title, a negotiable instru-

                    20
          ment or a similar commercial document, is subject to
          liability for pecuniary loss caused to another who deals with
          him or with a third person regarding the article or document
          in justifiable reliance upon the truth of the representation.

          Comment:

          b. [T]he maker of a fraudulent misrepresentation incor-
          porated in a [commercial] document has reason to expect
          that it will reach and influence any person whom the docu-
          ment reaches.

Indeed, to hold otherwise would frustrate the purpose of Md. Code
Ann. Com. Law § 5-116(1) and UCP Art. 54(a), which permit parties
to designate letters of credit transferable. Although Maryland courts
have not adopted Restatement (Second) of Torts §§ 531, 532, and 533
(1977), we believe that they would accept the principles stated in
these sections. We know of no state that has rejected them, and no
Maryland case in conflict with them has come to our attention.

VII

To recover for negligent misrepresentation, a plaintiff must prove
that:

          (1) the defendant, owing a duty of care to the plaintiff, neg-
          ligently asserts a false statement; (2) the defendant intends
          that his statement will be acted upon by the plaintiff; (3) the
          defendant has knowledge that the plaintiff will probably rely
          on the statement, which, if erroneous, will cause loss or
          injury; (4) the plaintiff, justifiably, takes action in reliance
          on the statement; and (5) the plaintiff suffers damage proxi-
          mately caused by the defendant's negligence.

L & P Converters, 100 Md. App. at 568-69, 642 A.2d at 267. Where
the defendant's conduct creates a risk of only economic loss, the
plaintiff must prove that an intimate nexus exists between the parties.
Weisman v. Connors, 312 Md. 428, 446-48, 540 A.2d 783, 791-93
(1988). "The requirement of an intimate nexus is satisfied by contrac-

                    21
tual privity or its equivalent." L & P Converters, 100 Md. App. at
570, 642 A.2d at 267. In the absence of this nexus, the defendant does
not owe a duty of care to the plaintiff and cannot, therefore, be liable
in negligence.

In granting Provident's motion for summary judgment, the district
court concluded that transferability is not an equivalent of privity. 852
F. Supp. at 436. In essence, this determination recasts the analysis of
the fraud claim. For both tort claims, the district court concluded that
Provident could not be liable to BDS because there was no relation-
ship between the two.

We believe that BDS has demonstrated a sufficient nexus with
Provident to give rise to a duty of care. The Maryland courts have
turned to the leading New York cases on tort duties involving eco-
nomic loss to give meaning to the term "intimate nexus."

          There must be knowledge, or its equivalent, that the infor-
          mation is desired for a serious purpose; that he to whom it
          is given intends to rely and act upon it; that, if false or erro-
          neous, he will because of it be injured in person or property.
          Finally, the relationship of the parties, arising out of contract
          or otherwise, must be such that in morals and good con-
          science the one has the right to rely upon the other for infor-
          mation, and the other giving the information owes a duty to
          give it with care. An inquiry made of a stranger is one thing;
          of a person with whom the inquirer has entered, or is about
          to enter, into a contract concerning the goods which are, or
          are to be, its subject, is another.

Weisman, 312 Md. at 447, 540 A.2d at 792 (quoting International
Products Co. v. Erie R. Co., 244 N.Y. 331, 338, 155 N.E. 662, 664
(1927)).

In this case, Provident and Suriel agreed to an explicit contractual
provision that made the LOC transferable. The effect of the ensuing
transfer was to substitute BDS for Suriel. Provident should have been
aware that, as a result of transfer, it could become obligated to pay
a beneficiary with whom it had not previously dealt. See Henry Har-
field, Letters of Credit 97. Transferability necessarily implies the pos-

                     22
sibility that the issuer may face a new beneficiary. If Provident had
not desired such a relationship with an unknown party, it could have
objected to transferability and insisted, instead, that Suriel rely on its
right of assignment. Md. Code Ann., Com. Law § 5-116(2); UCP Art.
55. Assignment insulates the issuer from the unknown party because
the beneficiary is simply alienating its right to receive money due
under the LOC. See Harfield, Letters of Credit 96-97. In contrast,
transferability contemplates a direct relationship between the issuer
and transferee-beneficiary. Again, to deny the existence of privity or
its equivalent between the issuer and the transferee of a transferable
letter of credit would frustrate the purpose of Md. Code Ann. Com.
Law § 116(1) and UCP 54(a). In the present case, the intimate nexus
between Provident and BDS provided by transferability requires that
Provident be held accountable if the evidence establishes the other
elements of negligent misrepresentation. See Weisman, 312 Md. at
448-49, 540 A.2d at 793; see also L & P Converters, 100 Md. App.
at 570-72, 642 A.2d at 267-68.

VIII

In conclusion, we hold that BDS has satisfied the requirements of
standing. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61
(1992). The issues concerning the nature and effect of Henry's letters,
fraud, and negligent misrepresentation must be submitted in a full evi-
dentiary proceeding to the trier of fact--in this case a jury, unless the
jury demand is waived. BDS's recovery, if any, is not barred as a mat-
ter of law by Henry's election to send the alleged amendments
directly to the beneficiary Suriel instead of transmitting them through
Manufacturers. Nor is BDS deprived of standing because Manufactur-
ers did not consent to the alleged amendments. Suriel's request for
transfer and Manufacturers' advice of transfer were sufficient as a

                     23
matter of law to transfer to BDS all of Suriel's rights in the LOC
including the alleged amendments.

REVERSED AND REMANDED FOR FURTHER

PROCEEDINGS CONSISTENT WITH THIS OPINION

                    24
